UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
December 31, 1995 1-1553
THE BLACK & DECKER CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0248090
(State of Incorporation) (I.R.S. Employer Identification Number)
Towson, Maryland 21286
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-716-3900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
Common Stock, par value $.50 per share New York Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 20, 1996 was $2,844,170,036.
The number of shares of Common Stock outstanding as of February 20, 1996 was
87,010,938.
The exhibit index as required by Item 601(a) of Regulation S-K is included in
Item 14 of Part IV of this report.
Documents Incorporated by Reference: Portions of the registrant's definitive
Proxy Statement for the 1996 Annual Meeting of Stockholders are incorporated by
reference in Part III of this report.
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The Black & Decker Corporation (collectively with its subsidiaries, the
Corporation), incorporated in Maryland in 1910, is a global marketer and
manufacturer of quality products used in and around the home and for
commercial applications. With products and services marketed in over 100
countries, the Corporation enjoys worldwide recognition of strong brand
names and a superior reputation for quality, design, innovation, and
value.
The Corporation is the world's leading producer of power tools, power
tool accessories and residential security hardware, and the Corporation's
product lines hold leading market share positions in these industries. The
household products business is the North American leader and is among the
major global competitors in the small electric household appliance
industry. The Corporation is the worldwide leader in the manufacturing of
steel golf club shafts and glass container-making equipment and is the
largest global supplier of engineered fastening systems to the markets it
serves. These assertions are based on total volume of sales of products
compared to the total market for those products and are supported by
market research studies sponsored by the Corporation as well as
independent industry statistics available through various trade
organizations and periodicals, internally generated market data, and other
sources.
The Corporation's unsecured revolving credit facility (the Credit
Facility) provides that the interest rate margin over the London Interbank
Offered Rate (LIBOR) declines as the Corporation's leverage ratio
improves. Borrowings under the Credit Facility were at LIBOR plus .4375%
at December 31, 1994. Due to improvements in the Corporation's leverage
ratio, the borrowing rate under the Credit Facility declined by .1125%,
effective January 1, 1995, to LIBOR plus .325% and declined by .075%,
effective January 1, 1996, to LIBOR plus .25%. The interest rate margin
over LIBOR, which cannot exceed .4375%, is determined quarterly based upon
the leverage ratio at that time.
During 1994, the Corporation filed a shelf registration statement
with the Securities and Exchange Commission to issue up to $500 million of
debt securities, which may consist of debentures, notes or other unsecured
evidences of indebtedness (the Medium Term Notes). During 1994, the
Corporation issued $151.8 million aggregate principal amount of Medium
Term Notes under this shelf registration statement. During 1995, the
Corporation issued an additional $85.0 million aggregate principal amount
of Medium Term Notes. For additional information about the shelf
registration statement, see Note 9 of Notes to Consolidated Financial
Statements, included in Item 8 of Part II of this report.
During 1995, the Corporation sold PRC Realty Systems, Inc. (RSI)
and PRC Environmental Management, Inc. (EMI) for aggregate proceeds of
approximately $100 million. On December 13, 1995, the Corporation
announced that it had signed a definitive agreement to sell PRC Inc., to
Litton Industries, Inc., for approximately $425 million. Together, PRC
Inc., RSI and EMI comprised the Corporation's information technology and
services (PRC) segment. On February 16, 1996, the Corporation completed
the sale of PRC Inc. For additional information about the discontinued PRC
segment, see the discussion under the caption "Discontinued Operations"
and Note 2 of Notes to Consolidated Financial Statements included in Item
8 of Part II of this report.
(b) DISCONTINUED OPERATIONS
On December 13, 1995, the Corporation announced that it had signed a
definitive agreement to sell PRC Inc., the remaining business in its
information technology and services (PRC)segment, for $425.0 million. The
sale of PRC Inc. was completed on February 16, 1996. Proceeds from the
sale were used to reduce debt. A net gain on the sale of PRC Inc. of
approximately $80.0 to $90.0 million will be recognized in the first
quarter of 1996. For additional information with respect to the pro forma
effects of the consummation of the sale of PRC Inc. on the Corporation's
financial position as of December 31, 1995, and the pro forma effects of
the sales of PRC Inc., RSI, and EMI on the Corporation's earnings from
continuing operations for the year then ended, see the unaudited pro forma
financial information included in Item 14(d) of Part IV of this report.
The Corporation acquired PRC through its acquisition of Emhart
Corporation in April 1989. The sale of PRC will allow the Corporation to
reduce its debt level and concentrate on its more strategic businesses.
Operating results, net assets, and cash flows of the discontinued PRC
segment have been reported separately from the continuing operations of
the Corporation in the Consolidated Financial Statements included in Item
8 of Part II of this report.
Net earnings of the discontinued PRC segment were $38.4 million ($.41
per share on a fully diluted basis) in 1995, $37.5 million ($.44 per share
on a fully diluted basis) in 1994, and $31.1 million ($.37 per share on a
fully diluted basis) in 1993 on revenues of $800.1 million, $883.1
million, and $760.7 million, respectively. The results of the
discontinued PRC segment do not reflect any expense for interest allocated
by or management fees charged by the Corporation.
(c) FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
Unless otherwise indicated, the following discussion of the Corporation's
business segments pertains to the continuing operations of the Corporation
and excludes any matters in respect of the discontinued PRC segment.
The Corporation operates in two business segments: Consumer and Home
Improvement Products, including consumer and professional power tools and
accessories, household products, security hardware, outdoor products
(composed of electric lawn and garden tools and recreational products),
plumbing products, and product service; and Commercial and Industrial
Products, including fastening systems and glass container-making
equipment. See Note 16 of Notes to Consolidated Financial Statements
included in Item 8 of Part II, and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in Item 7 of Part
II of this report.
Revenues from continuing operations by product group within business
segments are presented in the following table.
<TABLE>
1995 Revenues by Product Group within Business Segments
(Millions of Dollars)
<CAPTION>
Year Ended
December 31, 1995
Amount %
------ ------
<S> <C> <C>
Consumer and Home Improvement Products
Power Tools and Product Service ............. $1,826 38%
Household Products .......................... 846 18
Security Hardware ........................... 527 11
Accessories ................................. 343 7
Outdoor Products ............................ 321 7
Plumbing Products ........................... 213 5
------ ------
Total Consumer and Home Improvement Products $4,076 86%
------ ------
Commercial and Industrial Products ............ $ 690 14%
------ ------
Total Revenues ................................ $4,766 100%
====== ======
</TABLE>
There is no single class of product within the product groups listed
in the above table that represents more than 10% of the Corporation's
consolidated revenues from continuing operations.
(d) NARRATIVE DESCRIPTION OF THE BUSINESS
Unless otherwise indicated, the following discussion of the business of
the Corporation pertains to the continuing operations of the Corporation
and excludes any matters in respect of the discontinued PRC segment.
The following is a brief description of each of the business segments.
CONSUMER AND HOME IMPROVEMENT PRODUCTS SEGMENT
The Consumer and Home Improvement Products segment is composed of consumer
(home use) and professional power tools and accessories, household
products, security hardware, outdoor products (composed of electric lawn
and garden tools and recreational products), plumbing products, and
product service. Power tools include both corded and cordless electric
portable power tools, such as drills, screwdrivers, saws, sanders,
grinders, car care products, Workmate workcenters and related products,
and bench and stationary tools. Accessories include accessories and
attachments for power tools, and a variety of consumer-use fastening
products, including gluing, stapling and riveting products. Household
products include a variety of both corded and cordless small electric
household appliances, including hand-held vacuums; irons; lighting
products; food mixers, processors and choppers; can openers; blenders;
coffee makers; kettles; toasters and toaster ovens; wafflebakers; knives;
breadmakers; and fans. Security hardware includes both residential and
commercial door hardware, including locksets, high security and electronic
locks and locking devices, deadbolts, door closers, hinges and exit
devices, and master keying systems. Outdoor products include a variety of
both corded and cordless electric lawn and garden tools, such as hedge and
yard trimmers, lawn mowers and edgers, blower/vacuums, shredders, grass
shears, lawnrakers, and related accessories. Outdoor products also include
recreational products, which include a variety of steel and composite golf
club shafts and specialty tubing. Plumbing products include a variety of
conventional and decorative faucets, shower valves, and bath accessories.
Power tools, household products, electric lawn and garden tools, and
related accessories are marketed around the world under the Black & Decker
name as well as other trademarks and trade names, including DeWALT, Black
& Decker Industry & Construction, Elu, Proline, Macho, TimberWolf,
Cyclone, Trimcat, Kodiak, Scrugun, Wildcat, Guaranteed Tough,
Versa-Clutch, VersaPak, Workmate, ShopBox, Alligator, Air Station,
Dustbuster, SnakeLight, Toast-R-Oven, Handy Steamer, HandyChopper, Light
'N Easy, Groom 'N' Edge, Hedge Hog, Vac 'N' Mulch, Reflex, B&D, Piranha,
Piranha Pro, Bullet, Pilot-Point, Scorpion Anti-Slip, Master Series,
PowerShot, and POP. Security hardware products are marketed under a
variety of trademarks and trade names, including Black & Decker, Geo,
Kwikset, TITAN, TITAN Commercial Series, Lane, NEMEF, DOM, and Corbin
Co. Recreational products are marketed under the trademarks and trade
names True Temper, Dynamic, Dynamic Gold, Dynalite, EI-70, Comet, Rocket,
True Lite, SensiCore, TT Lite, Release, and others. Plumbing products
are marketed under the trademarks and trade names Price Pfister, The
Pfabulous Pfaucet With The Pfunny Name, Genesis, Society Brass Collection,
Verve, Windsor, Georgetown, Jet Setter, Society Finishes, and others.
The Corporation's product service program supports its power tools,
electric lawn and garden products, and household products businesses.
Replacement parts and product repair services are available through a
network of company-operated service centers, which are identified and
listed in product information material generally included in product
packaging. At December 31, 1995, there were over 200 such service
centers, of which approximately one-half were located in the United
States. The remainder were located around the world, primarily in Europe,
Mexico, Australia, Canada, and Latin America. These company-operated
service centers are supplemented by several hundred authorized service
centers operated by independent local owners. The Corporation also
operates a reconditioning center in which power tools and household
appliances are reconditioned and then re-sold through numerous
company-operated factory outlets and service centers.
Most of the Corporation's consumer products sold in the United States
carry a two-year warranty, pursuant to which the consumer can return
defective products during the two years following the purchase in exchange
for a replacement product or repair at no cost to the consumer. Consumer
products sold outside the United States generally have similar warranty
arrangements. Such arrangements vary, however, depending upon local market
conditions and laws and regulations.
The Corporation's product offerings in the Consumer and Home
Improvement Products segment are sold primarily to retailers, wholesalers,
distributors, and jobbers, although some reconditioned power tools and
household products are sold through company-operated service centers and
factory outlets directly to end users. Certain security hardware products
are sold to commercial, institutional, and industrial customers.
The principal materials used in the manufacturing of products in the
Consumer and Home Improvement Products segment are plastics, aluminum,
copper, steel, bronze, zinc, brass, certain electronic components, and
batteries. These materials are used in various forms. For example,
aluminum or steel may be used in wire, sheet, bar, and strip stock form.
The materials used in the various manufacturing processes are
purchased on the open market, and the majority are available through
multiple sources and are in adequate supply. The Corporation has
experienced no significant work stoppages to date as a result of shortages
of materials. The Corporation has certain long-term commitments for the
purchase of various component parts and raw materials and believes that it
is unlikely that any of these agreements would be terminated prematurely.
Alternate sources of supply at competitive prices are available for most,
if not all, materials for which long-term commitments exist. The
Corporation believes that the termination of any of these commitments
would not have a material adverse effect on operations. From time to time,
the Corporation enters into commodity hedges on certain raw materials used
in the manufacturing process to reduce the risk of market price
fluctuations. As of December 31, 1995, the amount of product under
commodity hedges was not material to the Corporation.
As a global marketer and manufacturer, the Corporation purchases
materials and supplies from suppliers in many different countries around
the world. Certain of the finished products and component parts are
purchased from suppliers that have manufacturing operations in mainland
China. China has been granted Most Favored Nation (MFN) status through
July 3, 1996, and currently there are no significant trade restrictions or
tariffs imposed on such products. The Corporation has investigated
alternate sources of supply in case the MFN status is not extended.
Alternative sources of supply are available, or can be developed, for many
of these products. The Corporation believes that, although there could be
some disruption in the supply of certain of these finished products and
component parts if China's MFN status is not extended or if significant
trade restrictions or tariffs are imposed, the impact would not have a
material adverse effect on the operating results of the Corporation.
Principal manufacturing and assembly facilities in the United States
are located in Fayetteville and Asheboro, North Carolina; Easton and
Hampstead, Maryland; Anaheim and Pacoima, California; Denison, Texas;
Amory and Olive Branch, Mississippi; and Bristow, Oklahoma.
Principal facilities outside the United States are located in
Buchlberg and Bruhl, Germany; Molteno and Perugia, Italy; Spennymoor,
Meadowfield, and Rotherham, England; Brockville, Canada; Queretaro,
Mexico; Jurong Town, Singapore; Kuantan, Malaysia; Newcastle,
Australia; and Apeldoorn, Netherlands. For additional information
with respect to these and other properties owned or leased by the
Corporation, see Item 2, "Properties."
As previously announced, during 1995, the Corporation closed its
manufacturing facilities located in Tarboro, North Carolina, and Delemont,
Switzerland, and transferred production from those locations to other
manufacturing facilities of the Corporation. The Corporation ceased
manufactuing at its facility in Santo Andre, Brazil, late in 1995 and will
begin to manufacture at a new owned facility in Uberaba, Brazil, in early
1996. Administrative offices remain at the Santo Andre site. These plant
actions are part of the Corporation's continuing effort to identify
opportunities to improve its manufacturing cost structure.
The Corporation holds various patents and licenses on many of its
products and processes in the Consumer and Home Improvement Products
segment. Although these patents and licenses are important, the
Corporation is not materially dependent on such patents or licenses with
respect to its operations.
The Corporation holds various trademarks that are employed in its
businesses and operates under various trade names, some of which are
stated above. The Corporation believes that these trademarks and trade
names are important to the marketing and distribution of its products.
A significant portion of the Corporation's revenues in the Consumer
and Home Improvement Products segment is derived from the do-it-yourself
and home modernization markets, which generally are not seasonal in
nature. However, sales of household products and certain consumer power
tools tend to be higher during the period immediately preceding the
Christmas gift-giving season, while the sales of most electric lawn and
garden tools are at their peak during the winter and early spring period.
Most of the Corporation's other product lines within this segment are not
generally seasonal in nature but may be influenced by trends in the
residential and commercial construction markets and other general economic
trends.
The Corporation is one of the world's leaders in the manufacturing
and marketing of portable power tools, small electric household
appliances, electric lawn and garden tools, security hardware, plumbing
products, and accessories. Worldwide, the markets in which the
Corporation sells these products are highly competitive on the basis of
price, quality, and after-sale service. A number of competing domestic
and foreign companies are strong, well-established manufacturers that
compete on a global basis. Some of these companies manufacture products
that are competitive with a number of the Corporation's product lines.
Other competitors restrict their operations to fewer categories, and some
offer only a narrow range of competitive products. Competition from
certain of these manufacturers has been intense in recent years and is
expected to continue.
COMMERCIAL AND INDUSTRIAL PRODUCTS SEGMENT
The Corporation's fastening systems business manufactures an extensive
line of metal and plastic fasteners and engineered fastening systems for
commercial applications, including blind riveting and stud welding
systems, specialty screws, prevailing torque nuts and assemblies, and
insert systems. The fastening systems products are marketed under the
trademarks and trade names Emhart Fastening Teknologies, POP, HeliCoil,
Parker-Kalon, Gripco, Warren, Tucker, NPR, Dodge, POP NUT, WELL-NUT, and
others.
The principal markets for these products include the automotive,
transportation, construction, electronics, aerospace, machine tool, and
appliance industries. Substantial sales are made to automotive
manufacturers worldwide. Some of these products also are sold through the
Corporation's Consumer and Home Improvement Products segment.
Products are marketed directly to customers and also through
distributors and representatives. These products face competition from
many manufacturers in several countries. Product quality, performance,
reliability, price, delivery, and technical and application engineering
services are the primary competitive factors. Except for sales to
automotive manufacturers, which historically schedule plant shutdowns
during July and August of each year, there is little seasonal variation.
The Corporation owns a number of United States and foreign patents,
trademarks, and license rights relating to the fastening systems business.
While the Corporation considers those patents, trademarks, and license
rights to be valuable, the Corporation is not materially dependent upon
such patents or license rights with respect to its operations.
Principal manufacturing facilities for the fastening systems business
in the United States are located in Danbury and Shelton, Connecticut;
South Whitley and Montpelier, Indiana; Campbellsville and Hopkinsville,
Kentucky; and Mt. Clemens, Michigan. Principal facilities outside the
United States are located in Birmingham, England; Giessen, Germany; and
Toyohashi, Japan. For additional information with respect to these and
other properties owned or leased by the Corporation, see Item 2,
"Properties."
The raw materials used in the fastening systems business consist
primarily of ferrous and nonferrous metals in the form of wire, bar stock,
strip and sheet metals, and chemical compounds, plastics, and rubber.
These materials are readily available from a number of suppliers.
The Corporation manufactures a variety of automatic, high-speed
machines for the glass container-making industry, including machines for
supplying molten glass for the forming process and electronic inspection
equipment for monitoring quality levels. These machines are used in
producing bottles, jars, tumblers, and other glass containers primarily
for food, beverage, pharmaceutical, and household products packaging. The
Corporation also provides replacement parts and a variety of engineering,
repairing, rebuilding, and other services to the glass container-making
industry throughout the world, and these activities generate nearly
two-thirds of the sales in this business. These products and services are
marketed principally under the trademarks and trade names Emhart, Emhart
Glass, Powers, FlexLine, T-600 Forming Control System, Verti-Flow Cooling
System, and Total Inspection Machine.
The Corporation sells glass container-making machinery and
replacement parts primarily through its own sales force directly to glass
container manufacturers throughout the world. The business is not
dependent on one or a few customers, the loss of which would have a
material adverse effect on operating results of the business.
Some domestic manufacturers and a number of foreign manufacturers
compete with the Corporation in the manufacture and sale of various types
of glass container-making equipment. However, the Corporation believes
that it is the leading supplier and offers the most complete line of glass
container-making and inspection machinery, parts, and service. In recent
years, the glass container-making equipment business has experienced the
effects of increased competition with packaging applications of plastic
and other non-glass containers. Important competitive factors are price,
technological and machine performance features, product reliability, and
technical and application engineering services. There is little seasonal
variation in this business.
The Corporation owns a number of United States and foreign patents,
trademarks, and license rights relating to the glass container-making
business. While the Corporation considers those patents, trademarks, and
license rights to be valuable, this business is not materially dependent
upon such patents or license rights with respect to its operations.
The principal glass container-making machinery manufacturing facility
in the United States is located in Windsor, Connecticut. Principal
manufacturing facilities outside the United States are located in Oerebro
and Sundsvall, Sweden. For additional information with respect to these
and other properties owned or leased by the Corporation, see Item 2,
"Properties."
The principal raw materials required for the glass container-making
equipment business are steel, iron, copper and copper-based materials,
aluminum and refractory materials, and electronic components. Manufactured
parts are purchased from a number of suppliers. All such materials and
components are generally available in adequate quantities.
During 1992, the Corporation commenced a restructuring plan which
included the reorganization of Dynapert, the Corporation's printed circuit
board assembly equipment business. The business was divided into the
through-hole and surface-mount machinery product lines. This restructuring
plan included the withdrawal from the manufacturing of surface-mount
machinery in Europe which was completed in 1993. The Corporation sold the
remaining through-hole business in 1993 and the remaining surface-mount
business in 1995.
<TABLE>
BACKLOG
The following is a summary of total backlog by business segment as of the
referenced dates
<CAPTION>
(Millions of Dollars) December 31,
1995 1994
---- ----
<S> <C> <C>
Consumer and Home Improvement Products ............... $ 96 $103
Commercial and Industrial Products ................... 134 126
---- ----
Total Backlog ............................... $230 $229
==== ====
</TABLE>
None of the backlog at December 31, 1995, or at December 31, 1994,
included unfunded amounts.
OTHER INFORMATION
The Corporation's product development program in the United States for
the Consumer and Home Improvement Products segment is coordinated from the
Corporation's headquarters in Towson, Maryland, for power tools and
accessories; from Shelton, Connecticut, for household products; from
Anaheim, California, for residential security hardware; and from Pacoima,
California, for plumbing products. Outside the United States, product
development activities for power tools and accessories and household
products are coordinated from Slough, England, and are carried on at
facilities in Spennymoor, England; Brockville, Canada; Civate, Italy;
Idstein, Germany; and Croydon, Australia.
Product development activities for the Commercial and Industrial
Products segment are currently carried on at various product or business
group headquarters or at principal manufacturing locations as previously
noted.
Costs associated with development of new products and changes to
existing products are charged to operations as incurred. See Note 1 of
Notes to Consolidated Financial Statements included in Item 8 of Part II
of this report for amounts of expenditures for product development
activities.
As of December 31, 1995, the Corporation employed approximately
29,300 persons in its continuing operations worldwide (approximately
34,200 persons, including the employees of its discontinued PRC segment).
Approximately 2,100 employees in the United States are covered by
collective bargaining agreements. During 1995, several collective
bargaining agreements in the United States were negotiated without
material disruption to operations. A number of other agreements are
scheduled for negotiation during 1996. Also, the Corporation has
government-mandated collective bargaining arrangements or union contracts
with employees in other countries. The Corporation's operations have not
been affected significantly by work stoppages and, in the opinion of
management, employee relations are good.
The Corporation's operations worldwide are subject to certain
foreign, federal, state and local environmental laws and regulations. In
recent years, many state and local governments have enacted laws and
regulations that govern the labeling and packaging of products and limit
the sale of products containing certain materials deemed to be
environmentally sensitive. These laws and regulations not only limit the
acceptable methods for disposal of products and components that contain
certain substances, but also require that products be designed in a manner
to permit easy recycling or proper disposal of environmentally sensitive
components such as nickel cadmium batteries. The Corporation is in
substantial compliance with these laws and regulations. Although
compliance involves continuing costs, it has not materially increased
capital expenditures and has not had a material adverse effect on the
Corporation.
Pursuant to authority granted under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA), the United
States Environmental Protection Agency (EPA) has issued a National
Priority List (NPL) of sites at which action is to be taken by the EPA or
state authorities to mitigate the risk of release of hazardous substances
into the environment. The Corporation is engaged in continuing activities
with regard to various sites on the NPL and other sites covered under
CERCLA. As of December 31, 1995, the Corporation had been identified as a
potentially responsible party (PRP) in connection with approximately 27
sites being investigated by federal or state agencies under CERCLA. The
Corporation also is engaged in site investigations and remedial activities
to address environmental contamination from past operations at current and
former manufacturing facilities in the United States and abroad.
To minimize the Corporation's potential liability, when appropriate,
management has undertaken, among other things, active participation in
steering committees established at the sites and has agreed to remediation
through consent orders with the appropriate government agencies. Due to
uncertainty over the Corporation's involvement in some of the sites,
uncertainty over the remedial measures to be adopted at various sites and
facilities, and the fact that imposition of joint and several liability
with the right of contribution is possible under CERCLA, the liability of
the Corporation with respect to any site at which remedial measures have
not been completed cannot be established with certainty. On the basis of
periodic reviews conducted with respect to these sites, however,
appropriate liability accruals have been established by the Corporation.
As of December 31, 1995, the Corporation's aggregate probable exposure
with respect of environmental liabilities, for which accruals have been
established in the Consolidated Financial Statements, was $61.0 million.
With respect to environmental liabilities, unless otherwise noted below,
the Corporation does not believe that its liability with respect to any
individual site will exceed $10.0 million.
Pursuant to the terms of the Corporation's agreement to sell the
Bostik chemical adhesives business to Orkem S.A., the Corporation agreed
to indemnify Orkem against costs incurred or claims made with respect to
environmental matters at Bostik facilities within four years from the date
of sale to the extent that the aggregate costs and claims exceeded $5.0
million; provided, however, that the Corporation's total liability to
Orkem for all environmental matters with respect to Bostik facilities
shall not exceed $10.0 million. By letter dated November 22, 1993, Orkem's
successor in interest ("Total, S.A.") notified the Corporation that within
the four-year period following the closing it had incurred costs of
approximately $5.4 million and demanded payment of the amount in excess of
$5.0 million. Total, S.A. also demanded indemnification for a number of
environmental conditions identified in its letter, the cost of which it
estimated would exceed the $10.0 million limitation of the Corporation's
indemnification obligation. The Corporation and Total, S.A. continue to
review the indemnification claims and, as of December 31, 1995, the
Corporation had paid $2,225,670 of the claims.
Emhart previously received a notice of responsibility from the
Massachusetts Department of Environmental Protection for the 90-acre site
of the former United Shoe Machinery business at Beverly, Massachusetts.
The site has been classified a non-priority site, with a waiver of
approvals allowed. An investigation of contamination has been completed,
and a remediation plan has been proposed (estimated at $1.0 million) under
the Massachusetts Contingency Plan.
In or about 1985, as a consequence of investigations stemming from an
underground storage tank leak from a nearby gas station, the Corporation
discovered certain groundwater contamination at its facility located in
Hampstead, Maryland. Upon discovery of the groundwater contamination, the
Corporation, in cooperation with the Department of the Environment of the
State of Maryland (MDE), embarked on a program to remediate groundwater
contamination, including installation of an air stripping system designed
to remove contaminants from groundwater. The Corporation, in cooperation
with MDE, conducted extensive investigations as to potential sources of
the groundwater contamination. Following submission of the results of its
investigations to MDE, the Corporation proposed to expand its groundwater
remediation system and also proposed to excavate and remediate soils in
the vicinity of the plant that appear to be a source area for certain
contamination. The Corporation has received all permits necessary to
operate its expanded groundwater treatment facility at the Hampstead
facility, and the system is fully operational.
In October 1994, suit was filed in the United States District Court
for the District of Maryland against the Corporation by the owners of a
farm that is adjacent to the Hampstead facility (Leister et al. v. The
Black & Decker Corporation (Civil Action No. JFM 94-2809)). Plaintiffs
claim that contamination, allegedly emanating from the facility, has
migrated in groundwater and has adversely affected plaintiffs' property.
Plaintiffs have alleged various claims for relief, including causes of
action under the Federal Resource Conservation and Recovery Act, CERCLA,
and the Clean Water Act, as well as various state tort claims, including
claims for negligence, nuisance, intentional misrepresentation, and
negligent misrepresentation. Plaintiffs seek various forms of relief,
including compensatory damages of $20.0 million and punitive damages of
$100.0 million.
The Corporation filed various motions to, among other things, dismiss
plaintiffs' claims, and the Court granted the Corporation's motion to
dismiss all but one claim. Following that ruling, both the Corporation and
plaintiffs filed motions for summary judgment on the remaining claim. The
Corporation believes that plaintiffs' claims are without merit and intends
to defend vigorously against the allegations made in this matter.
Management is of the opinion that the ultimate resolution of this matter
will not have a material adverse effect on the Corporation.
In October 1992, the Corporation's Price Pfister subsidiary received
a 60-day notice of intent to file suit under California's Proposition 65
from the Natural Resources Defense Council (NRDC) and the Environmental
Law Foundation (ELF), alleging improper warnings and discharge of lead
into drinking water in California. On December 15, 1992, Price Pfister and
numerous other plumbing manufacturers were sued by the State of California
in the Superior Court for the City and County of San Francisco. On the
same day, a separate suit was filed by the NRDC and the ELF. The suits
filed by the State of California and the NRDC and the ELF included
substantially the same allegations, namely that lead leaches from brass
faucets into tap water in violation of California's lead discharge
prohibitions of Proposition 65, that the manufacture and sale of brass
faucets exposes individuals to lead without a proper "clear and reasonable
warning," and that such violations of Proposition 65 also constitute
unfair business practices under California law. The NRDC and the ELF suit
also alleged breach of warranty and breach of contract claims against
Price Pfister and the other plumbing manufacturers. The State of
California and the NRDC and the ELF generally sought the following relief:
(a) elimination of lead from brass faucets; (b) improved public disclosure
programs regarding lead in brass faucets; (c) commencement of a public
information campaign regarding alleged health risks arising from lead
exposure; (d) restitution to purchasers of faucets; (e) statutory
penalties and punitive damages in unstated amounts; and (f) attorneys'
fees and other costs.
Subsequent to the filing of their complaints, plaintiffs filed a
motion for a preliminary injunction seeking to require Price Pfister and
certain other defendants to provide specific warning language in a
particular manner with faucets at the time of sale. Plaintiff's motion for
a preliminary injunction was denied, and the trial court accepted
defendants' proposed warning system. Defendants filed demurrers to the
State of California's claim that brass faucets result in a "prohibited
discharge" of lead into drinking water under California law and to the
standing of the NRDC and the ELF to bring their claims.
In May 1994, Judge Bea of the California Superior Court for the City
and County of San Francisco issued an order rejecting the Attorney
General's claims that lead which leaches from faucets constitutes a
prohibited discharge of lead into water or onto or into land where lead
will pass or is at least likely to pass into a source of drinking water.
Judge Bea's order granted the Attorney General 20 days to amend his
complaint to state a cause of action under Proposition 65. In the
companion case involving similar claims by the NRDC and the ELF, Judge
Cahill of the California Superior Court for the City and County of San
Francisco denied defendants' challenges to the standing of the NRDC and
the ELF to bring these claims and refused to stay the proceedings pending
resolution of the claims by the Attorney General.
Subsequent to Judge Bea's order rejecting the Attorney General's
claims and granting the Attorney General 20 days to amend his complaint to
state a cause of action under Proposition 65, the Attorney General filed
an appeal of Judge Bea's order. Prior to a final ruling on the appeal in
the case involving the Attorney General's claims, the Corporation entered
into a settlement pursuant to which the Corporation agreed to take certain
actions with respect to the future sale of its products in California and
agreed to the payment of specified amounts to the State of California and
the attorneys for the NRDC and the ELF.
In 1988, J.C. Rhodes, a former subsidiary of Emhart Industries,
Inc., was notified by both the EPA and the State of Massachusetts that it
was considered a PRP with regard to the Sullivan's Ledge site in New
Bedford, Massachusetts. Emhart and 11 other companies formed a PRP group
to respond to the EPA's and Massachusetts' demands, and, in September
1990, executed a Consent Order to perform the remedial action recommended
by the EPA in its Record of Decision. The remedial action is now underway.
A second area of the Sullivan's Ledge site, known as Middle Marsh,
was investigated by the EPA, and a Record of Decision was issued in
September 1991. In September 1992, Emhart, 11 other companies, and the
City of New Bedford, Massachusetts, executed a Consent Order to perform
the remediation required in the Middle Marsh section of the site. At this
time, Emhart's estimated liability for remediation cost at the Sullivan's
Ledge site is estimated at $2.0 million.
The Corporation has been investigating certain environmental matters
at its NEMEF security hardware facility in the Netherlands. The NEMEF
facility has been a manufacturing operation since 1921. During building
construction in 1990, soil and groundwater contamination was discovered on
the property. Investigations to understand the full extent of the
contamination were undertaken at that time, and those investigations are
continuing. The Corporation is continuing to work with consultants and
local authorities to develop a comprehensive remediation plan in
conjunction with neighboring property owners.
In the opinion of management, the costs of compliance with respect to
the matters set forth above and other remedial costs have been adequately
accrued, and the ultimate resolution of these matters will not have a
material adverse effect on the Corporation. The ongoing costs of
compliance with existing environmental laws and regulations have not had,
nor are they expected to have, a material adverse effect upon the
Corporation's capital expenditures or financial position.
(e) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Reference is made to Note 16 of Notes to Consolidated Financial
Statements, entitled "Business Segment and Geographic Areas," included in
Item 8 of Part II and to the section entitled "Business Segments" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of Part II of this report.
(f) EXECUTIVE OFFICERS AND OTHER SENIOR OFFICERS OF THE CORPORATION
The current Executive Officers and Other Senior Officers of the
Corporation, their ages, current offices or positions, and their business
experience during the past five years is set forth below.
Nolan D. Archibald - 52
Chairman, President, and Chief Executive Officer,
January 1990 - present;
President and Chief Executive Officer,
May 1989 - January 1990.
Raymond A. DeVita - 59
Executive Vice President and President -
Commercial and Industrial Group,
May 1989 - present.
Dennis G. Heiner - 52
Executive Vice President and President -
Security Hardware Group,
January 1992 - present;
Executive Vice President and President -
Household Products Group,
May 1989 - January 1992.
Don R. Graber - 52
Group Vice President and President - Household Products,
July 1994 - present;
Group Vice President and President - International,
March 1993 - July 1994;
Vice President and President - International,
February 1992 - March 1993;
President - Black & Decker Canada, September 1988 - February 1992.
Roger H. Thomas - 53
Group Vice President and Chairman - Eastern Hemisphere,
October 1995 - present;
Group Vice President and President - Eastern Hemisphere,
April 1994 - October 1995;
Group Vice President and President - Europe,
May 1989 - April 1994.
Charles E. Fenton - 47
Vice President and General Counsel,
May 1989 - present.
Joseph Galli - 37
Group Vice President and President - Power Tools,
October 1995 - present;
Vice President and President -
North American Power Tools,
October 1993 - October 1995;
President - U.S. Power Tools,
February 1993 - October 1993;
Vice President Sales and Marketing - U.S. Power Tools,
May 1991 - February 1993;
Vice President Marketing - U.S. Power Tools,
August 1990 - May 1991.
Kathleen W. Hyle - 37
Vice President and Treasurer,
May 1994 - present;
Assistant Treasurer, Domestic,
December 1992 - May 1994;
Director, Domestic Finance,
February 1990 - December 1992.
Barbara B. Lucas - 50
Vice President - Public Affairs and
Corporate Secretary,
July 1985 - present.
Thomas M. Schoewe - 43
Vice President and Chief Financial Officer,
October 1993 - present;
Vice President - Finance,
January 1990 - October 1993.
Steven E. Simms - 39
Group Vice President and President - Accessories,
October 1995 - present;
President - North American Accessories,
April 1993 - October 1995;
Vice President - European Marketing
and Product Planning,
September 1990 - April 1993.
Leonard A. Strom - 50
Vice President - Human Resources,
May 1986 - present.
ITEM 2. PROPERTIES
Unless otherwise indicated, the following discussion of the Corporation's
properties pertains to the continuing operations of the Corporation and
excludes any matters in respect of the discontinued PRC segment.
The Corporation and its subsidiaries operate 47 manufacturing
facilities around the world, including 22 located outside the United
States in 13 foreign countries. The major properties associated with each
business segment are listed in Narrative Description of the Business in
Item 1(d) of Part I of this report.
The Corporation owns most of its facilities with the exception of the
following major leased facilities.
In the United States: Mt. Clemens, Michigan; Amory, Mississippi;
Shelton, Connecticut; and Towson, Maryland.
Outside the United States: Rotherham, England, and Kuantan, Malaysia.
During 1993, the Corporation recorded a charge of $29 million for the
closure and reorganization of certain manufacturing sites. These plant
actions were substantially completed during 1994. During 1995, the
Corporation closed its manufacturing facilities in Tarboro, North
Carolina, and Delemont, Switzerland, and transferred production from those
locations to other manufacturing facilities of the Corporation. The
Corporation ceased manufacturing at its facility in Santo Andre, Brazil
late in 1995 and will begin to manufacture at a new owned facility in
Uberaba, Brazil, in early 1996. These plant actions are part of the
Corporation's continuing effort to identify opportunities to improve its
manufacturing cost structure.
Additional property both owned and leased by the Corporation in
Towson, Maryland, is used for administrative offices. Subsidiaries of the
Corporation lease certain locations primarily for smaller manufacturing
and/or assembly operations, service operations, sales and administrative
offices, and for warehousing and distribution centers. The Corporation
also owns a manufacturing plant which is located on leased land in Jurong
Town, Singapore.
The Corporation's average utilization rate for its manufacturing
facilities for 1995 was in the range of 75% to 85%. The Corporation
continues to evaluate its worldwide manufacturing cost structure to
identify opportunities to improve capacity utilization and will take
appropriate action as deemed necessary.
Management believes that its owned and leased facilities are suitable
and adequate to meet the Corporation's anticipated needs.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in various lawsuits in the ordinary course of
business. These lawsuits primarily involve claims for damages arising out of the
use of the Corporation's products and allegations of patent and trademark
infringement. The Corporation also is involved in litigation and administrative
proceedings involving employment matters and commercial disputes. Some of these
lawsuits include claims for punitive as well as compensatory damages. The
Corporation, using current product sales data and historical trends, actuarially
calculates the estimate of its exposure for product liability. The Corporation
is insured for product liability claims for amounts in excess of established
deductibles and accrues for the estimated liability as described above up to the
limits of the deductibles. As previously noted under Item 1 of Part I of this
report, the Corporation also is party to litigation and administrative
proceedings with respect to claims involving the discharge of hazardous
substances into the environment. Certain of these matters assert damages and
liability for remedial investigations and clean-up costs with respect to sites
at which the Corporation has been identified as a PRP under federal and state
environmental laws and regulations. Other matters involve sites that the
Corporation owns and operates or previously sold.
On or about March 31, 1989, a purported class action complaint, titled
Cooperman et al. v. The Black & Decker Corporation et al., No. 89 Civ 2177 (the
Cooperman Complaint), was filed in the United States District Court for the
Southern District of New York alleging that the Corporation's settlement
agreement with Topper Acquisition Corp. and Topper L.P., bidders for Emhart
Corporation, and the payments by the Corporation thereunder violated the federal
securities laws, particularly sections 10(b) and 14(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations, including rules
10b-13 and 14d-10, thereunder. Plaintiffs initially sought injunctive relief
prohibiting the Corporation from consummating its tender offer for Emhart and
now seek rescissory damages as well as costs, disbursements, and reasonable
attorneys' and other fees. The Corporation's request for leave to move for
summary judgment was denied by the District Court, and the District Court issued
an order directing that discovery be completed by June 1, 1991, and providing
that the Corporation might again apply for leave to move for summary judgment on
or before June 15, 1991. The parties subsequently have entered into a number of
stipulations and orders amending the date for the completion of discovery and
the date before which the Corporation may again apply for leave to move for
summary judgment. The Corporation believes the claims made in the Cooperman
Complaint are without merit and intends to defend vigorously against the
allegations made in this matter. In the opinion of management, the ultimate
resolution of the Cooperman Complaint will not have a material adverse effect on
the Corporation.
In March 1990, the Corporation's former PRC subsidiary was served by the
Inspector General of the United States Department of Defense with a subpoena for
documents from the period 1986 to 1990 in connection with a criminal
investigation of bid and proposal cost charging practices of certain divisions
of PRC. Since that date, PRC has been served with two additional Inspector
General subpoenas for marketing and proposal-related documents. During 1992, PRC
and some former employees also received grand jury subpoenas issued by the
United States District Court for the Eastern District of Virginia. During 1993,
PRC received an additional subpoena from the grand jury directing PRC to provide
information concerning the procurement and government property management
functions of certain divisions of PRC. In January 1996, the United States
Attorney advised PRC that the criminal investigation has concluded without
further action and the matter is being transferred to the Civil Division of the
Department of Justice.
In connection with the Corporation's sale of PRC to Litton Industries,
Inc., the Corporation agreed to indemnify Litton for various liabilities,
including liabilities relating to the matters subject to the foregoing
subpoenas. The Corporation cannot predict the eventual outcome of these
investigations, but, based on currently available information, management
believes that the investigations will not have a material adverse effect on the
Corporation.
On June 1, 1994, Masco Corporation of Indiana ("Masco") filed suit against
the Corporation's Price Pfister subsidiary in the United States District Court
for the Eastern District of Virginia (Civ. No. 94-728A). Masco alleged that
Price Pfister's manufacture, use and sale of its Genesis Model 42 Series of
lavatory faucets infringed and induced infringement of Masco's U.S. Design
Patent No. 323,877, was unfair competition under federal and Virginia law, and
infringed the trade dress rights associated with lavatory faucets of Delta
Faucet Company, a division of Masco. Masco sought an injunction, profits,
damages (trebled), costs and attorneys' fees.
Price Pfister filed a counterclaim for infringement by Masco of Price
Pfister's rights in U.S. Design Patent Nos. 329,911, 328,335, and 327,732, for
unfair competition and patent misuse under common statutory law, for abuse of
process, and for trademark infringement under Price Pfister's U.S. Trademark
Registration No. 1,808,996 and trademark registrations of several states. Masco
counterclaimed for cancellation of U.S. Trademark Registration No. 1,808,996 and
also instituted a separate Cancellation Proceeding in the U.S. Patent and
Trademark Office.
Following the filing by Masco and Price Pfister of a number of motions,
trial on the claims and counterclaims in this matter was held in November 1994.
The trial resulted in a verdict in favor of Masco on Masco's design patent
infringement claim with damages being awarded against Price Pfister in the
amount of $1,374,596.35, plus interest, and Price Pfister being enjoined from
continued infringement of Masco's rights. All other claims and counterclaims
were dismissed. Price Pfister filed an appeal of this decision, but on appeal
the decision of the trial court was upheld. Price Pfister has paid the judgment
in this matter.
In the opinion of management, amounts accrued for awards or assessments in
connection with the matters specified above and in Item 1 of Part I of this
report with respect to environmental matters and other litigation and
administrative proceedings to which the Corporation is a party are adequate and,
accordingly, ultimate resolution of these matters will not have a material
adverse effect on the Corporation.
As of December 31, 1995, the Corporation had no known probable but
inestimable exposures for awards and assessments in connection with the matters
specified above and in Item 1 of Part I of this report with respect to
environmental matters and other litigation and administrative proceedings that
could have a material effect on the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY STOCK AND RELATED SECURITY
HOLDER MATTERS
(a) MARKET INFORMATION
The Corporation's Common Stock is listed on the New York Stock Exchange
and the Pacific Stock Exchange and also is traded on the London,
Frankfurt, and Swiss exchanges.
The following table sets forth, for the periods indicated, the high
and low sales prices of the Common Stock as reported in the consolidated
reporting system for the New York Stock Exchange Composite Transactions:
<TABLE>
<CAPTION>
Quarter 1995 1994
------- ------------------ ------------------
<S> <C> <C>
January to March .. $29-5/8 to $22-7/8 $22-3/8 to $19-1/4
April to June ..... $33 to $27-1/2 $21 to $17
July to September . $34-5/8 to $30-1/4 $23-1/8 to $17
October to December $38-1/8 to $32-1/8 $25-3/4 to $21-1/8
</TABLE>
(b) HOLDERS OF THE CORPORATION'S CAPITAL STOCK
As of February 20, 1996, there were 18,811 holders of record of the
Corporation's Common Stock. As of February 20, 1996, there was one holder
of record of the Corporation's Series B Cumulative Convertible Preferred
Stock (the Series B Preferred Stock).
(c) DIVIDENDS
The Corporation has paid consecutive quarterly dividends on its Common
Stock since 1937. Future dividends necessarily will depend upon the
Corporation's earnings, financial condition, and other factors, and the
payment of dividends on the outstanding shares of Series B Preferred
Stock. The Credit Facility does not restrict the Corporation's ability
to pay regular dividends in the ordinary course of business on the Common
Stock or the Series B Preferred Stock. In the event that dividends on the
Series B Preferred Stock are in arrears, thereafter and until all accrued
but unpaid dividends on the shares of Series B Preferred Stock shall have
been paid in full, the Corporation may not declare or pay dividends on,
make any other distributions on, or redeem or purchase or otherwise
acquire for consideration, any shares of Common Stock.
Quarterly dividends per common share for the most recent two years
are as follows:
<TABLE>
<CAPTION>
Quarter 1995 1994
------- ---- ----
<S> <C> <C>
January to March $.10 $.10
April to June .10 .10
July to September .10 .10
October to December .10 .10
---- ----
$.40 $.40
==== ====
</TABLE>
In February 1996, the Board of Directors approved a 20% increase in
the quarterly cash dividend per common share, from $.10 to $.12 per share,
beginning in March 1996.
During each of the quarters in 1995 and 1994, the Corporation
declared a dividend of approximately $2.9 million on its shares of Series
B Preferred Stock. During the most recent two years, no other dividends
were declared or paid in respect of shares of preferred stock of the
Corporation.
Common Stock: 150,000,000 authorized, $.50 par value;
86,447,588 shares and 84,688,803 shares
outstanding as of December 31, 1995 and
1994, respectively.
Preferred Stock: 5,000,000 authorized, without par value;
150,000 shares of Series B Cumulative
Convertible Preferred Stock outstanding
as of December 31, 1995 and 1994.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
FIVE-YEAR SUMMARY
(Millions of Dollars Except Per Share Data)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995(a) 1994 1993(b) 1992(c) 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $4,766.1 $4,365.2 $4,121.5 $4,045.7 $3,952.6
Earnings (loss) from
continuing operations 216.5 89.9 64.1 (95.3) 16.1
Earnings from discontinued
operations (d) 38.4 37.5 31.1 22.0 36.9
Extraordinary items (30.9) -- -- (22.7) --
Cumulative effects of changes
in accounting principle -- -- (29.2) (237.6) --
Net earnings (loss) 224.0 127.4 66.0 (333.6) 53.0
Earnings (loss) per common and
common equivalent share:
Primary:
Continuing operations 2.33 .93 .63 (1.40) .21
Discontinued operations .44 .44 .37 .29 .60
Extraordinary items (.35) -- -- (.30) --
Cumulative effects of
accounting changes -- -- (.35) (3.11) --
Net earnings (loss) 2.42 1.37 .65 (4.52) .81
Assuming full dilution:
Continuing operations 2.29 .93 .63 (1.40) .21
Discontinued operations .41 .44 .37 .29 .60
Extraordinary items (.33) -- -- (.30) --
Cumulative effects of
accounting changes -- -- (.35) (3.11) --
Net earnings (loss) 2.37 1.37 .65 (4.52) .81
Total assets 5,545.3 5,264.3 5,166.8 5,295.0 5,456.8
Long-term debt 1,704.5 1,723.2 2,069.2 2,108.5 2,625.8
Cash dividends per
common share .40 .40 .40 .40 .40
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings from continuing operations for 1995 include a $65.0 million
reduction in income tax expense as a result of the reversal of a portion of
the Corporation's deferred tax asset valuation allowance. In 1995, the
Corporation recognized a $30.9 million extraordinary loss from
extinguishment of debt, net of income tax benefit of $2.6 million.
(b) Effective January 1, 1993, the Corporation changed its method of accounting
for postemployment benefits. In addition, earnings from continuing
operations for 1993 include a restructuring credit of $6.3 million before
tax ($.2 million after tax).
(c) Effective January 1, 1992, the Corporation changed its methods of accounting
for income taxes and postretirement benefits other than pensions. In 1992,
the Corporation recognized a $22.7 million extraordinary loss from
extinguishment of debt. In addition, earnings from continuing operations for
1992 included a restructuring charge of $142.4 million before tax ($134.7
million after tax).
(d) Earnings from discontinued operations represent the earnings, net of
applicable income taxes, of the Corporation's discontinued PRC segment. The
earnings of the discontinued PRC segment do not reflect any charge for
interest allocated to that segment by the Corporation. For additional
information about the discontinued PRC segment, see the discussion under the
caption "Discontinued Operations" included in Item 1 of Part I of this
report and Note 2 of Notes to Consolidated Financial Statements included in
Item 8 of Part II of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Corporation reported net earnings of $224.0 million or $2.37 per share on a
fully diluted basis for the year ended December 31, 1995, compared to net
earnings of $127.4 million or $1.37 per share on a fully diluted basis in 1994.
Excluding the effects of a $65.0 million decrease in income tax expense as a
result of the Corporation's reduction in its deferred tax asset valuation
allowance in 1995, earnings from continuing operations increased from $89.9
million ($.93 per share on a fully diluted basis) in 1994 to $151.5 million
($1.60 per share on a fully diluted basis) in 1995. This improvement in earnings
from continuing operations in 1995 over 1994 was a function of strong operating
results, a lower effective tax rate, and lower interest expense. No interest
expense was allocated by the Corporation to its discontinued operations.
On December 13, 1995, the Corporation announced that it had reached a
definitive agreement to sell PRC Inc., the remaining business in its information
technology and services segment. The sale of PRC Inc. is expected to be
completed in the first quarter of 1996.
During 1995, the Corporation generated free cash flow (cash available for
debt reduction prior to the effects of cash proceeds received from sales of
businesses, equity offerings, and sales of receivables) of $34.7 million
compared to free cash flow of $116.1 million in 1994. The decrease in free cash
flow in 1995 from the 1994 level was primarily the result of higher working
capital levels and capital expenditures in 1995 than in 1994 when the
Corporation experienced particularly strong free cash flow from the initial
effects of more stringent working capital management.
The combination of strong operating results and the proceeds received from
sales of portions of the discontinued information technology and services
segment in 1995 enabled the Corporation to reduce its ratio of debt to total
capitalization from 67% at December 31, 1994, to 62% at December 31, 1995.
DISCONTINUED OPERATIONS
On December 13, 1995, the Corporation announced that it had signed a definitive
agreement to sell PRC Inc., the remaining business in its information technology
and services segment, for $425.0 million. The sale is expected to be completed
in the first quarter of 1996. A net gain on the sale of PRC Inc., estimated at
$80.0 to $90.0 million, will be recognized upon completion of the sale. Proceeds
from the sale of PRC Inc. will be used to reduce debt.
The Corporation sold PRC Realty Systems, Inc. (RSI) and PRC Environmental
Management, Inc. (EMI) earlier in 1995 for aggregate proceeds of approximately
$100 million. Together, PRC Inc., RSI, and EMI comprised the Corporation's
information technology and services (PRC) segment.
The Corporation acquired PRC through its acquisition of Emhart Corporation
in April 1989. The sale of PRC will allow the Corporation to reduce its debt
level and concentrate on its more strategic businesses.
Operating results, net assets, and cash flows of the discontinued PRC
operations have been segregated in the accompanying Consolidated Financial
Statements. Net earnings of the discontinued PRC segment were $38.4 million
($.41 per share on a fully diluted basis) in 1995, $37.5 million ($.44 per share
on a fully diluted basis) in 1994, and $31.1 million ($.37 per share on a fully
diluted basis) in 1993 on revenues of $800.1 million, $883.1 million and $760.7
million, respectively.
CONTINUING OPERATIONS
REVENUES
The following chart sets forth an analysis of the consolidated changes in
revenues for the years ended December 31, 1995, December 31, 1994, and December
31, 1993.
ANALYSIS OF CHANGES IN REVENUES OF CONTINUING OPERATIONS
For the Year Ended December 31,
(Dollars in Millions) 1995 1994 1993
------- ------- -------
Total revenues ........................... $ 4,766 $ 4,365 $ 4,122
Unit volume - existing (1) ............... 6% 8% 5%
- disposed (2) ............... --% (3)% --%
Price .................................... 1% 1% 1%
Currency ................................. 2% --% (4)%
------- ------- -------
Change in total revenues ................. 9% 6% 2%
======= ======= =======
In the above chart and throughout the remainder of this discussion, the
following definitions apply:
(1) Existing - Reflects the change in unit volume for businesses where
period-to-period comparability exists.
(2) Disposed - Reflects the change in total revenues from continuing operations
for businesses that were included in prior year results, but subsequently
have been sold.
Total revenues for the year ended December 31, 1995, were $4.8 billion,
which represents a 9% increase over 1994 revenues of $4.4 billion. Despite an
increasingly difficult retail environment throughout 1995, the Corporation
achieved 6% growth in existing unit volume in 1995 over the level experienced in
1994. The 1995 growth in unit volume was experienced both in the Consumer and
Home Improvement Products (Consumer) segment and in the Commercial and
Industrial Products (Commercial) segment.
Total revenues for the year ended December 31, 1994, were $4.4 billion,
which represented a 6% increase over 1993 revenues of $4.1 billion. During 1994,
existing unit volume grew by 8% compared to 5% growth in 1993, due primarily to
revenue growth in the Consumer segment.
EARNINGS
Operating income from continuing operations as a percentage of revenues was 8.9%
for 1995 compared to 8.1% and 7.3% for 1994 and 1993, respectively.
Gross margin as a percentage of revenues in 1995 was 36.7% compared to
36.6% for 1994 and 35.5% for 1993. Gross margin in 1995 was slightly higher than
the prior year level. The impact of increased manufacturing productivity and
cost reduction initiatives during 1995, however, was substantially offset by
rising commodity costs and by reduced gross margin in the European
operations. Gross margin in 1995 was adversely affected by a softening European
retail environment in the fourth quarter of 1995 and by residual inefficiencies
in European operations associated with the closure of two manufacturing
facilities since mid 1994. The improvement in gross margin during 1994 over the
1993 level stemmed from improvements in the Consumer segment, which resulted
primarily from increased manufacturing productivity, the implementation of cost
reduction initiatives, and the realization of the leverage effects of higher
sales volume on fixed and semi-fixed costs.
Marketing and administrative expenses as a percentage of revenues were
27.8% for 1995 compared to 28.5% for 1994 and 28.2% for 1993. The improvement in
1995 compared to 1994 was the result of cost reduction initiatives and the
leverage of fixed and semi-fixed costs over a higher sales base.
Marketing and administrative expenses as a percentage of revenues increased by
.3% from 28.2% for 1993 to 28.5% for 1994 as a result of higher promotion costs
in 1994, partially offset by the effects on 1994 results of cost reduction
initiatives and the leverage of fixed and semi-fixed costs over a higher sales
base.
Net interest expense (interest expense less interest income) was $184.4
million in 1995 compared to $187.9 million in 1994 and $171.8 million in 1993.
Net interest expense for 1995 was below the 1994 level as a result of reduced
borrowing levels during the year, partially offset by higher interest rates on
variable rate debt. Higher interest rates during 1994, partially offset by
reduced borrowing levels in that year, caused an increase in net interest
expense in 1994 over the 1993 level.
Other expense for 1995, 1994, and 1993 primarily included costs
associated with the sale of receivables programs.
As more fully described in Note 12 of Notes to Consolidated Financial
Statements, a full valuation allowance was provided on net deferred tax assets
in the United States at December 31, 1994, based on the Corporation's history of
taxable earnings (losses) over the past several years and the volatility of
comprehensive taxable earnings (losses) in the United States due to foreign
exchange contracts. In addition, a full valuation allowance on net tax assets in
certain foreign taxing jurisdictions was provided at December 31, 1994, based on
the history of taxable earnings (losses), the tax carryforward periods, and
projected earnings. During 1995, the Corporation reversed a portion of the
deferred tax asset valuation allowance based on its projection of future taxable
earnings in the United States, including the impact of the pending sale of PRC
Inc. The effect of this reduction in the deferred tax asset valuation allowance
was to decrease 1995 income tax expense by $65.0 million. An analysis of taxes
on earnings is included in Note 12 of Notes to Consolidated Financial
Statements.
Excluding the effects of the $65.0 million income tax benefit that resulted
from the reduction of its deferred tax asset valuation allowance in 1995, the
Corporation's reported tax rate on continuing operations was 33% in 1995
compared to a rate of 40% in 1994 and 48% in 1993. Contributing to the lower tax
rate for 1995 compared to 1994 and 1993 were higher taxable earnings in the
United States and a change in mix of operating income outside the United States
from those subsidiaries in higher rate tax jurisdictions to subsidiaries
in lower rate tax jurisdictions or subsidiaries that profit from the utilization
of net operating loss carryforwards.
BUSINESS SEGMENTS
The Corporation operates in two business segments: Consumer and Home Improvement
Products, including consumer and professional power tools and accessories,
household products, security hardware, outdoor products (composed of electric
lawn and garden tools and recreational products), plumbing products, and product
service; and Commercial and Industrial Products, including fastening systems and
glass container-making equipment.
REVENUES AND OPERATING INCOME BY BUSINESS SEGMENT
For the Year Ended
December 31,
(Millions of Dollars) 1995 1994 1993
------ ------ ------
Consumer and Home Improvement Products
Total revenues ...................................... $4,076 $3,774 $3,530
Operating income .................................... 348 294 216
Operating income excluding restructuring
costs or credits and goodwill amortization ....... 400 351 281
Commercial and Industrial Products
Total revenues ...................................... 690 591 592
Operating income .................................... 75 53 77
Operating income excluding restructuring
costs or credits and goodwill amortization ....... 92 69 73
Corporate and Eliminations
Operating income .................................... 3 5 10
------ ------ ------
Total revenues ...................................... $4,766 $4,365 $4,122
Total operating income .............................. $ 426 $ 352 $ 303
Total operating income excluding restruc-
turing credits and goodwill amortization ......... $ 495 $ 425 $ 364
------ ------ ------
CONSUMER AND HOME IMPROVEMENT PRODUCTS
The following chart sets forth an analysis of the change in revenues for the
year ended December 31, 1995, compared to the year ended December 31, 1994, by
geographic area within the Consumer segment.
United Total
States Europe Other Consumer
Existing unit volume .......... 7% 4% 4% 5%
Price ......................... --% --% 4% 1%
Currency ...................... --% 9% (5)% 2%
----- ----- ----- -----
Total Consumer ................ 7% 13% 3% 8%
===== ===== ===== =====
Total revenues in the Consumer segment for 1995 were 8% higher than in
1994, with existing unit volume up 5% over the 1994 level. Unit volume in the
United States increased by 7% in 1995 over the 1994 level as a result of strong
unit volume growth in the power tools and accessories and household products
businesses, partially offset by unit volume declines in the security hardware
and plumbing products businesses. The 1995 domestic growth in the power tools
and accessories business was the result of continued strong demand for DeWALT
professional power tools and accessories and the successful expansion in the
latter half of 1995 of a line of consumer products that use the VersaPak
interchangeable battery system. During 1995, the household products business
achieved a double-digit rate of growth in unit volume driven by the continued
success of the SnakeLight flexible flashlight, which was introduced late in
1994. The domestic security hardware and plumbing products businesses each
experienced modest unit volume declines from 1994 levels during 1995. The
decrease in unit volume of the security hardware business was due to inventory
reductions made by its customers in the latter part of 1995. While the plumbing
products business experienced unit volume growth in the second half of 1995 over
the corresponding period in 1994, that growth was not sufficient to cover
revenue shortfalls experienced in the first half of 1995 as a result of poor
weather conditions in the western United States and the resulting soft demand in
professional distribution channels.
Excluding the substantial positive effects of changes in foreign exchange
rates, revenues in the Corporation's Consumer businesses in Europe increased by
4% in 1995 over the 1994 level despite a weak fourth quarter in 1995. This 4%
increase was composed of increased sales of power tools and accessories,
household products, and security hardware, offset by decreased sales of outdoor
products. The growth in power tools and accessories revenues during 1995 over
the prior year level was attributable to strong sales of professional products,
partially offset by sales declines in consumer power tools and accessories. The
increased household products revenues in 1995 over the 1994 level was due
primarily to the introduction of the SnakeLight flexible flashlight in Europe
late in 1995. An extremely dry winter and late spring resulted in decreased
revenues for outdoor products in 1995 compared to 1994. Exclusive of positive
effects of changes in foreign exchange rates during 1995, some European
countries achieved results substantially higher than the prior year level, and
other countries, most notably, Germany, the United Kingdom, and France, reported
results essentially equal to or below the prior year level.
Excluding the negative effects of changes in foreign exchange rates
principally due to the Mexican peso devaluation, revenues in the Corporation's
Consumer businesses in other geographic regions increased by 8% in 1995 over the
1994 level. Revenue growth occurred in a number of countries, including Canada
and, most strongly, Brazil, while revenues in other countries were essentially
equal to or below the prior year level.
Operating income as a percentage of revenues for the Consumer segment was
8.6% in 1995 compared to 7.8% in 1994. Excluding the effect of goodwill
amortization, operating income as a percentage of revenues would have been 9.8%
in 1995 compared to 9.3% in 1994. The household products business achieved
strong improvement in operating income in 1995 as a result of increased sales
volume, higher manufacturing productivity, and actions taken by the business to
either improve profitability or drop certain lower margin products from its
product lines. Improved operating income levels in 1995 over 1994 in the
worldwide power tools and accessories business resulted principally from
substantial improvements in the domestic power tools and accessories business as
a result of increased sales volume, higher manufacturing productivity, and the
impact of cost reduction initiatives, partially offset by reduced profitability
in the European operations. A softening retail environment in the fourth quarter
of 1995, expenses incurred in connection with the reorganization of certain
European operations, and residual inefficiencies associated with the closure of
two manufacturing facilities since mid 1994 contributed to markedly lower
profitability in the Corporation's Consumer businesses in Europe in 1995 than in
1994. Cost reduction initiatives and manufacturing productivity improvements
resulted in increased operating income as a percentage of revenues during 1995
compared to 1994 in the security hardware business, despite year-to-year sales
declines in its domestic operations. A decline in operating income in the
plumbing products business in 1995 compared to 1994 resulted from reduced sales
and rising material costs.
Total revenues in the Consumer segment for 1994 were 7% higher than in
1993. Existing unit volume increased by 8% for 1994 over the 1993 level. Unit
volume in the United States for 1994 rose by 8% over the 1993 level. The
domestic unit volume increase resulted from double-digit rates of growth in the
power tools and accessories, security hardware, and plumbing products
businesses. This growth primarily stemmed from the continued strong demand for
the DeWALT professional power tools and accessories line, expanded distribution
of TITAN locksets, and the introduction of the Genesis series of
single-control faucets. Despite strong demand experienced late in 1994 when the
SnakeLight flexible flashlight and a new line of under-the-cabinet kitchen
appliances were introduced in the United States, unit volume in the household
products business was down slightly in 1994 compared to the prior year level.
The Corporation's consumer power tools business in Europe achieved moderate
unit volume growth in 1994 over the 1993 level. All major European power tool
markets achieved unit volume increases in 1994, except the United Kingdom and
Germany, where unit volumes were essentially flat compared to the prior year
levels. Unit volume in the European security hardware business was also
essentially flat compared to the prior year. Unit volume in the Far East and in
a number of consumer businesses in Latin America, including those in Brazil and
Mexico, increased substantially in 1994 over the 1993 level.
Operating income as a percentage of total revenues for the Consumer segment
was 7.8% for 1994 compared to 6.1% for 1993. Excluding the effects of goodwill
amortization and, for 1993, restructuring charges of $13.1 million, operating
income as a percentage of total revenues for the Consumer segment would have
been 9.3% for 1994 compared to 8.0% for 1993. The improvement in operating
income levels in 1994 over 1993 in the worldwide power tools and accessories
business as well as in the domestic security hardware and plumbing products
businesses was primarily the result of increased manufacturing productivity, the
implementation of cost reduction initiatives, and the effect of leveraging fixed
and semi-fixed costs over a higher sales base. Partially offsetting this
improvement was a decline in the operating income level in 1994 over 1993 for
the household products business. This decline was primarily the result of
increased promotion spending and administrative expenses in 1994, which were not
offset by revenue increases. In addition, operating income improved during 1994
for the golf club shafts business over the low level experienced in 1993 due to
shifting consumer preferences to graphite golf club shafts from steel golf club
shafts.
COMMERCIAL AND INDUSTRIAL PRODUCTS
The following chart sets forth an analysis of the change in revenues for the
year ended December 31, 1995, compared to the year ended December 31, 1994, by
geographic area within the Commercial segment.
United Total
States Europe Other Commercial
Existing unit volume ............. (2)% 24% 7% 10%
Price ............................ 1% 1% --% 1%
Currency ......................... --% 13% 7% 6%
----- ----- ----- -----
Total Commercial ................. (1)% 38% 14% 17%
===== ===== ===== =====
Total revenues in the Commercial segment for 1995 were 17% higher than the
1994 level. Excluding the substantial positive effects of changes in foreign
exchange rates, revenues in the Commercial segment were 11% higher in 1995 than
in the preceding year. The fastening systems (Fastening) business achieved solid
unit volume growth in 1995 over the prior year level, as softening industrial
sales in the United States and Europe were more than offset by increased
automotive sales in those regions. The glass container-making equipment (Glass)
business experienced a double-digit rate of growth in unit volume in 1995
compared to a weak 1994 despite declines in volumes in the United States. The
backlog of orders in the Glass business at December 31, 1995, was slightly above
the 1994 level, reflecting strong order levels experienced during 1995.
Operating income as a percentage of revenues for the Commercial segment was
10.8% in 1995 compared to 8.9% in 1994. Excluding the effects of goodwill
amortization, operating income as a percentage of revenues would have been 13.3%
in 1995 compared to 11.6% in 1994. The Fastening and Glass businesses each
experienced improvements in operating income percentages.
Total revenues in the Commercial segment for 1994 were essentially flat
compared to those of the prior year. An increase of 4% in existing unit volume,
coupled with the positive effects of pricing and changes in foreign exchange
rates, were offset by the effects of the sale of the remaining Dynapert business
late in 1993. A double-digit rate of increase in unit volume in the Fastening
business was partially offset by a volume decline in the Glass business.
Fastening business sales improved during 1994 in the United States and Europe,
primarily as a result of the strengthening of the automotive industry. Sales in
the Glass business were weak throughout all geographic areas during 1994.
Operating income as a percentage of total revenues for the Commercial
segment for 1994 was 8.9% compared to 12.9% for 1993. Excluding the effects of
goodwill amortization and, for 1993, restructuring credits of $19.4 million
relating to the gain on the sale of Dynapert's through-hole business, operating
income as a percentage of total revenues for the Commercial segment would have
been 11.6% for 1994 compared to 12.4% for 1993. Operating income improved in the
Fastening business in 1994 as a result of increased sales and cost reduction
initiatives, but was offset by an operating income decline in the Glass business
due to revenue shortfalls.
FINANCIAL CONDITION
Operating activities of continuing operations before the sale of receivables
generated cash of $316.9 million for the year ended December 31, 1995, compared
to $304.4 million for the year ended December 31, 1994. This increase in cash
generation during 1995 was primarily the result of increased profitability,
partially offset by increased working capital levels. The major cause of the
working capital increase at December 31, 1995, over the prior year level was an
increase in inventories. Despite a weakening retail environment, the Corporation
achieved sales growth of 6%, excluding the positive effects of changes in
foreign exchange rates, in the fourth quarter of 1995 over the corresponding
period in 1994. That growth, however, was below the Corporation's expectations,
and inventory levels at year end were higher than planned. While a portion of
the inventory increase is required to support new product initiatives and
manufacturing rationalizations that are underway and should further improve
manufacturing productivity, the Corporation will actively seek to reduce
inventory levels in 1996.
In addition to measuring its cash flow generation and usage based upon the
operating, investing, and financing classifications included in the Consolidated
Statement of Cash Flows, the Corporation monitors its free cash flow, a measure
commonly employed by bond rating agencies and banks. The Corporation defines
free cash flow as cash available for debt reduction (including short-term
borrowings), prior to the effects of cash proceeds received from sales of
divested businesses, equity offerings, and sales of receivables. Free cash flow,
a more inclusive measure of cash flow generation than cash flows from operating
activities included in the Consolidated Statement of Cash Flows, considers items
such as cash used for capital expenditures and dividends, as well as net cash
inflows or outflows from hedging activities. During the year ended December 31,
1995, the Corporation generated free cash flow of $34.7 million compared to
$116.1 million of free cash flow generated in 1994. The decrease in free cash
flow in 1995 from the 1994 level was primarily the result of higher working
capital levels and capital expenditures in 1995 than in 1994 when the
Corporation experienced particularly strong free cash flow from the initial
effects of more stringent working capital management.
The Corporation expects to reduce debt by approximately $400.0 million in
the first quarter of 1996 upon receipt of the proceeds from the sale of PRC Inc.
Had the sale of PRC Inc. closed prior to December 31, 1995 and a net gain of
$80.0 million been recognized upon the sale, the Corporation's ratio of debt to
total capitalization would have decreased from 62.3% at December 31, 1995, to
approximately 57%.
The total amount of receivables sold under the Corporation's sale of
receivables program at December 31, 1995, was $230.0 million compared to $244.0
million at December 31, 1994. The sale of receivables program provides for a
seasonal expansion of the amount of receivables that may be sold, from $200.0
million to $275.0 million during the period from October 1 through January 31.
The Corporation's liquidity facility, which supports the sale of receivables
program, expires in May 1996. The Corporation expects to be able to extend this
facility beyond December 1996.
Excluding amounts related to discontinued operations, investing activities
for 1995 used cash of $195.5 million compared to $205.0 million of cash used in
1994. Capital expenditures of $203.1 million during 1995 exceeded the 1994 level
of $181.5 million. During 1995, approximately 91% of the capital expenditures
were in the Consumer segment, primarily in support of new product initiatives
and productivity enhancements. The Corporation expects capital spending in 1996
to approximate the 1995 level.
The Corporation actively seeks to identify opportunities to improve its
cost structure. These opportunities may involve the closure of manufacturing
facilities or the reorganization of other operations.
The ongoing costs of compliance with existing environmental laws and
regulations have not had, nor are they expected to have, a material adverse
effect on the Corporation's capital expenditures or financial position.
The Corporation has a number of manufacturing sites throughout the world
and sells its products in over 100 countries. As a result, the Corporation is
exposed to movements in the exchange rates of various currencies against the
United States dollar. The major foreign currencies in which the Corporation has
foreign currency risk are the pound sterling, deutsche mark, Dutch guilder,
Canadian dollar, Swedish krona, Japanese yen, French franc, Italian lira,
Australian dollar, Mexican peso, and Brazilian real.
Assets and liabilities of the Corporation's subsidiaries located outside
the United States are translated at rates of exchange at the balance sheet date,
as more fully explained in Note 1 of Notes to Consolidated Financial Statements.
The resulting translation adjustments are included in equity adjustment from
translation, a separate component of stockholders' equity. During 1995,
translation adjustments, recorded in the equity adjustment from translation
component of stockholders' equity, increased stockholders' equity by $44.9
million compared to an increase of $98.7 million in 1994.
As more fully explained in Note 10 of Notes to Consolidated Financial
Statements, the Corporation historically has hedged a portion of its net
investment in foreign subsidiaries. During 1995, the Corporation decided to
limit the future hedging of its net investment in foreign subsidiaries. This
action may increase the volatility of reported equity in the future, but will
result in more predictable cash flows from hedging activities. During 1994, the
Corporation elected to hedge a portion, generally limited to tangible net worth,
of its foreign subsidiaries. Prior to 1994, the Corporation operated under a
full hedge policy, hedging the net assets, including goodwill, of its foreign
subsidiaries.
In hedging the exposure to foreign currency fluctuations on its net
investments in subsidiaries located outside the United States, the Corporation
has entered into various currency forward contracts and options. These hedging
activities generate cash inflows and outflows that offset the translation
adjustment. During 1995, these activities netted to a cash outflow of $4.7
million compared to a cash outflow of $35.5 million in 1994. The corresponding
gains and losses on these hedging activities were recorded in the equity
adjustment from translation component of stockholders' equity. Also included in
the equity adjustment from translation component were the costs of maintaining
the hedge portfolio of foreign exchange contracts. These hedge costs decreased
stockholders' equity by $8.7 million and $33.0 million in 1995 and 1994,
respectively.
As more fully described in Note 10 of Notes to Consolidated Financial
Statements, the Corporation seeks to minimize through its foreign currency
hedging activities the risk that its United States dollar cash flows resulting
from product sales outside the United States will be affected by changes in
exchange rates. Foreign currency commitment and transaction exposures generally
are an integral part of the responsibility of management of the Corporation's
individual operating units. These management responses to foreign exchange
movements vary. For example, pricing actions, changes in cost structures, and
changes in hedging strategies may all be effective responses to a change in
exchange rates.
In late 1994, the Mexican peso was severely devalued. Because the
Corporation's Mexican peso exposure was hedged, this devaluation did not have a
significant effect on earnings in 1994. While the currency situation in Mexico
had an adverse effect on Mexican revenues in 1995, the effect on operating
income was substantially offset by pricing actions and changes in cost
structures and by the lower relative costs of Mexican production during 1995.
Financing activities for 1995 used cash of $127.0 million compared to
$210.9 million of cash used in 1994. During 1995, the Corporation recognized a
$30.9 million extraordinary loss, $26.5 million of which was a non-cash charge,
as a result of the early redemption of its Emhart subsidiary's 9.25% sinking
fund debentures in the aggregate principal amount of $150.0 million. This
extraordinary loss consisted of the write-off of the associated debt discount,
plus premiums and costs associated with the redemption, net of related income
tax benefits.
As more fully explained in Note 10 of Notes to Consolidated Financial
Statements, the Corporation seeks to issue debt opportunistically, whether at
fixed or variable rates, at the lowest possible costs. Based upon its assessment
of the future interest rate environment and its desired variable rate debt to
total debt ratio, the Corporation may later convert such debt from fixed to
variable or from variable to fixed interest rates, or from United States
dollar-based rates to rates based upon another currency, through the use of
interest rate swap agreements. In addition, the Corporation may enter into
interest rate cap agreements in order to limit the effects of increasing
interest rates on a portion of its variable rate debt.
In order to meet its goal of fixing or limiting interest costs, the
Corporation maintains a portfolio of interest rate hedge instruments. These
interest rate hedges could change the mix of fixed and variable rate debt as
actual interest rates move outside the ranges covered by these instruments. The
Corporation's variable rate debt to total debt ratio, after taking interest rate
hedges into account, was 43% at December 31, 1995, compared to 34% at December
31, 1994, and 46% at December 31, 1993. At December 31, 1995, average debt
maturity was 4.0 years compared to 4.9 years at December 31, 1994, and 4.8 years
at December 31, 1993.
The Corporation's unsecured revolving credit facility (the Credit Facility)
includes certain covenants that require the Corporation to meet specified
minimum cash flow coverage and maximum leverage (debt to equity) ratios during
the term of the loan, as more fully explained in Note 9 of Notes to Consolidated
Financial Statements. The Corporation's leverage ratio during the life of the
Credit Facility may not exceed 2.2 at the end of any fiscal quarter. The cash
flow coverage ratio calculated as of the end of each fiscal quarter must be
greater than 2.5 for any 12-month period. At December 31, 1995, the Corporation
was well within the limits specified for the leverage and cash flow coverage
ratios and was in compliance with all other covenants and provisions of the
Credit Facility.
The Corporation began the process of negotiating a replacement to the
Credit Facility during the first quarter of 1996. The replacement facility is
not expected to contain terms more stringent than those set forth in the Credit
Facility and is expected to expire in the year 2001. The Corporation expects to
continue to meet the covenants imposed by the Credit Facility (or any
replacement facility) over the next 12 months.
The Corporation will continue to have cash requirements to support seasonal
working capital needs and capital expenditures, to pay interest, and to service
debt. In order to meet these cash requirements, the Corporation intends to use
internally generated funds and to borrow under the Credit Facility or under
short-term borrowing facilities. Management believes that cash generated from
these sources will be adequate to meet the Corporation's cash requirements over
the next 12 months.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Corporation and its
subsidiaries are included herein as indicated below:
Consolidated Financial Statements
Consolidated Statement of Earnings
- years ended December 31, 1995, 1994, and 1993
Consolidated Balance Sheet
- December 31, 1995 and 1994
Consolidated Statement of Cash Flows - years ended December 31, 1995, 1994,
and 1993
Notes to Consolidated Financial Statements
Report of Independent Auditors
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $4,766.1 $4,365.2 $4,121.5
Cost of goods sold 3,016.7 2,769.7 2,657.4
Marketing and administrative expenses 1,323.3 1,243.6 1,161.4
- ----------------------------------------------------------------------------------------------------------------------------
Operating Income 426.1 351.9 302.7
Interest expense (net of interest income of $8.6
for 1995, $6.9 for 1994, and $8.2 for 1993) 184.4 187.9 171.8
Other expense 16.2 15.4 7.4
- ----------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations Before Income Taxes 225.5 148.6 123.5
Income taxes 9.0 58.7 59.4
- ----------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations 216.5 89.9 64.1
Earnings from discontinued operations (net of income taxes of
$8.7 for 1995, $4.0 for 1994, and $1.3 for 1993) 38.4 37.5 31.1
- ----------------------------------------------------------------------------------------------------------------------------
Earnings Before Extraordinary Item and Cumulative Effect
of Change in Accounting Principle 254.9 127.4 95.2
Extraordinary loss from early extinguishment of debt
(net of income tax benefit of $2.6) (30.9) -- --
Cumulative effect to January 1, 1993, of change in
accounting principle for postemployment benefits -- -- (29.2)
- ----------------------------------------------------------------------------------------------------------------------------
Net Earnings $ 224.0 $ 127.4 $ 66.0
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
Net Earnings Applicable to Common Shares $ 212.4 $ 115.8 $ 54.4
============================================================================================================================
Net Earnings Per Common and Common Equivalent Share:
- ----------------------------------------------------------------------------------------------------------------------------
Primary:
Earnings from continuing operations $ 2.33 $ .93 $ .63
Earnings from discontinued operations .44 .44 .37
Extraordinary loss from early extinguishment of debt (.35) -- --
Cumulative effect adjustment for postemployment benefits -- -- (.35)
- ----------------------------------------------------------------------------------------------------------------------------
Primary Earnings Per Share $ 2.42 $ 1.37 $ .65
============================================================================================================================
Shares Used in Computing Primary Earnings Per Share
(in Millions) 87.9 84.3 83.6
============================================================================================================================
Assuming Full Dilution:
Earnings from continuing operations $ 2.29 $ .93 $ .63
Earnings from discontinued operations .41 .44 .37
Extraordinary loss from early extinguishment of debt (.33) -- --
Cumulative effect adjustment for postemployment benefits -- -- (.35)
- ----------------------------------------------------------------------------------------------------------------------------
Fully Diluted Earnings Per Share $ 2.37 $ 1.37 $ .65
============================================================================================================================
Shares Used in Computing Fully Diluted
Earnings Per Share (in Millions) 94.7 84.3 83.6
============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<TABLE>
CONSOLIDATED BALANCE SHEET
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<CAPTION>
December 31,
- -------------------------------------------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 131.6 $ 65.0
Trade receivables, less allowances of $43.1 for 1995 and $38.2 for 1994 651.3 635.1
Inventories 855.7 700.5
Net assets of discontinued operations 302.4 333.1
Other current assets 165.6 110.1
- -------------------------------------------------------------------------------------------------------------------
Total Current Assets 2,106.6 1,843.8
- -------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment 866.8 822.7
Goodwill 2,142.0 2,194.7
Other Assets 429.9 403.1
- -------------------------------------------------------------------------------------------------------------------
$ 5,545.3 $ 5,264.3
===================================================================================================================
Liabilities and Stockholders' Equity
Short-term borrowings $ 599.2 $ 549.0
Current maturities of long-term debt 48.0 121.1
Trade accounts payable 396.7 284.1
Other accrued liabilities 743.0 757.5
- -------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,786.9 1,711.7
- -------------------------------------------------------------------------------------------------------------------
Long-Term Debt 1,704.5 1,723.2
Deferred Income Taxes 52.8 45.4
Postretirement Benefits 307.8 328.2
Other Long-Term Liabilities 270.1 286.4
Stockholders' Equity
Convertible preferred stock (outstanding: December 31, 1995
and 1994--150,000 shares) 150.0 150.0
Common stock (outstanding: December 31, 1995--86,447,588 shares,
December 31, 1994--84,688,803 shares) 43.2 42.3
Capital in excess of par value 1,084.5 1,049.1
Retained earnings 202.6 24.6
Equity adjustment from translation (57.1) (96.6)
- -------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 1,423.2 1,169.4
- -------------------------------------------------------------------------------------------------------------------
$ 5,545.3 $ 5,264.3
===================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net earnings $ 224.0 $ 127.4 $ 66.0
Adjustments to reconcile net earnings to cash flow from operating
activities of continuing operations:
Non-cash charges and credits:
Depreciation and amortization 206.7 195.4 182.4
Deferred income taxes (46.1) 8.9 18.8
Extraordinary item 26.5 -- --
Cumulative effect of change in accounting principle -- -- 29.2
Other 19.5 1.9 (6.7)
Earnings of discontinued operations (38.4) (37.5) (31.1)
Changes in selected working capital items:
Trade receivables 14.8 (83.5) (42.0)
Inventories (138.7) 31.9 (15.6)
Trade accounts payable 108.1 58.3 9.5
Other assets and liabilities (59.5) 1.6 (113.3)
Net (decrease) increase in receivables sold (14.0) 26.0 6.5
- ---------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities of continuing operations 302.9 330.4 103.7
Cash flow from operating activities of discontinued operations 1.5 79.3 32.3
- ---------------------------------------------------------------------------------------------------------------------
Cash Flow From Operating Activities 304.4 409.7 136.0
- ---------------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from partial sale of discontinued operations 95.5 -- --
Investing activities of discontinued operations (12.9) (15.5) (18.4)
Proceeds from disposal of assets and businesses 12.3 12.0 113.4
Capital expenditures (203.1) (181.5) (190.3)
Cash inflow from hedging activities 485.6 1,070.4 1,096.6
Cash outflow from hedging activities (490.3) (1,105.9) (1,085.1)
- ---------------------------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities (112.9) (220.5) (83.8)
- ---------------------------------------------------------------------------------------------------------------------
Cash Flow Before Financing Activities 191.5 189.2 52.2
Financing Activities
Net increase (decrease) in short-term borrowings 47.2 217.4 (14.1)
Proceeds from long-term debt (including revolving credit facility) 274.0 1,226.7 2,008.3
Payments on long-term debt (including revolving credit facility) (425.2) (1,622.8) (1,989.4)
Issuance of equity interest in a subsidiary -- 4.3 4.4
Issuance of common stock 23.0 8.8 6.4
Cash dividends (46.0) (45.3) (45.1)
- ---------------------------------------------------------------------------------------------------------------------
Cash Flow From Financing Activities (127.0) (210.9) (29.5)
Effect of exchange rate changes on cash 2.1 5.4 (7.1)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 66.6 (16.3) 15.6
Cash and cash equivalents at beginning of year 65.0 81.3 65.7
- ---------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 131.6 $ 65.0 $ 81.3
=====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Black & Decker Corporation and Subsidiaries
NOTE 1: SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The Consolidated Financial Statements include the
accounts of the Corporation and its subsidiaries. Intercompany transactions have
been eliminated.
RECLASSIFICATIONS: The accompanying Consolidated Financial Statements for 1994
and 1993 have been reclassified to identify separately the results of
operations, net assets, and cash flows of the Corporation's discontinued
information technology and services segment (see Note 2). In addition, certain
prior year's amounts in the Consolidated Financial Statements have been
reclassified to conform to the presentation used in 1995.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results inevitably will differ from those estimates,
and such differences may be material to the financial statements.
FOREIGN CURRENCY TRANSLATION: The financial statements of subsidiaries
outside the United States, except those subsidiaries located in highly
inflationary economies, are generally measured using the local currency as the
functional currency. Assets, including goodwill, and liabilities of these
subsidiaries are translated at the rates of exchange at the balance sheet date.
The resultant translation adjustments are included in equity adjustment from
translation, a separate component of stockholders' equity. Income and expense
items are translated at average monthly rates of exchange. Gains and losses from
foreign currency transactions of these subsidiaries are included in net
earnings. For subsidiaries operating in highly inflationary economies, gains
and losses from balance sheet translation adjustments are included in net
earnings.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents includes cash on hand,
demand deposits, and short-term investments with original maturities of three
months or less.
INVENTORIES: Inventories are stated at the lower of cost or market. The
cost of United States inventories is based primarily on the last-in, first-out
(LIFO) method; all other inventories are based on the first-in, first-out (FIFO)
method.
PROPERTY AND DEPRECIATION: Property, plant and equipment is stated at
cost. Depreciation is computed generally on the straight-line method for
financial reporting purposes and on accelerated and straight-line methods for
tax reporting purposes.
GOODWILL AND OTHER INTANGIBLES: Goodwill and other intangibles are amortized
on the straight-line method over periods ranging up to 40 years. On a periodic
basis, the Corporation estimates the future undiscounted cash flows of the
businesses to which goodwill relates in order to ensure that the carrying value
of goodwill has not been impaired.
PRODUCT DEVELOPMENT COSTS: Costs associated with the development of new products
and changes to existing products are charged to operations as incurred. Product
development costs were $96.1 million in 1995, $89.2 million in 1994, and
$90.6 million in 1993.
ADVERTISING AND PROMOTION: All costs associated with advertising and promoting
products are expensed in the year incurred. Advertising and promotion expense,
including expense of consumer rebates, was $265.1 million in 1995, $249.9
million in 1994, and $209.3 million in 1993.
POSTRETIREMENT BENEFITS: The Corporation and its subsidiaries have pension
plans covering substantially all of their employees, who are primarily covered
by non-contributory defined benefit plans. The plans are funded in conformity
with the funding requirements of applicable government regulations. Generally,
benefits are based on age, years of service, and the level of compensation
during the final years of employment. Prior service costs for defined benefit
plans are generally amortized over the estimated remaining service periods of
employees.
Certain employees are covered by defined contribution plans. The
Corporation's contributions to the plans are based on a percentage of employee
compensation or employee contributions. The plans are funded on a current basis.
In addition to pension benefits, the Corporation provides certain
postretirement medical, dental, and life insurance benefits, principally to
certain United States employees. Retirees in other countries are generally
covered by government-sponsored programs.
The Corporation uses the corridor approach in the valuation of defined
benefits plans and other postretirement benefits. The corridor approach defers
all actuarial gains and losses resulting from variances between actual results
and economic estimates or actuarial assumptions. For defined benefit pension
plans, these unrecognized gains and losses are amortized when the net gains and
losses exceed 10% of the greater of the market-related value of plan assets or
the projected benefit obligation at the beginning of the year. For other
postretirement benefits, amortization occurs when the net gains and losses
exceed 10% of the accumulated postretirement benefit obligation at the beginning
of the year. The amount in excess of the corridor is amortized over the average
remaining service period to retirement date of active plan participants or, for
retired participants, the average remaining life expectancy.
DERIVATIVE FINANCIAL INSTRUMENTS: Derivative financial instruments are used
by the Corporation principally in the management of its interest rate and
foreign currency exposures.
Amounts to be paid or received under interest rate swap agreements are
accrued as interest rates change and are recognized over the life of the swap
agreements as an adjustment to interest expense. The related amounts payable to,
or receivable from, the counterparties are included in other accrued
liabilities. The fair value of the swap agreements is not recognized in the
Consolidated Financial Statements, since they are accounted for as hedges.
The costs of interest rate cap agreements are included in interest expense
ratably over the lives of the agreements. Payments to be received as a result of
the cap agreements are accrued as a reduction of interest expense. The
unamortized costs of the cap agreements are included in other assets.
In the case of an early termination of an interest rate swap or cap, gains
or losses resulting from the early termination are deferred and amortized as an
adjustment to the yield of the related debt instrument over the remaining period
originally covered by the terminated swap or cap.
Gains and losses on hedges of net investments are not included in the
Consolidated Statement of Earnings, but are reflected in the Consolidated
Balance Sheet in the equity adjustment from translation component of
stockholders' equity, with the related amounts payable to or due from the
counterparties included in other liabilities or other assets.
Gains and losses on foreign currency transaction hedges are recognized in
income and offset the foreign exchange gains and losses on the underlying
transactions. Gains and losses of foreign currency firm commitment hedges are
deferred and included in the basis of the transactions underlying the
commitments.
STOCK-BASED COMPENSATION: The Financial Accounting Standards Board (FASB)
recently issued Statement of Financial Accounting Standards (SFAS) No.123,
"Accounting for Stock-Based Compensation." This new standard encourages, but
does not require, companies to recognize compensation expense for grants of
stock, stock options, and other equity instruments based on a fair-value method
of accounting.
Companies that do not choose to adopt the new expense recognition rules of
SFAS No. 123 will continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion (APBO) No. 25, but will be required to
provide pro forma disclosures of the compensation expense determined under the
fair-value provisions of SFAS No. 123, if material. APBO No. 25 requires no
recognition of compensation expense for most of the stock-based compensation
arrangements provided by the Corporation, namely, broad-based employee stock
purchase plans and option grants where the exercise price is equal to the market
price at the date of grant.
The Corporation is required to adopt either the recognition or the
disclosure provisions of SFAS No. 123 by no later than January 1, 1997. The
Corporation expects to continue to follow the accounting provisions of APBO No.
25 for stock-based compensation and to furnish the pro forma disclosures
required under SFAS No. 123, if material.
IMPAIRMENT OF LONG-LIVED ASSETS: The FASB recently issued SFAS No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which the Corporation is required to adopt effective January 1,
1996. SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles held and used by a company be reviewed for possible impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. SFAS No. 121 also requires that long-lived
assets and certain identifiable intangibles held for sale, other than those
related to discontinued operations, be reported at the lower of carrying amount
or fair value less cost to sell. The Corporation does not expect the effect of
its adoption of SFAS No.121 to be material.
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary earnings per common
and common equivalent share are computed by dividing net earnings, after
deducting preferred stock dividends, by the weighted average number of common
shares outstanding during each year plus, for 1995, the incremental shares that
would have been outstanding under certain employee benefit plans and upon the
assumed exercise of dilutive stock options. For 1994 and 1993, these incremental
shares were immaterial and, accordingly, were not considered in the calculation
of primary earnings per share.
In 1995, fully diluted earnings per share are computed by dividing net
earnings by the weighted average number of common shares outstanding during 1995
plus the incremental shares that would have been outstanding under certain
employee benefit plans and upon the assumed exercise of dilutive stock options
and conversion of the preferred shares. In 1994 and 1993, conversion of the
preferred shares would have been anti-dilutive and, therefore, was not
considered in the computation of fully diluted earnings per share. Also, in 1994
and 1993, the incremental shares that would have been outstanding under certain
employee benefit plans and upon the assumed exercise of dilutive stock options
were immaterial and, accordingly, were not considered in the calculation of
fully diluted earnings per share. As a result, fully diluted earnings per share
for 1994 and 1993 are not materially different from primary earnings per share.
NOTE 2: DISCONTINUED OPERATIONS
On December 13, 1995, the Corporation announced that it had signed a definitive
agreement to sell PRC Inc. for $425.0 million. The sale of PRC Inc. to Litton
Industries, Inc., is expected to be completed in the first quarter of 1996. A
net gain on the sale of PRC Inc., estimated at $80.0 to $90.0 million, will be
recognized upon completion of the sale. The Corporation sold PRC Realty Systems,
Inc. ("RSI") on March 31, 1995, and sold PRC Environmental Management, Inc.
("EMI") on September 15, 1995, for proceeds of $60.0 million and $35.5 million,
respectively. The aggregate gain on the sale of RSI and EMI of $2.5 million, net
of applicable income taxes of $5.5 million, is included in earnings of
discontinued operations for 1995. Together, PRC Inc., RSI, and EMI comprised the
Corporation's information technology and services ("PRC") segment.
Earnings from the discontinued PRC segment amounted to $38.4 million in
1995, $37.5 million in 1994, and $31.1 million in 1993, net of applicable income
taxes of $8.7 million, $4.0 million, and $1.3 million, respectively, and are
shown separately in the Consolidated Statement of Earnings. The results of the
discontinued operations of PRC do not reflect any expense for interest allocated
by or management fees charged by the Corporation.
Revenues of the discontinued PRC segment were $800.1 million in 1995,
$883.1 million in 1994, and $760.7 million in 1993. These revenues are not
included in revenues as reported in the Consolidated Statement of Earnings.
Net assets of the discontinued PRC segment at the end of each year, in
millions of dollars, consisted of the following:
1995 1994
------ ------
Cash and cash equivalents ............................... $ 2.8 $ .9
Accounts receivable, net of allowances ................... 251.9 275.8
Inventories .............................................. 13.5 22.5
Current deferred tax benefits ............................ 40.0 --
Other current assets ..................................... 22.6 23.3
Plant and equipment, net of accumulated depreciation ..... 20.0 35.4
Goodwill, net of accumulated amortization ................ 40.1 98.3
Other non-current assets ................................. 46.0 46.3
Accounts payable ......................................... (97.5) (121.1)
Accrued expenses and other liabilities ................... (37.0) (48.3)
------ ------
$302.4 $333.1
====== ======
NOTE 3: TRADE RECEIVABLES
CONCENTRATION OF CREDIT: The Corporation sells products and services to
customers in diversified industries and geographic regions, and, therefore, has
no significant concentrations of credit risk. The Corporation continuously
evaluates the creditworthiness of its customers and generally does not require
collateral.
SALE OF RECEIVABLES PROGRAM: The Corporation's sale of receivables program
provides for a seasonal expansion of capacity from $200.0 million to $275.0
million during the period from October 1 through January 31. Receivables under
this program are sold on a revolving basis and are not subject to any
significant recourse provisions. At December 31, 1995, the Corporation had sold
$230.0 million of receivables under this program compared to $244.0 million at
December 31, 1994. The discount on the sale of receivables is included in other
expense.
NOTE 4: INVENTORIES
The classification of inventories at the end of each year, in millions of
dollars, was as follows:
1995 1994
------- -------
FIFO Cost
Raw materials and work-in-process ................. $231.6 $198.6
Finished products ................................. 665.0 543.1
------- -------
896.6 741.7
Excess of FIFO cost over LIFO inventory value ........ (40.9) (41.2)
------- -------
$855.7 $700.5
======= =======
The cost of United States inventories stated under the LIFO method was
approximately 44% and 50% of the value of total inventories at December 31, 1995
and 1994, respectively.
NOTE 5: PROPERTY,PLANT AND EQUIPMENT
Property, plant and equipment at the end of each year, in millions of dollars,
consisted of the following:
1995 1994
-------- --------
Property, plant and equipment at cost:
Land and improvements ............................ $ 69.4 $ 68.3
Buildings ........................................ 360.7 342.6
Machinery and equipment .......................... 1,342.1 1,257.9
-------- --------
1,772.2 1,668.8
Less accumulated depreciation .................... 905.4 846.1
-------- --------
$ 866.8 $ 822.7
======== ========
NOTE 6: GOODWILL
Goodwill at the end of each year, in millions of dollars, was as follows:
1995 1994
-------- --------
Goodwill ..................................... $2,635.0 $2,619.3
Less accumulated amortization ................ 493.0 424.6
-------- --------
$2,142.0 $2,194.7
======== ========
NOTE 7: OTHER ACCRUED LIABILITIES
Other accrued liabilities at the end of each year, in millions of dollars,
included the following:
1995 1994
------- -------
Salaries and wages ....................... $ 91.8 $ 84.1
Employee benefits ........................ 66.2 53.5
All other ................................ 585.0 619.9
------- -------
$743.0 $757.5
======= =======
All other at December 31, 1995 and 1994, primarily consisted of accruals
for trade discounts and allowances, insurance, warranty costs, advertising,
interest, and income and other taxes.
NOTE 8: SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1995 and 1994, included unsecured money
market loans in the amounts of $206.5 million and $293.3 million, respectively,
at contracted interest rates based on a margin over the London Interbank Offered
Rate (LIBOR). These loans are payable on demand with a one-to-five day notice
period. Short-term borrowings at December 31, 1995 and 1994, also included
$150.0 million and $75.0 million, respectively, of competitive bid rate loans
under the Corporation's unsecured revolving credit facility, as more fully
described in Note 9. Short-term borrowings in the amounts of $242.7 million and
$180.7 million at December 31, 1995 and 1994, respectively, primarily consisted
of borrowings of subsidiaries outside the United States under the terms of
uncommitted lines of credit or other short-term borrowing arrangements. The
weighted average interest rate on short-term borrowings outstanding at December
31, 1995 and 1994, was 6.2% and 7.0%, respectively.
Under the terms of uncommitted lines of credit at December 31, 1995,
certain subsidiaries outside the United States may borrow up to an additional
$396.7 million on such terms as may be mutually agreed upon. These arrangements
do not have termination dates and are reviewed periodically. No material
compensating balances are required or maintained.
NOTE 9: LONG-TERM DEBT
The composition of long-term debt at the end of each year, in millions of
dollars, was as follows:
1995 1994
-------- --------
Revolving credit facility expiring 1997 ............ $ 436.8 $ 426.2
7.50% notes due 2003 ............................... 500.0 500.0
6.625% notes due 2000 .............................. 250.0 250.0
7.0% notes due 2006 ................................ 250.0 250.0
Medium Term Notes due from 1996 through 2002 ....... 236.8 151.8
9.25% sinking fund debentures ...................... -- 150.0
6.75% deutsche mark bearer bonds ................... -- 111.4
Other loans due through 2009 ....................... 78.9 37.6
Less current maturities of long-term debt .......... (48.0) (121.1)
Less debt discounts ................................ -- (32.7)
-------- --------
$1,704.5 $1,723.2
======== ========
In 1995, the Corporation recognized a $30.9 million extraordinary loss as a
result of the early redemption of the 9.25% sinking fund debentures of its
subsidiary, Emhart Corporation. The extraordinary loss consisted primarily of
the write-off of the associated debt discount plus premiums and costs associated
with the redemption, net of income tax benefits of $2.6 million. The Corporation
financed Emhart's redemption of the sinking fund debentures through internally
generated cash and proceeds from the sales of the RSI and EMI businesses during
1995.
During 1994, the Corporation filed a shelf registration statement to issue
up to $500.0 million of debt securities, which may consist of debentures, notes,
or other unsecured evidences of indebtedness (the Medium Term Notes). As of
December 31, 1995, $236.8 million aggregate principal amount of the Medium Term
Notes had been issued under this shelf registration statement. Of that amount,
$194.8 million bear interest at fixed rates ranging from 6.93% to 8.95%, while
the remainder bears interest at variable rates.
As a result of the issuance of public debt, the Corporation reduced the
amount of credit available under its unsecured revolving credit facility (the
Credit Facility) from $1.7 billion as of December 31, 1994, to $1.4 billion as
of December 31, 1995. The amount available for borrowing under the Credit
Facility at December 31, 1995, was $813.2 million.
Borrowing options under the Credit Facility are at LIBOR plus a specified
percentage, or at other variable rates set forth therein. The interest rate
margin over LIBOR declines as the Corporation's leverage ratio improves. At
December 31, 1994, borrowings under the Credit Facility were at LIBOR plus
.4375% (borrowings were at LIBOR plus .50% prior to the renegotiation of pricing
under the Credit Facility in October 1994). Due to improvements in the
Corporation's leverage ratio, the borrowing rate under the Credit Facility
declined by .1125%, effective January 1, 1995, to LIBOR plus .325% and declined
by .075%, effective January 1, 1996, to LIBOR plus .25%. The Corporation also is
able to borrow by means of competitive bid rate loans under the Credit Facility.
Competitive bid rate loans are made through an auction process at then-current
market rates and are classified as short-term borrowings in the Consolidated
Balance Sheet. In addition to interest payable on the principal amount of
indebtedness outstanding from time to time under the Credit Facility, the
Corporation is required to pay an annual facility fee to each bank equal to
.175% (.25%, prior to October 1994) of the amount of the bank's commitment,
whether used or unused.
The Credit Facility includes various customary covenants, including
covenants limiting the ability of the Corporation and its subsidiaries to pledge
assets or incur liens on assets, and financial covenants requiring the
Corporation to maintain a specified leverage ratio and to achieve certain levels
of cash flow to fixed expense coverage. As of December 31, 1995, the Corporation
was in compliance with all terms and conditions of the Credit Facility. The
Corporation expects to continue to meet the covenants imposed by the Credit
Facility over the next 12 months. Meeting the cash flow coverage ratio is
dependent upon the level of future earnings and interest rates, each of which
can have a significant impact on the ratio.
Indebtedness of subsidiaries in the aggregate principal amounts of $759.1
million and $773.8 million were included in the Consolidated Balance Sheet at
December 31, 1995 and 1994, respectively, in short-term borrowings, current
maturities of long-term debt, and long-term debt.
Principal payments on long-term debt obligations due over the next five
years are as follows: $48.0 million in 1996, $488.4 million in 1997, $56.7
million in 1998, $57.0 million in 1999, and $250.0 million in 2000. Interest
payments on all indebtedness were $209.0 million in 1995, $184.9 million in
1994, and $165.0 million in 1993.
NOTE 10: DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation is exposed to market risks arising from changes in interest
rates. With products and services marketed in over 100 countries and with
manufacturing sites in 14 countries, the Corporation also is exposed to risks
arising from changes in foreign exchange rates. As an end user of derivative
financial instruments, the Corporation utilizes derivatives to manage these
risks by creating offsetting market positions. The Corporation's use of
derivatives with respect to interest rate and foreign currency exposures is
discussed below.
CREDIT EXPOSURE: The Corporation is exposed to credit-related losses in the
event of non-performance by counterparties to certain derivative financial
instruments. The Corporation monitors the creditworthiness of the counterparties
and presently does not expect default by any of the counterparties. The
Corporation does not obtain collateral in connection with its derivative
financial instruments.
The credit exposure that results from interest rate and foreign exchange
contracts is represented by the fair value of contracts with a positive fair
value as of the reporting date, as indicated below. Some derivatives are not
subject to credit exposures. The fair value of all financial instruments is
summarized in Note 11.
INTEREST RATE RISK MANAGEMENT: The Corporation manages its interest rate risk,
primarily through the use of interest rate swap and cap agreements, in order to
achieve a cost effective mix of fixed to variable rate indebtedness. The
Corporation seeks to issue debt opportunistically, whether fixed or variable,
at the lowest possible cost and then, based upon its assessment of the future
interest rate environment, may, through the use of interest rate derivatives,
convert such debt from fixed to variable or from variable to fixed interest
rates. Similarly, the Corporation may, at times, seek to limit the effects of
rising interest rates on its variable rate debt through the use of interest rate
caps.
The amounts exchanged by the counterparties to interest rate swap and cap
agreements normally are based upon notional amounts and other terms, generally
related to interest rates, of the derivatives. While notional amounts of
interest rate swaps and caps form part of the basis for the amounts exchanged by
the counterparties, the notional amounts are not themselves exchanged and,
therefore, do not represent a measure of the Corporation's exposure as an end
user of derivative financial instruments. The notional amounts of the
Corporation's interest rate derivatives at the end of each year, in millions of
dollars, were as follows:
1995 1994
------- -------
Interest rate swaps:
Fixed to variable rates ..................... $700.0 $850.0
Variable to fixed rates ..................... 450.0 750.0
Rate basis swaps ............................ 150.0 200.0
U.S. rates to foreign rates ................. 175.0 175.0
Interest rate caps purchased ................... $150.0 $100.0
The Corporation's portfolio of interest rate swap instruments as of
December 31, 1995, included $700.0 million notional amounts of fixed to variable
rate swaps with a weighted average fixed rate receipt of 6.25%. The basis of the
variable rate swaps paid is LIBOR. A number of the fixed to variable rate swaps
contain provisions that permit, during a portion of the terms of the swap, the
setting of the variable rates at either the beginning or the end of the reset
periods, at the option of the counterparties. The reset periods generally occur
every three to six months. The maturities of these swaps, by notional amounts,
are as follows: $100.0 million in 1998, $150.0 million in 2000, and the balance
in the years 2001 through 2004. A total of $300.0 million of these swaps,
maturing in 2003, contains provisions that permit the counterparties to
terminate the swap, without penalty, beginning in 1998.
As of December 31, 1995, the portfolio also included $450.0 million
notional amounts of variable to fixed rate swaps with a weighted average fixed
rate payment of 6.52%. The basis of the variable rate received is LIBOR. Of
these swaps to fixed rates, $200.0 million and $250.0 million mature in 1997 and
1998, respectively.
As of December 31, 1995, the portfolio also contained $150.0 million
notional amounts of rate basis swaps, which swap to the higher of a specified
weighted average fixed rate payment of 6.85% or a weighted average variable rate
payment of LIBOR minus 1.49%. The basis of the variable rates received is LIBOR.
Rates received under these rate basis swaps are generally reset every three
months. The maturities of these swaps, by notional amounts, are as follows:
$50.0 million in 1996, $50.0 million in 1997, and $50.0 million in 1998. At
December 31, 1995, payments under these swaps were based on the weighted average
fixed rate payment provisions of the swap agreements.
The remainder of the interest rate swap portfolio as of December 31, 1995,
consisted of $175.0 million notional amounts of interest rates swaps that swap
from United States dollars into foreign currencies. Of that amount, $150.0
million had been swapped from fixed rate United States dollars (with a weighted
average fixed rate of 6.75%) into fixed rate Japanese yen (with a weighted
average fixed rate of 4.68%). Of the $150.0 million notional amounts, $100.0
million mature in 1996, and the balance in 1997. A total of $25.0 million
notional amounts of interest rate swaps, maturing in 1997, had been swapped from
variable rate United States dollars (with the variable rate based on LIBOR) into
fixed rate Swiss francs (with a weighted average fixed rate of 5.17%).
As of December 31, 1995, the Corporation also had $150.0 million notional
amounts of interest rate caps, which have the effect of limiting the
Corporation's exposure to high interest rates. The interest rate caps mature in
1997 and have cap rates of 7.0%. For a total of $100.0 million notional amounts
of the interest rate caps, the cap rates increase from 7.0% to 9.0% for any
period in which LIBOR exceeds 9.0%.
The Corporation's credit exposure on its interest rate derivatives as of
December 31, 1995 and 1994, was $3.5 million and $22.2 million, respectively.
Deferred gains and losses on the early termination of interest rate swaps as of
December 31, 1995 and 1994, were not significant.
FOREIGN CURRENCY MANAGEMENT: The Corporation enters into various foreign
currency contracts in managing its foreign exchange risks. The contractual
amounts of foreign currency derivative financial instruments (principally,
forward exchange contracts and options) are generally exchanged by the
counterparties.
In order to limit the volatility of reported equity, the Corporation
historically has hedged a portion of its net investment in subsidiaries located
outside the United States, where practicable, except for those subsidiaries
located in highly inflationary economies. This has been accomplished through the
use of foreign currency forward contracts, foreign currency swaps, and purchased
foreign currency options with little or no intrinsic value at the inception of
the options. During 1995, the Corporation decided to limit the future hedging of
its net investment in foreign subsidiaries. This action may increase the
volatility of reported equity in the future but will result in more predictable
cash flows from hedging activities. During 1994, the Corporation elected to
hedge a portion, generally limited to tangible net worth, of its net investment
in subsidiaries outside the United States. Prior to 1994, the Corporation
generally operated under a full hedge policy, hedging the net assets, including
goodwill, of its subsidiaries outside the United States.
Through its foreign currency hedging activities, the Corporation seeks to
minimize the risk that cash flows resulting from the sales of products outside
the United States will be affected by changes in exchange rates. Foreign
currency transaction and commitment exposures generally are the responsibility
of the Corporation's individual operating units to manage as an integral part of
their business. Management responds to foreign exchange movements through many
alternative means, such as pricing actions, changes in cost structure, and
changes in hedging strategies.
The Corporation hedges its foreign currency transaction and firm purchase
commitment exposures, including firm intercompany foreign currency purchases,
based on management's judgment, generally through the use of forward exchange
contracts and purchased options with little or no intrinsic value at the
inception of the options. Some of the contracts involve the exchange of two
foreign currencies, according to the local needs of the subsidiaries. The
Corporation utilizes some natural hedges to mitigate its transaction and
commitment exposures. Intercompany foreign currency purchase commitments are
considered to be firm when performance under the commitments is probable because
of sufficiently large disincentives to the Corporation for non-performance.
Deferred gains and losses on hedged intercompany purchases are recognized in
cost of sales when the related inventory is sold or when a hedged purchase is no
longer expected to occur.
The following table summarizes the contractual amounts of the Corporation's
forward exchange contracts as of December 31, 1995 and 1994, in millions of
dollars, including details by major currency as of December 31, 1995. Foreign
currency amounts are translated at current rates as of the reporting date. The
"Buy" amounts represent the United States dollar equivalent of commitments to
purchase currencies, and the "Sell" amounts represent the United States dollar
equivalent of commitments to sell currencies.
As of December 31, 1995 Buy Sell
-------- --------
United States dollar .................... $ 964.8 $ (754.0)
Pound sterling .......................... 375.8 (168.5)
Deutsche mark ........................... 162.4 (312.7)
Swedish krona ........................... 129.7 (137.1)
Japanese yen ............................ 24.2 (178.8)
French franc ............................ 82.0 (131.8)
Canadian dollar ......................... 290.8 (254.3)
Italian lira ............................ 113.1 (107.3)
Swiss franc ............................. 59.3 (54.8)
Other ................................... 103.7 (222.9)
-------- --------
Total ................................... $2,305.8 $(2,322.2)
======== ========
As of December 31, 1994
Total ..................................... $2,120.5 $(2,137.1)
======== ========
The contractual amounts of the Corporation's purchased currency options to
buy currencies, predominantly the United States dollar, and to sell various
currencies were $25.1 million and $25.6 million, respectively, at December 31,
1995, and $266.7 million and $262.3 million, respectively, at December 31, 1994.
The Corporation's credit exposure on its foreign currency derivatives as of
December 31, 1995 and 1994, was $28.9 million and $43.2 million, respectively.
Gross deferred realized gains and losses on commitment hedges were not
significant at December 31, 1995 and 1994. Substantially all of the amounts
deferred at December 31, 1995, are expected to be recognized in earnings during
1996, when the gains or losses on the underlying transactions also will be
recognized.
NOTE 11: FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical cost amounts.
The following methods and assumptions were used by the Corporation in
estimating fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS, TRADE RECEIVABLES, CERTAIN OTHER CURRENT ASSETS,
SHORT-TERM BORROWINGS, AND CURRENT MATURITIES OF LONG-TERM DEBT: The amounts
reported in the Consolidated Balance Sheet approximate fair value.
LONG-TERM DEBT: Publicly traded debt is valued based on quoted market values.
The amount reported in the Consolidated Balance Sheet for the remaining long-
term debt approximates fair value since such debt was either variable rate debt
or fixed rate debt that had been recently issued as of the reporting date.
INTEREST RATE HEDGES: The fair value of interest rate hedges, including interest
rate swaps and caps, reflects the estimated amounts that the Corporation would
receive or pay to terminate the contracts at the reporting date, thereby taking
into account unrealized gains and losses of open contracts as of the reporting
date.
FOREIGN CURRENCY CONTRACTS: The fair values of forward exchange contracts and
options are estimated using prices established by financial institutions for
comparable instruments.
The following table sets forth the carrying amounts and fair values of the
Corporation's financial instruments, except for those noted above for which
carrying values approximate fair values, in millions of dollars:
Assets (Liabilities) Carrying Fair
As of December 31, 1995 Amount Value
-------- --------
Non-derivatives:
Long-term debt .......................... $(1,704.5) $(1,779.9)
-------- --------
Derivatives relating to:
Debt
Assets ................................ 2.6 3.5
Liabilities ........................... (.5) (16.4)
Foreign Currency
Assets ................................ 12.6 28.9
Liabilities ........................... (32.6) (46.3)
-------- --------
Assets (Liabilities) Carrying Fair
As of December 31, 1994 Amount Value
-------- --------
Non-derivatives:
Long-term debt .......................... $(1,723.2) $(1,637.3)
-------- --------
Derivatives relating to:
Debt
Assets ................................ .6 22.2
Liabilities ........................... (1.4) (101.8)
Foreign Currency
Assets ................................ 38.0 43.2
Liabilities ........................... (43.9) (62.6)
-------- --------
The carrying amounts of debt-related derivatives are included in the
Consolidated Balance Sheet in other accrued liabilities. The carrying amounts of
foreign currency-related derivatives related to net investment and commitment
hedges are included in the Consolidated Balance Sheet in other current assets
and other accrued liabilities. The carrying amounts of foreign currency-related
derivatives related to transaction hedges are included in the same balance sheet
line item as the hedged transaction.
NOTE 12: INCOME TAXES
Earnings (losses) from continuing operations before income taxes, extraordinary
item, and cumulative effect of change in accounting principle, for each year, in
millions of dollars, were as follows:
1995 1994 1993
------- ------- -------
United States ................. $ 83.5 $(16.6) $ 19.9
Other countries ............... 142.0 165.2 103.6
------- ------- -------
$225.5 $148.6 $123.5
======= ======= =======
Significant components of income taxes (benefits) for each year, in
millions of dollars, were as follows:
1995 1994 1993
------- ------- -------
Current:
United States ..................... $20.2 $ 4.7 $ 7.3
Other countries ................... 33.5 43.7 32.3
Withholding on remittances
from other countries ............ 1.4 1.4 1.0
------- ------- -------
55.1 49.8 40.6
------- ------- -------
Deferred:
United States ..................... (50.2) 12.0 20.7
Other countries ................... 4.1 (3.1) (1.9)
------- ------- -------
(46.1) 8.9 18.8
------- ------- -------
$ 9.0 $58.7 $59.4
======= ======= =======
During 1995, 1994 and 1993, the Corporation utilized United States tax loss
carryforwards and capital loss carryforwards obtained in a prior business
combination. The effect of utilizing these carryforwards was to recognize
deferred income tax expense and to reduce goodwill by $21.0 million in 1995,
$15.5 million in 1994, and $21.7 million in 1993.
In 1995, income tax benefits of $2.6 million were recorded on the
extraordinary loss on extinguishment of debt. In 1993, no income tax benefits
were recorded on the cumulative effect adjustment for postemployment benefits.
The tax assets related to this adjustment were predominantly in the United
States and were offset by a corresponding increase in the deferred tax asset
valuation allowance. Income tax expense recorded directly as an adjustment to
equity as a result of hedging activities in 1995, 1994, and 1993 was not
significant.
Income tax payments were $56.3 million in 1995, $44.5 million in 1994, and
$92.2 million in 1993. Taxes paid during 1993 included $49.0 million of
previously accrued tax payments relating to settlement of prior-year tax audit
issues.
Deferred tax assets (liabilities) at the end of each year, in millions of
dollars, were composed of the following:
1995 1994
------- -------
Deferred tax liabilities:
Fixed assets ...................................... $ (45.8) $ (54.4)
Postretirement benefits ........................... (32.5) (31.2)
Other ............................................. (8.8) (28.1)
------- -------
Gross deferred tax liabilities ....................... (87.1) (113.7)
------- -------
Deferred tax assets:
Bad debt allowance ................................ 6.0 4.1
Inventories ....................................... 16.3 17.2
Postretirement benefits ........................... 7.9 19.2
Fixed assets ...................................... -- 5.7
Net assets of discontinued operations ............. 40.0 --
Other accruals .................................... 97.8 131.5
Tax loss carryforwards ............................ 115.9 144.3
Tax credit and capital loss carryforwards ......... 58.0 55.1
------- -------
Gross deferred tax assets ............................ 341.9 377.1
------- -------
Deferred tax asset valuation allowance ............... (187.7) (301.2)
------- -------
Net deferred tax assets (liabilities) ................ $ 67.1 $ (37.8)
======= =======
Deferred income taxes are included in the Consolidated Balance Sheet in
other current assets, net assets of discontinued operations, other accrued
liabilities, and deferred income taxes.
Net deferred tax assets (prior to the valuation allowance) of $41.0 million
as of December 31, 1995, resulted from a prior business combination and,
accordingly, will result in a reduction of goodwill if realized for financial
reporting purposes.
At December 31, 1994, a full valuation allowance was provided on net
deferred tax assets in the United States based upon the Corporation's history of
taxable earnings (losses) over the past several years and the volatility of
comprehensive taxable earnings (losses) in the United States due to foreign
exchange contracts. In addition, a full valuation allowance on net tax assets in
certain foreign taxing jurisdictions was provided at December 31, 1994, based on
the history of taxable earnings (losses), the tax carryforward periods, and
projected earnings.
During the year ended December 31, 1995, the deferred tax asset valuation
allowance decreased by $113.5 million. Included in the decrease was $109.0
million, which resulted from the Corporation's reversal of a portion of the
deferred tax asset valuation allowance based on the projection of estimable
taxable earnings in the United States, including the effect of the pending sale
of PRC Inc. The remaining decrease was due to the utilization of domestic tax
loss carryforwards, offset by increased tax losses generated by foreign
operations.
During the year ended December 31, 1994, the deferred tax asset valuation
allowance decreased by $45.3 million, primarily due to utilization of tax loss
carryforwards and capital loss carryforwards.
Tax basis carryforwards at December 31, 1995, consisted of net operating
losses expiring from 1996 to 2011, capital loss carryforwards expiring in 1996,
and other tax credits expiring from 1998 to 2008.
At December 31, 1995, unremitted earnings of subsidiaries outside the
United States were approximately $1.3 billion, on which no United States taxes
have been provided. The Corporation's intention is to reinvest these earnings
permanently or to repatriate the earnings only when tax effective to do so. It
is not practicable to estimate the amount of additional tax that might be
payable upon repatriation of foreign earnings; however, the Corporation believes
that United States foreign tax credits would largely eliminate any United States
tax and offset any foreign withholding tax.
A reconciliation of income taxes at the federal statutory rate to the
Corporation's income taxes for each year, in millions of dollars, is as follows:
1995 1994 1993
------- ------- -------
Income taxes at federal
statutory rate .............................. $78.9 $52.0 $43.2
Lower effective taxes on earnings of
other countries ............................. (16.5) (18.7) (15.0)
Effect of net operating loss carryforwards ..... (19.4) (2.7) (.7)
Effect of reduction in deferred tax asset
valuation allowance due to projection
of estimable earnings in the United
States, including the effect of the
pending sale of PRC Inc. .................... (65.0) -- --
Withholding on remittances from other
countries ................................... 1.4 1.4 1.0
Amortization and write-off of goodwill ......... 24.6 24.5 23.7
Other-net ...................................... 5.0 2.2 7.2
------- ------- -------
Income taxes ................................... $ 9.0 $58.7 $59.4
======= ======= =======
NOTE 13: POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
Net pension cost (credit) for all domestic defined benefit plans included the
following components for each year, in millions of dollars:
1995 1994 1993
------- ------- -------
Service cost ................................ $ 11.3 $14.0 $11.8
Interest cost on projected benefit obligation 47.9 45.6 44.0
Actual return on assets ..................... (108.2) (20.8) (98.6)
Net amortization and deferral ............... 39.3 (38.2) 33.4
------- ------- -------
Net pension cost (credit) ................ $ (9.7) $ .6 $(9.4)
======= ======= =======
The funded status of the domestic defined benefit plans at the end of each
year, in millions of dollars, was as follows:
1995 1994
------- -------
Actuarial present value of benefit obligations:
Vested benefit ..................................... $585.2 $492.9
======= =======
Accumulated benefit ................................ $611.5 $505.4
======= =======
Projected benefit .................................. $653.0 $553.1
Plan assets at fair value ............................... 750.6 686.6
------- -------
Plan assets in excess of projected benefit obligation ... 97.6 133.5
Unrecognized net loss ................................... 129.3 79.6
Unrecognized prior service cost ......................... 5.6 6.3
Unrecognized net asset at date of adoption net
of amortization ........................................ (4.2) (5.3)
------- -------
Net pension asset recognized in the Consolidated
Balance Sheet........................................... $228.3 $214.1
======= =======
Discount rates .......................................... 7.75% 9.0%
Salary scales ........................................... 5.0-6.0% 5.0-6.0%
Expected return on plan assets .......................... 10.5% 10.5%
The Corporation's net pension expense (credit) for defined benefit pension
plans outside the United States was $.8 million in 1995, $(2.0) million in 1994,
and $(.7) million in 1993. The net pension asset recognized in the Consolidated
Balance Sheet for those plans outside the United States where assets exceeded
accumulated benefits was $102.0 million and $96.6 million at December 31, 1995
and 1994, respectively. Liabilities of these plans were discounted at rates
ranging from 8.0% to 9.0% in 1995 and from 5.0% to 9.0% in 1994, and expected
rates of return on assets of these plans ranged from 10.0% to 10.5% in 1995 and
from 5.5% to 12.0% in 1994. The net pension liability recognized in the
Consolidated Balance Sheet for those plans outside the United States where
accumulated benefits exceeded assets was $71.7 million and $66.9 million at
December 31, 1995 and 1994, respectively. Liabilities of these predominantly
unfunded plans were discounted at rates ranging from 4.5% to 9.0% in 1995 and
from 7.0% to 10.0% in 1994.
Assets of domestic plans and plans outside the United States consist
principally of investments in equity securities, debt securities, and cash
equivalents.
The expected returns on plan assets during 1993 for defined benefit plans
were 10.5% for plans in the United States and 5.5% to 12.0% for funded plans
outside the United States.
Expense for defined contribution plans amounted to $11.6 million, $8.3
million, and $7.1 million in 1995, 1994, and 1993, respectively.
The Corporation has several unfunded health care plans that provide certain
postretirement medical, dental, and life insurance benefits for most United
States employees. The postretirement medical and dental plans are contributory
and include certain cost-sharing features, such as deductibles and co-payments.
Net periodic postretirement benefit expense included the following
components, in millions of dollars:
1995 1994 1993
------- ------- -------
Service expense ............................... $ 1.6 $ 1.8 $ 1.7
Interest expense .............................. 14.0 12.9 14.8
Net amortization .............................. (7.0) (8.0) (7.7)
------- ------- -------
Net periodic postretirement benefit expense ... $ 8.6 $ 6.7 $ 8.8
======= ======= =======
The reconciliation of the accumulated postretirement benefit obligation to
the liability recognized in the Consolidated Balance Sheet at the end of each
year, in millions of dollars, was as follows:
1995 1994
------- -------
Accumulated postretirement benefit obligation:
Retirees ............................................ $129.0 $133.1
Fully eligible active participants .................. 15.7 10.7
Other active participants ........................... 13.5 22.2
------- -------
Total .................................................. 158.2 166.0
------- -------
Unrecognized prior service cost ........................ 59.7 63.5
Unrecognized net loss .................................. 22.3 15.8
------- -------
Net postretirement benefit liability recognized in
the Consolidated Balance Sheet ...................... $240.2 $245.3
======= =======
The health care cost trend rate used to determine the postretirement
benefit obligation was 8.75% for 1995 and 1996, decreases gradually to an
ultimate rate of 4.75% in 2001, and remains at that level thereafter. The trend
rate is a significant factor in determining the amounts reported. The effect of
a 1% annual increase in these assumed health care cost trend rates would
increase the accumulated postretirement benefit obligation by approximately
$11.8 million. The effect of a 1% increase on the aggregate of the service and
interest cost components of net periodic postretirement benefit cost is
immaterial. An assumed discount rate of 7.75% was used to measure the
accumulated postretirement benefit obligation for 1995 compared to 9.0% used in
1994.
As of January 1, 1993, the Corporation adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," which addresses the accounting for
certain benefits provided to former employees prior to retirement. These
benefits primarily relate to disability and workers' compensation. Prior to
January 1, 1993, the Corporation recognized the cost of providing these benefits
principally on the cash basis. Since that date, the Corporation's policy has
been to accrue these benefits when payment of such benefits is probable and when
sufficient information exists to make reasonable estimates of the amounts to be
paid. As a result of the adoption of SFAS No. 112, a $29.2 million cumulative
effect adjustment was recorded as a reduction of net income during 1993.
NOTE 14: STOCKHOLDERS'EQUITY
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Equity
Outstanding Outstanding Capital in Retained Adjustment
Preferred Common $.50 Excess of Earnings From
Shares Amount Shares Par Value Par Value (Deficit) Translation
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 150,000 $150.0 83,428,106 $41.7 $1,028.6 $ (78.4) $(67.9)
Net earnings -- -- -- -- -- 66.0 --
Cash dividends:
Common ($.40 per share) -- -- -- -- -- (33.5) --
Preferred -- -- -- -- -- (11.6) --
Common stock issued under
employee benefit plans -- -- 417,088 .2 6.2 -- --
Valuation changes, less net effect
of hedging activities -- -- -- -- -- -- (52.4)
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 150,000 150.0 83,845,194 41.9 1,034.8 (57.5) (120.3)
Net earnings -- -- -- -- -- 127.4 --
Cash dividends:
Common ($.40 per share) -- -- -- -- -- (33.7) --
Preferred -- -- -- -- -- (11.6) --
Common stock issued under
employee benefit plans -- -- 843,609 .4 14.3 -- --
Valuation changes, less net effect
of hedging activities -- -- -- -- -- -- 23.7
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 150,000 150.0 84,688,803 42.3 1,049.1 24.6 (96.6)
Net earnings -- -- -- -- -- 224.0 --
Cash dividends:
Common ($.40 per share) -- -- -- -- -- (34.4) --
Preferred -- -- -- -- -- (11.6) --
Common stock issued under
employee benefit plans -- -- 1,758,785 .9 35.4 -- --
Valuation changes, less net effect
of hedging activities -- -- -- -- -- -- 39.5
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 150,000 $150.0 86,447,588 $43.2 $1,084.5 $202.6 $(57.1)
====================================================================================================================
</TABLE>
The Corporation has one class of $.50 par value common stock with
150,000,000 authorized shares. The Corporation has authorized 5,000,000 shares
of preferred stock without par value, of which 1,500,000 shares have been
designated as Series A Junior Participating Preferred Stock (Series A) and
150,000 shares have been designated as Series B Cumulative Convertible Preferred
Stock (Series B).
Holders of Series B stock are entitled to dividends, payable quarterly, at
an annual rate of $77.50 per share. In accordance with the terms of the Articles
Supplementary that set forth the terms and conditions of the Series B stock,
each share of Series B stock now is convertible into 42-1/3 shares of common
stock and is entitled to 42-1/3 votes on matters submitted generally to the
stockholders of the Corporation. The conversion rate and the number of votes per
share are subject to adjustment under certain circumstances pursuant to
anti-dilution provisions. The Corporation has reserved 6,350,000 shares of
common stock for issuance upon conversion of the shares of Series B stock. The
shares of Series B stock are not redeemable at the option of the Corporation
until September 2001. For a 90-day period thereafter, the Corporation is
entitled to redeem all, but not less than all, of the shares of Series B stock
at a redemption price equal to the current market price of the shares of common
stock into which the Series B stock is then convertible. The shares of Series B
stock are not subject to redemption at the option of the holders of the shares
under any circumstances. The Corporation also has the option, after September
1996, to require the conversion of the shares of Series B stock into shares of
common stock if the current market price of the shares of common stock is at
least equal to $39.45 per share (subject to adjustment) for a period of 20
trading days out of 30 consecutive trading days.
In connection with the sale of the Series B stock, the Corporation and the
purchaser of Series B stock entered into a standstill agreement that includes,
among other things, provisions limiting the purchaser's ownership and voting of
shares of the Corporation's capital stock, provisions limiting actions by the
purchaser with respect to the Corporation, and provisions generally restricting
the purchaser's equity interest to 15%. The standstill agreement expires in
September 2001.
The Corporation has a Stockholder Rights Plan pursuant to which, under
certain conditions, each stockholder has share purchase rights for each
outstanding share of common stock and Series B stock of the Corporation. The
Corporation has reserved 1,500,000 shares of Series A stock for possible
issuance upon exercise of the rights.
NOTE 15: STOCK OPTION AND PURCHASE PLANS
Under various stock option plans, options to purchase common stock may be
granted until 2002. Options generally are granted at fair market value at the
date of grant, are exercisable in installments beginning one year from the date
of grant, and expire 10 years after the date of grant. The plans permit the
issuance of either incentive stock options or non-qualified stock options,
which, for certain of the plans, may be accompanied by stock or cash
appreciation rights or limited stock appreciation rights issued simultaneously
with the grant of the stock options. Additionally, certain plans allow for the
granting of stock appreciation rights on a stand-alone basis.
As of December 31, 1995, 14,500 incentive stock options, 5,387,434
non-qualified stock options without cash appreciation rights, and 150,000
non-qualified stock options with cash appreciation rights were outstanding under
domestic plans. There were 236,754 stock options outstanding under the
Corporation's United Kingdom plan.
Under all plans, there were 358,564 shares of common stock reserved for
future grants as of December 31, 1995. Transactions are summarized as follows:
Stock Options
Outstanding Price Range
------------- ------------
December 31, 1994 ....................... 6,452,282 $ 9.88-25.25
Granted ................................. 736,100 30.13-35.38
Exercised ............................... 1,165,152 9.88-25.25
Cancelled or expired .................... 234,542 9.88-25.25
------------ ------------
December 31, 1995 ....................... 5,788,688 9.88-35.38
------------ ------------
Stock Options
Outstanding Price Range
------------- ------------
Shares exercisable at
December 31, 1995 ..................... 3,910,292 $9.88-25.25
------------ ------------
Shares exercised during the year
ended December 31, 1994 ............... 343,702 9.88-21.63
------------ ------------
Shares exercised during the year
ended December 31, 1993 ............... 330,024 9.88-20.88
------------ ------------
Under the 1991 Employees Stock Purchase Plan, employees may subscribe to
purchase shares of the Corporation's common stock at the lower of 90% of market
value on the date offered or on the date purchased.
Transactions under this plan are summarized as follows:
Common Shares
Subscribed Prices
---------- ------
December 31, 1994 ......................... 152,880 $19.13
Subscriptions ............................. 193,120 25.50
Purchases ................................. 135,686 19.13
Cancellations ............................. 19,651 19.13-25.50
--------- -----------
December 31, 1995 ......................... 190,663 25.50
--------- -----------
Shares purchased during the year
ended December 31, 1994 ................ 208,529 16.25
--------- -----------
Shares purchased during the year
ended December 31, 1993 ................ 87,064 16.75
--------- -----------
NOTE 16: BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
The Corporation operates in two business segments: Consumer and Home Improvement
Products, including consumer and professional power tools and accessories,
household products, security hardware, outdoor products (composed of electric
lawn and garden tools and recreational products), plumbing products, and product
service; and Commercial and Industrial Products, including fastening systems and
glass container-making equipment.
Sales, operating income, capital expenditures, and depreciation set forth
in the following table exclude the results of the discontinued PRC segment.
Corporate assets included in corporate and eliminations were $688.1 million at
December 31, 1995, $575.4 million at December 31, 1994, and $567.9 million at
December 31, 1993, and consist principally of cash and cash equivalents, other
current assets, property, other sundry assets, and net assets of the
discontinued PRC segment. The remainder of corporate and eliminations includes
certain pension credits and amounts to eliminate intercompany items, including
accounts receivable and payable and intercompany profit in inventory.
<TABLE>
Business Segments
(Millions of Dollars)
<CAPTION>
Consumer & Commercial &
Home Improvement Industrial Corporate &
1995 Products Products Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $4,075.6 $ 690.5 $ -- $4,766.1
Operating income 348.5 74.8 2.8 426.1
Operating income excluding goodwill amortization 399.8 91.9 2.8 494.5
Identifiable assets 4,929.2 1,382.8 (766.7) 5,545.3
Capital expenditures 184.1 15.7 3.3 203.1
Depreciation 115.9 15.4 4.6 135.9
1994
- ---------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $3,773.8 $ 591.4 $ -- $4,365.2
Operating income 293.7 52.6 5.6 351.9
Operating income excluding goodwill amortization 350.6 68.7 5.6 424.9
Identifiable assets 4,686.2 1,390.0 (811.9) 5,264.3
Capital expenditures 166.5 12.4 2.6 181.5
Depreciation 101.5 13.9 4.0 119.4
1993
- ---------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $3,529.6 $ 591.9 $ -- $4,121.5
Operating income 215.8 76.5 10.4 302.7
Operating income excluding restructuring costs and
credits and goodwill amortization 280.8 73.2 10.4 364.4
Identifiable assets 4,693.9 1,375.5 (902.6) 5,166.8
Capital expenditures 171.7 13.9 4.7 190.3
Depreciation 94.2 13.4 3.7 111.3
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Geographic Areas
(Millions of Dollars)
United Corporate &
1995 States Europe Other Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $2,551.2 $1,503.6 $711.3 $ -- $4,766.1
Sales and transfers between geographic areas 287.8 165.0 206.0 (658.8) --
- ---------------------------------------------------------------------------------------------------------------------
Total sales $2,839.0 $1,668.6 $917.3 $(658.8) $4,766.1
=====================================================================================================================
Operating income $ 300.2 $ 96.0 $ 27.1 $ 2.8 $ 426.1
Identifiable assets $3,216.6 $2,488.4 $763.9 $(923.6) $5,545.3
- ---------------------------------------------------------------------------------------------------------------------
1994
- ---------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $2,409.3 $1,279.3 $676.6 $ -- $4,365.2
Sales and transfers between geographic areas 234.9 147.6 213.7 (596.2) --
- ---------------------------------------------------------------------------------------------------------------------
Total sales $2,644.2 $1,426.9 $890.3 $(596.2) $4,365.2
=====================================================================================================================
Operating income $ 217.0 $ 114.6 $ 14.7 $ 5.6 $ 351.9
Identifiable assets $3,200.0 $2,305.9 $670.8 $(912.4) $5,264.3
- ---------------------------------------------------------------------------------------------------------------------
1993
- ---------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $2,308.6 $1,200.3 $612.6 $ -- $4,121.5
Sales and transfers between geographic areas 236.5 143.3 208.9 (588.7) --
- ---------------------------------------------------------------------------------------------------------------------
Total sales $2,545.1 $1,343.6 $821.5 $(588.7) $4,121.5
=====================================================================================================================
Operating income $ 185.0 $ 101.5 $ 5.8 $ 10.4 $ 302.7
Identifiable assets $3,166.9 $2,255.0 $622.7 $(877.8) $5,166.8
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
For 1993, the Consumer and Home Improvement Products segment included
charges of $29.0 million for plant closures and reorganizations offset by a gain
of $15.9 million for the sale of Corbin Russwin. The Commercial and Industrial
Products segment included a gain of $19.4 million for the sale of Dynapert.
In the Geographic Areas table, United States includes all domestic
operations and several intercompany manufacturing facilities outside the United
States, which manufacture products predominantly for sale in the United States.
Other includes subsidiaries located in Canada, Latin America, Australia, and the
Far East.
For 1993, restructuring credits in the amount of $6.3 million were included
in the United States geographic segment.
Transfers between geographic areas are accounted for at cost plus a
reasonable profit. Transfers between business segments are not significant.
Identifiable assets are those assets identified with the operations in each area
or segment, including goodwill.
NOTE 17: OTHER EXPENSE
Other expense for 1995, 1994, and 1993 primarily included the costs associated
with the sale of receivables program.
NOTE 18: LEASES
The Corporation leases certain service centers, offices, warehouses,
manufacturing facilities, and equipment. Generally, the leases carry renewal
provisions and require the Corporation to pay maintenance costs. Rental payments
may be adjusted for increases in taxes and insurance above specified amounts.
Rental expense charged to earnings from continuing operations for 1995, 1994,
and 1993 amounted to $68.0 million, $64.9 million, and $61.2 million,
respectively. Capital leases are immaterial in amount and are generally treated
as operating leases. Future minimum payments under non-cancellable operating
leases with initial or remaining terms of more than one year as of December 31,
1995, in millions of dollars, were as follows:
1996......................... $ 42.4
1997......................... 33.3
1998......................... 24.2
1999......................... 16.9
2000......................... 12.1
Thereafter................... 37.6
------
Total $166.5
======
NOTE 19: LITIGATION AND CONTINGENT LIABILITIES
The Corporation is involved in various lawsuits in the ordinary course of
business. These lawsuits primarily involve claims for damages arising out of the
use of the Corporation's products and allegations of patent and trademark
infringement. The Corporation also is involved in litigation and administrative
proceedings involving employment matters and commercial disputes. Some of these
lawsuits include claims for punitive as well as compensatory damages. The
Corporation, using current product sales data and historical trends, actuarially
calculates the estimate of its current exposure for product liability. The
Corporation is insured for product liability claims for amounts in excess of
established deductibles and accrues for the estimated liability up to the limits
of the deductibles. All other claims and lawsuits are accrued for on a
case-by-case basis.
The Corporation also is involved in lawsuits and administrative proceedings
with respect to claims involving the discharge of hazardous substances into the
environment. Certain of these claims assert damages and liability for remedial
investigations and cleanup costs with respect to sites at which the Corporation
has been identified as a potentially responsible party under federal and state
environmental laws and regulations (off-site). Other matters involve sites that
the Corporation currently owns and operates or has previously sold (on-site).
For off-site claims, the Corporation makes an assessment of the costs involved
based on environmental studies, prior experience at similar sites, and the
experience of other named parties. The Corporation also considers the ability of
other parties to share costs, the percentage of the Corporation's exposure
relative to all other parties, and the effects of inflation on these estimated
costs. For on-site matters associated with properties currently owned, an
assessment is made as to whether an investigation and remediation would be
required under applicable federal and state laws. For on-site matters associated
with properties previously sold, the Corporation considers the terms of sale as
well as applicable federal and state laws to determine if the Corporation has
any remaining liability. If the Corporation is determined to have potential
liability for properties currently owned or previously sold, an estimate is made
of the total costs of investigation and remediation and other potential costs
associated with the site.
The Corporation's estimate of the costs associated with legal, product
liability, and environmental exposures is accrued if, in management's judgment,
the likelihood of a loss is probable. These accrued liabilities are not
discounted.
Insurance recoveries for environmental and certain general liability claims
are not recognized until realized. In the opinion of management, amounts accrued
for awards or assessments in connection with these matters are adequate and,
accordingly, ultimate resolution of these matters will not have a material
effect on the Corporation.
As of December 31, 1995, the Corporation had no known probable but
inestimable exposures that could have a material effect on the Corporation.
NOTE 20: QUARTERLY RESULTS (UNAUDITED)
(Millions of Dollars Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31, 1995 First Quarter Second Quarter Third Quarter Fourth Quarter
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $1,021.4 $1,135.4 $1,168.9 $1,440.4
Cost of goods sold 642.5 716.2 744.8 913.2
Marketing and administrative expenses 298.2 325.7 320.7 378.7
- --------------------------------------------------------------------------------------------------------------------
Operating income 80.7 93.5 103.4 148.5
Interest expense (net of interest income) 46.8 47.5 47.7 42.4
Other expense 2.8 3.7 5.9 3.8
- --------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
income taxes 31.1 42.3 49.8 102.3
Income taxes (benefit) 12.0 14.2 17.5 (34.7)
- --------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 19.1 28.1 32.3 137.0
Earnings from discontinued operations 6.6 6.7 11.2 13.9
- --------------------------------------------------------------------------------------------------------------------
Earnings before extraordinary item 25.7 34.8 43.5 150.9
Extraordinary loss from extinguishment of debt -- -- -- (30.9)
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 25.7 $ 34.8 $ 43.5 $ 120.0
- --------------------------------------------------------------------------------------------------------------------
Net earnings per common and common equivalent share:
Primary:
Earnings from continuing operations $ .19 $ .29 $ .33 $ 1.51
Earnings from discontinued operations .08 .08 .13 .16
Extraordinary loss -- -- -- (.35)
- --------------------------------------------------------------------------------------------------------------------
Primary earnings per share $ .27 $ .37 $ .46 $ 1.32
- --------------------------------------------------------------------------------------------------------------------
Assuming full dilution:
Earnings from continuing operations $ .19 $ .29 $ .34 $ 1.43
Earnings from discontinued operations .08 .08 .12 .15
Extraordinary loss -- -- -- (.32)
- --------------------------------------------------------------------------------------------------------------------
Fully diluted earnings per share $ .27 $ .37 $ .46 $ 1.26
- --------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
- --------------------------------------------------------------------------------------------------------------------
Revenues $ 894.4 $1,015.8 $1,096.6 $1,358.4
Cost of goods sold 570.7 644.2 701.8 853.0
Marketing and administrative expenses 263.5 295.5 312.3 372.3
- --------------------------------------------------------------------------------------------------------------------
Operating income 60.2 76.1 82.5 133.1
Interest expense (net of interest income) 43.9 47.8 45.3 50.9
Other expense 2.1 2.3 2.9 8.1
- --------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
income taxes 14.2 26.0 34.3 74.1
Income taxes 6.4 10.4 13.6 28.3
- --------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 7.8 15.6 20.7 45.8
Earnings from discontinued operations 6.8 7.4 8.6 14.7
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 14.6 $ 23.0 $ 29.3 $ 60.5
- --------------------------------------------------------------------------------------------------------------------
Net earnings per common and common equivalent share:
Primary:
Earnings from continuing operations $ .06 $ .15 $ .21 $ .51
Earnings from discontinued operations .08 .09 .10 .17
- --------------------------------------------------------------------------------------------------------------------
Primary earnings per share $ .14 $ .24 $ .31 $ .68
- --------------------------------------------------------------------------------------------------------------------
Assuming full dilution:
Earnings from continuing operations $ .06 $ .15 $ .21 $ .49
Earnings from discontinued operations .08 .09 .10 .16
- --------------------------------------------------------------------------------------------------------------------
Fully diluted earnings per share $ .14 $ .24 $ .31 $ .65
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
As described in Note 2, during the fourth quarter of 1995, the Corporation
agreed to sell the remainder of its PRC segment. Changes in previously reported
results are due to the reclassification of amounts applicable to the
discontinued operations of PRC. The results of the discontinued operations do
not reflect any expense for interest allocated by or management fees charged by
the Corporation.
The extraordinary loss recognized in the fourth quarter of 1995 resulted
from the early extinguishment of debt. The three-month period ended December 31,
1995, included a tax benefit of $65.0 million ($.73 per share on a primary basis
and $.68 per share on a fully diluted basis) related to the reduction of the
Corporation's deferred tax asset valuation allowance.
Earnings per common and common equivalent share are computed independently
for each of the quarters presented. Therefore, the sum of the quarters may not
necessarily be equal to the full year earnings per share amounts due to stock
transactions which occurred during 1995 and 1994 and, with respect to fully
diluted earnings per share, whether the assumed conversion of preferred shares
was dilutive or anti-dilutive during each quarter.
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
of The Black & Decker Corporation:
We have audited the accompanying consolidated balance sheets of The Black &
Decker Corporation as of December 31, 1995 and 1994, and the related
consolidated statements of earnings and cash flows for each of the three years
in the period ended December 31, 1995. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Black & Decker Corporation at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 13 to the financial statements, effective January 1,
1993, the Corporation changed its method of accounting for postemployment
benefits.
/s/ERNST & YOUNG LLP
Baltimore, Maryland
January 31, 1996
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information required under this Item with respect to Directors is contained in
the Corporation's Proxy Statement for the Annual Meeting of Stockholders to be
held April 23, 1996, under the captions Election of Directors and Board of
Directors - Section 16 and is incorporated herein by reference.
Information required under this Item with respect to Executive Officers of
the Corporation is included in Item 1 of Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this Item is contained in the Corporation's Proxy
Statement for the Annual Meeting of Stockholders to be held April 23, 1996,
under the captions Board of Directors and Executive Compensation and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information required under this Item is contained in the Corporation's Proxy
Statement for the Annual Meeting of Stockholders to be held April 23, 1996,
under the captions Voting Securities and Security Ownership of Management and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in the Corporation's Proxy
Statement for the Annual Meeting of Stockholders to be held April 23, 1996,
under the caption Executive Compensation and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) LIST OF FINANCIAL STATEMENTS,FINANCIAL STATEMENT SCHEDULES, AND EXHIBITS
(1) List of Financial Statements
The following consolidated financial statements of the Corporation
and its subsidiaries are included in Item 8 of Part II:
Consolidated Statement of Earnings - years ended December 31,
1995, 1994, and 1993.
Consolidated Balance Sheet - December 31, 1995 and 1994.
Consolidated Statement of Cash Flows - years ended December 31,
1995, 1994, and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
(2) List of Financial Statement Schedules
The following financial statement schedule of the Corporation and
its subsidiaries is included herein.
Schedule II - Valuation and Qualifying Accounts and Reserves.
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under
the related instructions or are inapplicable and, therefore, have
been omitted.
(3) List of Exhibits
The following exhibits are either included in this report or
incorporated herein by reference as indicated below:
Exhibit No. Exhibit
3(a)(1) Charter of the Corporation, as amended,
included in the Corporation's Quarterly Report
on Form 10-Q for the quarter ended December 25,
1988, is incorporated herein by reference.
3(a)(2) Articles Supplementary of the Corporation, as
filed with the State Department of Assessments
and Taxation of the State of Maryland on
September 5, 1991, included in the
Corporation's Current Report on Form 8-K dated
September 25, 1991, is incorporated herein by
reference.
3(b) By-Laws of the Corporation, as amended.
4(a) Indenture dated as of March 24, 1993, by and
between The Black & Decker Corporation and
Security Trust Company, National Association,
included in the Corporation's Current Report on
Form 8-K filed with the Commission on March 26,
1993, is incorporated herein by reference.
4(b) Form of 7-1/2% Notes due April 1, 2003,
included in the Corporation's Current Report on
Form 8-K filed with the Commission on March 26,
1993, is incorporated herein by reference.
4(c) Form of 6-5/8% Notes due November 15, 2000,
included in the Corporation's Current Report on
Form 8-K filed with the Commission on November
22, 1993, is incorporated herein by reference.
4(d) Form of 7% Notes due February 1, 2006, included
in the Corporation's Current Report on Form 8-K
filed with the Commission on January 20, 1994,
is incorporated herein by reference.
4(e)(1) Credit Agreement dated as of November 18, 1992,
among The Black & Decker Corporation, Black &
Decker Holdings Inc., Black & Decker GmbH,
DOM Sicherheitstechnik GmbH & Co. KG, Black &
Decker(France) S.A.R.L., the banks listed on
the signature pages thereto, Chemical Bank,
Credit Suisse and The Bank of Nova Scotia, as
Managing Agents, and Credit Suisse, as
Administrative Agent, included in the
Corporation's Annual Report on Form 10-K for
the year ended December 31, 1992, is
incorporated herein by reference.
4(e)(2) Amendment No. 1 dated as of October 21, 1994,
to Credit Agreement dated as of November 18,
1992, by and among The Black & Decker
Corporation, Black & Decker Holdings Inc.,
Black & Decker GmbH, DOM Sicherheitstechnik
GmbH & Co. KG, Black & Decker(France) S.A.R.L.,
the banks listed therein, Chemical Bank, Credit
Suisse and The Bank of Nova Scotia, as Managing
Agents, and Credit Suisse, as Administrative
Agent, included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended
October 2, 1994, is incorporated herein by
reference.
4(f) Indenture dated as of September 9, 1994, by and
between The Black & Decker Corporation and
Marine Midland Bank, as Trustee, included in
the Corporation's Current Report on Form 8-K
filed with the Commission on September 9, 1994,
is incorporated herein by reference.
The Corporation agrees to furnish a copy of any other documents with
respect to long-term debt instruments of the Corporation and its
subsidiaries upon request.
4(g)(1) Rights Agreement, dated as of April 17, 1986,
by and between the Corporation and Morgan
Guaranty Trust Company of New York, included in
the Corporation's Current Report on Form 8-K
dated April 29, 1986, is incorporated herein by
reference.
4(g)(2) Amendment Agreement to the Rights Agreement
dated as of March 31, 1988, between the
Corporation and Morgan Guaranty Trust Company
of New York as Rights Agent, included in the
Corporation's Quarterly Report on Form 10-Q for
the quarter ended March 27, 1988, is
incorporated herein by reference.
4(g)(3) Second Amendment Agreement to the Rights
Agreement dated as of September 6, 1991, by and
between the Corporation and First Chicago Trust
Company of New York as successor Rights Agent,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1991,
is incorporated herein by reference.
10(a) The Black & Decker Corporation Deferred
Compensation Plan For Non-Employee Directors,
as amended, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended October 2, 1994, is incorporated herein
by reference.
10(b) The Black & Decker 1982 Stock Option Plan, as
amended, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended September 29, 1991, is incorporated
herein by reference.
10(c) The Black & Decker 1986 Stock Option Plan, as
amended, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended September 29, 1991, is incorporated
herein by reference.
10(d) The Black & Decker 1986 U.K. Approved Option
Scheme, as amended, included in the
Corporation's Registration Statement on Form
S-8 (Reg.No.33-47651), filed with the
Commission on May 5, 1992, is incorporated
herein by reference.
10(e) The Black & Decker 1989 Stock Option Plan, as
amended, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended September 29, 1991, is incorporated
herein by reference.
10(f) The Black & Decker 1992 Stock Option Plan,
included in the Corporation's Registration
Statement on Form S-8 (Reg.No.33-47652), filed
with the Commission on May 5, 1992, is
incorporated herein by reference.
10(g) The Black & Decker 1995 Stock Option Plan for
Non-Employee Directors, included in the
definitive Proxy Statement for the 1995 Annual
Meeting of Stockholders of the Corporation
dated March 9, 1995, is incorporated herein by
reference.
10(h)(1) The Black & Decker Performance Equity Plan, as
amended, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended March 29, 1992, is incorporated herein
by reference.
10(h)(2) The Black & Decker Performance Equity Plan, as
amended subject to approval of the stockholders
of the Corporation at the 1996 Annual Meeting
of Stockholders.
10(i) Annual Incentive Plan, included in the
Corporation's Annual Report on Form 10-K for
the year ended December 31, 1992, is
incorporated herein by reference.
10(j) The Black & Decker Executive Annual Incentive
Plan subject to the approval of the
stockholders of the Corporation at the 1996
Annual Meeting of Stockholders.
10(k) Amended and Restated Employment Agreement,
dated as of November 1, 1995, by and
between the Corporation and Nolan D. Archibald.
10(l) Letter Agreement, dated May 31, 1989, by and
between the Corporation and Raymond A. DeVita,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1991,
is incorporated herein by reference.
10(m) Letter Agreement, dated February 1, 1975, by
and between the Corporation and Alonzo G.
Decker, Jr., included in the Corporation's
Annual Report on Form 10-K for the year ended
December 31, 1990, is incorporated herein by
reference.
10(n) The Black & Decker Supplemental Pension Plan,
as amended, included in the Corporation's
Annual Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by
reference.
10(o) The Black & Decker Executive Deferred
Compensation Plan, as amended, included in the
Corporation's Quarterly Report on Form 10-Q for
the quarter ended October 3, 1993, is
incorporated herein by reference.
10(p) The Black & Decker Supplemental Retirement
Savings Plan, included in the Corporation's
Registration Statement on Form S-8 (Reg.No.33-
65013), filed with the Commission on December
14, 1995, is incorporated herein by reference.
10(q) The Black & Decker Supplemental Executive
Retirement Plan, as amended.
10(r) The Black & Decker Executive Life Insurance
Program, as amended, included in the
Corporation's Quarterly Report on Form 10-Q
for the quarter ended April 4, 1993, is
incorporated herein by reference.
10(s) The Black & Decker Executive Salary Continuance
Plan, included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended April
12, 1995, is incorporated herein by reference.
10(t) Description of the Corporation's policy and
procedure for relocation of existing employees
(individual transfers), included in the
Corporation's Annual Report on Form 10-K for
the year ended December 31, 1991, is
incorporated herein by reference.
10(u) Description of the Corporation's policy and
procedures for relocation of new employees,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1991,
is incorporated herein by reference.
10(v) Form of Amendment and Restatement of Severance
Benefits Agreement by and between the
Corporation and approximately 17 of its key
employees.
10(w) Amendment and Restatement of Severance
Benefits Agreement, dated November 20, 1995, by
and between the Corporation and Nolan D.
Archibald.
10(x) Amendment and Restatement of Severance Benefits
Agreement, dated November 21, 1995, by and
between the Corporation and Raymond A. DeVita.
10(y) Amendment and Restatement of Severance Benefits
Agreement, dated November 14, 1995, by and
between the Corporation and Charles E. Fenton.
10(z) Amendment and Restatement of Severance Benefits
Agreement, dated December 5, 1995, by and
between the Corporation and Joseph Galli.
10(aa) Amendment and Restatement of Severance Benefits
Agreement, dated November 18, 1995, by and
between the Corporation and Don R. Graber.
10(bb)(1) Agreement and Plan of Merger dated as of
March 19, 1989, included in the Corporation's
Schedule 14D-1 in respect of Emhart
Corporation filed on March 22, 1989, is
incorporated herein by reference.
10(bb)(2) Amendment Agreement dated as of April 26, 1989,
included in the Corporation's Amendment No. 5
to Schedule 14D-1 in respect of Emhart
Corporation filed on April 28, 1989, is
incorporated herein by reference.
10(cc) Letter Agreement dated as of August 13, 1991,
by and between the Corporation and Newell Co.,
included in the Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 30,
1991, is incorporated herein by reference.
10(dd) Standstill Agreement dated as of September 24,
1991, between the Corporation and Newell Co.,
included in the Corporation's Current Report
on Form 8-K dated September 25, 1991, is
incorporated herein by reference.
10(ee) Distribution Agreement dated September 9, 1994,
by and between The Black & Decker Corporation,
Lehman Brothers Inc., Citicorp Securities,
Inc., Goldman, Sachs & Co., Morgan Stanley &
Co. Incorporated, NationsBanc Capital Markets,
Inc. and Salomon Brothers Inc., included in the
Corporation's Current Report on Form 8-K filed
with the Commission on September 9, 1994, is
incorporated herein by reference.
10(ff) Stock Purchase Agreement dated as of December
13, 1995, by and among The Black & Decker
Corporation, PRC Investments Inc., PRC Inc. and
Litton Industries, Inc.
11 Computation of Earnings Per Share.
12 Computation of Ratios.
21 List of Subsidiaries.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
All other items are "not applicable" or "none".
(b) Reports on Form 8-K
The Corporation filed a Current Report on Form 8-K with the Commission
on December 21, 1995. This Current Report on Form 8-K was filed
pursuant to Item 5 of Form 8-K and reported the Corporation's
definitive agreement to sell PRC Inc. to Litton Industries, Inc., for
$425.0 million.
All other items are "not applicable" or "none".
(c) Exhibits
The exhibits required by Item 601 of Regulation S-K are filed herewith.
(d) Financial Statement Schedules and Other Financial Statements
(1) The Financial Statement Schedule required by Regulation S-X is
filed herewith.
(2) The following Unaudited Pro Forma Financial Information
contemplated by Article 11 of Regulation S-X, reflecting the
Corporation's sales of the businesses comprising its discontinued
information technology and services segment, is filed herewith:
Pro Forma Statement of Earnings (Unaudited) - for the year
ended December 31, 1995
Pro Forma Balance Sheet (Unaudited) - as of December 31, 1995
The Unaudited Pro Forma Financial Information set forth below is
being provided in this Annual Report on Form 10-K in lieu of the
filing of a separate Current Report on Form 8-K pursuant to Item
2 thereof.
As indicated above in Item 1 of Part I of this Annual Report
on Form 10-K, during 1995 the Corporation sold PRC Realty Systems,
Inc. and PRC Environmental Management, Inc. and entered into an
agreement to sell PRC Inc. for $425 million to Litton Industries,
Inc. On February 16, 1996, the Corporation completed the sale of
PRC Inc. to Litton Industries, Inc. A copy of the Stock Purchase
Agreement dated as of December 13, 1995, by and among the
Corporation, PRC Investments Inc., PRC Inc., and Litton
Industries, Inc. is being filed herewith as Exhibit 10(ff), and is
incorporated herein by reference.
<TABLE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
(Millions of Dollars)
<CAPTION>
Balance Additions Other
At Charged Changes Balance
Beginning to Costs Add At End
Description of Period and Expenses Deductions (Deduct) of Period
- ----------- --------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Reserve for doubtful accounts
and cash discounts $38.2 $56.6 $52.9(A) $1.2(B) $43.1
===== ===== ===== ==== =====
Year Ended December 31, 1994
Reserve for doubtful accounts
and cash discounts $36.6 $41.8 $41.7(A) $1.5(B) $38.2
===== ===== ===== ==== =====
Year Ended December 31, 1993
Reserve for doubtful accounts
and cash discounts $46.7 $30.8 $39.2(A) $(1.7)(B) $36.6
===== ===== ===== ====== =====
(A) Accounts written off during the year and cash discounts taken by customers.
(B) Primarily includes currency translation adjustments.
</TABLE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Black & Decker Corporation and Subsidiaries
The Corporation completed the sale of PRC Inc. on February 16, 1996. The
Corporation sold Realty Systems, Inc. (RSI) on March 31, 1995, and PRC
Environmental Management, Inc. (EMI) on September 15, 1995. Together, PRC Inc.,
RSI, and EMI comprised the Corporation's discontinued information technology and
services (PRC) segment.
The following unaudited Pro Forma Consolidated Statement of Earnings and
Pro Forma Consolidated Balance Sheet are based on the historical Consolidated
Statement of Earnings and Consolidated Balance Sheet of the Corporation,
adjusted to reflect the sales of PRC Inc. and, for purposes of the Pro Forma
Consolidated Statement of Earnings, RSI and EMI.
The unaudited Pro Forma Consolidated Statement of Earnings for the year
ended December 31, 1995, presents the Corporation's results from continuing
operations prior to the extraordinary loss on extinguishment of debt, adjusted
to give effect to the sale of the discontinued PRC segment, assuming that the
sales of PRC Inc., RSI, and EMI, and the reduction of the Corporation's debt
with the proceeds therefrom, had taken place on January 1, 1995.
The unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1995,
presents the Corporation's financial position, adjusted to give effect to the
sale of PRC Inc., assuming that the sale of PRC Inc., and the reduction of the
Corporation's debt with the proceeds therefrom, had taken place on December 31,
1995. The proceeds received from the sales of RSI and EMI, and the associated
debt reductions therefrom, are reflected in the Corporation's historical
Consolidated Balance Sheet as of December 31, 1995.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable under the circumstances. The
following unaudited pro forma financial information should be read in
conjunction with the Corporation's historical Consolidated Financial Statements
and notes thereto, included in Item 8 of Part II of this report. In addition,
the following unaudited pro forma financial information is provided for
informational purposes only, and is not necessarily indicative of what the
actual results from continuing operations of the Corporation would have been had
the sales of PRC Inc., RSI, and EMI and the associated debt reductions taken
place on January 1, 1995, or what the actual financial position of the
Corporation would have been had the sale of PRC Inc. and the associated debt
reduction taken place on December 31, 1995. Further, the unaudited pro forma
financial information does not purport to indicate the future results of
operations or financial position of the Corporation.
<TABLE>
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
FOR THE YEAR ENDED DECEMBER 31, 1995
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Actual (a) Adjustments Pro Forma
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $4,766.1 $ -- $ 4,766.1
Cost of goods sold 3,016.7 -- 3,016.7
Marketing and administrative expenses 1,323.3 -- 1,323.3
- -------------------------------------------------------------------------------------------------------------------------------
Operating Income 426.1 -- 426.1
Interest expense (net of interest income of $8.6) 184.4 (27.8) (b) 156.6
Other expense 16.2 -- 16.2
- -------------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations Before Income Taxes 225.5 27.8 253.3
Income taxes 9.0 2.2 (c) 11.2
- -------------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations $216.5 $25.6 $242.1
===============================================================================================================================
Earnings from Continuing Operations Applicable to
Common Shares $204.9 $25.6 $230.5
===============================================================================================================================
Earnings from Continuing Operations Per Common
and Common Equivalent Share:
- -------------------------------------------------------------------------------------------------------------------------------
Primary:
Earnings from continuing operations $2.33 $2.62
===============================================================================================================================
Shares Used in Computing Primary Earnings from Continuing
Operations Per Share (in Millions) 87.9 87.9
===============================================================================================================================
Fully Diluted:
Earnings from continuing operations $2.29 $2.56
===============================================================================================================================
Shares Used in Computing Fully Diluted Earnings
From Continuing Operations Per Share (in Millions) 94.7 94.7
===============================================================================================================================
</TABLE>
(a) The actual results shown herein reflect only those of the Corporation's
continuing operations and exclude the extraordinary loss on extinguishment
of debt that occurred during 1995. The operating results of PRC Inc., RSI,
and EMI (collectively, the discontinued PRC segment) are reflected in
earnings from discontinued operations in the Corporation's historical
Consolidated Statement of Earnings included in Item 8 of Part II of this
report. As a result, no adjustment to earnings from continuing operations
is necessary to eliminate the operating results of the discontinued PRC
segment.
(b) To reflect the reduction of interest expense due to the following: (i) the
Corporation's assumed repayment of $405.0 million of variable rate short-
term borrowings with the proceeds from the sale of PRC Inc.; (ii) the
Corporation's assumed repayment of $60.0 million of variable rate
short-term borrowings with the proceeds from the sale of RSI; and (iii) the
Corporation's assumed repayment of $35.5 million of variable rate
short-term borrowings with the proceeds from the sale of EMI. In all cases,
an assumed interest rate of 6.25% was used, which approximates the
Corporation's weighted average interest rate on its domestic variable rate
short-term borrowings during 1995. The effect on pro forma earnings from
continuing operations of a 1/8% variance in the assumed interest rate would
be approximately $.5 million.
(c) To reflect the income tax effect of adjustment (b) above at the
Corporation's marginal tax rate for the tax jurisdictions affected. That
marginal tax rate differs from the statutory tax rate as a result of the
Corporation's net operating loss carryforwards. The Corporation's
historical income tax expense of $9.0 million for the year ended December
31, 1995, includes a $65.0 million tax benefit ($.74 per share on a primary
basis and $.69 per share on a fully diluted basis) due to the reduction of
its deferred tax asset valuation allowance, a portion of which related to
the anticipated gain on the sale of PRC Inc. For purposes of the Pro Forma
Statement of Earnings, no pro forma adjustment was made to that $65.0
million tax benefit, since any such adjustment will not have a continuing
impact on the Corporation.
<TABLE>
PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
DECEMBER 31, 1995
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Actual Adjustments Pro Forma
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 131.6 $425.0 (a)
(405.0) (b) $ 151.6
Trade receivables less allowances of $43.1 651.3 -- 651.3
Inventories 855.7 -- 855.7
Net assets of discontinued operations 302.4 (302.4) (c) --
Other current assets 165.6 (20.0) (d) 145.6
- ---------------------------------------------------------------------------------------------------------------------------
Total Current Assets 2,106.6 (302.4) 1,804.2
- ---------------------------------------------------------------------------------------------------------------------------
Property, Plant & Equipment 866.8 -- 866.8
Goodwill 2,142.0 -- 2,142.0
Other Assets 429.9 -- 429.9
- ---------------------------------------------------------------------------------------------------------------------------
$5,545.3 $(302.4) $5,242.9
===========================================================================================================================
Liabilities and Stockholders' Equity
Short-term borrowings $ 599.2 $(405.0)(b) $ 194.2
Current maturities of long-term debt 48.0 -- 48.0
Trade accounts payable 396.7 -- 396.7
Other accrued liabilities 743.0 17.6 (e) 760.6
- ---------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,786.9 (387.4) 1,399.5
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Debt 1,704.5 -- 1,704.5
Deferred Income Taxes 52.8 -- 52.8
Postretirement Benefits 307.8 -- 307.8
Other Long-Term Liabilities 270.1 -- 270.1
Stockholders' Equity
Convertible preferred stock (outstanding: 150,000 shares) 150.0 -- 150.0
Common stock (outstanding: 86,447,588 shares) 43.2 -- 43.2
Capital in excess of par value 1,084.5 -- 1,084.5
Retained earnings 202.6 85.0 (f) 287.6
Equity adjustment from translation (57.1) -- (57.1)
- ---------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 1,423.2 85.0 1,508.2
- ---------------------------------------------------------------------------------------------------------------------------
$5,545.3 $(302.4) $5,242.9
===========================================================================================================================
</TABLE>
(a) To reflect the Corporation's receipt of cash proceeds from the sale of PRC
Inc.
(b) To reflect the Corporation's reduction of short-term borrowings upon
receipt of the cash proceeds from the sale of PRC Inc.
(c) To eliminate the net assets of discontinued operations.
(d) To reverse the Corporation's deferred tax asset related to the gain on the
sale of PRC Inc.
(e) To reflect the accrual of expenses related to the sale of PRC Inc.
(f) To reflect an estimated gain on the sale of PRC Inc., net of income taxes,
in the amount of $85.0 million. The Corporation estimates that its net gain
on the sale of PRC Inc. will be in the range of $80.0 to $90.0 million.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE BLACK & DECKER CORPORATION
Date: February 29, 1996 By /s/ NOLAN D. ARCHIBALD
----------------- ----------------------
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 29, 1996, by the following persons on behalf
of the registrant and in the capacities indicated.
Signature Title Date
Principal Executive Officer
/s/ NOLAN D. ARCHIBALD February 29, 1996
- ---------------------- -----------------
Nolan D. Archibald Chairman, President, and
Chief Executive Officer
Principal Financial Officer
/s/ THOMAS M. SCHOEWE February 29, 1996
- --------------------- -----------------
Thomas M. Schoewe Vice President and
Chief Financial Officer
Principal Accounting Officer
/s/ STEPHEN F. REEVES February 29, 1996
- --------------------- -----------------
Stephen F. Reeves Corporate Controller
This report has been signed by the following directors, constituting a
majority of the Board of Directors, by Nolan D. Archibald, Attorney-in-Fact.
Nolan D. Archibald J. Dean Muncaster
Barbara L. Bowles Lawrence R. Pugh
Malcolm Candlish Mark H. Willes
Alonzo G. Decker, Jr. M. Cabell Woodward, Jr.
Anthony Luiso
/s/ NOLAN D. ARCHIBALD Date: February 29, 1996
- ----------------------
Nolan D. Archibald
Attorney-in-Fact
Exhibit 3(b)
Adopted 08/13/91
Amended 04/26/94
Amended 12/08/94
Amended 12/14/95
BYLAWS
OF
THE BLACK & DECKER CORPORATION
ARTICLE I
Stockholders
SECTION 1. Annual Meeting.
The annual meeting of stockholders shall be held on the last Tuesday in
April of each year or on such day within 15 days thereof and at such time and at
such place as the Board of Directors may by resolution provide for the purpose
of electing directors and for the transaction of only such other business as is
properly brought before the meeting in accordance with these Bylaws.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board, or (c) otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business (other than the election of directors by holders of shares of Series B
Cumulative Convertible Preferred Stock (the "Series B Stock") in accordance with
the provisions of the Articles Supplementary in respect of the Series B Stock)
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given written notice thereof that is received by the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 65 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder must be so received not later than the close of
business on the 15th day following the day on which the notice of the date of
the annual meeting was mailed or the public disclosure was made, whichever first
occurred. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this section, provided, however, that nothing in this
section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
The Chairman of the annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Article, and if the
Chairman should so determine, he or she shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
SECTION 2. Special Meetings.
Special meetings of the stockholders may be called at any time for any
purpose or purposes by the Chief Executive Officer, by a majority of the Board
of Directors, or by a majority of the Executive Committee. Special meetings of
the stockholders shall be called forthwith by the Chairman of the Board, by the
President, or by the Secretary of the Corporation upon the written request of
stockholders entitled to cast at least 25% of all votes entitled to be cast at
the special meeting. Special meetings of holders of Series B Stock for the
purpose of electing directors in accordance with the provisions of the Articles
Supplementary in respect of the Series B Stock shall be called forthwith by the
Chairman of the Board, by the President or by the Secretary of the Corporation
upon the written request of stockholders owning in the aggregate at least 10% of
the outstanding shares of Series B Stock. Such written request shall state the
purpose or purposes of the meeting and the matters proposed to be acted on at
the meeting. However called, notice of the meeting shall be given to each
stockholder and shall state the purpose or purposes of the meeting. No business
other than that stated in the notice shall be transacted at any special meeting.
SECTION 3. Place of Meetings.
All meetings of stockholders shall be held at the principal offices of
the Corporation at Towson, Baltimore County, Maryland, or at such other location
in the State of Maryland as the Board of Directors may provide in the notice of
the meeting.
SECTION 4. Notice of Meetings.
Written or printed notice of each meeting of the stockholders shall be
delivered to each stockholder by leaving the notice with the stockholder at the
stockholder's residence or usual place of business, or by mailing it, postage
prepaid and addressed to the stockholder at the stockholder's address as it
appears upon the records of the Corporation. The notice shall be delivered or
mailed not more than 90 nor less than 20 days before the meeting, and shall
state the place, day, and hour at which the meeting is to be held. No notice of
any meeting of the stockholders need be given to any stockholder who attends the
meeting in person or by proxy, or to any stockholder who, in writing executed
and filed with the records of the meeting either before or after the holding
thereof, waives notice.
SECTION 5. Quorum.
Except as otherwise provided in the charter of the Corporation in
respect of the Series B Stock, at any meeting of stockholders the presence in
person or by proxy of the holders of record of a majority of the shares of stock
entitled to vote at the meeting shall constitute a quorum. In the absence of a
quorum, the stockholders entitled to vote who shall be present in person or by
proxy at any meeting (or adjournment thereof) may, by a majority vote and
without further notice, adjourn the meeting from time to time, but not for a
period of over thirty days at any one time, until a quorum shall attend. At any
adjourned meeting at which a quorum shall be present, any business may be
transacted that could have been transacted if the meeting had been held as
originally scheduled.
SECTION 6. Conduct of Meetings.
Meetings of stockholders shall be presided over by the Chairman of the
Board of Directors of the Corporation or, in the Chairman's absence, by the Vice
Chairman of the Board, or if both of such officers are absent, by the President
of the Corporation. The Secretary of the Corporation shall act as secretary of
meetings of the stockholders and in the Secretary's absence, the records of the
proceedings shall be kept and authenticated by such other person as may be
appointed for that purpose at the meeting by the presiding officer. The rules
contained in the current edition of Robert's Rules of Order Newly Revised shall
govern in all cases to which they are applicable and in which they are not
inconsistent with these Bylaws and any special rules of order the meeting may
adopt.
SECTION 7. Approval of Minutes.
The minutes of all meetings of stockholders shall be corrected and
approved by a committee of directors designated by the Board and if none is
designated, by the Organization Committee. At a subsequent meeting of
stockholders, a relevant excerpt from the minutes may be read for information at
the request of a stockholder.
SECTION 8. Proxies.
Stockholders may vote either in person or by proxy, but no proxy that
is dated more than 11 months before the meeting at which it is offered shall be
accepted unless the proxy shall on its face name a longer period for which it is
to remain in force. Every proxy shall be in writing and signed by the
stockholder, or by the stockholder's duly authorized agent, and shall be dated.
The proxy need not be sealed, witnessed or acknowledged. Proxies shall be filed
with the Secretary of the Corporation at or before the meeting.
SECTION 9. Voting.
Except as otherwise provided in the charter of the Corporation, at all
meetings of stockholders, each holder of shares of Common Stock shall be
entitled to one vote and each holder of shares of Series B Stock shall be
entitled to the number of votes provided for in the charter of the Corporation
for each share of stock of the Corporation registered in the stockholder's name
upon the books of the Corporation on the date fixed by the Board of Directors as
the record date for the determination of stockholders entitled to vote at the
meeting. Except as otherwise provided in the charter of the Corporation, all
elections and matters submitted to a vote at meetings of stockholders shall be
decided by a majority of all votes cast in person or by proxy, unless more than
a majority of the votes cast is required by statute, by charter, or by these
Bylaws. If the officer of the Corporation presiding over the meeting shall so
determine, a vote by ballot may be taken upon any election or matter, and the
vote shall be so taken upon the request of the holders of ten percent of the
stock present and entitled to vote on the election or matter. If the presiding
officer shall so determine, the votes on all matters to be voted upon by ballot
may be postponed to be voted on at the same time or on a single ballot.
SECTION 10. Inspectors of Elections.
Two or more inspectors may be appointed by the presiding officer at any
meeting. If so appointed, the inspectors shall open and close the polls, receive
and take charge of the proxies and ballots, decide all questions as to the
qualifications of voters and the validity of proxies, determine and report the
results of elections and votes on matters before the meeting, and do such other
acts as may be proper to conduct the election and the vote with fairness to all
stockholders.
SECTION 11. List of Stockholders.
Prior to each meeting of the stockholders, the Secretary of the
Corporation shall prepare, as of the record date fixed by the Board of Directors
with respect to the meeting, a full and accurate list of all stockholders
entitled to vote at the meeting, indicating the number of shares and class of
stock held by each. The Secretary shall be responsible for the production of
that list at the meeting.
ARTICLE II
Board of Directors
SECTION 1. Powers.
The property, business, and affairs of the Corporation shall be managed
by the Board of Directors of the Corporation. The Board of Directors may
exercise all the powers of the Corporation, except those conferred upon or
reserved to the stockholders by statute, by charter or by these Bylaws. The
Board of Directors shall keep minutes of each of its meetings and a full account
of all of its transactions.
SECTION 2. Number of Directors.
Except as the holders of Series B Stock may exercise their right as a
class to elect a director or directors in certain events, the number of
directors of the Corporation shall be 14 or such other number not less than nine
as may from time to time be determined by the vote of three-fourths of the
entire Board of Directors. However, the number of directors may not be decreased
to less than nine, nor the tenure of office of a director be affected by any
change in number.
SECTION 3. Nomination of Directors.
Except as provided in the charter of the Corporation in respect of the
Series B Stock voting as a class, only persons who are nominated in accordance
with the following procedures shall be eligible for election as Directors at a
meeting of stockholders. Nominations of persons for election as Directors may be
made at a meeting of stockholders by or at the direction of the Board of
Directors by any nominating committee or person appointed by the Board or by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this section.
Nominations, other than those made by or at the direction of the Board, shall be
made pursuant to written notice delivered to or mailed and received by the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 65 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder must be so received not later than the close of
business on the 15th day following the day on which notice of the date of the
meeting was mailed or public disclosure was made, whichever first occurred. The
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-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 and number of
shares of capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of Directors pursuant to
Rule 14a under the Securities Exchange Act of 1934; and (b) as to the
stockholder giving the notice (i) the name and record address of stockholder and
(ii) the class and number of shares of capital stock of the Corporation which
are beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of the proposed nominee to serve
as Director of the Corporation.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if the Chairman should so determine, he or she shall so
declare to the meeting and the defective nomination shall be disregarded.
SECTION 4. Election.
Except as hereinafter provided, the members of the Board of Directors
shall be elected each year at the annual meeting of stockholders by the vote of
the holders of record of a majority of the shares of stock present in person or
by proxy and entitled to vote at the meeting. Each director shall hold office
until the next annual meeting of stockholders held after his or her election and
until his or her successor shall have been duly elected and qualified, or until
death, or until he or she shall have resigned, or shall have been removed as
hereinafter provided. Each person elected as director of the Corporation shall
qualify as such by written acceptance or by attendance at and participation as a
director in a duly called meeting of the Board of Directors.
SECTION 5. Removal.
At a duly called meeting of the stockholders at which a quorum is
present, the stockholders may, by vote of the holders of a majority of the votes
entitled to be cast at the meeting, remove with or without cause any director or
directors from office, and may elect a successor or successors to fill any
resulting vacancy for the remainder of the term of the director so removed.
SECTION 6. Vacancies.
Except as provided in the charter of the Corporation in respect of
directors elected by holders of the Series B Stock voting as a class, (a) if any
director shall die or resign, or if the stockholders shall remove any director
without electing a successor to fill the remaining term, that vacancy may be
filled by the vote of a majority of the remaining members of the Board of
Directors, although a majority may be less than a quorum, and (b) vacancies in
the Board created by an increase in the number of directors may be filled by the
vote of a majority of the entire Board as constituted prior to the increase. A
director elected by the Board of Directors to fill any vacancy, however created,
shall hold office until the next annual meeting of stockholders and until his or
her successor shall have been duly elected and qualified.
SECTION 7. Meetings.
Immediately after each annual meeting of stockholders at which a Board
of Directors shall have been elected, the Board of Directors shall meet, without
notice, for the election of an Executive Committee of the Board of Directors,
for the election of officers of the Corporation, and for the transaction of
other business. Other regular meetings of the Board of Directors shall be held
in the months of February, July, October and December on the day and at the time
designated by the Chief Executive Officer. Special meetings of the Board of
Directors may be called at any time by the Chief Executive Officer or by any two
directors. Regular and special meetings of the Board of Directors may be held at
such place, in or out of the State of Maryland, as the Board may from time to
time determine.
SECTION 8. Notice of Meetings.
Except for the meeting immediately following the annual meeting of
stockholders, notice of the place, day and hour of a regular meeting of the
Board of Directors shall be given in writing to each director not less than
three days prior to the meeting and delivered to the director or to the
director's residence or usual place of business, or by mailing it, postage
prepaid and addressed to the director at his or her address as it appears upon
the records of the Corporation. Notice of special meetings may be given in the
same way, or may be given personally, by telephone, or by telegraph or facsimile
message sent to the director's home or business address as it appears upon the
records of the Corporation, not less than one day prior to the meeting. Unless
required by these Bylaws or by resolution of the Board of Directors, no notice
of any meeting of the Board of Directors need state the business to be
transacted at the meeting. No notice of any meeting of the Board of Directors
need be given to any director who attends, or to any director who, in writing
executed and filed with the records of the meeting either before or after the
holding thereof, waives notice.
SECTION 9. Quorum.
A majority of the Board of Directors shall constitute a quorum for the
transaction of business at meetings of the Board of Directors. Except as
otherwise provided by statute, by charter, or by these Bylaws, the vote of a
majority of the directors present at a duly constituted meeting shall be
sufficient to pass any measure, and such decision shall be the decision of the
Board of Directors. In the absence of a quorum, the directors present, by
majority vote and without further notice, may adjourn the meeting from time to
time until a quorum shall be present. The Board of Directors may also take
action or make decisions by any other method which may be permitted by statute,
by charter, or by these Bylaws.
SECTION 10. Presumption of Assent.
A director of the Corporation who is present at a meeting of the Board
of Directors at which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless the director announces his or her
dissent at the meeting, and (a) the dissent is entered in the minutes of the
meeting, (b) before the meeting adjourns the director files with the person
acting as the secretary of the meeting a written dissent to the action, or (c)
the director forwards a written dissent within 24 hours after the meeting is
adjourned by registered or certified mail to the Secretary of the Corporation.
The right to dissent does not apply to a director who voted in favor of the
action or who failed to announce his or her dissent at the meeting. A director
may abstain from voting on any matter before the meeting by so stating at the
time the vote is taken and by causing the abstention to be recorded or stated in
writing in the same manner as provided above for a dissent.
SECTION 11. Compensation.
Each director shall be entitled to receive such remuneration as may be
fixed from time to time by the Board of Directors. However, no director who
receives a salary as an officer or employee of the Corporation or of any
subsidiary thereof shall receive any remuneration as a director or as a member
of any committee of the Board of Directors. Each director may also receive
reimbursement for the reasonable expenses incurred in attending the meetings of
the Board of Directors, the meetings of any committee thereof, or otherwise in
connection with attending to the affairs of the Corporation.
SECTION 12. Director Emeritus.
Any retired member of the Board of Directors may be designated by the
Board as a Director Emeritus for a period of one year for each of the three
years next succeeding retirement as a Director. Each Director Emeritus shall
receive notices of meetings, remuneration, and reimbursement for expenses in
attending meetings as may be fixed by the Board of Directors from time to time.
A Director Emeritus shall be entitled to attend all meetings of the Board of
Directors and of any committee to which he or she may be appointed and may
participate in the discussion of (but not in the voting on) any matter properly
before the meeting. A Director Emeritus shall not be counted for the purpose of
determining the number of appointments to be made to a committee or for
determining a quorum of the committee.
ARTICLE III
Committees
SECTION 1. Executive Committee.
At its first meeting after the annual meeting of the stockholders, the
Board of Directors shall elect an Executive Committee consisting of at least
five members of the Board, of whom the Chairman of the Board, if any, shall be
one. The Board shall designate a Chairman of the Committee who shall serve as
Chairman of the Committee at the pleasure of the Board. During the intervals
between the meetings of the Board of Directors, the Executive Committee shall
possess and may exercise all powers in the management and direction of the
business and affairs of the Corporation except as limited by the Maryland
General Corporation Law or by resolution of the Board of Directors. All action
taken by the Executive Committee shall be reported to the Board of Directors at
its meeting next succeeding such action, and shall be subject to revision and
alteration by the Board, provided that no rights of third parties may be
adversely affected by any revision or alteration. Delegation of authority to the
Executive Committee shall not relieve the Board of Directors or any director of
any responsibility imposed by law or statute or by charter.
SECTION 2. Other Committees.
From time to time the Board of Directors by resolution adopted by the
affirmative vote of a majority of the members of the entire Board may provide
for and appoint other committees to have the powers and perform the duties
assigned to them by the Board of Directors. These committees may include, but
are not limited to, an Organization Committee, a Finance Committee, and an Audit
Committee.
SECTION 3. Meetings of Committees.
Each Committee of the Board of Directors shall fix its own rules of
procedure, and shall meet as provided by those rules or by resolution of the
Board, or at the call of the chairman or any two members of the committee. A
majority of each committee shall constitute a quorum thereof, and in every case
the affirmative vote of a majority of the entire committee shall be necessary to
take any action. Each committee may also take action by any other method that
may be permitted by statute, by charter, or by these Bylaws. In the event a
member of a committee fails to attend any meeting of the committee, the other
members of the committee present at the meeting, whether or not they constitute
a quorum, may appoint a member of the Board of Directors to act in the place of
the absent member. Regular minutes of the proceedings of each committee and a
full account of all its transactions shall be kept in a book provided for the
purpose, except that the Organization Committee shall not be required to keep
minutes. Vacancies in any committee of the Board of Directors shall be filled by
the Board of Directors.
ARTICLE IV
Officers
SECTION 1. Election and Tenure.
The Board of Directors may elect a Chairman and a Vice Chairman from
among the directors. The Board of Directors shall elect a President, a Treasurer
and a Secretary, and one or more Vice Presidents, one or more Assistant
Treasurers, one or more Assistant Secretaries, and such other officers with such
powers and duties as the Board may designate, none of whom need be a director.
Each officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his or her election and
until a successor shall have been duly chosen and qualified or until he or she
shall have resigned or been removed. All elections to office shall be by a
majority vote of the entire Board of Directors.
SECTION 2. Chairman of the Board.
The Chairman of the Board shall preside at all meetings of stockholders
and of the Board of Directors at which he or she shall be present. The Chairman
shall have such other powers and perform such other duties as from time to time
may be assigned by the Board of Directors.
SECTION 3. Vice Chairman of the Board.
The Vice Chairman of the Board, in the absence of the Chairman of the
Board, shall preside at all meetings of stockholders and the Board of Directors.
(In the absence of the Chairman and the Vice Chairman, the Board of Directors
shall elect a chairman of the meeting.) The Vice Chairman shall have such other
powers and perform such other duties as from time to time may be assigned by the
Board of Directors or by the Chairman of the Board.
SECTION 4. President.
The President shall be the Chief Executive Officer of the Corporation
and, subject to the control of the Board of Directors and the Executive
Committee, shall have general charge and supervision of the Corporation's
business, affairs, and properties. The President shall have authority to sign
and execute, in the name of the Corporation, all authorized deeds, mortgages,
bonds, contracts or other instruments. The President may sign, with the
Secretary or the Treasurer, stock certificates of the Corporation. In the
absence of the Chairman and the Vice Chairman of the Board, the President shall
preside at meetings of stockholders. In general, the President shall perform all
the duties ordinarily incident to the office of a president of a corporation,
and such other duties as, from time to time, may be assigned by the Board of
Directors or by the Executive Committee.
SECTION 5. Vice Presidents.
Each Vice President, which term shall include any Executive Vice
President or Group Vice President, shall have the power to sign and execute,
unless otherwise provided by resolution of the Board of Directors, all contracts
or other obligations in the name of the Corporation in the ordinary course of
business, and with the Secretary, or with the Treasurer, or with an Assistant
Secretary, or with an Assistant Treasurer, may sign stock certificates of the
Corporation. At the request of the President or in the President's absence or
during the President's inability to act, the Vice President or Vice Presidents
shall perform the duties and exercise the functions of the President, and when
so acting shall have the powers of the President. If there is more than one Vice
President, the Board of Directors may determine which one or more of the Vice
Presidents shall perform any of such duties or exercise any of such functions,
or if the determination is not made by the Board, the President may make the
determination. The Vice President or Vice Presidents shall have such other
powers and perform such other duties as may be assigned by the Board of
Directors or by the President. For purposes of this Article IV, Section 5, the
term Vice President does not include a Vice President appointed pursuant to
Article IV, Section 9.
SECTION 6. Secretary.
The Secretary shall keep the minutes of the meetings of the
stockholders, of the Board of Directors, and of the Executive Committee,
including all the votes taken at the meetings, and record them in books provided
for that purpose. The Secretary shall see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by statute. The
Secretary shall be the custodian of the records and of the corporate seal of the
Corporation. The Secretary may affix the corporate seal to any document executed
on behalf of the Corporation, and may attest the same. The Secretary may sign,
with the President or a Vice President, stock certificates of the Corporation.
In general, the Secretary shall perform all duties ordinarily incident to the
office of a secretary of a corporation, and such other duties as, from time to
time, may be assigned by the Board of Directors or by the President.
SECTION 7. Treasurer.
The Treasurer shall have charge of and be responsible for all
funds, securities, receipts and disbursements of the Corporation, and shall
deposit or cause to be deposited, in the name of the Corporation, all moneys or
other valuable effects in such banks, trust companies, or depositories as may be
designated by the Board of Directors. The Treasurer shall maintain full and
accurate accounts of all assets, liabilities and transactions of the
Corporation, and shall render to the President and the Board of Directors,
whenever they may require it, an account of all transactions as Treasurer and of
the financial condition of the Corporation. In general, the Treasurer shall
perform all the duties ordinarily incident to the office of a treasurer of a
corporation, and such other duties as, from time to time, may be assigned to him
or her by the Board of Directors or by the President. The Treasurer shall give
the Corporation a bond, if required by the Board of Directors, in a sum, and
with one or more sureties, satisfactory to the Board of Directors, for the
faithful performance of the duties of the office and for the restoration to the
Corporation in case of death, resignation, retirement or removal from office of
all corporate books, papers, vouchers, moneys, and other properties of whatever
kind in his or her possession or under his or her control.
SECTION 8. Subordinate Officers.
The subordinate officers shall consist of such assistant officers and
agents as may be deemed desirable and as may be elected by a majority of the
members of the Board of Directors. Each such subordinate officer shall hold
office for such period, have such authority and perform such duties as the Board
of Directors may prescribe.
SECTION 9. Appointed Vice Presidents.
The Chief Executive Officer may from time to time appoint one or more
Vice Presidents with such administrative powers and duties as may be designated
or approved by the Chief Executive Officer. An appointed Vice President shall
not be a corporate officer and may be removed by the Chief Executive Officer.
SECTION 10. Officers Holding Two or More Offices.
Any two or more of the above named offices, except those of Chairman
and Vice Chairman of the Board and those of President and Vice President, may be
held by the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if the instrument is required by statute,
by charter, by these Bylaws, or by resolution of the Board of Directors to be
executed, acknowledged, or verified by two or more officers.
SECTION 11. Compensation.
The Board of Directors shall have power to fix the compensation of all
officers of the Corporation. It may authorize any officer upon whom the power of
appointing subordinate officers may have been conferred to fix the compensation
of the subordinate officers.
SECTION 12. Removal.
Any officer of the Corporation may be removed, with or without cause,
by a vote of a majority of the entire Board of Directors, and any officer of the
Corporation appointed by another officer may also be removed, with or without
cause, by the appointing officer, by the Executive Committee, or by the Board of
Directors.
SECTION 13. Vacancies.
A vacancy in any office because of death, resignation, removal, or any
other cause shall be filled for the unexpired portion of the term by election of
the Board of Directors at any regular or special meeting.
ARTICLE V
Stock
SECTION 1. Certificates.
Each stockholder shall be entitled to a certificate or certificates
which shall represent and certify the number and kind of shares of the
Corporation's stock owned by the stockholder for which full payment has been
made, or for which payment is being made by installments in conjunction with a
stockholder-approved option plan. Each stock certificate shall be signed by the
Chairman, the President or a Vice President and countersigned by the Secretary
or Treasurer or Assistant Treasurer of the Corporation. A stock certificate
shall be deemed to be so signed and sealed whether the required signatures are
manual or facsimile signatures and whether the seal is a facsimile seal or any
other form of seal. In case any officer of the Corporation who has signed a
stock certificate ceases to be an officer of the Corporation, whether because of
death, resignation or otherwise, before the stock certificate is issued, the
certificate may nevertheless be issued and delivered by the Corporation as if
the officer had not ceased to be such officer on the date of issue.
SECTION 2. Transfer of Shares.
Shares of stock shall be transferable only on the books of the
Corporation by the holder thereof, in person or by duly authorized agent, upon
the surrender of the stock certificate representing the shares to be
transferred, properly endorsed. The Board of Directors shall have power and
authority to make other rules and regulations concerning the issue, transfer and
registration of stock certificates as it may deem expedient.
SECTION 3. Transfer Agents and Registrars.
The Corporation may have one or more transfer agents and one or more
registrars of its stock, whose respective duties the Board of Directors may,
from time to time, define. No stock certificate shall be valid until
countersigned by a transfer agent, if the Corporation has a transfer agent in
respect of that class or series of capital stock, or until registered by a
registrar, if the Corporation has a registrar in respect of that class or series
of capital stock. The duties of transfer agent and registrar may be combined.
SECTION 4. New Certificates.
In case any stock certificate is alleged to have been lost, stolen,
mutilated, or destroyed, the Board of Directors may authorize the issue of a new
certificate in place thereof upon such terms and conditions as it may deem
advisable. The Board of Directors may, in its discretion, further require the
owner of the stock certificate or the owner's duly authorized agent to give bond
with sufficient surety to the Corporation to indemnify it against any loss or
claim which may arise by reason of the issue of a stock certificate in the place
of one reportedly lost, stolen, or destroyed.
SECTION 5. Record Dates.
The Board of Directors may fix, in advance, a date as the record date
for the purpose of determining those stockholders who shall be entitled to
notice of, or to vote at, any meeting of stockholders, or for the purpose of
determining those stockholders who shall be entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of making any other
proper determination with respect to stockholders. Except as provided in the
charter of the Corporation in respect of the Series B Stock, the date shall be
not more than 90 days, and in the case of a meeting of stockholders, not less
than 10 days, prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken. In lieu of fixing a record date,
the Board of Directors may provide that the stock transfer books shall be closed
for a stated period, not to exceed in any case 20 days. When the stock transfer
books are closed for the purpose of determining stockholders entitled to notice
of or to vote at a meeting of stockholders, the closing of the transfer books
shall be at least 10 days before the date of the meeting.
SECTION 6. Annual Report.
The President of the Corporation shall annually prepare a full and
correct statement of the affairs of the Corporation, including a balance sheet
and a financial statement of operations for the preceding fiscal year. These
statements shall be sent to the extent possible to each beneficial owner of the
stock of the Corporation prior to or with the proxy statement and notice to
stockholders of the annual meeting of stockholders. It will be submitted at the
annual meeting, and within 20 days thereafter be placed on file at the
Corporation's principal offices in Maryland.
ARTICLE VI
Dividends and Finance
SECTION 1. Dividends.
Subject to any statutory or charter conditions and limitations, the
Board of Directors may in its discretion declare what, if any, dividends shall
be paid from the surplus or from the net profits of the Corporation, the date
when the dividends shall be payable, and the date for the determination of
holders of record to whom the dividends shall be paid.
SECTION 2. Depositories.
The Board of Directors from time to time shall designate one or more
banks or trust companies as depositories of the Corporation and shall designate
those officers and agents who shall have authority to deposit corporate funds in
such depositories. It shall also designate those officers and agents who shall
have authority to withdraw from time to time any or all of the funds of the
Corporation so deposited upon checks, drafts, or orders for the payment of
money, notes and other evidences of indebtedness, drawn against the account and
issued in the name of the Corporation. The signatures of the officers or agents
may be made manually or by facsimile. No check or order for the payment of money
shall be invalidated because a person whose signature appears thereon has ceased
to be an officer or agent of the Corporation prior to the time of payment of the
check or order by any depository.
SECTION 3. Corporate Obligations.
No loans shall be contracted on behalf of the Corporation and no
evidences of indebtedness or guaranties of the obligations of others shall be
issued in the name of the Corporation unless authorized by a resolution of the
Board of Directors. Such authority may be either general or specific. When duly
authorized, all loans, promissory notes, acceptances, other evidences of
indebtedness and guaranties shall be signed by the President, a Vice President,
the Treasurer, or an Assistant Treasurer.
SECTION 4. Fiscal Year.
The fiscal year of the Corporation shall begin on the first day of
January and end on the last day of December of each year.
ARTICLE VII
Books and Records
SECTION 1. Books and Records.
The Corporation shall maintain a stock ledger which shall contain the
name and address of each stockholder and the number of shares of stock of the
Corporation which the stockholder holds. The ledger shall be kept at the
principal offices of the Corporation in Towson, Baltimore County, Maryland, or
at the offices of the Corporation's stock transfer agent. All other books,
accounts, and records of the Corporation, including the original or a certified
copy of these Bylaws, the minutes of all stockholders meetings, a copy of the
annual statement, and any voting trust agreements on file with the Corporation,
shall be kept and maintained by the Secretary at the principal offices of the
Corporation in Towson.
SECTION 2. Inspection Rights.
Except as otherwise provided by statute or by charter, the Board of
Directors shall determine whether and to what extent the books, accounts, and
records of the Corporation, or any of them, shall be open to the inspection of
stockholders. No stockholder shall have any right to inspect any book, account,
document or record of the Corporation except as conferred by statute, by
charter, or by resolution of the stockholders or the Board of Directors.
ARTICLE VIII
Seal
SECTION 1. Seal.
The seal of the Corporation shall consist of a circular impression
bearing the name of the Corporation and the word "Maryland" around the rim and
in the center the word "Incorporated" and the year "1910."
ARTICLE IX
Indemnification
SECTION 1. Indemnification.
The Corporation to the full extent permitted by, and in the manner
permissible under, the laws of the State of Maryland and other applicable laws
and regulations may indemnify any person who is or was an officer, employee, or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee, or agent of another corporation or entity and
shall indemnify any director of the Corporation or any director who is or was
serving at the request of the Corporation as a director of another corporation
or entity, who by reason of his or her position was, is, or is threatened to be
made a party to an action or proceeding, whether civil, criminal,
administrative, or investigative, against any and all expenses (including, but
not limited to, attorneys' fees, judgments, fines, penalties, and amounts paid
in settlement) actually and reasonably incurred by the director, officer,
employee, or agent in connection with the proceeding. Repeal or modification of
this Section or the relevant law shall not affect adversely any rights or
obligations then existing with respect to any state of facts then or theretofore
existing or any action, suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
ARTICLE X
Amendments
SECTION 1. Amendment of Bylaws.
These Bylaws may be amended at any meeting of the stockholders by a
majority of all the votes cast, provided the text of the amendment is submitted
with the notice of the meeting. The Board of Directors may also amend these
Bylaws by a vote of a majority of the directors present at a meeting, provided
that the Board of Directors shall not consider or act on any amendment to these
Bylaws that, directly or indirectly, modifies the meaning or effect of any
amendment to these Bylaws adopted by the stockholders within the preceding 12-
month period, or any amendment to these Bylaws that, directly or indirectly,
contains substantially similar provisions to those of an amendment rejected by
the stockholders within the preceding 12-month period.
Exhibit 10(h)(2)
THE BLACK & DECKER PERFORMANCE EQUITY PLAN
Section 1. Purpose
The purpose of The Black & Decker Performance Equity Plan (the "Plan")
is to attract and retain key employees of The Black & Decker Corporation (the
"Corporation") and its Subsidiaries, to motivate those employees to put forth
maximum efforts for the long-term success of the business, and to encourage
ownership of the Corporation's Stock by them.
Section 2. Definitions
The following definitions are applicable to the Plan:
(a) "Committee" shall mean the Organization Committee of the
Corporation's Board of Directors or such other committee of the Board comprised
of not less than three members as the Board of Directors shall from time to time
appoint to administer the Plan. All members of the Committee shall be members of
the Board of Directors of the Corporation who are not eligible to participate in
the Plan and who are (i) disinterested persons as defined in Rule 16b-3 adopted
pursuant to the Exchange Act, and (ii) outside directors as defined in the
Section 162(m) Regulations.
(b) "Designated Beneficiary" shall mean the beneficiary designated by
the Participant, in a manner determined by the Committee, to receive shares of
Stock or other payments due the Participant in the event of the Participant's
death, or in the absence of an effective designation by the Participant, the
Participant's surviving spouse, or, if there is no surviving spouse, the
Participant's estate.
(c) "Employee" shall mean a regular full-time salaried
employee of the Corporation or of a Subsidiary.
(d) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) "Executive Officer" shall mean an executive officer of the
Corporation within the meaning of Rule 3b-7 promulgated under the Exchange Act
and a "covered employee" as defined by the Section 162(m) Regulations.
(f) "Fiscal Year" shall mean the fiscal year of the
Corporation.
(g) "Participant" shall mean an Employee who is selected by
the Committee to participate in the Plan pursuant to Section 5.
(h) "Performance Goals" shall mean the performance objective
or objectives relating to, in whole or in part, the performance of the
Corporation or any Subsidiary, group, division, or operating unit of the
Corporation or any Subsidiary during a Performance Period. With respect to a
Participant who is an Executive Officer, the performance objective
or objectives shall be based on one of, or a combination of, the following
factors: the market price of the Stock at the close of business on the last
business day of the Performance Period, increases in the market price of the
Stock during the Performance Period, the earnings for the Performance Period or
any year or years in the Performance Period (either before taxes, before
interest and taxes, before depreciation, amortization, interest and taxes, or
after all of the foregoing), the earnings per share for the Performance Period
or any year or years in the Performance Period, or, as to the Corporation or any
Subsidiary, group, division or operating unit thereof, the average annual return
on equity or net assets for the Performance Period or the return on equity or
net assets for a specified year or years in the Performance Period, the average
annual gross margin or cost of goods sold for the Performance Period or the
gross margin or cost of goods sold for a specified year or years in the
Performance Period, or the average annual cash flow from operations or free cash
flow for the Performance Period or the cash flow from operations or free cash
flow for a specified year or years in the Performance Period.
(i) "Performance Period" shall mean with respect to each grant of
Performance Shares a period of three to five Fiscal Years.
(j) "Performance Shares" shall mean a grant pursuant to Sections 5 and
7 of an award in the form of shares of Common Stock or units equivalent thereto.
(k) "Section 162(m) Regulations" shall mean the regulations adopted
pursuant to Section 162(m) of the Internal Revenue Code of 1986 (as amended), as
such regulations may be amended from time to time.
(l) "Stock" shall mean the common stock, $.50 par value, of
the Corporation.
(m) "Subsidiary" shall mean any business entity in which the
Corporation, directly or indirectly, owns 50 percent or more of the total
combined voting power of all classes of stock or other equity interests.
Section 3. Administration
The Plan shall be administered by the Committee. The Committee shall
have full power to establish the form and terms and conditions (including,
without limitation, noncompete, confidentiality or similar provisions) of the
Performance Share Agreement that shall represent the grant of Performance Shares
to a Participant hereunder, to construe and interpret the Plan and to establish
and amend rules and regulations for its administration. All actions taken and
decisions made by the Committee pursuant to the provisions of the Plan shall be
binding and conclusive on all persons for all purposes, including but not
limited to Participants and their legal representatives and beneficiaries. The
rights of a Participant shall at all times be subject to the terms and
conditions set forth in the respective Performance Share Agreement.
Section 4. Maximum Amount Available for Grants
(a) The maximum number of Performance Shares that may be granted and
the maximum number of shares of Stock that may be issued under the Plan is
1,500,000, subject to adjustment as provided in Section 11. If Performance
Shares are forfeited under the Plan, they and any related shares of Stock shall
again be available for grant and issuance under the Plan. Subject to Section 10,
if Performance Shares are paid in cash rather than in shares of Stock, they and
any related shares of Stock shall not be available for grant and issuance.
(b) Shares of Stock delivered under the Plan shall be made
available from authorized but unissued shares.
(c) With respect to each Performance Period beginning on or after
January 1, 1996, the maximum number of Performance Shares that may be granted,
and the maximum number of shares of Stock that may be issued, to any Participant
shall be 75,000.
Section 5. Participation; Grants
The Committee shall from time to time make grants of Performance Shares
to Participants selected from among those Employees who, in the opinion of the
Committee, have the capacity to contribute in substantial measure to the
successful performance of the Corporation and its Subsidiaries. In making
grants, the Committee may take into account a Participant's level of
responsibility, rate of compensation, individual performance and contribution,
and such other criteria as it deems appropriate. If an Employee becomes a
Participant after the commencement of a Performance Period, the number of
Performance Shares granted, if any, may be prorated for the length of time
remaining in the Performance Period. With respect to any Employee who is or
becomes an Executive Officer, the Committee may not designate the Employee a
Participant more than 90 days after the commencement of a Performance Period.
The Committee may not grant Performance Shares to any member of the Committee.
Section 6. Performance Goals
The Committee shall establish Performance Goals for each Performance
Period on the basis of such criteria, and to accomplish such objectives, as the
Committee may from time to time determine. The Committee shall also establish a
schedule or schedules for the Performance Period setting forth the percentage of
the Performance Shares granted that will be earned or forfeited based on the
percentages of the Performance Goals for the period that are actually achieved
or exceeded. To provide Participants with additional motivation, the Committee,
in its discretion, may provide for the issuance to individual Participants,
where Performance Goals in excess of a target are achieved or exceeded, of
additional, fully vested and unrestricted Performance Shares not to exceed 50%
of the Performance Shares granted for the Performance Period; provided, however,
that with respect to Performance Periods beginning on or after January 1, 1996,
if such an additional grant is made to an Executive Officer, the number of
additional Performance Shares to be granted to the Executive Officer shall be
fixed by the Committee within 90 days of the commencement of the Performance
Period, and the grant of additional Performance Shares to the Executive Officer
shall be contingent upon the attainment of the Performance Goals established, in
writing, by the Committee within 90 days of the commencement of the Performance
Period. In setting Performance Goals, the Committee may use return on equity,
earnings growth, revenue growth, peer comparisons or such other measures of
performance in such manner as it deems appropriate; provided, however, that for
Performance Periods beginning on or after January 1, 1996, Performance Goals
established with respect to a Participant who is an Executive Officer shall be
based on one of, or a combination of, the factors set forth in the definition of
Performance Goals. The Committee shall establish Performance Goals before, or as
soon as practicable after, the commencement of the Performance Period; provided
that with respect to a Participant who is an Executive Officer the Performance
Goals shall be established in writing by the Committee not later than 90 days
after the commencement of the Performance Period. During the Performance Period
and until such time thereafter as payment is made in accordance with Section
8(b), the Committee shall have the authority to adjust upward or downward the
Performance Goals or the measure or measures of performance in such manner as it
deems appropriate to reflect unusual, extraordinary or nonrecurring events,
changes in applicable accounting rules or principles or in the Corporation's
methods of accounting, changes in applicable tax law or regulations, changes in
Fiscal Year or such other factors as the Committee may determine, including
authority to determine that all or any portion of any Performance Shares
otherwise earned for the Performance Period have not been earned (even if
applicable Performance Goals originally established have been met).
Notwithstanding the preceding sentence, with respect to a Performance Period
beginning on or after January 1, 1996, the Committee shall have no such
authority to the extent that the existence or exercise of the authority would
result in any awards made to such Participants for the Performance Period not
being excluded from covered compensation under the Section 162(m) Regulations as
a result of the qualified performance based compensation exclusion in the
Section 162(m) Regulations.
Section 7. During Performance Period
(a) Performance Shares may be granted in the form of either
shares of Stock or units equivalent thereto as described in the following
paragraphs of this Section 7.
(b) If Performance Shares are granted in the form of shares of Stock,
certificates representing the Performance Shares shall be issued in the name of
the Participant, but shall be retained in the custody of the Corporation until
the expiration of the Performance Period and the determination of the number of
shares, if any, that are to be forfeited pursuant to the terms of the grant.
During the Performance Period (and until such time thereafter as payment is made
in accordance with Section 8(b)), the Performance Shares shall not be
transferable, except to the extent rights may pass upon the death of the
Participant to a Designated Beneficiary pursuant to the terms of this Plan. The
Participant shall have the right during the Performance Period to receive all
cash dividends and other cash distributions with respect to the Performance
Shares granted to the Participant that have not previously been forfeited and to
vote such shares. Any distribution of shares of stock or other securities or
property made with respect to Performance Shares held in the name of a
Participant shall be treated as part of the Performance Shares of the
Participant and shall be subject to forfeiture and all the other limitations and
restrictions imposed upon such Performance Shares. Upon the expiration of the
Performance Period or the occurrence of any other event that may give rise to
forfeiture under the Plan, the Corporation may defer payment of dividends on
Performance Shares until a determination is made as to the number of such
shares, if any, to be forfeited, and no further dividends shall be paid with
respect to forfeited shares after the date of the forfeiture (regardless of
whether the record date of the dividend is before or after the date of the
forfeiture). The Participant shall retain the right to vote all Performance
Shares until a determination has been made by the Committee as to whether such
shares, or a part thereof, have been forfeited. In the event of the death of the
Participant, his Designated Beneficiary shall have the same right to receive
cash dividends and other cash distributions with respect to the Performance
Shares that are not forfeited and to vote such shares as the Participant would
have had if he had survived.
(c) If Performance Shares are granted in the form of units equivalent
to shares of Stock, no certificates shall be issued with respect to the units,
but the Corporation shall maintain a bookkeeping account in the name of the
Participant to which the units shall relate and the units shall otherwise be
treated in a comparable manner as if the Participant had been awarded shares of
Stock (except that no voting rights or other stock ownership rights shall apply
to the units). Each such unit shall represent the right to receive one share of
Stock or a cash payment of equivalent value at the time, in the manner and
subject to the restrictions set forth in the Plan. If, during the Performance
Period, cash dividends or other cash distributions are paid with respect to
shares of Stock, the Corporation shall pay to the Participant in cash an amount
equal to the cash dividends or cash distributions that he would have received if
the Performance Shares had been granted in the form of shares of Stock rather
than units equivalent thereto. If, during the Performance Period, shares of
stock or other securities or property are distributed with respect to the
Stock, additional units equivalent to such shares, securities or property shall
be added to the Participant's bookkeeping account as additional units and shall
be subject to forfeiture and all other limitations and restrictions imposed upon
the related units. Upon the expiration of the Performance Period or the
occurrence of any other event that may give rise to forfeiture under the Plan,
the Corporation may defer payment of dividend equivalents on units of
Performance Shares until a determination is made as to the number of such units,
if any, to be forfeited, and no further dividend equivalents shall be paid with
respect to forfeited units after the date of the forfeiture (regardless of
whether the record date of the dividend is before or after the date of the
forfeiture). In the event of the death of the Participant, his Designated
Beneficiary shall have the same right to receive cash payments equivalent to
cash dividends and other cash distributions with respect to the units of
Performance Shares which are not forfeited as the Participant would have had if
he had survived. A Participant (or Designated Beneficiary) shall have no right
to or interest in any specific assets of the Corporation or any of its
Subsidiaries by reason of the establishment of the bookkeeping account described
in this paragraph (c), and shall have only the right of an unsecured creditor of
the Corporation with respect to amounts payable from such account under this
Plan.
Section 8. Payment
(a) As soon as practicable after the end of a Performance Period,
except as permitted in paragraph (c) of this Section 8, the Committee shall
determine the extent to which the Performance Goals have been achieved or
exceeded and, on this basis, shall certify and declare in writing what
percentages, if any, of the granted Performance Shares have been earned with
respect to the Performance Period.
(b) In accordance with the procedures specified by the Committee from
time to time, payment of Performance Shares that have been earned shall be made
in Stock, cash equivalent in value to the corresponding shares of Stock, or a
combination thereof as determined by the Committee.
(c) For the first Performance Period established under the Plan (but
not for any subsequent Performance Periods), the Committee may in its discretion
establish interim Performance Goals applicable to a Fiscal Year or Years ending
prior to the end of the Performance Period, and provide for a portion of the
Performance Shares granted for the Performance Period to be earned and paid out
as soon as practicable following the end of each such Fiscal Year or Years to
the extent such interim Performance Goals are satisfied.
Section 9. Termination of Employment and Forfeitures
Subject to the provisions of Section 10:
(a) Except as otherwise provided in paragraph (c) below, Performance
Shares which are granted but not earned by a Participant with respect to the
Performance Period shall be forfeited.
(b) Except as otherwise provided in paragraph (c) below or in Section 8
(c), if a Participant ceases to be an Employee prior to the end of the
Performance Period, all of such Participant's Performance Shares for the
Performance Period shall be forfeited.
(c) If prior to the end of a Performance Period, a Participant dies or
ceases to be an Employee by reason of (i) retirement from active employment with
a right to receive an immediate pension benefit under the applicable pension
plan of the Corporation or any of its Subsidiaries, (ii) extended disability
(such as entitles the Participant to long-term disability payments under the
applicable pension plan or long-term disability plan of the Corporation or any
of its Subsidiaries), or (iii) for any other reason specified in each case by
the Committee, there shall be forfeited as of the cessation of employment a
number of Performance Shares equal to the number initially granted to the
Participant for that Performance Period multiplied by a fraction, (i) the
numerator of which shall be the number of full calendar months from the date of
the Participant's cessation of employment to the end of the Performance Period,
and (ii) the denominator of which shall be the number of months representing the
entire Performance Period; provided, that with respect to Performance Periods
beginning before January 1, 1996, the Committee is authorized to declare (before
or as soon as practicable after such cessation of employment) that a lesser
number of Performance Shares shall be forfeited as of the date of such cessation
of employment. With respect to the Performance Shares that are not so forfeited
as of the date of such cessation of employment, the Performance Period shall
continue and the percentage of such remaining Performance Shares that are earned
or forfeited shall be determined based upon the extent to which the applicable
Performance Goals for such Performance Period have been achieved or exceeded
(subject to the last two sentences of Section 6).
(d) Transfer from the Corporation to a Subsidiary, from a Subsidiary to
the Corporation, or from one Subsidiary to another Subsidiary shall not be
considered a termination of employment. Nor shall it be considered a termination
of employment if an Employee is placed on military or sick leave or on other
leave of absence that is considered by the Committee as continuing intact the
employment relationship. In those cases, the employment relationship shall be
continued until the later of the date when the leave equals 90 days or the date
when an Employee's right to reemployment shall no longer be guaranteed either by
law or by contract, except that in the event active employment is not renewed at
the end of the leave of absence, the employment relationship shall be deemed to
have been terminated at the beginning of the leave of absence.
Section 10. Mergers, Sales and Change of Control
(a) In the case of (i) any merger, consolidation, share exchange or
combination of the corporation with or into another corporation (other than a
merger, consolidation, share exchange or combination in which the Corporation is
the surviving corporation and which does not result in the outstanding Stock
being converted into or exchanged for different securities, cash or other
property, or any combination thereof) or a sale of all or substantially all of
the business or assets of the Corporation or (ii) a Change of Control of the
Corporation, all Performance Periods shall be deemed to have ended as of the end
of the most recent quarterly accounting period prior to the date of the merger,
consolidation, share exchange, combination, sale of assets, or Change of Control
and the maximum percentage of Performance Shares (150% of the number granted or,
with respect to Performance Periods beginning on or after January 1, 1996, 100%
of the number granted) shall be deemed to have been earned. In the event that
application of the foregoing provisions results in more than 1,500,000
Performance Shares being deemed to have been earned, then notwithstanding any
other provision of the Plan (including but not limited to the provisions of
Section 4) any Performance Shares in excess of 1,500,000 deemed to have been
earned shall be paid in cash equivalent in value to the corresponding shares of
Stock.
(b) "Change of Control" of the Corporation shall mean a change of
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation is in fact required to do so, provided that,
without limitation, such a change of control shall be deemed to have occurred if
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation or a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially the same
proportions as their ownership of Stock of the Corporation, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities; or (B)
during any period of two consecutive years (not including any period prior to
the adoption of the Plan), individuals who at the beginning of the period
constitute the Board and any new director (other than a director designated by a
person who has entered into an agreement with the Corporation to effect a
transaction described in clauses (A) or (D) of this definition) whose election
by the Board or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board; or (C) the Corporation enters into an
agreement, the consummation of which would result in the occurrence of a change
in control of the Corporation; or (D) the stockholders of the Corporation
approve a merger, consolidation or share exchange between the Corporation and
any other corporation, other than a merger or consolidation which would
result in the voting securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 60% of the
combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger, consolidation or
share exchange, or the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all the Corporation's
assets.
Section 11. Adjustment of and Changes in Stock
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, share exchange, rights
offering, distribution of assets, or any other change in the corporate structure
or capital stock of the Corporation, the Committee shall make such adjustments,
if any, as it deems appropriate in the number of Performance Shares that have
been or may be granted under the Plan, the number of shares of Stock available
for issuance under the Plan, and the Performance Goals and the number of
Performance Shares that may be earned, to reflect the change, and any
adjustments so made shall be conclusive for all purposes of the Plan.
Section 12. Miscellaneous Provisions
(a) The rights or interest of a Participant or Designated Beneficiary
under the Plan may not be assigned, encumbered or transferred until such time as
payment is made in accordance with Section 8(b), except to the extent rights may
pass upon the death of the Participant to a Designated Beneficiary pursuant to
the terms of this Plan.
(b) No Employee or other person shall have any claim or right to be
granted Performance Shares under the Plan. Neither the Plan nor any action taken
thereunder shall be construed as giving any Employee or other person any right
to be retained in the employ of the Corporation or any of its Subsidiaries.
(c) Performance Shares granted or earned and cash dividends
or other cash distribution paid under the Plan shall not be deemed compensation
in determining the amount of any entitlement under any retirement or other
employee benefit plan of the Corporation or any of its Subsidiaries.
(d) The Committee may adopt and apply rules that will ensure that the
Corporation and its Subsidiaries will be able to comply with applicable
provisions of any Federal, state or local law relating to the withholding of
tax, including but not limited to the withholding of tax on dividends paid on
Performance Shares and on the amount, if any, includable in income of a
Participant after the expiration of the Performance Period. The Committee shall
have the right in its discretion to satisfy withholding tax liability by
retaining or purchasing Performance Shares.
(e) The Plan shall be construed in accordance with and
governed by the laws of the State of Maryland.
(f) In this Plan, whenever the context so requires, the masculine
gender includes the feminine and a singular number includes the plural.
Section 13. Amendment or Termination
The Board of Directors of the Corporation may amend, suspend or
terminate the Plan at any time and in such manner and to such extent as it deems
advisable, but no amendment shall be made without the approval of a majority of
the shares represented and entitled to vote at a duly called meeting of
stockholders at which a quorum is present that would (i) increase the number of
Performance Shares that may be granted under the Plan (except as provided in
Section 11), (ii) increase the maximum number of shares of Stock available for
issuance under the Plan (except as provided in Section 11), (iii) materially
increase the 50% limitation set forth in Section 6, or (iv) change the Plan's
eligibility requirements. No amendment, suspension or termination shall impair
any right theretofore granted to any Participant, without the consent of the
Participant.
Section 14. Effective Date and Term of Plan
This Plan shall become effective only if approved by the affirmative
vote of the holders of a majority of the shares represented and entitled to vote
at the Annual Meeting of Stockholders of the Corporation to be held on January
29, 1990, or any adjournment thereof, and, if so approved, shall be effective as
of January 1, 1990. Performance Shares may be granted under the Plan after
December 31, 1995, only if the amendments to the Plan approved by the Board of
Directors of the Corporation on February 14, 1996, are approved by the
affirmative vote of the holders of a majority of the shares present and entitled
to vote at the Annual Meeting of Stockholders of the Corporation to be held on
April 23, 1996, or any adjournment thereof. No Performance Shares shall be
granted under the Plan after December 31, 2000.
Section 15. Indemnification of Committee
In addition to such other rights of indemnification as they may have as
members of the Corporation's Board of Directors or as members of the Committee,
each member of the Committee shall be indemnified by the Corporation against the
reasonable expenses, including attorney's fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which he may be a party by reason of any
action taken or failure to act under or in connection with the Plan, or any
Performance Shares granted thereunder, and against all amounts paid by him in
settlement thereof, provided such settlement is approved by independent legal
counsel selected by the Corporation, or paid by him in satisfaction of a
judgment in any such action, suit or proceeding except in relation to matters as
to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for gross negligence or misconduct in his duties;
provided that within 60 days after the institution of such action, suit or
proceeding, the Committee member shall in writing offer the Corporation the
opportunity, at its own expense, to handle and defend the same.
Exhibit 10(j)
THE BLACK & DECKER EXECUTIVE ANNUAL INCENTIVE PLAN
1. Purpose
The purpose of The Black & Decker Corporation Executive Annual
Incentive Plan is to make a part of the annual compensation of the
Corporation's officers dependent on the Corporation's performance and
to provide rewards for performance as a competitive incentive to their
efforts on the Corporation's behalf, and thus to enhance and reinforce
the Corporation's ability to achieve its business goals. It is the
intention of the Board of Directors of the Corporation in adopting the
Plan that amounts paid to Participants under the Plan be "qualified
performance-based compensation" within the meaning of Section 162(m) of
the Code and the Section 162(m) Regulations.
2. Definitions
Whenever used for purposes of the Plan, the following terms have the
meanings defined below, and when the defined meaning is intended, the
term is capitalized:
(a) "Award" means a grant to a Participant of incentive
compensation under the Plan.
(b) "CEO" means the Chief Executive Officer of the
Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(d) "Committee" means the Organization Committee of the Board of
Directors of the Corporation, or any other committee
consisting solely of two or more "outside directors" (within
the meaning of the Section 162(m) Regulations) designated as
such by the Board of Directors of the Corporation.
(e) "Corporation" means The Black & Decker Corporation.
(f) "Maximum Participant Award" means, with respect to a
particular Participant, the maximum Award payable to such
Participant as determined in accordance with Section 6(c)
under the Plan.
(g) "Participant" means an employee who is an officer of the
Corporation who has been designated to participate in the
Plan.
(h) "Performance Period" means the fiscal year in respect of
which an Award is to be paid under the Plan.
(i) "Plan" means The Black & Decker Executive Annual Incentive
Plan, as amended from time to time.
(j) "Section 162(m) Regulations" mean the regulations adopted
pursuant to Section 162(m) of the Code, as amended from time
to time.
(k) "Subsidiary" means any domestic or foreign corporation, at
least 50% of the outstanding voting stock or voting power of
which is beneficially owned, directly or indirectly, by the
Corporation.
3. Administration
(a) The Committee shall determine who shall be a Participant,
the applicable performance goals for each Performance
Period and the amount of any Awards paid under the Plan,
shall construe, interpret and administer the Plan, and
shall adopt such rules and regulations and take such
other action as it deems appropriate. All decisions by
the Committee shall be final, conclusive and binding on
the Corporation and each Participant, former Participant,
beneficiary and every other interested person. The
Committee may condition participation in the Plan by an
employee upon the employee agreeing to certain terms and
conditions of employment (including, without limitation,
noncompete, confidentiality or similar provisions).
Prior to the payment of any Awards under the Plan the
Committee shall certify, in accordance with the Section
162(m) Regulations, that the performance goals in respect
of the applicable Performance Period have been satisfied.
The Committee will report annually to the Board of
Directors of the Corporation all action taken under the
Plan, including Awards paid.
(b) Within 90 days of the beginning of each Performance
Period (or, if earlier, before 25% of the period of
service to which the performance goals relate has
elapsed), the Committee shall establish or approve
performance goals for the Performance Period. The
performance goals established by the Committee shall be
stated in terms of an objective formula or standard and
shall be based on one of, or a combination of, the
following factors: the market price of the Corporation's
Common Stock at the close of business on the last
business day of the Performance Period, increases in the
market price of the Corporation's Common Stock during the
Performance Period, the earnings for the Performance
Period (either before taxes, before interest and taxes,
before depreciation, amortization, interest and taxes, or
after all of the foregoing), the earnings per share for
the Performance Period, or, as to the Corporation or any
business unit thereof, the return on equity or net assets
for the Performance Period, the gross margin or cost of
goods sold for the Performance Period, or the cash flow from
operations or free cash flow for the Performance Period.
(c) The Committee shall administer the Plan in a manner consistent
with the terms and conditions of the Section 162(m)
Regulations to enable Awards paid under the Plan to be
"qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the Section 162(m)
Regulations.
4. Participation
(a) Participation in the Plan shall be limited to selected
officers of the Corporation who the Committee has
determined have a significant influence on the
Corporation's annual corporate performance. The
selection of Participants shall be made by the Committee
within 90 days of the beginning of a Performance Period
(or, if earlier, before 25% of the period of service to
which the performance goals relate has elapsed) and
communicated to the Participants as soon thereafter as
practicable.
(b) At any time during a Performance Period the Committee may
designate new Participants or remove officers from
participation, in its sole discretion. An officer's
participation in the Plan in any prior year or years shall not
give the officer the right to be a Participant in any
subsequent year.
5. Awards
(a) At the end of each Performance Period, the CEO shall submit a
written report to the Committee describing the performance of
the Corporation (or, if applicable, a business unit) relative
to those performance goals previously established by the
Committee for the Performance Period.
(b) Awards shall be made annually in accordance with the
respective performance against the performance goals
established by the Committee for the respective Performance
Period.
(c) The decision to pay or not to pay an Award and the amount
of the Award to be paid shall be made by the Committee
based on the performance goals established in respect of
the applicable Performance Period and in accordance with
the Section 162(m) Regulations. Under no circumstances
may the Committee make an Award to a Participant that
exceeds the applicable Maximum Participant Award for the
respective Performance Period. The Committee in its sole
discretion may reduce the amount of any Award paid to a
Participant below the amount of the Award that otherwise would
be payable to the Participant upon application of the
performance goals for the applicable Performance Period or may
decide not to pay an Award when performance goals for the
applicable Performance Periods have been satisfied, but under
no circumstances may the Committee increase the amount of any
Award that otherwise would be payable to the Participant upon
application of the performance goals for the applicable
Performance Period.
(d) With respect to each Participant, the Maximum Participant
Award for a Performance Period shall be equal to 200% of his
or her annual base salary on the date the Committee
establishes the performance goals for the applicable
Performance Period. Notwithstanding the foregoing, under no
circumstances may the Maximum Participant Award for any
Performance Period exceed $4 million.
6. Payment of Awards
(a) Awards shall be paid as soon as practicable after the end of a
Performance Period, after audited results for the Performance
Period are available, and after the Committee has certified
that the applicable performance goals have been satisfied.
(b) Awards shall be paid in cash and shall be paid in the currency
in which each Participant's base salary is paid.
7. Termination of Employment
If before an Award is actually paid to a Participant with respect to a
Performance Period the Participant ceases to be a regular, full-time
employee of the Corporation or any of its Subsidiaries for a reason
other than retirement with a right to an immediate retirement benefit,
the Participant's eligibility under the Plan shall terminate and no
Award will be made. If a Participant's employment terminates at a time
when the Participant has a right to receive an immediate retirement
benefit from the Corporation or any of its Subsidiaries, the Committee
may make such Award as it deems appropriate under the circumstances;
provided, however, that the Award shall not exceed the Award the
Participant would have been entitled to receive upon application of the
performance goals for the applicable Performance Period if the
Participant had been employed for the entire Performance Period times a
fraction the numerator of which shall equal the number of days the
Participant was employed by the Corporation and its Subsidiaries during
the Performance Period and the denominator of which shall equal the
number of days in the Performance Period.
8. Claim to Awards and Employment Rights
No officer or other person shall have any claim or right to be granted
an Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any person any right to be
retained in the employ of the Corporation or a Subsidiary or affecting
the right of the Corporation and its Subsidiaries to terminate the
employment of any person at any time, for any reason and with or
without notice.
9. Tax Withholding
The Corporation or a Subsidiary, as appropriate, shall have the right
to deduct from all Award payments for any Federal, State or local taxes
or other similar payments required by law to be withheld with respect
to such payments.
10. Expenses of Plan
The expenses of administering the Plan shall be borne by the
Corporation and its Subsidiaries.
11. Amendment and Termination
The Corporation may, in its discretion, terminate, amend or modify this
Plan at any time and from time to time.
12. Effective Date of the Plan
The Plan shall be effective as of January 1, 1996, provided that the
Plan is approved by the stockholders of the Corporation at the 1996
Annual Meeting of Stockholders or any adjournment thereof. In the event
the Plan is not approved by the stockholders of the Corporation at the
1996 Annual Meeting of Stockholders or any adjournment thereof, the
Plan shall terminate and be of no force and effect and no benefits
shall be payable hereunder.
Exhibit 10(k)
THE BLACK & DECKER CORPORATION
Amended and Restated
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as of this 1st
day of November, 1995, between The Black & Decker Corporation, a Maryland
corporation (the "Corporation"), and Nolan D. Archibald (the "Executive").
The Corporation desires to continue to have the benefits of the
Executive's knowledge and experience as a full-time employee, and the
Executive desires to continue in full-time employment with the Corporation.
Accordingly, in consideration of the mutual covenants and
representations contained herein, the parties agree as follows:
1. Full-Time Employment of Executive.
a. Duties and Status.
(1) The Corporation hereby engages the Executive
as Chairman and Chief Executive Officer for the employment period as defined in
paragraph 3.a. and the Executive accepts such employment on the terms and
conditions set forth in this Agreement. During the employment period, the
Executive shall be assigned to corporate headquarters located at Towson,
Maryland. The Executive shall exercise such authority and perform such duties as
are commensurate with the By-Laws of the Corporation and the normal duties of a
Chairman and Chief Executive Officer of a publicly traded corporation, and shall
perform such other reasonably related managerial duties and responsibilities for
the Corporation as may be assigned to him by the Board of Directors of the
Corporation.
(2) During the employment period, the Executive
shall (a) devote his full time and efforts to the business of the Corporation
and, unless approved by the Board of Directors of the Corporation, will not
engage in consulting work or any trade or business for his own account or for or
on behalf of any other person, firm or corporation which competes, conflicts or
interferes with the performance of his duties hereunder in any way, and (b)
accept such additional office or offices to which he may be elected by the Board
of Directors of the Corporation, provided that the performance of the duties of
such office or offices shall be consistent with the scope of the duties provided
for in subparagraph (1) of this paragraph a.
b. Compensation and General Benefits.
(1) The Corporation shall pay the Executive an
annual salary which is not less than the greater of (i) his annual base salary
from the Corporation on the date hereof or (ii) any subsequently established
higher annual base salary. Such salary shall be payable in periodic equal
installments which are not less frequent than the periodic installments relating
to his salary immediately prior to the date hereof. Such salary shall be subject
to normal periodic review for increases based on the policies of the Corporation
and contributions to the enterprise.
(2) In addition to the salary provided by sub-
paragraph (1) of this paragraph b, the Corporation shall provide thrift, stock
option, retirement, group life, supplemental life, long-term disability,
accident, dental and health insurance programs and other perquisites and
benefits available to the Corporation's principal executive officers. The
Executive shall also be entitled to participate in any other employee benefit
programs that may be established by the Corporation and in which other
executives of the Corporation are entitled to participate, including, without
limitation, any annual incentive plan, performance equity plan, and supplemental
executive retirement plan as in effect from time to time.
2. Competition; Confidential Information.
The Executive and the Corporation recognize that, due
to the nature of his engagements hereunder and the relationship of the Executive
to the Corporation, the Executive will have access to, and may assist in
developing, confidential and proprietary information relating to the business
and operations of the Corporation and its affiliates. The Executive acknowledges
that such information will be of central importance to the business of the
Corporation and its affiliates and that disclosure of it to or its use by others
could cause substantial loss to the Corporation. The Executive and the
Corporation also recognize that an important part of the Executive's duties will
be to develop good will for the Corporation through his personal contact with
others having business relationships with the Corporation and its affiliates,
and that there is a danger that this good will, a proprietary asset of the
Corporation and its affiliates, may follow the Executive if and when his
relationship with the Corporation is terminated. The Executive accordingly
agrees as follows:
a. Non-Competition. During the employment period, as defined
in Section 3.a., the Executive will not, directly or indirectly, either
individually or as owner, partner, agent, employee, consultant or otherwise,
except for the account of and on behalf of the Corporation or its affiliates,
engage in any activity competitive with the business of the Corporation or its
affiliates, nor will he, in competition with the Corporation or its affiliates,
solicit or otherwise attempt to establish any business relationships with any
person, firm or corporation which was, at any time during the employment period,
a customer or supplier of the Corporation. However, nothing in this Section 2
shall be construed to prevent the Executive from owning, as an investment, not
more than 5% of a class of equity securities issued by any competitor of the
Corporation and publicly traded and registered under Section 12 of the
Securities Exchange Act of 1934.
b. Confidential Information. During and at all times after the
expiration of the employment period, the Executive (1) will not disclose any
trade secrets, customer lists, production processes, business plans, or other
proprietary information which is treated as confidential by the Corporation or
its affiliates which is now known to him or which hereafter may become known to
him as a result of his employment or association with the Corporation and (2)
will not at any time, directly or indirectly, disclose any such information to
any person, firm or corporation, or use the same in any way other than in
connection with the business of the Corporation or its affiliates.
c. Corporation's Remedies for Breach. It is recognized that
damages in the event of breach of this Section 2 by the Executive would be
difficult, if not impossible, to ascertain, and it is, therefore, agreed that
the Corporation, in addition to and without limiting any other remedy or right
it may have, shall have the right to an injunction or other equitable relief in
any court of competent jurisdiction, enjoining any such breach. The existence of
this right shall not preclude any other rights and remedies at law or in equity
which the Corporation may have.
3. Employment Period.
a. Duration. The employment period, which commenced prior to
the date of this Agreement, shall continue until this Agreement is terminated by
(1) the death or substantially total disability of the Executive, (2) mutual
agreement, (3) action of the Corporation for justifiable cause as provided in
paragraph 3.b., (4) action of the Corporation or notice by the Executive as
provided in paragraph 3.c., or (5) the voluntary resignation of the Executive
upon 30 days prior written notice.
b. Performance and Termination - Employment Period. Subject to
the performance of the covenants and agreements made by the Corporation herein,
the Executive will perform his duties during the employment period in good faith
and will observe faithfully the covenants and agreements made by him herein. The
Corporation shall not terminate the employment of the Executive during the
employment period except for substantial and serious cause involving dishonesty,
gross negligence, material and persistent failure of the Executive to perform
his duties hereunder, or material breach of express obligations of this
Agreement within the control of the Executive. The termination of the
Executive's employment for reasons other than those specified in the preceding
sentence shall be deemed to be a termination of employment without justifiable
cause and shall be an immediate termination of this Agreement. After such
termination, the Executive shall be immediately entitled to the severance pay
and benefits provided in Section 3.c. of this Agreement. No breach or default
by the Executive shall be deemed to have occurred hereunder unless written
notice thereof shall have been given by the Corporation to the Executive and
the Executive shall have failed to cure such breach or default within 30 days
after he receives the notice.
c. Executive's Remedies for Breach.
(1) This Agreement shall be immediately terminat-
ed without further notice if the Corporation terminates the employment of the
Executive without justifiable cause. This Agreement may also be terminated upon
written notice from the Executive to the Board of Directors if: (i) the
Corporation shall fail to observe or perform any covenant to be observed or
performed by the Corporation, or (ii) the Corporation shall materially change
the Executive's duties so that he is no longer performing the functions of the
Chairman and Chief Executive Officer, or (iii) the Corporation shall otherwise
materially breach this Agreement.
(2) If this Agreement is terminated for any reason
identified in paragraph 3.c.(1), all rights, duties and obligations shall cease
except that the provisions of paragraph 2.b. of this Agreement shall remain in
force and except that the Corporation shall be obligated to provide the
following benefits:
(A) The Corporation shall pay the Executive
his full base salary through the date of termination at the rate in effect at
the time of his termination, plus all other amounts to which he is entitled
under any compensation plan of the Corporation, at the time such payments are
due, except as otherwise provided below.
(B) In lieu of any further salary payments
to the Executive for periods subsequent to his termination, the Corporation
shall pay as severance pay to the Executive a lump sum severance payment
(together with the payments provided in paragraph C, below, the
"Severance Payments") equal to his Performance Equity Plan ("PEP") Maximum
Payment plus three times the sum of his (x) annual base salary in effect
immediately prior to the Executive's termination and (y) Annual Incentive Plan
("AIP") Maximum Payment for the year in which the date of termination occurs.
PEP Maximum Payment shall mean an amount equal to the value of 150% of the
Performance Shares that are forfeited by the Executive pursuant to the PEP as a
result of the Executive's termination. For purposes of calculating the PEP
Maximum Payment, the per share value of the shares of common stock of the
Corporation (the "Corporation's Shares") shall be the closing price per share of
the Corporation's Shares as reported on the New York Stock Exchange (the "NYSE")
on or nearest to the date of termination (or, if not listed on the NYSE, on a
nationally recognized exchange or quotation system on which volume in the
Corporation's Shares is highest). The provisions of this paragraph 3.c.(2)(B)
shall not in any way affect the Executive's rights under the PEP. AIP Maximum
Payment shall mean the maximum payment that the Executive could have received
under the AIP.
(C) The Corporation shall pay to the Execu-
tive any deferred compensation, including but not limited to deferred bonuses
and amounts deferred under the Executive Deferred Compensation Plan, allocated
or credited to the Executive or his account as of the date of termination.
(D) The Corporation shall also pay to the
Executive all legal fees and expenses incurred by him as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provided hereunder).
(E) If the payments provided under para-
graphs (B) and (C) above (the "Contract Payments") or any other portion of
the Total Payments (as defined below) will be subject to the tax imposed by
Section 4999 of the Code (the "Excise Tax"), the Corporation shall pay to the
Executive at the time specified in paragraph (F) below, an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Contract Payment and such other Total
Payments and any federal and state and local income tax and Excise Tax upon the
payment provided for by this paragraph, shall be equal to the Contract Payments
and such other Total Payments. For purposes of determining whether any of the
payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) any other payments or benefits received or to be received by the Executive
in connection with a change in control of the Corporation or his termination of
employment (whether payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Corporation, its successors, any person
whose actions result in a change in control of the Corporation or any
corporation affiliated (or which, as a result of the completion of a transaction
causing a change in control of the Corporation, will become affiliated) with the
Corporation within the meaning of Section 1504 of the Code (together with the
Contract Payments, the "Total Payments") shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel selected by the
Corporation's independent auditors and acceptable to the Executive the Total
Payments (in whole or in part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4)(B) of the Code either to the extent such reasonable compensation is
in excess of the base amount within the meaning of Section 280G(b)(3) of the
code, or are otherwise not subject to the Excise Tax, (ii) the amount of the
Total Payments that shall be treated as subject to the Excise Tax shall be equal
to the lesser of (A) the total amount of the Total Payments or (B) the amount of
excess parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (i), above) and (iii) the value of any non-cash benefits or any
deferred payment or benefit as determined by the Corporation's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
date of termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of the Executive's
employment, he shall repay to the Corporation at the time that the amount of
such reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax and/or a federal and state and local
income tax deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(d) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment in
respect of such excess (plus any interest payable with respect to such excess)
at the time that the amount of such excess is finally determined.
(F) The payments provided for in paragraphs
(B), (C), and (E) above shall be made not later than the fifth day
following the date of the Executive's termination, provided, however, that if
the amounts of such payments cannot be finally determined on or before such day,
the Corporation shall pay to the Executive on such day an estimate, as
determined in good faith by the Corporation, of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest at
a rate equal to 120% of the rate provided in Section 1274(d) of the Code) as
soon as the amount thereof can be determined but in no event later than the
thirtieth day after the date of the Executive's termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Corporation to the
Executive payable on the fifth day after demand by the Corporation
(together with interest at a rate equal to 120% of the rate provided in Section
1274(d) of the Code). The payments provided for in paragraph (D) above shall
be made from time to time, in each instance not later than the fifth day
following a written request for payment by the Executive.
(G) For a 36-month period after the termina-
tion of the Executive, the Corporation shall provide the Executive with life,
disability, accident and health insurance benefits substantially similar to
those which he is receiving immediately prior to termination. Benefits otherwise
receivable by the Executive pursuant to this subparagraph (G) shall be reduced
to the extent comparable benefits are actually received by the Executive during
the 36-month period following his termination, and any such benefits actually
received by the Executive shall be reported to the Corporation.
(H) If upon the Executive's termination he
is not eligible because of age or lack of credited service to receive benefits
under the provisions of the Corporation's Supplemental Executive Retirement Plan
(the "SERP"), then upon his attaining at least age 55, the Corporation will pay
the Executive the same benefits that he would have been entitled to receive
under the SERP as if he had remained an employee of the Corporation until the
greater of age 55 or his actual age on the date of his termination plus the
Additional Age Credit defined below. If upon the Executive's termination he is
eligible to receive benefits under the provisions of the SERP, then the
Corporation will pay him the benefits that he would have been entitled to
receive under the provisions of the SERP as if he had accumulated the
Additional Age Credit defined below. Additional Age Credit shall mean 36
additional months of age. For the purpose of this paragraph in determining
"Final Average Pay" under the SERP, the greater of "Final Average Pay"
(as defined in the SERP) or the Executive's "Pay" (as defined in the SERP) for
the 12-month period prior to his termination of employment will be used.
(I) The Executive shall not be required to
mitigate the amount of any payment provided for in this Paragraph 3.c.(2) by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Paragraph 3.c.(2) be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Corporation, or otherwise except as specifically provided in
this Paragraph 3.c.(2).
(J) In addition to all other amounts payable
to the Executive under this Paragraph 3.c.(2), the Executive shall be entitled
to receive all benefits payable to him under the Black & Decker Retirement Plan,
Thrift Plan and any other plan or agreement relating to retirement benefits.
d. If termination of the Executive's employment occurs under
circumstances to which both this Agreement and a change of control agreement
between the Corporation and the Executive apply, the Executive will be entitled
to the benefits of the more favorable agreement, but not to both.
e. No payments made under the provisions of paragraph 3.c.(2)
of this Agreement shall be offset against payments to which the Executive may be
entitled under the SERP and vice versa.
4. Waivers.
The waiver by the Corporation of a breach by the Executive of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by him.
5. Binding Effect.
The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Corporation.
6. Entire Agreement.
Except as otherwise herein provided, this Agreement and
attachments hereto constitute the entire understanding of the Executive and the
Corporation with respect to the subject matter hereof and supersedes any and all
prior understandings, written or oral. This Agreement may not be changed or
canceled orally, but only by an instrument in writing signed by the parties.
This Agreement shall be governed by the laws of the State of Maryland and the
invalidity or unenforceability of any provisions hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
ATTEST: THE BLACK & DECKER CORPORATION
/S/ BARBARA B. LUCAS By /S/ LAWRENCE R. PUGH
Lawrence R. Pugh, Chairman,
Organization Committee
WITNESS:
/S/ LOWELL R. BOWEN /S/ NOLAN D. ARCHIBALD (SEAL)
Nolan D. Archibald
Exhibit 10(q)
THE BLACK & DECKER
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
INTRODUCTION
The Black & Decker Supplemental Executive Retirement Plan provides
certain supplemental retirement benefits for selected executive employees of The
Black & Decker Corporation and its subsidiaries and affiliates. This document
amends The Black & Decker Supplemental Executive Retirement Plan, originally
effective on January 1, 1984 and as amended and restated effective January 1,
1993, by restating the Plan in its entirety. The Plan is intended to provide
supplemental retirement benefits primarily for a select group of management or
highly paid executive employees. The employees eligible for the Plan are only
those executive employees selected by the Organization Committee of the
Corporation.
SECTION 1 - Definitions
Each of the following terms, when used in this Plan, has the meaning
indicated below, unless a different meaning is plainly implied by the context:
"Actual Retirement Date" means the date that a Participant's employment
by Black & Decker terminates on or after the Participant's Early Retirement Date
or Normal Retirement Date, as the case may be, whether due to retirement, death,
resignation or dismissal or, in the case of a Protected Participant, the
Protected Participant's 55th birthday, if later than the date of termination of
his or her employment with Black & Decker. If, however, a Participant's active
employment with Black & Decker ceases prior to the Participant's Normal
Retirement Date due to Disability, the Participant's Actual Retirement Date
shall mean the Participant's Normal Retirement Date, unless the Participant
elects, with the Committee's approval, to receive benefits under this Plan at a
date preceding the Participant's Normal Retirement Date (but not earlier than
the Participant's Early Retirement Date), in which case the date benefit
payments under this Plan begin will be the Participant's Actual Retirement Date.
"Actuarial Adjustment" means a reduction to the Participant's benefits
under this Plan that is the Actuarial Equivalent of any portion of the
Participant's Social Security Benefits and Other Retirement Benefits that the
Participant could have received as retirement or disability income at the same
time the Participant was receiving benefits under this Plan (and which,
therefore, would have reduced the Participant's benefits under this Plan) if,
solely because of the Participant's election of an alternative form of payment
under the plan, program, arrangement or agreement providing those Social
Security Benefits or Other Retirement Benefits, no reduction would otherwise be
made to the Participant's benefits under this Plan with respect to the portion
of those Social Security Benefits or Other Retirement Benefits that was subject
to that election by the Participant. However, no Actuarial Adjustment is to be
made by reason of the Participant's election to provide benefits after the
Participant's death for the Participant's spouse under the plan, program,
arrangement or agreement providing Social Security Benefits or Other Retirement
Benefits. Whether an Actuarial Adjustment is appropriate and the amount of that
Adjustment to the Participant's benefit is to be determined by the Committee, in
its sole discretion, but based on the Actuarial Assumptions in effect when that
Actuarial Adjustment first applies.
"Actuarial Assumptions" means generally, the actuarial assumptions used
in calculating benefits under the Black & Decker Pension Plan, or such other
interest and mortality rates and other pertinent actuarial assumptions and
methods as may be adopted by the Committee from time to time, in its sole
discretion, for use in determining benefits under this Plan.
"Actuarial Equivalent" means a benefit having the same actuarial value,
based on the Actuarial Assumptions applicable at the time actuarial equivalency
is to be determined.
"Black & Decker" means the Corporation, Black & Decker (U.S) Inc.,
Black & Decker Inc. and all of their subsidiaries and affiliates, both
collectively and individually.
"Board" means the Corporation's Board of Directors.
"Change in Control of the Corporation" shall mean a change in control
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Corporation is in fact
required to comply therewith, provided that, without limitation, such a change
in control shall be deemed to have occurred if (A) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or any of its subsidiaries or a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities; (B)
during any period of two consecutive years (not including any period prior to
the Effective Date), individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this definition) whose election by the Board
or nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof; (C) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Corporation; or (D) the stockholders of the Corporation approve a merger, share
exchange or consolidation of the Corporation with any other corporation, other
than a merger, share exchange or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger, share exchange or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
"Committee" means The Black & Decker Corporation Pension Management
Committee.
"Committee Secretary" means the Secretary of the Committee.
"Corporation" means The Black & Decker Corporation, a Maryland
corporation.
"Credited Service" means all periods during which an Employee qualifies
as an employee of Black & Decker, including all periods during which the
Employee is absent on leave authorized by Black & Decker, and including all
periods for which the Employee receives Benefit Service Credit under the Black &
Decker Pension Plan. Subject to the foregoing, unless otherwise determined by
the Committee in its sole discretion, Credited Service under this Plan shall not
include any period of employment with any company during any period when that
company was not a subsidiary or affiliate of the Corporation. Credited Service
also includes all periods of Disability beginning while the Employee is employed
by Black & Decker and continuing as long as the Disability continues. Credited
Service is to be measured on the basis of one month's credit for each full
calendar month in any Credited Service period; no partial credit is to be given
for partial calendar months of Credited Service. Twelve months of Credited
Service is equivalent to one year of Credited Service, whether or not those
months were consecutive. No loss of Credited Service will occur by reason of an
interruption in an Employee's period of Credited Service, regardless of the
length of that interruption.
"Disability" means an illness or injury which would cause the Employee
to be disabled under the terms of The Black & Decker Disability Plan or that
totally prevents the Employee from satisfactorily performing the Employee's
usual duties with Black & Decker, as determined by the Committee based on
professional medical advice. The Committee may require the Employee to submit
from time to time to medical examinations by physicians selected or approved by
the Committee to establish the Disability or its continuation, provided that
those examinations may not be required more frequently than once each year. The
Employee's refusal to submit to any examination reasonably requested by the
Committee under this Section is grounds for the Committee to find that the
Employee's Disability no longer exists.
"Early Retirement Date" means the first day of the calendar month
coincident with or next following the date upon which the Participant has both
attained age 55 and completed 5 years of Credited Service; provided, however,
that, in the case of a Protected Participant, the Early Retirement Date shall be
the first day of the calendar month coincident with or next following the
Protected Participant's 55th birthday.
"Effective Date" means August 1, 1995, the effective date of this
amended and restated Plan. The Prior Plan was originally effective as of January
1, 1984 and amended and restated effective as of January 1, 1993.
"Employee" means any person rendering personal services to Black &
Decker as an employee.
"Final Average Pay" means the average monthly amount of the
Participant's Pay for the 3 consecutive years in which the Participant's Pay was
the highest out of the 5-year period ending on the date the Participant's
employment with Black & Decker terminates; provided, however, that, in the case
of a Protected Participant, the Protected Participant's "Final Average Pay"
shall be based on the 3 consecutive years in which the Protected Participant's
Pay was the highest out of the 5-year period ending on the date that the Change
in Control of the Corporation occurred, if this produces a higher Final Average
Pay.
"Normal Retirement Date" means the first day of the calendar month
coincident with or next following the date upon which the Participant has both
attained age 60 and completed 5 years of Credited Service; provided, however,
that, in the case of a Protected Participant, the Normal Retirement Date shall
be the first day of the calendar month coincident with or next following the
Participant's 60th birthday.
"Other Retirement Benefits" means any retirement or any disability
income benefits, and any severance pay, salary continuance, notice pay,
termination indemnity, unemployment compensation, or the like, that the
Participant is entitled to receive under any plan, program, arrangement or
agreement provided, maintained or funded, in part or in whole, by any of the
Participant's employers (whether or not affiliated with Black & Decker) except:
(a) any Social Security Benefit; (b) any portion of that retirement or
disability income which is attributable to the Participant's contributions,
including contributions made by the Participant's employer pursuant to a salary
reduction agreement with the Participant (such as under The Black & Decker
Executive Deferred Compensation Plan or The Black & Decker Supplemental
Retirement Savings Plan); (c) any death benefits under a life insurance contract
with a life insurance company; (d) any defined contribution pension, profit
sharing or stock bonus plan, unless that plan is intended to provide the primary
source of retirement income (in addition to Social Security Benefits) funded by
Black & Decker for the employees at any location covered by that plan; (e) any
"parachute payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986 made by reason of a Change in Control of the Corporation pursuant
to an individual golden parachute agreement in writing between the Participant
and the Corporation; and (f) any amounts paid under an individual written
agreement between the Participant and the Corporation which agreement expressly
refers to this Plan and provides that those amounts shall not reduce the
benefits under this Plan. In determining the Death Benefit payable to the
Participant's spouse under Section 6(b), the term "Other Retirement Benefits"
means any benefit payable to the spouse under any plan, program, arrangement or
agreement that provided or would have provided to the Participant severance,
retirement or disability benefits that constituted "Other Retirement Benefits"
as described in the preceding sentence, but excluding the following payments to
the spouse: (a) any Social Security Benefit; (b) any benefit
attributable to the Participant's contributions (including contributions
made by the Participant's employer pursuant to a salary reduction agreement with
the Participant); (c) any death benefits (including accelerated death benefits)
under a life insurance contract with a life insurance company; and (d) any
defined contribution pension, profit sharing or stock bonus plan, unless that
plan is intended to provide the primary source of retirement income (in addition
to Social Security Benefits) funded by Black & Decker for the employees at any
location covered by that plan. Without limiting the generality of the
foregoing, the term "Other Retirement Benefits" includes benefits payable to a
Participant under any plan, program, arrangement or agreement provided or
maintained at any time by any employer of the Participant (whether or not
affiliated with Black & Decker) which provides benefits in excess of any of the
limitations imposed by the Internal Revenue Code of 1986, as amended, on
benefits payable from a tax-advantaged or tax-qualified pension plan on
compensation covered under a tax-advantaged or tax-qualified pension plan
(such as The Black & Decker Supplemental Pension Plan).
"Participant" means any Employee who qualifies for participation in
this Plan, as more particularly described in Section 2.
"Pay" means the actual compensation paid during the relevant period by
Black & Decker to the Participant for services as an Employee, including basic
salary, bonuses, annual incentive awards, any amounts contributed to any
employee benefit plan pursuant to a salary or other compensation reduction
agreement with the Participant, and including, for the year of deferral, amounts
deferred by the Participant under any non-qualified deferred compensation plan
(such as The Black & Decker Executive Deferred Compensation Plan); and salary
continuation payments during sick leave (other than long-term disability
benefits). The term "Pay" does not include any incentive awards or other amounts
paid pursuant to any long-range performance compensation plan, amounts paid
pursuant to The Black & Decker Performance Equity Plan or any "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of 1986
made pursuant to a golden parachute agreement by reason of a Change in Control
of the Corporation or any non-cash remuneration, imputed income (including
income imputed under any group life insurance program), perquisites and other
cash or non-cash fringe benefits, such as (but not limited to) reimbursements or
allowances for expenses (such as automobile, moving or relocation, country club,
tax preparation, overseas housing, educational and similar expense allowances);
contributions to or benefits under any employee pension or welfare benefit plan
or payments received by a Participant under any non-qualified deferred
compensation plan (such as The Black & Decker Executive Deferred Compensation
Plan or The Black & Decker Supplemental Retirement Savings Plan); special
recognition awards; stock bonuses, income attributable to discount stock
purchases, stock options or stock appreciation rights; income attributable to
the vesting of restricted property; benefits received under any severance plan
or program; and allowances for or the provision of counseling or other personal
services (such as financial and tax counseling). For any period during which the
Participant is entitled to Credited Service by reason of a Disability, the
Participant's Pay is deemed to continue during that Disability period at a
monthly rate equal to 1/12th of the Participant's basic salary (before any
salary reduction for contributions to any employee benefit plan pursuant to a
salary reduction agreement with the Participant) at the Participant's annual
salary rate in effect at the date that the Disability began plus all items other
than basic salary and such salary reduction contributions) included in the
Participant's actual Pay during the 12-month period ending on the date that the
Disability began.
"Plan" means this document entitled "The Black & Decker Supplemental
Executive Retirement Plan", effective as of August 1, 1995, as it may be amended
from time to time. This document completely amends and restates the Black &
Decker Supplemental Executive Retirement Plan as effective January 1, 1993 and
which is referred to in this Plan as the "Prior Plan." To the extent any person
is receiving benefits hereunder prior to the Effective Date, such benefits and
the payment thereof shall be determined under the terms of the Prior Plan.
"Protected Participant" means a Participant who is an Employee when a
Change in Control of the Corporation occurs.
"Social Security Benefit" means the retirement or disability income
payments under any plan, program or arrangement which is sponsored, mandated or
administered by any government and which provides or would provide retirement or
disability income to the Participant and to which any of the Participant's
employers (whether or not affiliated with Black & Decker) has made contributions
on the Participant's behalf. In determining the Death Benefit payable to the
Participant's spouse under Section 6, the term "Social Security Benefit" means
any payment to the spouse under a governmental program described in the
preceding sentence and attributable to the Participant's employment.
SECTION 2 - Eligibility
Any executive employee may be selected for participation in this Plan
by the Organization Committee of the Corporation and will automatically become a
Participant on the date designated by that committee in its written notice to
the Employee of selection for participation under this Plan. Any Employee who
was a Participant in the Prior Plan immediately prior to the Effective Date
shall continue as a Participant hereunder without further action by the
Organization Committee of the Corporation.
SECTION 3 - Normal Retirement Benefit
Subject to Section 5, any Participant whose employment with Black &
Decker terminates at or after the Participant's Normal Retirement Date is
entitled to receive under this Plan a monthly benefit, beginning at the
Participant's Actual Retirement Date and continuing for the Participant's life.
The amount of each monthly benefit payment under this Section 3 is to be equal
to 50% of his or her Final Average Pay less the sum of: (i) all Social Security
Benefits and all Other Retirement Benefits payable to the Participant during
that month and (ii) the Actuarial Adjustments for that month. In the event that
any offsets to the Participant's benefit under this Plan exceed the monthly
benefit payment under this Plan, such excess shall be carried over and applied
against subsequent monthly benefit payments under this Plan until such excess is
exhausted. The offsets to the Participant's benefits under this Plan (as
described in the preceding sentence) are not to be increased to reflect any
increase in the Participant's Social Security Benefits or Other Retirement
Benefits attributable to increases in the cost-of-living after his or her Actual
Retirement Date and no benefit is payable to the Participant in any month when
those offsets exceed 50% of the Participant's Final Average Pay.
SECTION 4 - Early Retirement Benefit
Subject to Section 5, any Participant whose employment with Black &
Decker terminates at or after the Participant's Early Retirement Date or, in the
case of a Protected Participant, whose employment with Black & Decker terminates
at any time before his or her Normal Retirement Date (whether or not after his
or her Early Retirement Date) is entitled to receive under this Plan a monthly
benefit beginning on the first day of the calendar month after the Participant's
Actual Retirement Date and continuing for the Participant's life. The amount of
each monthly benefit payment under this Section 4 is to be equal to: (a) 50% of
the Participant's Final Average Pay, reduced by 1/3 of 1% for each full calendar
month by which the Participant's Actual Retirement Date precedes the
Participant's Normal Retirement Date, less (b) the sum of: (i) the Participant's
Social Security Benefit and all Other Retirement Benefits payable to the
Participant during that month and (ii) the Actuarial Adjustment for that month.
In the event that any offsets to the Participant's benefit under this Plan
exceed the monthly benefit payment under this Plan, such excess shall be carried
over and applied against subsequent monthly benefit payments under this Plan
until such excess is exhausted. The offsets to the Participant's benefits under
this Plan (as described in the preceding sentence) are not to be increased to
reflect any increase in the Participant's Social Security Benefits or Other
Retirement Benefits attributable to increases in the cost-of-living after the
Participant's Actual Retirement Date and no benefit is payable to the
Participant in any month when those offsets exceed 50% of the Participant's
Final Average Pay, reduced by 1/3 of 1% for each full calendar month by which
the Participant's Actual Retirement Date precedes the Participant's Normal
Retirement Date.
SECTION 5 - Benefit Reduction for Less than 10 Years' Service
Notwithstanding anything to the contrary in this Plan, if a Participant
(other than a Protected Participant) has less than 10 years of Credited Service
at the Participant's Actual Retirement Date, the monthly benefit described in
Section 3 or 4, as appropriate, is to be multiplied by a fraction, the numerator
of which equals the Participant's years of Credited Service (including
fractional years) and the denominator of which equals 10 years. For this
purpose, months of Credited Service equal 1/12th of a year's credit for each
full calendar month of Credited Service. This Section 5 shall not apply in the
case of a Protected Participant.
SECTION 6 - Death Benefits
No benefits under this Plan are payable after the Participant's death
except as otherwise provided in this Section 6.
(a) Pre-Retirement Death Benefit. No benefits under this Plan are
payable after the Participant's death if the Participant dies before the
Participant's Actual Retirement Date.
(b) Post-Retirement Death Benefit. If the Participant dies after the
Participant's Actual Retirement Date, the Participant's surviving spouse, if
any, is entitled to receive a monthly benefit beginning on the first day of the
calendar month coincident with or following the Participant's death and
continuing for the spouse's life in the monthly amount equal to one-half of the
monthly benefit that the Participant was receiving or would have been entitled
to receive at the Participant's death under Section 3 or 4 of this Plan
(determined before the stated offsets of the Participant's Social Security
Benefits, Other Retirement Benefits and Actuarial Adjustments are applied but
subject to Section 5) less the Social Security Benefits and Other Retirement
Benefits payable to the Participant's spouse during that month.
SECTION 7 - Vesting
(a) Except in the case of a Protected Participant, upon termination of
a Participant's employment with Black & Decker at any time for any reason before
the Participant's Early Retirement Date, or if the Participant dies before the
Participant's Actual Retirement Date, the Participant's (and the surviving
spouse's) right to benefits under this Plan will be completely forfeited. In the
case of a Protected Participant, the Protected Participant's and his or her
spouse's right to benefits under this Plan will be completely forfeited if the
Protected Participant dies before his or her Actual Retirement Date. Except in
the case of a Protected Participant, if this Plan is terminated by the
Corporation on or after a Participant's Early Retirement Date but before the
Participant's Actual Retirement Date, the Participant will be entitled to
receive a monthly benefit under this Plan commencing at the Participant's Actual
Retirement Date and continuing for the Participant's life in the amount the
Participant would have received under this Plan based on the Participant's
Credited Service and Final Average Pay determined at the Plan's termination
date, and the Participant's surviving spouse shall be entitled to receive the
corresponding post-retirement death benefit pursuant to Section 6(b). If this
Plan is terminated or amended after a Change in Control of the Corporation, each
Protected Participant who has not consented in writing to that termination or
amendment shall be entitled to receive a monthly benefit, commencing at his or
her Actual Retirement Date, that is not less than the monthly benefit the
Protected Participant would have received if the Plan termination or amendment
had not occurred and the Protected Participant's surviving spouse shall be
entitled to receive the corresponding post-retirement death benefit pursuant to
Section 6(b).
(b) Notwithstanding anything to the contrary, all of the Participant's
(and surviving spouse's) rights and benefits under this Plan will be forfeited:
(i) if the Participant's employment with Black & Decker is
terminated by reason of fraud, misappropriation or intentional material
damage to the property or business of Black & Decker; commission of a
felony; or the continuance of willful and repeated failure by the
Participant to perform his or her duties after written notice to the
Participant specifying such failure; or
(ii) if before the Participant's Actual Retirement Date and
for a period of 24 months following the Participant's termination of
employment, the Participant, without the Corporation's written consent,
enters into competition with Black & Decker or the Participant
discloses confidential information.
(c) For purposes of this Section 7, the Participant will be deemed to
be in competition with Black & Decker if the Participant, directly or
indirectly, solicits as a customer any company which is or was a customer of
Black & Decker during the Participant's employment, or which is or was a
potential customer of Black & Decker with which Black & Decker has made or will
make business contacts during the Participant's employment; provided, however,
that solicitation of a company as a customer of any business which is not in
direct or indirect competition with any of the types of business conducted by
Black & Decker within any of the same territories as Black & Decker shall not be
prohibited hereby. In addition, a Participant will be deemed to be in
competition with Black & Decker if the Participant directly or indirectly
becomes an owner, officer, director, operator, sole proprietor, partner, joint
venturer, contractor or consultant, or participates in or is connected with the
ownership, operation, management or control of any company in direct or indirect
competition with any of the types of businesses conducted by Black & Decker
within any of the same territories as Black & Decker; provided, however, that
the ownership for investment of less than 5% of the outstanding stock of any of
the classes of stock issued by a publicly-held company shall not be prohibited
hereby. The Participant shall be deemed to have disclosed "confidential
information" if the Participant fails to preserve as confidential and uses,
communicates, or discloses to any person, to the actual or potential detriment
of Black & Decker, orally, in writing or by publication, any information,
regardless of when, where or how acquired relating to or concerning the affairs
of Black & Decker; provided, however, that the foregoing obligations shall not
apply to information which is or becomes public through no fault of the
Participant.
(d) The Committee shall have the absolute right to determine in its
sole discretion (i) whether or not a Participant's employment was terminated as
a result of a wrongful act, and (ii) whether or not a Participant has entered
into competition with Black & Decker or has disclosed confidential information
so as to cause a forfeiture of the Participant's benefits hereunder.
SECTION 8 - Additional Provisions Concerning Benefits
(a) The offsets described in Sections 3, 4 and 6 for Social Security
Benefits, Other Retirement Benefits and Actuarial Adjustments are to be applied
separately to each monthly payment under this Plan when that payment becomes
due, ignoring increases in those Social Security Benefits and Other Retirement
Benefits attributable to increases in the cost-of-living after the Participant's
Actual Retirement Date. The Committee will decide, in its sole discretion, the
manner in which these offsets are to be applied. The payments under this Plan
are conditioned on the agreement of the Participant and the Participant's spouse
(i) to inform the Committee of all retirement, severance, disability and death
benefit payments received or receivable by them that may reduce the
Corporation's obligations to pay benefits under this Plan and (ii) to provide
all information about those payments that the Committee may reasonably request
from time to time in order to administer this Plan.
(b) The benefit payments under this Plan will be calculated in U.S.
dollars using the appropriate currency exchange rate selected by the Committee
in its sole discretion at the Participant's Actual Retirement Date. The benefits
under this Plan will be paid to the Participant and the Participant's spouse in
any currency designated by the Participant at the Participant's Actual
Retirement Date (or, if the Participant dies before benefits commence, the
currency designated by the spouse), based on the appropriate currency
exchange rate (selected by the Committee in its sole discretion) in effect
at the Participant's Actual Retirement Date. Once benefit payments under this
Plan have begun, the currency selected by the Participant (or the Participant's
spouse) and the applicable exchange rate may not be changed except to the extent
that the Committee, in its sole discretion, may approve a change in order to
prevent extreme financial hardship to the Participant or the Participant's
spouse.
SECTION 9 - Corporation's Obligations are Unfunded and Unsecured
Except as otherwise required by applicable law, the Corporation's
obligations under this Plan are not required to be funded or secured in any
manner; no assets need be placed in trust or in escrow or otherwise physically
or legally segregated for the benefit of any Participant; and the eventual
payment of the benefits described in this Plan to a Participant or the
Participant's spouse is not required to be secured to the Participant or them by
the issuance of any negotiable instrument or other evidence of the Corporation's
indebtedness. Neither a Participant nor the Participant's spouse is entitled to
any property interest, legal or equitable, in any specific asset of the
Corporation, and, to the extent that any person acquires any right to receive
payments under the provisions of this Plan, that right is intended to be no
greater than or to have any preference or priority over, the rights of any other
unsecured general creditor of the Corporation. However, the Corporation reserves
the right, in its sole discretion, to accumulate assets to offset its eventual
liabilities under this Plan and physically or legally to segregate assets for
the benefit of any Participant or Participant's spouse (whether by escrow, by
trust, by the purchase of an annuity contract or by any other method of funding
selected by the Corporation) without liability for any adverse tax consequences
resulting to that Participant or Participant's spouse from the Corporation's
action. Any such segregation of assets may be made with respect to the
Corporation's obligations under this Plan for benefits attributable to an
individual Participant, a selected group of Participants or all Participants, as
the Corporation may determine from time to time, in its absolute discretion.
Benefits under this Plan shall be payable by the Corporation from the
Corporation's general assets and no other company shall have any responsibility
or liability under this Plan. The Corporation's liabilities under this Plan
shall, however, be discharged to the extent of any payment received by the
Participant (or the Participant's surviving spouse) from any other company made
for that purpose and on the Corporation's behalf or for its benefit.
SECTION 10 - Alienation or Encumbrance
No payments, benefits or rights under this Plan shall be subject in any
manner to anticipation, sale, transfer, assignment, mortgage, pledge,
encumbrance, charge or alienation by a Participant, the Participant's spouse or
any other person who could or might possibly receive benefit payments that were
due to the Participant or the Participant's spouse, but were not paid. If the
Corporation determines that any person entitled to payments under this Plan has
become insolvent, bankrupt, or has attempted to anticipate, sell, transfer,
assign, mortgage, pledge, encumber, charge or otherwise in any manner alienate
any amount payable to that person under this Plan or that there is any danger of
any levy, attachment, or other court process or encumbrance on the part of any
creditor of that person, against any benefit or other amounts payable to that
person, the Corporation may, in its sole discretion and to the extent permitted
by law, at any time, withhold any or all such payments or benefits and apply the
same for the benefit of that person, in such manner and in such proportion as
the Corporation may deem proper.
SECTION 11 - Other Benefits
The provisions of this Plan relate only to the specific benefits
described in this Plan and are not intended to affect any other benefits to
which a Participant may be entitled as a retiree and former employee of Black &
Decker. Nothing contained in this Plan shall in any manner modify, impair or
affect the existing rights or interests of a Participant under any other benefit
plan provided by Black & Decker, and the rights and interests of a Participant
to any benefits or as a participant or beneficiary in or under any or all such
plans shall continue in full force and effect unimpaired, subject nonetheless
to the eligibility requirements and other terms of each such plan. This Section
shall not be interpreted as modifying in any way the effect that the
Participant's termination of employment and retirement at the Participant's
Actual Retirement Date has upon the Participant's rights under such other plans
The benefits provided under this Plan are not to be applied as an offset against
any other retirement or deferred compensation benefits or payments that are
otherwise to be provided by Black & Decker to the Participant or the
Participant's beneficiaries; and those benefits or payments are to be calculated
first, ignoring this Plan's existence. In no event shall any benefits payable
under this Plan be treated as salary or other compensation to a Participant for
the purpose of computing benefits to which the Participant may be entitled under
any other benefit plan of Black & Decker.
SECTION 12 - No Guarantee of Employment
The Plan shall not be construed as conferring any legal rights upon any
Participant for continuation of employment, nor shall it interfere with the
rights of Black & Decker to discharge a Participant and to treat the Participant
without regard to the effect which such treatment might have upon the
Participant under the Plan.
SECTION 13 - Cooperation of Parties
Each Participant (and surviving spouse) shall perform any and all
reasonable acts and execute any and all reasonable documents and papers that are
necessary or desirable for carrying out this Plan or any of its provisions.
SECTION 14 - Claims Procedure
Any claim by a Participant, a Participant's spouse or beneficiary that
benefits under the Plan have not been paid in accordance with the terms and
conditions of the Plan shall be made in writing and delivered to the Committee
at the Corporation's principal office in the State of Maryland. The Committee
shall notify the claimant if any additional information is needed to process the
claim. All claims shall be approved or denied by the Committee within 90 days of
receipt of the claim by the Committee. If the claim is denied, the Committee
shall furnish the claimant with a written notice containing:
(a) an explanation of the reason for the denial;
(b) a specific reference to the applicable provisions of the Plan;
and
(c) a description of any additional material or information
necessary for the claimant to pursue the claim.
Within 90 days of receipt of the notice described above, the claimant
shall, if further review is desired, file a written request for consideration
with the Committee. A request for reconsideration must include an explanation of
the grounds for the request and the facts supporting the claim. So long as the
claimant's request for review is pending, including such 90 day period, the
claimant or the claimant's duly authorized representative may review pertinent
documents and may submit issues and comments in writing to the Committee.
A final and binding decision shall be made by the Committee within 60
days of the filing of the request for reconsideration; provided, however, that
the Committee, in its discretion, may extend this period up to an additional 60
days.
The decision by the Committee shall be conveyed to the claimant in
writing and shall include specific reasons for the decision, with specific
references to the applicable provisions of the Plan on which the decision is
based.
SECTION 15 - Incapacity
If a Participant or the Participant's spouse has become legally
incompetent, then the legal guardian, or other legal representative of such
Participant's or spouse's estate shall be entitled to act for and represent such
incompetent Participant or spouse in all matters and to the same extent as the
Participant or spouse could have done but for such incompetency, including but
not limited to the receipt of Plan benefits.
SECTION 16 - Administration
(a) The Plan shall be administered by the Committee, which shall be
responsible for all matters affecting the administration of the Plan and shall
have the following duties and responsibilities in connection with the
administration of the Plan:
(i) To prepare and enforce such rules, regulations and
procedures as shall be proper for the efficient administration of the
Plan, such rules, regulations and procedures to apply uniformly to all
Participants;
(ii) To determine all questions arising in the administration,
interpretation and application of the Plan, including questions of the
status and rights of Participants and any other persons hereunder;
(iii) To decide any dispute arising hereunder;
(iv) To correct defects, supply omissions, and reconcile
inconsistencies to the extent necessary to effectuate the Plan;
(v) To compute the amount of benefits which shall be payable
to any Participant or spouse in accordance with the provisions of the
Plan and to determine the person or persons to whom such benefits shall
be paid;
(vi) To select the currency conversion or exchange rates to be
applied in determining a Participant's or spouse's benefits under this
Plan, where foreign currencies are involved;
(vii) To authorize all payments that shall be made pursuant
to the provisions of this Plan;
(viii) To make recommendations to the Corporation's Board of
Directors with respect to proposed amendments to the Plan;
(ix) To file all reports with government agencies, employees,
and other parties as may be required by law, whether such reports are
initially the obligation of the Corporation or the Plan;
(x) To have all such other powers as may be necessary to
discharge its duties hereunder.
(b) The Committee shall have the authority to interpret the Plan in its
sole and absolute discretion. The Committee's interpretation of the Plan and
actions in respect of the Plan shall be binding and conclusive on all persons
for all purposes.
(c) Neither the Committee nor any person acting on its behalf shall be
liable to any person for any action taken or omitted in connection with the
interpretation and administration of the Plan unless attributable to gross
negligence or willful misconduct. In addition to such other rights of
indemnification they may have as directors, officers or employees of the
Corporation, each member of the Committee shall be indemnified by the
Corporation against the reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which such member may
be a party by reason of any action taken or omitted under or in connection with
the Plan, and against all amounts paid in settlement thereof, provided such
settlement is approved by independent legal counsel selected by the Corporation,
or paid by such member in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such member is liable for gross negligence
or willful misconduct in such member's duties; provided that within 60 days
after the institution of such action, suit or proceeding the member shall in
writing offer the Corporation the opportunity, at its own expense, to handle and
defend the same.
(d) If a Participant is also a member of the Committee, the Participant
may not vote or act upon matters relating specifically to such member's
participation in the Plan.
SECTION 17 - Amendments and Termination
The Board of Directors of the Corporation reserves the right at any
time and from time to time to the extent permissible under law, to amend or
terminate this Plan, prospectively or retroactively, in whole or in part;
provided, however, that no such amendment or termination shall, without the
Participant's written agreement, reduce or impair (a) the benefits or rights of
any Participant (or spouse) whose Actual Retirement Date occurred before the
date the amendment is adopted or the Plan is terminated, (b) the vested benefits
and rights of any Participant who is then employed by Black & Decker or (c) the
right of any Protected Participant and/or his or her surviving spouse to receive
benefits under this Plan determined as if that Plan termination or amendment had
not occurred. Any amendment or termination shall be adopted by resolution of the
Corporation's Board of Directors.
SECTION 18 - Severability
If any provision of this Plan shall be held void or unenforceable, the
remaining provisions of the Plan shall remain in full force and effect;
provided, however, that in interpreting this Plan, such void or unenforceable
provision shall be replaced with an effective and legally permissible provision,
the effect of which shall be identical to, or as close as reasonably possible
to, the effect of the original provision.
SECTION 19 - Construction
Any use of the singular shall include the plural, and vice versa, as
may be appropriate. Titles, captions or paragraph headings contained in this
Plan are for purposes of convenience and reference only, and shall not operate
to define or modify the text to which they relate.
SECTION 20 - Choice of Law
This Plan, and the respective rights and duties of the Corporation and
all persons thereunder, shall in all respect be governed by and construed under
the laws of the State of Maryland, except to the extent, if any, that those laws
may have been pre-empted by federal law. This Plan is intended to be a "pension
plan" within the meaning of Section 3(2)(A) of the Employee Retirement Income
Security Act of 1974, as amended (ERISA), which is exempt from Parts 2, 3 and 4
of ERISA by virtue of Sections 201(2), 301(a)(3) and 401(a)(1) thereof,
respectively, and is not designed to meet the requirements of Section 401(a) of
the Internal Revenue Code of 1986, as amended.
SECTION 21 - Parties to be Bound
The provisions of this Plan shall be binding upon, and shall inure to
the benefit of the Corporation, its successors and assigns, and each Participant
and the Participant's spouse.
Originally Adopted January 30, 1984
Amendment and Restatement adopted February 18, 1993.
Amendment and Restatement adopted July 20, 1995.
Amendment and Restatement adopted February 14, 1996.
Exhibit 10(v)
________ __, 1995
[NAME AND ADDRESS]
Dear __________:
The Black & Decker Corporation (the "Corporation") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated subsequent to a "change in control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31, 2000; provided, however, that
if a change in control of the Corporation shall have occurred prior to December
31, 2000, this Agreement shall continue in effect for a period of 36 months
beyond the month in which such change in control occurred, at which time this
Agreement shall terminate. Notwithstanding the foregoing, and provided no change
in control of the Corporation shall have occurred, this Agreement shall
automatically terminate upon the earlier to occur of (i) your termination of
employment
________ __, 1995
Page 2
with the Corporation, or (ii) the Corporation's furnishing you with notice of
termination, irrespective of the effective date of such termination.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply therewith, provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its subsidiaries or a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; (C) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Corporation; or (D) the stockholders of the Corporation approve a merger, share
exchange or consolidation of the Corporation with any other corporation, other
than a merger, share exchange or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger, share exchange or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
________ __, 1995
Page 3
3. Termination Following Change in Control of the Corporation. If any
of the events described in Section 2 hereof constituting a change in control of
the Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (A)
because of your death, Disability or Retirement, (B) by the Corporation for
Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for six
consecutive months, and within 30 days after written notice of termination is
given you shall not have returned to the full-time performance of your duties,
your employment may be terminated for "Disability." Termination by the
Corporation or you of your employment based on "Retirement" shall mean
retirement from active employment with the right to receive an immediate pension
benefit under the applicable pension plan of the Corporation in accordance with
the Corporation's retirement policy in effect at the time of the change in
control of the Corporation.
(ii) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties with the
Corporation, other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance by you of a Notice of Termination (as defined in Subsection 3(iv)
hereof) for Good Reason (as defined in Subsection 3(iii) hereof), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise. For purposes of this Subsection, no act or
failure to act on your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that your action
or omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
________ __, 1995
Page 4
Board you were guilty of conduct set forth above in clauses (A) or (B) of the
first sentence of this Subsection and specifying the particulars thereof in
detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as such terms are defined in Subsections 3(v) and 3(iv) hereof,
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your current status as an executive of the Corporation or a
substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change
in control of the Corporation;
(B) a reduction by the Corporation in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time, except for across-the-board salary
reductions similarly affecting all senior executives of the Corporation
and all senior executives of any person in control of the Corporation;
(C) your relocation to a location not within 25 miles
of your present office or job location, except for required travel on
the Corporation's business to an extent substantially consistent with
your present business travel obligations;
(D) the failure by the Corporation, without your
consent, to pay to you any portion of your current compensation, or to
pay to you any portion of an installment of deferred compensation under
any deferred compensation program of the Corporation, within seven days
of the date such compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which you were entitled, or any compensation plan
in which you participated immediately prior to the change in control of
the Corporation which is material to your total compensation, including
but not limited to the Corporation's (i) Annual Incentive Plan ("AIP")
or other annual incentive compensation plan; (ii) Performance Equity
Plan ("PEP") or other long-term incentive compensation plan;
________ __, 1995
Page 5
(iii) stock option plans; (iv) retirement plans; (v) Supplemental
Executive Retirement Plan ("SERP"); and (vi) Executive Deferred
Compensation Plan; or any substitute plan or plans adopted prior to the
change in control of the Corporation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made
with respect to such plan and such equitable arrangement provides
substantially equivalent benefits not materially less favorable to you
(both in terms of the amount of benefits provided and the level of your
participation relative to other participants), or the failure by the
Corporation to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable (both in terms of the amount of benefits provided and the
level of your participation relative to other participants) as existed
at the time of the change in control of the Corporation;
(F) the failure by the Corporation to continue to
provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, dental, health
and accident, or disability plans in which you were participating at
the time of the change in control of the Corporation, the failure to
continue to provide you with a Corporation automobile or allowance in
lieu thereof, if you were provided with such an automobile or allowance
in lieu thereof at the time of the change in control of the
Corporation, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time
of the change in control of the Corporation, or the failure by the
Corporation to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service with the
Corporation in accordance with the Corporation's normal vacation policy
in effect at the time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection 3(iv) hereof (and, if applicable, the
requirements of Subsection 3(ii) hereof); for purposes of this
Agreement, no such purported termination shall be effective.
________ __, 1995
Page 6
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported
termination of your employment by the Corporation or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of
Termination" shall mean (A) if your employment is terminated for Disability, 30
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such 30-day period),
and (B) if your employment is terminated pursuant to Subsections 3(ii) or 3(iii)
hereof or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection 3(ii) hereof shall not be less than 30 days, and in the case of a
termination pursuant to Subsection 3(iii) hereof shall not be less than l5 nor
more than 60 days, respectively, from the date such Notice of Termination is
given); provided that if within l5 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this proviso), the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit and insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts
________ __, 1995
Page 7
paid under this Subsection are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement.
4. Compensation Upon Termination or During Disability.
Following a change in control of the Corporation, as defined by
Section 2 hereof, upon termination of your employment or during a
period of Disability you shall be entitled to the following
benefits:
(i) During any period that you fail to perform
your full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together with all
amounts payable to you under any compensation plan of the Corporation during
such period, until this Agreement is terminated pursuant to Subsection 3(i)
hereof. Thereafter, or in the event your employment shall be terminated by the
Corporation or by you for Retirement, or by reason of your death, your benefits
shall be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the
Corporation for Cause, Disability, death or Retirement, or by you other than for
Good Reason, the Corporation shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan of the Corporation at the time such payments are due, and the Corporation
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall
be terminated (a) by the Corporation other than for Cause, Disability, death or
Retirement or (b) by you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Corporation, at the
time such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation shall
pay as severance pay to you a lump sum severance payment (together with
the payments provided in
________ __, 1995
Page 8
paragraph (C) of this Subsection 4(iii), the "Severance Payments")
equal to three times the sum of your (a) annual base salary in effect
immediately prior to the occurrence of the circumstance giving rise to
the Notice of Termination given in respect thereof, and (b) AIP Maximum
Payment for the year in which the Date of Termination occurs. AIP
Maximum Payment shall mean the higher of (1) the award you would be
entitled to receive for 1995 based on the maximum payout factor for the
AIP or (2) any greater award you would be entitled to receive for any
subsequent year (including the year in which your employment is
terminated) based on the maximum payout factor for the AIP for such
subsequent year. The provisions of this Section 4(iii)(B) shall not in
any way affect your rights under the Corporation's stock option plans
or the PEP.
(C) The Corporation shall pay to you any deferred
compensation, including but not limited to deferred bonuses and amounts
deferred under the Executive Deferred Compensation Plan, allocated or
credited to you or your account as of the Date of Termination.
(D) The Corporation shall also pay to you all legal
fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(E) If the payments provided under paragraphs (B) and
(C) above (the "Contract Payments") or any other portion of the Total
Payments (as defined below) will be subject to the tax imposed by
Section 4999 of the Code (the "Excise Tax"), the Corporation shall pay
to you at the time specified in paragraph (F) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by
you, after deduction of any Excise Tax on the Contract Payment and such
other Total Payments and any federal and state and local income tax and
Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Contract Payments and such other Total Payments. For
purposes of determining whether any of the payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection
with a change in control of the Corporation or your termination of
employment (whether payable pursuant to the terms of this Agreement or
any other
________ __, 1995
Page 9
plan, arrangement or agreement with the Corporation, its successors,
any person whose actions result in a change in control of the
Corporation or any corporation affiliated (or which, as a result of the
completion of a transaction causing a change in control of the
Corporation, will become affiliated) with the Corporation within the
meaning of Section 1504 of the Code) (together with the Contract
Payments, the "Total Payments") shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Corporation's independent auditors and
acceptable to you the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code either to the extent such reasonable compensation is in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code,
or are otherwise not subject to the Excise Tax, (ii) the amount of the
Total Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Total Payments or
(B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) (after applying clause (i), above), and (iii) the
value of any non-cash benefits or any deferred payment or benefit as
determined by the Corporation's independent auditors in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, you shall be deemed
to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Corporation at
the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal and state and local income tax imposed on the
Gross-Up Payment being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate
________ __, 1995
Page 10
provided in Section 1274(d) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of your employment (including by reason of
any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Corporation shall make an
additional Gross-Up Payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(F) The payments provided for in paragraphs (B), (C)
and (E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Corporation shall pay to you on such day an estimate, as determined in
good faith by the Corporation, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest at
a rate equal to 120% of the rate provided in Section 1274(d) of the
Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Corporation to you payable on the fifth day after demand
by the Corporation (together with interest at a rate equal to 120% of
the rate provided in Section 1274(d) of the Code). The payments
provided for in paragraph (D) above shall be made from time to time, in
each instance not later than the fifth day following a written request
for payment by you.
(iv) If your employment shall be terminated (A) by
the Corporation other than for Cause, Disability, death or Retirement or (B) by
you for Good Reason, then for a 36-month period after such termination, the
Corporation shall arrange to provide you with life, disability, accident,
medical, dental and health insurance benefits substantially similar to those
that you are receiving immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced
to the extent comparable benefits are actually received by you from another
employer during the 36- month period following your termination, and any such
benefits actually received by you shall be reported to the Corporation.
(v) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you as the result of
employment by
________ __, 1995
Page 11
another employer, by retirement benefits, by offset against any amount claimed
to be owed by you to the Corporation, or otherwise except as specifically
provided in this Section 4.
(vi) In addition to all other amounts payable to
you under this Section 4, you shall be entitled to receive all benefits payable
to you under The Black & Decker Executive Salary Continuance Plan, the SERP, or
any plan or agreement sponsored by the Corporation or any of its subsidiaries
relating to retirement benefits.
5. Successors; Binding Agreement.
(i) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, share exchange, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Corporation to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason following
a change in control of the Corporation, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your legatee or other designee or, if there is no
such designee, to your estate.
(iii) In the event that you are employed by a
subsidiary of the Corporation, wherever in this Agreement reference is made to
the "Corporation," unless the context otherwise requires, such reference shall
also include such subsidiary. The Corporation shall cause such subsidiary to
carry out the terms of this Agreement insofar as they relate to the employment
relationship between you and such subsidiary, and the
________ __, 1995
Page 12
Corporation shall indemnify you and save you harmless from and against all
liability and damage you may suffer as a consequence of such subsidiary's
failure to perform and carry out such terms. Wherever reference is made to any
benefit program of the Corporation, such reference shall include, where
appropriate, the corresponding benefit program of such subsidiary if you were a
participant in such benefit program on the date a change in control of the
Corporation has occurred.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
7. Miscellaneous. This Agreement amends and restates the agreement
between the parties dated _____________. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Maryland. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Corporation under Section 4 hereof shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
________ __, 1995
Page 13
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the State of Maryland, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE BLACK & DECKER CORPORATION
By_________________________________
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to this ____ day of
__________ 1995
- ---------------------------
[NAME]
Exhibit 10(w)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
BLACK & DECKER LOGO
October 25, 1995
Mr. Nolan D. Archibald
9017 Brickyard Road
Potomac, Maryland 20854
Dear Nolan:
The Black & Decker Corporation (the "Corporation") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated subsequent to a "change in control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2000; provided,
however, that if a change in control of the Corporation shall have occurred
prior to December 31, 2000, this Agreement shall continue in effect for a period
of 36 months beyond the month in which such change in control occurred, at
which time this Agreement shall terminate. Notwithstanding the
Mr. Nolan D. Archibald
October 25, 1995
Page 2
foregoing, and provided no change in control of the Corporation shall have
occurred, this Agreement shall automatically terminate upon the earlier to occur
of (i) your termination of employment with the Corporation, or (ii) the
Corporation's furnishing you with notice of termination, irrespective of the
effective date of such termination.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply therewith, provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its subsidiaries or a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; (C) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Corporation; or (D) the stockholders of the Corporation approve a merger, share
exchange or consolidation of the Corporation with any other corporation, other
than a merger, share exchange or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger, share exchange or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Mr. Nolan D. Archibald
October 25, 1995
Page 3
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
3. Termination Following Change in Control of the Corporation. If any
of the events described in Section 2 hereof constituting a change in control of
the Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (A)
because of your death, Disability or Retirement, (B) by the Corporation for
Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for six
consecutive months, and within 30 days after written notice of termination is
given you shall not have returned to the full-time performance of your duties,
your employment may be terminated for "Disability." Termination by the
Corporation or you of your employment based on "Retirement" shall mean
retirement from active employment with the right to receive an immediate pension
benefit under the applicable pension plan of the Corporation in accordance with
the Corporation's retirement policy in effect at the time of the change in
control of the Corporation.
(ii) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties with the
Corporation, other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance by you of a Notice of Termination (as defined in Subsection 3(iv)
hereof) for Good Reason (as defined in Subsection 3(iii) hereof), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise. For purposes of this Subsection, no act or
failure to act on your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that your action
or omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to you and an
Mr. Nolan D. Archibald
October 25, 1995
Page 4
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of conduct
set forth above in clauses (A) or (B) of the first sentence of this Subsection
and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as such terms are defined in Subsections 3(v) and 3(iv) hereof,
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your status as Chairman, President and Chief Executive Officer of
the Corporation or a substantial adverse alteration in the nature or
status of your responsibilities from those in effect immediately prior
to the change in control of the Corporation, it being understood that
for the purpose of this Agreement, "Chairman, President and Chief
Executive Officer of the Corporation" shall mean that after a change in
control of the Corporation has occurred, you are the Chairman,
President and Chief Executive Officer of (1) the Corporation, if it is
the surviving entity in any merger, share exchange, acquisition or
other business combination with the Corporation, (2) the successor
entity to the Corporation in any merger, share exchange, consolidation,
acquisition or other business combination with the Corporation, or (3)
any entity that beneficially owns a majority of the voting stock of the
Corporation, provided that in all of the foregoing cases such entity is
a publicly held corporation that (a) on a consolidated basis has a net
worth equal to or greater than the Corporation immediately before the
change in control of the Corporation, (b) has an independent board of
directors, and (c) no person or business organization, or affiliated
group of persons or business organizations, owns or controls 20% or
more of the voting stock of such corporation;
(B) a reduction by the Corporation in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time, except for across-the-board salary
reductions similarly affecting all senior executives of the Corporation
and all senior executives of any person in control of the Corporation;
Mr. Nolan D. Archibald
October 25, 1995
Page 5
(C) your relocation to a location not within 25 miles
of your present office or job location, except for required travel on
the Corporation's business to an extent substantially consistent with
your present business travel obligations;
(D) the failure by the Corporation, without your
consent, to pay to you any portion of your current compensation, or to
pay to you any portion of an installment of deferred compensation under
any deferred compensation program of the Corporation, within seven days
of the date such compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which you were entitled, or any compensation plan
in which you participated immediately prior to the change in control of
the Corporation which is material to your total compensation, including
but not limited to the Corporation's (i) Annual Incentive Plan ("AIP")
or other annual incentive compensation plan; (ii) Performance Equity
Plan ("PEP") or other long-term incentive compensation plan; (iii)
stock option plans; (iv) retirement plans; (v) Supplemental Executive
Retirement Plan ("SERP"); and (vi) Executive Deferred Compensation
Plan; or any substitute plan or plans adopted prior to the change in
control of the Corporation, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with
respect to such plan and such equitable arrangement provides
substantially equivalent benefits not materially less favorable to you
(both in terms of the amount of benefits provided and the level of your
participation relative to other participants), or the failure by the
Corporation to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable (both in terms of the amount of benefits provided and the
level of your participation relative to other participants) as existed
at the time of the change in control of the Corporation;
(F) the failure by the Corporation to continue to
provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, dental, health
and accident, or disability plans in which you were participating at
the time of the change in control of the Corporation, the failure to
continue to provide you with a Corporation automobile or allowance in
lieu thereof, if you were provided with such an automobile or allowance
in lieu thereof at the time of the change in control of the
Corporation, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits or
deprive you of any
Mr. Nolan D. Archibald
October 25, 1995
Page 6
material fringe benefit enjoyed by you at the time of the change in
control of the Corporation, or the failure by the Corporation to
provide you with the number of paid vacation days to which you are
entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in effect at
the time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection 3(iv) hereof (and, if applicable, the
requirements of Subsection 3(ii) hereof); for purposes of this
Agreement, no such purported termination shall be effective.
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported
termination of your employment by the Corporation or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of
Termination" shall mean (A) if your employment is terminated for Disability, 30
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such 30-day period),
and (B) if your employment is terminated pursuant to Subsections 3(ii) or 3(iii)
hereof or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection 3(ii) hereof shall not be less than 30 days, and in the case of a
termination pursuant to Subsection 3(iii) hereof shall not be less than l5 nor
more than 60 days, respectively, from the date such Notice of Termination is
given); provided that if within l5 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this proviso),
Mr. Nolan D. Archibald
October 25, 1995
Page 7
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Corporation will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Corporation, as defined by Section 2 hereof, upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform
your full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together with all
amounts payable to you under any compensation plan of the Corporation during
such period, until this Agreement is terminated pursuant to Subsection 3(i)
hereof. Thereafter, or in the event your employment shall be terminated by the
Corporation or by you for Retirement, or by reason of your death, your benefits
shall be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the
Corporation for Cause, Disability, death or Retirement, or by you other than for
Good Reason, the Corporation shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan of the Corporation at the time such payments are due, and the
Mr. Nolan D. Archibald
October 25, 1995
Page 8
Corporation shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall
be terminated (a) by the Corporation other than for Cause, Disability, death or
Retirement or (b) by you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Corporation, at the
time such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation shall
pay as severance pay to you a lump sum severance payment (together with
the payments provided in paragraph (C) of this Subsection 4(iii), the
"Severance Payments") equal to three times the sum of your (a) annual
base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in respect
thereof, and (b) AIP Maximum Payment for the year in which the Date of
Termination occurs. AIP Maximum Payment shall mean the higher of (1)
the award you would be entitled to receive for 1995 based on the
maximum payout factor for the AIP or (2) any greater award you would be
entitled to receive for any subsequent year (including the year in
which your employment is terminated) based on the maximum payout factor
for the AIP for such subsequent year. The provisions of this Section
4(iii)(B) shall not in any way affect your rights under the
Corporation's stock option plans or the PEP.
(C) The Corporation shall pay to you any deferred
compensation, including but not limited to deferred bonuses and amounts
deferred under the Executive Deferred Compensation Plan, allocated or
credited to you or your account as of the Date of Termination.
(D) The Corporation shall also pay to you all legal
fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(E) If the payments provided under paragraphs (B) and
(C) above (the "Contract Payments") or any other portion of the Total
Payments (as defined below) will be subject to
Mr. Nolan D. Archibald
October 25, 1995
Page 9
the tax imposed by Section 4999 of the Code (the "Excise Tax"), the
Corporation shall pay to you at the time specified in paragraph (F)
below, an additional amount (the "Gross-Up Payment") such that the net
amount retained by you, after deduction of any Excise Tax on the
Contract Payment and such other Total Payments and any federal and
state and local income tax and Excise Tax upon the payment provided for
by this paragraph, shall be equal to the Contract Payments and such
other Total Payments. For purposes of determining whether any of the
payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) any other payments or benefits received or to be
received by you in connection with a change in control of the
Corporation or your termination of employment (whether payable pursuant
to the terms of this Agreement or any other plan, arrangement or
agreement with the Corporation, its successors, any person whose
actions result in a change in control of the Corporation or any
corporation affiliated (or which, as a result of the completion of a
transaction causing a change in control of the Corporation, will become
affiliated) with the Corporation within the meaning of Section 1504 of
the Code) (together with the Contract Payments, the "Total Payments")
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the Corporation's
independent auditors and acceptable to you the Total Payments (in whole
or in part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4)(B) of the Code either to the extent such reasonable
compensation is in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the
Excise Tax, (ii) the amount of the Total Payments that shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit as determined by the
Corporation's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of determining
the amount of the Gross-Up Payment, you shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal rate of taxation in the
state and locality of your residence on the Date of Termination, net of
the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently
Mr. Nolan D. Archibald
October 25, 1995
Page 10
determined to be less than the amount taken into account hereunder at
the time of termination of your employment, you shall repay to the
Corporation at the time that the amount of such reduction in Excise Tax
is finally determined the portion of the Gross-Up Payment attributable
to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income
tax imposed on the Gross-Up Payment being repaid by you if such
repayment results in a reduction in Excise Tax and/or a federal and
state and local income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(d) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of your
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Corporation shall make an additional Gross-Up Payment in respect of
such excess (plus any interest payable with respect to such excess) at
the time that the amount of such excess is finally determined.
(F) The payments provided for in paragraphs (B), (C)
and (E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Corporation shall pay to you on such day an estimate, as determined in
good faith by the Corporation, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest at
a rate equal to 120% of the rate provided in Section 1274(d) of the
Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Corporation to you payable on the fifth day after demand
by the Corporation (together with interest at a rate equal to 120% of
the rate provided in Section 1274(d) of the Code). The payments
provided for in paragraph (D) above shall be made from time to time, in
each instance not later than the fifth day following a written request
for payment by you.
(iv) If your employment shall be terminated (A) by
the Corporation other than for Cause, Disability, death or Retirement or (B) by
you for Good Reason, then for a 36-month period after such termination, the
Corporation shall arrange to provide you with life, disability, accident,
medical, dental and health insurance benefits substantially similar to those
that you are receiving immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced
to the extent comparable benefits are actually received by you from another
employer during the 36-
Mr. Nolan D. Archibald
October 25, 1995
Page 11
month period following your termination, and any such benefits actually received
by you shall be reported to the Corporation.
(v) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise except as
specifically provided in this Section 4.
(vi) In addition to all other amounts payable to
you under this Section 4, you shall be entitled to receive all benefits payable
to you under The Black & Decker Executive Salary Continuance Plan, the SERP, or
any plan or agreement sponsored by the Corporation or any of its subsidiaries
relating to retirement benefits.
5. Successors; Binding Agreement.
(i) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, share exchange, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Corporation to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason following
a change in control of the Corporation, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your legatee or other designee or, if there is no
such designee, to your estate.
(iii) In the event that you are employed by a
subsidiary of the Corporation, wherever in this Agreement reference is made to
the "Corporation," unless the context
Mr. Nolan D. Archibald
October 25, 1995
Page 12
otherwise requires, such reference shall also include such subsidiary. The
Corporation shall cause such subsidiary to carry out the terms of this Agreement
insofar as they relate to the employment relationship between you and such
subsidiary, and the Corporation shall indemnify you and save you harmless from
and against all liability and damage you may suffer as a consequence of such
subsidiary's failure to perform and carry out such terms. Wherever reference is
made to any benefit program of the Corporation, such reference shall include,
where appropriate, the corresponding benefit program of such subsidiary if you
were a participant in such benefit program on the date a change in control of
the Corporation has occurred.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
7. Miscellaneous. This Agreement amends and restates the agreement
between the parties dated October 18, 1990. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Maryland. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. The obligations of the Corporation under Section 4 hereof shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
Mr. Nolan D. Archibald
October 25, 1995
Page 13
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the State of Maryland, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE BLACK & DECKER CORPORATION
By /s/ LAWRENCE R. pUGH
Lawrence R. Pugh
Chairman
Organization Committee
Agreed to this 20TH day of
November 1995
/s/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Exhibit 10(x)
The Black & Decker Corporation
701 East Joppa Road
Towson, MD 21268
410-716-3900
BLACK & DECKER LOGO
October 25, 1995
Mr. Raymond A. DeVita
9546 Ednam Cove
Germantown, Tennessee 38139
Dear Ray:
The Black & Decker Corporation (the "Corporation") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated subsequent to a "change in control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2000; provided,
however, that if a change in control of the Corporation shall have occurred
prior to December 31, 2000, this Agreement shall continue in effect for a period
of 36 months beyond the month in which such change in control occurred, at
which time this Agreement shall terminate. Notwithstanding the foregoing, and
provided no change in control of the Corporation
Mr. Raymond A. DeVita
October 25, 1995
Page 2
shall have occurred, this Agreement shall automatically terminate upon the
earlier to occur of (i) your termination of employment with the Corporation, or
(ii) the Corporation's furnishing you with notice of termination, irrespective
of the effective date of such termination.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply therewith, provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its subsidiaries or a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; (C) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Corporation; or (D) the stockholders of the Corporation approve a merger, share
exchange or consolidation of the Corporation with any other corporation, other
than a merger, share exchange or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger, share exchange or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Mr. Raymond A. DeVita
October 25, 1995
Page 3
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
3. Termination Following Change in Control of the Corporation. If any
of the events described in Section 2 hereof constituting a change in control of
the Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (A)
because of your death, Disability or Retirement, (B) by the Corporation for
Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for six
consecutive months, and within 30 days after written notice of termination is
given you shall not have returned to the full-time performance of your duties,
your employment may be terminated for "Disability." Termination by the
Corporation or you of your employment based on "Retirement" shall mean
retirement from active employment with the right to receive an immediate pension
benefit under the applicable pension plan of the Corporation in accordance with
the Corporation's retirement policy in effect at the time of the change in
control of the Corporation.
(ii) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties with the
Corporation, other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance by you of a Notice of Termination (as defined in Subsection 3(iv)
hereof) for Good Reason (as defined in Subsection 3(iii) hereof), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise. For purposes of this Subsection, no act or
failure to act on your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that your action
or omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held
Mr. Raymond A. DeVita
October 25, 1995
Page 4
for such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as such terms are defined in Subsections 3(v) and 3(iv) hereof,
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your current status as an executive of the Corporation or a
substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change
in control of the Corporation;
(B) a reduction by the Corporation in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time, except for across-the-board salary
reductions similarly affecting all senior executives of the Corporation
and all senior executives of any person in control of the Corporation;
(C) your relocation to a location not within 25 miles
of your present office or job location, except for required travel on
the Corporation's business to an extent substantially consistent with
your present business travel obligations;
(D) the failure by the Corporation, without your
consent, to pay to you any portion of your current compensation, or to
pay to you any portion of an installment of deferred compensation under
any deferred compensation program of the Corporation, within seven days
of the date such compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which you were entitled, or any compensation plan
in which you participated immediately prior to the change in control of
the Corporation which is material to your total compensation, including
but not limited to the
Mr. Raymond A. DeVita
October 25, 1995
Page 5
Corporation's (i) Annual Incentive Plan ("AIP") or other annual
incentive compensation plan; (ii) Performance Equity Plan ("PEP") or
other long-term incentive compensation plan; (iii) stock option plans;
(iv) retirement plans; (v) Supplemental Executive Retirement Plan
("SERP"); and (vi) Executive Deferred Compensation Plan; or any
substitute plan or plans adopted prior to the change in control of the
Corporation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan
and such equitable arrangement provides substantially equivalent
benefits not materially less favorable to you (both in terms of the
amount of benefits provided and the level of your participation
relative to other participants), or the failure by the Corporation to
continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable (both in
terms of the amount of benefits provided and the level of your
participation relative to other participants) as existed at the time of
the change in control of the Corporation;
(F) the failure by the Corporation to continue to
provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, dental, health
and accident, or disability plans in which you were participating at
the time of the change in control of the Corporation, the failure to
continue to provide you with a Corporation automobile or allowance in
lieu thereof, if you were provided with such an automobile or allowance
in lieu thereof at the time of the change in control of the
Corporation, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time
of the change in control of the Corporation, or the failure by the
Corporation to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service with the
Corporation in accordance with the Corporation's normal vacation policy
in effect at the time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection 3(iv) hereof (and, if applicable, the
requirements of Subsection 3(ii) hereof);
Mr. Raymond A. DeVita
October 25, 1995
Page 6
for purposes of this Agreement, no such purported termina-
tion shall be effective.
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported
termination of your employment by the Corporation or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of
Termination" shall mean (A) if your employment is terminated for Disability, 30
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such 30-day period),
and (B) if your employment is terminated pursuant to Subsections 3(ii) or 3(iii)
hereof or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection 3(ii) hereof shall not be less than 30 days, and in the case of a
termination pursuant to Subsection 3(iii) hereof shall not be less than l5 nor
more than 60 days, respectively, from the date such Notice of Termination is
given); provided that if within l5 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this proviso), the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit and
Mr. Raymond A. DeVita
October 25, 1995
Page 7
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Corporation, as defined by Section 2 hereof, upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform
your full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together with all
amounts payable to you under any compensation plan of the Corporation during
such period, until this Agreement is terminated pursuant to Subsection 3(i)
hereof. Thereafter, or in the event your employment shall be terminated by the
Corporation or by you for Retirement, or by reason of your death, your benefits
shall be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the
Corporation for Cause, Disability, death or Retirement, or by you other than for
Good Reason, the Corporation shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan of the Corporation at the time such payments are due, and the Corporation
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall
be terminated (a) by the Corporation other than for Cause, Disability, death or
Retirement or (b) by you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Corporation, at the
time such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you
Mr. Raymond A. DeVita
October 25, 1995
Page 8
for periods subsequent to the Date of Termination, the Corporation
shall pay as severance pay to you a lump sum severance payment
(together with the payments provided in paragraph (C) of this
Subsection 4(iii), the "Severance Payments") equal to three times the
sum of your (a) annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of Termination
given in respect thereof, and (b) AIP Maximum Payment for the year in
which the Date of Termination occurs. AIP Maximum Payment shall mean
the higher of (1) the award you would be entitled to receive for 1995
based on the maximum payout factor for the AIP or (2) any greater award
you would be entitled to receive for any subsequent year (including the
year in which your employment is terminated) based on the maximum
payout factor for the AIP for such subsequent year. The provisions of
this Section 4(iii)(B) shall not in any way affect your rights under
the Corporation's stock option plans or the PEP.
(C) The Corporation shall pay to you any deferred
compensation, including but not limited to deferred bonuses and amounts
deferred under the Executive Deferred Compensation Plan, allocated or
credited to you or your account as of the Date of Termination.
(D) The Corporation shall also pay to you all legal
fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(E) If the payments provided under paragraphs (B) and
(C) above (the "Contract Payments") or any other portion of the Total
Payments (as defined below) will be subject to the tax imposed by
Section 4999 of the Code (the "Excise Tax"), the Corporation shall pay
to you at the time specified in paragraph (F) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by
you, after deduction of any Excise Tax on the Contract Payment and such
other Total Payments and any federal and state and local income tax and
Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Contract Payments and such other Total Payments. For
purposes of determining whether any of the payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection
with a change in control of the Corporation or your termination of
employment (whether payable pursuant to the terms of this Agreement or
any other
Mr. Raymond A. DeVita
October 25, 1995
Page 9
plan, arrangement or agreement with the Corporation, its successors,
any person whose actions result in a change in control of the
Corporation or any corporation affiliated (or which, as a result of the
completion of a transaction causing a change in control of the
Corporation, will become affiliated) with the Corporation within the
meaning of Section 1504 of the Code) (together with the Contract
Payments, the "Total Payments") shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Corporation's independent auditors and
acceptable to you the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code either to the extent such reasonable compensation is in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code,
or are otherwise not subject to the Excise Tax, (ii) the amount of the
Total Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Total Payments or
(B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) (after applying clause (i), above), and (iii) the
value of any non-cash benefits or any deferred payment or benefit as
determined by the Corporation's independent auditors in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, you shall be deemed
to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Corporation at
the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal and state and local income tax imposed on the
Gross-Up Payment being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(d) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of your
Mr. Raymond A. DeVita
October 25, 1995
Page 10
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Corporation shall make an additional Gross-Up Payment in respect of
such excess (plus any interest payable with respect to such excess) at
the time that the amount of such excess is finally determined.
(F) The payments provided for in paragraphs (B), (C)
and (E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Corporation shall pay to you on such day an estimate, as determined in
good faith by the Corporation, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest at
a rate equal to 120% of the rate provided in Section 1274(d) of the
Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Corporation to you payable on the fifth day after demand
by the Corporation (together with interest at a rate equal to 120% of
the rate provided in Section 1274(d) of the Code). The payments
provided for in paragraph (D) above shall be made from time to time, in
each instance not later than the fifth day following a written request
for payment by you.
(iv) If your employment shall be terminated (A)by
the Corporation other than for Cause, Disability, death or Retirement or (B) by
you for Good Reason, then for a 36-month period after such termination, the
Corporation shall arrange to provide you with life, disability, accident,
medical, dental and health insurance benefits substantially similar to those
that you are receiving immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced
to the extent comparable benefits are actually received by you from another
employer during the 36- month period following your termination, and any such
benefits actually received by you shall be reported to the Corporation.
(v) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise except as
specifically provided in this Section 4.
(vi) In addition to all other amounts payable to
you under this Section 4, you shall be entitled to receive all
Mr. Raymond A. DeVita
October 25, 1995
Page 11
benefits payable to you under The Black & Decker Executive Salary Continuance
Plan, the SERP, or any plan or agreement sponsored by the Corporation or any of
its subsidiaries relating to retirement benefits.
5. Successors; Binding Agreement.
(i) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, share exchange, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Corporation to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason following
a change in control of the Corporation, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your legatee or other designee or, if there is no
such designee, to your estate.
(iii) In the event that you are employed by a
subsidiary of the Corporation, wherever in this Agreement reference is made to
the "Corporation," unless the context otherwise requires, such reference shall
also include such subsidiary. The Corporation shall cause such subsidiary to
carry out the terms of this Agreement insofar as they relate to the employment
relationship between you and such subsidiary, and the Corporation shall
indemnify you and save you harmless from and against all liability and damage
you may suffer as a consequence of such subsidiary's failure to perform and
carry out such terms. Wherever reference is made to any benefit program of the
Corporation, such reference shall include, where appropriate, the corresponding
benefit program of such subsidiary if you were a participant in such benefit
program on the date a change in control of the Corporation has occurred.
Mr. Raymond A. DeVita
October 25, 1995
Page 12
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
7. Miscellaneous. This Agreement amends and restates the agreement
between the parties dated October 18, 1990. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Maryland. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. The obligations of the Corporation under Section 4 hereof shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the State of Maryland, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid
Mr. Raymond A. DeVita
October 25, 1995
Page 13
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE BLACK & DECKER CORPORATION
By /s/NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to this 21st day of
November 1995
/S/ RAYMOND A DEVITA
Raymond A. DeVita
Exhibit 10(y)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
BLACK & DECKER LOGO
October 25, 1995
Mr. Charles E. Fenton
215 Upnor Road
Baltimore, Maryland 21212
Dear Charlie:
The Black & Decker Corporation (the "Corporation") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated subsequent to a "change in control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2000; provided,
however, that if a change in control of the Corporation shall have occurred
prior to December 31, 2000, this Agreement shall continue in effect for a period
of 36 months beyond the month in which such change in control occurred, at
which time this Agreement shall terminate. Notwithstanding the foregoing, and
provided no change in control of the Corporation
Mr. Charles E. Fenton
October 25, 1995
Page 2
shall have occurred, this Agreement shall automatically terminate upon the
earlier to occur of (i) your termination of employment with the Corporation, or
(ii) the Corporation's furnishing you with notice of termination, irrespective
of the effective date of such termination.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply therewith, provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its subsidiaries or a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; (C) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Corporation; or (D) the stockholders of the Corporation approve a merger, share
exchange or consolidation of the Corporation with any other corporation, other
than a merger, share exchange or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger, share exchange or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Mr. Charles E. Fenton
October 25, 1995
Page 3
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
3. Termination Following Change in Control of the Corporation. If any
of the events described in Section 2 hereof constituting a change in control of
the Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (A)
because of your death, Disability or Retirement, (B) by the Corporation for
Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for six
consecutive months, and within 30 days after written notice of termination is
given you shall not have returned to the full-time performance of your duties,
your employment may be terminated for "Disability." Termination by the
Corporation or you of your employment based on "Retirement" shall mean
retirement from active employment with the right to receive an immediate pension
benefit under the applicable pension plan of the Corporation in accordance with
the Corporation's retirement policy in effect at the time of the change in
control of the Corporation.
(ii) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties with the
Corporation, other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance by you of a Notice of Termination (as defined in Subsection 3(iv)
hereof) for Good Reason (as defined in Subsection 3(iii) hereof), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise. For purposes of this Subsection, no act or
failure to act on your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that your action
or omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held
Mr. Charles E. Fenton
October 25, 1995
Page 4
for such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as such terms are defined in Subsections 3(v) and 3(iv) hereof,
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your current status as an executive of the Corporation or a
substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change
in control of the Corporation;
(B) a reduction by the Corporation in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time, except for across-the-board salary
reductions similarly affecting all senior executives of the Corporation
and all senior executives of any person in control of the Corporation;
(C) your relocation to a location not within 25 miles
of your present office or job location, except for required travel on
the Corporation's business to an extent substantially consistent with
your present business travel obligations;
(D) the failure by the Corporation, without your
consent, to pay to you any portion of your current compensation, or to
pay to you any portion of an installment of deferred compensation under
any deferred compensation program of the Corporation, within seven days
of the date such compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which you were entitled, or any compensation plan
in which you participated immediately prior to the change in control of
the Corporation which is material to your total compensation, including
but not limited to the
Mr. Charles E. Fenton
October 25, 1995
Page 5
Corporation's (i) Annual Incentive Plan ("AIP") or other annual
incentive compensation plan; (ii) Performance Equity Plan ("PEP") or
other long-term incentive compensation plan; (iii) stock option plans;
(iv) retirement plans; (v) Supplemental Executive Retirement Plan
("SERP"); and (vi) Executive Deferred Compensation Plan; or any
substitute plan or plans adopted prior to the change in control of the
Corporation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan
and such equitable arrangement provides substantially equivalent
benefits not materially less favorable to you (both in terms of the
amount of benefits provided and the level of your participation
relative to other participants), or the failure by the Corporation to
continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable (both in
terms of the amount of benefits provided and the level of your
participation relative to other participants) as existed at the time of
the change in control of the Corporation;
(F) the failure by the Corporation to continue to
provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, dental, health
and accident, or disability plans in which you were participating at
the time of the change in control of the Corporation, the failure to
continue to provide you with a Corporation automobile or allowance in
lieu thereof, if you were provided with such an automobile or allowance
in lieu thereof at the time of the change in control of the
Corporation, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time
of the change in control of the Corporation, or the failure by the
Corporation to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service with the
Corporation in accordance with the Corporation's normal vacation policy
in effect at the time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection 3(iv) hereof (and, if applicable, the
requirements of Subsection 3(ii) hereof);
Mr. Charles E. Fenton
October 25, 1995
Page 6
for purposes of this Agreement, no such purported termina-
tion shall be effective.
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported
termination of your employment by the Corporation or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of
Termination" shall mean (A) if your employment is terminated for Disability, 30
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such 30-day period),
and (B) if your employment is terminated pursuant to Subsections 3(ii) or 3(iii)
hereof or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection 3(ii) hereof shall not be less than 30 days, and in the case of a
termination pursuant to Subsection 3(iii) hereof shall not be less than l5 nor
more than 60 days, respectively, from the date such Notice of Termination is
given); provided that if within l5 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this proviso), the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit and
Mr. Charles E. Fenton
October 25, 1995
Page 7
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Corporation, as defined by Section 2 hereof, upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform
your full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together with all
amounts payable to you under any compensation plan of the Corporation during
such period, until this Agreement is terminated pursuant to Subsection 3(i)
hereof. Thereafter, or in the event your employment shall be terminated by the
Corporation or by you for Retirement, or by reason of your death, your benefits
shall be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the
Corporation for Cause, Disability, death or Retirement, or by you other than for
Good Reason, the Corporation shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan of the Corporation at the time such payments are due, and the Corporation
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall
be terminated (a) by the Corporation other than for Cause, Disability, death or
Retirement or (b) by you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Corporation, at the
time such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you
Mr. Charles E. Fenton
October 25, 1995
Page 8
for periods subsequent to the Date of Termination, the Corporation
shall pay as severance pay to you a lump sum severance payment
(together with the payments provided in paragraph (C) of this
Subsection 4(iii), the "Severance Payments") equal to three times the
sum of your (a) annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of Termination
given in respect thereof, and (b) AIP Maximum Payment for the year in
which the Date of Termination occurs. AIP Maximum Payment shall mean
the higher of (1) the award you would be entitled to receive for 1995
based on the maximum payout factor for the AIP or (2) any greater award
you would be entitled to receive for any subsequent year (including the
year in which your employment is terminated) based on the maximum
payout factor for the AIP for such subsequent year. The provisions of
this Section 4(iii)(B) shall not in any way affect your rights under
the Corporation's stock option plans or the PEP.
(C) The Corporation shall pay to you any deferred
compensation, including but not limited to deferred bonuses and amounts
deferred under the Executive Deferred Compensation Plan, allocated or
credited to you or your account as of the Date of Termination.
(D) The Corporation shall also pay to you all legal
fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(E) If the payments provided under paragraphs (B) and
(C) above (the "Contract Payments") or any other portion of the Total
Payments (as defined below) will be subject to the tax imposed by
Section 4999 of the Code (the "Excise Tax"), the Corporation shall pay
to you at the time specified in paragraph (F) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by
you, after deduction of any Excise Tax on the Contract Payment and such
other Total Payments and any federal and state and local income tax and
Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Contract Payments and such other Total Payments. For
purposes of determining whether any of the payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection
with a change in control of the Corporation or your termination of
employment (whether payable pursuant to the terms of this Agreement or
any other
Mr. Charles E. Fenton
October 25, 1995
Page 9
plan, arrangement or agreement with the Corporation, its successors,
any person whose actions result in a change in control of the
Corporation or any corporation affiliated (or which, as a result of the
completion of a transaction causing a change in control of the
Corporation, will become affiliated) with the Corporation within the
meaning of Section 1504 of the Code) (together with the Contract
Payments, the "Total Payments") shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Corporation's independent auditors and
acceptable to you the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code either to the extent such reasonable compensation is in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code,
or are otherwise not subject to the Excise Tax, (ii) the amount of the
Total Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Total Payments or
(B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) (after applying clause (i), above), and (iii) the
value of any non-cash benefits or any deferred payment or benefit as
determined by the Corporation's independent auditors in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, you shall be deemed
to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Corporation at
the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal and state and local income tax imposed on the
Gross-Up Payment being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(d) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of your
Mr. Charles E. Fenton
October 25, 1995
Page 10
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Corporation shall make an additional Gross-Up Payment in respect of
such excess (plus any interest payable with respect to such excess) at
the time that the amount of such excess is finally determined.
(F) The payments provided for in paragraphs (B), (C)
and (E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Corporation shall pay to you on such day an estimate, as determined in
good faith by the Corporation, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest at
a rate equal to 120% of the rate provided in Section 1274(d) of the
Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Corporation to you payable on the fifth day after demand
by the Corporation (together with interest at a rate equal to 120% of
the rate provided in Section 1274(d) of the Code). The payments
provided for in paragraph (D) above shall be made from time to time, in
each instance not later than the fifth day following a written request
for payment by you.
(iv) If your employment shall be terminated (A) by
the Corporation other than for Cause, Disability, death or Retirement or (B) by
you for Good Reason, then for a 36-month period after such termination, the
Corporation shall arrange to provide you with life, disability, accident,
medical, dental and health insurance benefits substantially similar to those
that you are receiving immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced
to the extent comparable benefits are actually received by you from another
employer during the 36- month period following your termination, and any such
benefits actually received by you shall be reported to the Corporation.
(v) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise except as
specifically provided in this Section 4.
(vi) In addition to all other amounts payable to
you under this Section 4, you shall be entitled to receive all
Mr. Charles E. Fenton
October 25, 1995
Page 11
benefits payable to you under The Black & Decker Executive Salary Continuance
Plan, the SERP, or any plan or agreement sponsored by the Corporation or any of
its subsidiaries relating to retirement benefits.
5. Successors; Binding Agreement.
(i) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, share exchange, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Corporation to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason following
a change in control of the Corporation, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your legatee or other designee or, if there is no
such designee, to your estate.
(iii) In the event that you are employed by a
subsidiary of the Corporation, wherever in this Agreement reference is made to
the "Corporation," unless the context otherwise requires, such reference shall
also include such subsidiary. The Corporation shall cause such subsidiary to
carry out the terms of this Agreement insofar as they relate to the employment
relationship between you and such subsidiary, and the Corporation shall
indemnify you and save you harmless from and against all liability and damage
you may suffer as a consequence of such subsidiary's failure to perform and
carry out such terms. Wherever reference is made to any benefit program of the
Corporation, such reference shall include, where appropriate, the corresponding
benefit program of such subsidiary if you were a participant in such benefit
program on the date a change in control of the Corporation has occurred.
Mr. Charles E. Fenton
October 25, 1995
Page 12
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
7. Miscellaneous. This Agreement amends and restates the agreement
between the parties dated October 18, 1990. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Maryland. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. The obligations of the Corporation under Section 4 hereof shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the State of Maryland, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid
Mr. Charles E. Fenton
October 25, 1995
Page 13
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE BLACK & DECKER CORPORATION
By /s/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to this 14th day of
November 1995
/S/ CHARLES E. FENTON
Charles E. Fenton
Exhibit 10(z)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
BLACK & DECKER LOGO
October 25, 1995
Mr. Joseph Galli
13 Jackson Manor Court
Phoenix, Maryland 21131
Dear Joe:
The Black & Decker Corporation (the "Corporation") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated subsequent to a "change in control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2000; provided,
however, that if a change in control of the Corporation shall have occurred
prior to December 31, 2000, this Agreement shall continue in effect for a period
of 36 months beyond the month in which such change in control occurred, at
which time this Agreement shall terminate. Notwithstanding the foregoing, and
provided no change in control of the Corporation
Mr. Joseph Galli
October 25, 1995
Page 2
shall have occurred, this Agreement shall automatically terminate upon the
earlier to occur of (i) your termination of employment with the Corporation, or
(ii) the Corporation's furnishing you with notice of termination, irrespective
of the effective date of such termination.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply therewith, provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its subsidiaries or a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; (C) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Corporation; or (D) the stockholders of the Corporation approve a merger, share
exchange or consolidation of the Corporation with any other corporation, other
than a merger, share exchange or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger, share exchange or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Mr. Joseph Galli
October 25, 1995
Page 3
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
3. Termination Following Change in Control of the Corporation. If any
of the events described in Section 2 hereof constituting a change in control of
the Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (A)
because of your death, Disability or Retirement, (B) by the Corporation for
Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for six
consecutive months, and within 30 days after written notice of termination is
given you shall not have returned to the full-time performance of your duties,
your employment may be terminated for "Disability." Termination by the
Corporation or you of your employment based on "Retirement" shall mean
retirement from active employment with the right to receive an immediate pension
benefit under the applicable pension plan of the Corporation in accordance with
the Corporation's retirement policy in effect at the time of the change in
control of the Corporation.
(ii) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties with the
Corporation, other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance by you of a Notice of Termination (as defined in Subsection 3(iv)
hereof) for Good Reason (as defined in Subsection 3(iii) hereof), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise. For purposes of this Subsection, no act or
failure to act on your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that your action
or omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held
Mr. Joseph Galli
October 25, 1995
Page 4
for such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as such terms are defined in Subsections 3(v) and 3(iv) hereof,
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your current status as an executive of the Corporation or a
substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change
in control of the Corporation;
(B) a reduction by the Corporation in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time, except for across-the-board salary
reductions similarly affecting all senior executives of the Corporation
and all senior executives of any person in control of the Corporation;
(C) your relocation to a location not within 25 miles
of your present office or job location, except for required travel on
the Corporation's business to an extent substantially consistent with
your present business travel obligations;
(D) the failure by the Corporation, without your
consent, to pay to you any portion of your current compensation, or to
pay to you any portion of an installment of deferred compensation under
any deferred compensation program of the Corporation, within seven days
of the date such compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which you were entitled, or any compensation plan
in which you participated immediately prior to the change in control of
the Corporation which is material to your total compensation, including
but not limited to the
Mr. Joseph Galli
October 25, 1995
Page 5
Corporation's (i) Annual Incentive Plan ("AIP") or other annual
incentive compensation plan; (ii) Performance Equity Plan ("PEP") or
other long-term incentive compensation plan; (iii) stock option plans;
(iv) retirement plans; (v) Supplemental Executive Retirement Plan
("SERP"); and (vi) Executive Deferred Compensation Plan; or any
substitute plan or plans adopted prior to the change in control of the
Corporation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan
and such equitable arrangement provides substantially equivalent
benefits not materially less favorable to you (both in terms of the
amount of benefits provided and the level of your participation
relative to other participants), or the failure by the Corporation to
continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable (both in
terms of the amount of benefits provided and the level of your
participation relative to other participants) as existed at the time of
the change in control of the Corporation;
(F) the failure by the Corporation to continue to
provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, dental, health
and accident, or disability plans in which you were participating at
the time of the change in control of the Corporation, the failure to
continue to provide you with a Corporation automobile or allowance in
lieu thereof, if you were provided with such an automobile or allowance
in lieu thereof at the time of the change in control of the
Corporation, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time
of the change in control of the Corporation, or the failure by the
Corporation to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service with the
Corporation in accordance with the Corporation's normal vacation policy
in effect at the time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection 3(iv) hereof (and, if applicable, the
requirements of Subsection 3(ii) hereof);
Mr. Joseph Galli
October 25, 1995
Page 6
for purposes of this Agreement, no such purported termination shall be
effective.
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported
termination of your employment by the Corporation or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of
Termination" shall mean (A) if your employment is terminated for Disability, 30
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such 30-day period),
and (B) if your employment is terminated pursuant to Subsections 3(ii) or 3(iii)
hereof or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection 3(ii) hereof shall not be less than 30 days, and in the case of a
termination pursuant to Subsection 3(iii) hereof shall not be less than l5 nor
more than 60 days, respectively, from the date such Notice of Termination is
given); provided that if within l5 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this proviso), the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit and
Mr. Joseph Galli
October 25, 1995
Page 7
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Corporation, as defined by Section 2 hereof, upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform
your full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together with all
amounts payable to you under any compensation plan of the Corporation during
such period, until this Agreement is terminated pursuant to Subsection 3(i)
hereof. Thereafter, or in the event your employment shall be terminated by the
Corporation or by you for Retirement, or by reason of your death, your benefits
shall be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the
Corporation for Cause, Disability, death or Retirement, or by you other than for
Good Reason, the Corporation shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan of the Corporation at the time such payments are due, and the Corporation
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall
be terminated (a) by the Corporation other than for Cause, Disability, death or
Retirement or (b) by you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Corporation, at the
time such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you
Mr. Joseph Galli
October 25, 1995
Page 8
for periods subsequent to the Date of Termination, the Corporation
shall pay as severance pay to you a lump sum severance payment
(together with the payments provided in paragraph (C) of this
Subsection 4(iii), the "Severance Payments") equal to three times the
sum of your (a) annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of Termination
given in respect thereof, and (b) AIP Maximum Payment for the year in
which the Date of Termination occurs. AIP Maximum Payment shall mean
the higher of (1) the award you would be entitled to receive for 1995
based on the maximum payout factor for the AIP or (2) any greater award
you would be entitled to receive for any subsequent year (including the
year in which your employment is terminated) based on the maximum
payout factor for the AIP for such subsequent year. The provisions of
this Section 4(iii)(B) shall not in any way affect your rights under
the Corporation's stock option plans or the PEP.
(C) The Corporation shall pay to you any deferred
compensation, including but not limited to deferred bonuses and amounts
deferred under the Executive Deferred Compensation Plan, allocated or
credited to you or your account as of the Date of Termination.
(D) The Corporation shall also pay to you all legal
fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(E) If the payments provided under paragraphs (B) and
(C) above (the "Contract Payments") or any other portion of the Total
Payments (as defined below) will be subject to the tax imposed by
Section 4999 of the Code (the "Excise Tax"), the Corporation shall pay
to you at the time specified in paragraph (F) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by
you, after deduction of any Excise Tax on the Contract Payment and such
other Total Payments and any federal and state and local income tax and
Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Contract Payments and such other Total Payments. For
purposes of determining whether any of the payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection
with a change in control of the Corporation or your termination of
employment (whether payable pursuant to the terms of this Agreement or
any other
Mr. Joseph Galli
October 25, 1995
Page 9
plan, arrangement or agreement with the Corporation, its successors,
any person whose actions result in a change in control of the
Corporation or any corporation affiliated (or which, as a result of the
completion of a transaction causing a change in control of the
Corporation, will become affiliated) with the Corporation within the
meaning of Section 1504 of the Code) (together with the Contract
Payments, the "Total Payments") shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Corporation's independent auditors and
acceptable to you the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code either to the extent such reasonable compensation is in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code,
or are otherwise not subject to the Excise Tax, (ii) the amount of the
Total Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Total Payments or
(B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) (after applying clause (i), above), and (iii) the
value of any non-cash benefits or any deferred payment or benefit as
determined by the Corporation's independent auditors in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, you shall be deemed
to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Corporation at
the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal and state and local income tax imposed on the
Gross-Up Payment being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(d) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of your
Mr. Joseph Galli
October 25, 1995
Page 10
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Corporation shall make an additional Gross-Up Payment in respect of
such excess (plus any interest payable with respect to such excess) at
the time that the amount of such excess is finally determined.
(F) The payments provided for in paragraphs (B), (C)
and (E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Corporation shall pay to you on such day an estimate, as determined in
good faith by the Corporation, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest at
a rate equal to 120% of the rate provided in Section 1274(d) of the
Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Corporation to you payable on the fifth day after demand
by the Corporation (together with interest at a rate equal to 120% of
the rate provided in Section 1274(d) of the Code). The payments
provided for in paragraph (D) above shall be made from time to time, in
each instance not later than the fifth day following a written request
for payment by you.
(iv) If your employment shall be terminated (A) by
the Corporation other than for Cause, Disability, death or Retirement or (B) by
you for Good Reason, then for a 36-month period after such termination, the
Corporation shall arrange to provide you with life, disability, accident,
medical, dental and health insurance benefits substantially similar to those
that you are receiving immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced
to the extent comparable benefits are actually received by you from another
employer during the 36- month period following your termination, and any such
benefits actually received by you shall be reported to the Corporation.
(v) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise except as
specifically provided in this Section 4.
(vi) In addition to all other amounts payable to
you under this Section 4, you shall be entitled to receive all
Mr. Joseph Galli
October 25, 1995
Page 11
benefits payable to you under The Black & Decker Executive Salary Continuance
Plan, the SERP, or any plan or agreement sponsored by the Corporation or any of
its subsidiaries relating to retirement benefits.
5. Successors; Binding Agreement.
(i) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, share exchange, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Corporation to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason following
a change in control of the Corporation, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your legatee or other designee or, if there is no
such designee, to your estate.
(iii) In the event that you are employed by a
subsidiary of the Corporation, wherever in this Agreement reference is made to
the "Corporation," unless the context otherwise requires, such reference shall
also include such subsidiary. The Corporation shall cause such subsidiary to
carry out the terms of this Agreement insofar as they relate to the employment
relationship between you and such subsidiary, and the Corporation shall
indemnify you and save you harmless from and against all liability and damage
you may suffer as a consequence of such subsidiary's failure to perform and
carry out such terms. Wherever reference is made to any benefit program of the
Corporation, such reference shall include, where appropriate, the corresponding
benefit program of such subsidiary if you were a participant in such benefit
program on the date a change in control of the Corporation has occurred.
Mr. Joseph Galli
October 25, 1995
Page 12
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
7. Miscellaneous. This Agreement amends and restates the agreement
between the parties dated June 1, 1993. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Maryland. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Corporation under Section 4 hereof shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the State of Maryland, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid
Mr. Joseph Galli
October 25, 1995
Page 13
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE BLACK & DECKER CORPORATION
By /s/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to this 5th day of
December 1995
/S/ JOSEPH GALLI
Joseph Galli
Exhibit 10(aa)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
BLACK & DECKER LOGO
October 25, 1995
Mr. Don R. Graber
14 Soundview Farm Road
Weston, Connecticut 06883
Dear Don:
The Black & Decker Corporation (the "Corporation") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control of the
Corporation may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation, although no such change
is now contemplated.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated subsequent to a "change in control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 2000; provided,
however, that if a change in control of the Corporation shall have occurred
prior to December 31, 2000, this Agreement shall continue in effect for a period
of 36 months beyond the month in which such change in control occurred, at
which time this Agreement shall terminate. Notwithstanding the foregoing, and
provided no change in control of the Corporation
Mr. Don R. Graber
October 25, 1995
Page 2
shall have occurred, this Agreement shall automatically terminate upon the
earlier to occur of (i) your termination of employment with the Corporation, or
(ii) the Corporation's furnishing you with notice of termination, irrespective
of the effective date of such termination.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply therewith, provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its subsidiaries or a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; (C) the Corporation enters into an agreement, the consummation
of which would result in the occurrence of a change in control of the
Corporation; or (D) the stockholders of the Corporation approve a merger, share
exchange or consolidation of the Corporation with any other corporation, other
than a merger, share exchange or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger, share exchange or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Mr. Don R. Graber
October 25, 1995
Page 3
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
3. Termination Following Change in Control of the Corporation. If any
of the events described in Section 2 hereof constituting a change in control of
the Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (A)
because of your death, Disability or Retirement, (B) by the Corporation for
Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for six
consecutive months, and within 30 days after written notice of termination is
given you shall not have returned to the full-time performance of your duties,
your employment may be terminated for "Disability." Termination by the
Corporation or you of your employment based on "Retirement" shall mean
retirement from active employment with the right to receive an immediate pension
benefit under the applicable pension plan of the Corporation in accordance with
the Corporation's retirement policy in effect at the time of the change in
control of the Corporation.
(ii) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties with the
Corporation, other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance by you of a Notice of Termination (as defined in Subsection 3(iv)
hereof) for Good Reason (as defined in Subsection 3(iii) hereof), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise. For purposes of this Subsection, no act or
failure to act on your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that your action
or omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held
Mr. Don R. Graber
October 25, 1995
Page 4
for such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as such terms are defined in Subsections 3(v) and 3(iv) hereof,
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your current status as an executive of the Corporation or a
substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change
in control of the Corporation;
(B) a reduction by the Corporation in your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time, except for across-the-board salary
reductions similarly affecting all senior executives of the Corporation
and all senior executives of any person in control of the Corporation;
(C) your relocation to a location not within 25 miles
of your present office or job location, except for required travel on
the Corporation's business to an extent substantially consistent with
your present business travel obligations;
(D) the failure by the Corporation, without your
consent, to pay to you any portion of your current compensation, or to
pay to you any portion of an installment of deferred compensation under
any deferred compensation program of the Corporation, within seven days
of the date such compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which you were entitled, or any compensation plan
in which you participated immediately prior to the change in control of
the Corporation which is material to your total compensation, including
but not limited to the
Mr. Don R. Graber
October 25, 1995
Page 5
Corporation's (i) Annual Incentive Plan ("AIP") or other annual
incentive compensation plan; (ii) Performance Equity Plan ("PEP") or
other long-term incentive compensation plan; (iii) stock option plans;
(iv) retirement plans; (v) Supplemental Executive Retirement Plan
("SERP"); and (vi) Executive Deferred Compensation Plan; or any
substitute plan or plans adopted prior to the change in control of the
Corporation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan
and such equitable arrangement provides substantially equivalent
benefits not materially less favorable to you (both in terms of the
amount of benefits provided and the level of your participation
relative to other participants), or the failure by the Corporation to
continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable (both in
terms of the amount of benefits provided and the level of your
participation relative to other participants) as existed at the time of
the change in control of the Corporation;
(F) the failure by the Corporation to continue to
provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, dental, health
and accident, or disability plans in which you were participating at
the time of the change in control of the Corporation, the failure to
continue to provide you with a Corporation automobile or allowance in
lieu thereof, if you were provided with such an automobile or allowance
in lieu thereof at the time of the change in control of the
Corporation, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time
of the change in control of the Corporation, or the failure by the
Corporation to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service with the
Corporation in accordance with the Corporation's normal vacation policy
in effect at the time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection 3(iv) hereof (and, if applicable, the
requirements of Subsection 3(ii) hereof);
Mr. Don R. Graber
October 25, 1995
Page 6
for purposes of this Agreement, no such purported termination shall be
effective.
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported
termination of your employment by the Corporation or by you shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of
Termination" shall mean (A) if your employment is terminated for Disability, 30
days after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such 30-day period),
and (B) if your employment is terminated pursuant to Subsections 3(ii) or 3(iii)
hereof or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection 3(ii) hereof shall not be less than 30 days, and in the case of a
termination pursuant to Subsection 3(iii) hereof shall not be less than l5 nor
more than 60 days, respectively, from the date such Notice of Termination is
given); provided that if within l5 days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this proviso), the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit and
Mr. Don R. Graber
October 25, 1995
Page 7
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following
a change in control of the Corporation, as defined by Section 2 hereof, upon
termination of your employment or during a period of Disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform
your full-time duties with the Corporation as a result of incapacity due to
physical or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together with all
amounts payable to you under any compensation plan of the Corporation during
such period, until this Agreement is terminated pursuant to Subsection 3(i)
hereof. Thereafter, or in the event your employment shall be terminated by the
Corporation or by you for Retirement, or by reason of your death, your benefits
shall be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the
Corporation for Cause, Disability, death or Retirement, or by you other than for
Good Reason, the Corporation shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan of the Corporation at the time such payments are due, and the Corporation
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall
be terminated (a) by the Corporation other than for Cause, Disability, death or
Retirement or (b) by you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Corporation shall pay you your full base
salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Corporation, at the
time such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you
Mr. Don R. Graber
October 25, 1995
Page 8
for periods subsequent to the Date of Termination, the Corporation
shall pay as severance pay to you a lump sum severance payment
(together with the payments provided in paragraph (C) of this
Subsection 4(iii), the "Severance Payments") equal to three times the
sum of your (a) annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of Termination
given in respect thereof, and (b) AIP Maximum Payment for the year in
which the Date of Termination occurs. AIP Maximum Payment shall mean
the higher of (1) the award you would be entitled to receive for 1995
based on the maximum payout factor for the AIP or (2) any greater award
you would be entitled to receive for any subsequent year (including the
year in which your employment is terminated) based on the maximum
payout factor for the AIP for such subsequent year. The provisions of
this Section 4(iii)(B) shall not in any way affect your rights under
the Corporation's stock option plans or the PEP.
(C) The Corporation shall pay to you any deferred
compensation, including but not limited to deferred bonuses and amounts
deferred under the Executive Deferred Compensation Plan, allocated or
credited to you or your account as of the Date of Termination.
(D) The Corporation shall also pay to you all legal
fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder).
(E) If the payments provided under paragraphs (B) and
(C) above (the "Contract Payments") or any other portion of the Total
Payments (as defined below) will be subject to the tax imposed by
Section 4999 of the Code (the "Excise Tax"), the Corporation shall pay
to you at the time specified in paragraph (F) below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by
you, after deduction of any Excise Tax on the Contract Payment and such
other Total Payments and any federal and state and local income tax and
Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Contract Payments and such other Total Payments. For
purposes of determining whether any of the payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection
with a change in control of the Corporation or your termination of
employment (whether payable pursuant to the terms of this Agreement or
any other
Mr. Don R. Graber
October 25, 1995
Page 9
plan, arrangement or agreement with the Corporation, its successors,
any person whose actions result in a change in control of the
Corporation or any corporation affiliated (or which, as a result of the
completion of a transaction causing a change in control of the
Corporation, will become affiliated) with the Corporation within the
meaning of Section 1504 of the Code) (together with the Contract
Payments, the "Total Payments") shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Corporation's independent auditors and
acceptable to you the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code either to the extent such reasonable compensation is in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code,
or are otherwise not subject to the Excise Tax, (ii) the amount of the
Total Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Total Payments or
(B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) (after applying clause (i), above), and (iii) the
value of any non-cash benefits or any deferred payment or benefit as
determined by the Corporation's independent auditors in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, you shall be deemed
to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Corporation at
the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal and state and local income tax imposed on the
Gross-Up Payment being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(d) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of your
Mr. Don R. Graber
October 25, 1995
Page 10
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Corporation shall make an additional Gross-Up Payment in respect of
such excess (plus any interest payable with respect to such excess) at
the time that the amount of such excess is finally determined.
(F) The payments provided for in paragraphs (B), (C)
and (E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Corporation shall pay to you on such day an estimate, as determined in
good faith by the Corporation, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest at
a rate equal to 120% of the rate provided in Section 1274(d) of the
Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Corporation to you payable on the fifth day after demand
by the Corporation (together with interest at a rate equal to 120% of
the rate provided in Section 1274(d) of the Code). The payments
provided for in paragraph (D) above shall be made from time to time, in
each instance not later than the fifth day following a written request
for payment by you.
(iv) If your employment shall be terminated (A) by
the Corporation other than for Cause, Disability, death or Retirement or (B) by
you for Good Reason, then for a 36-month period after such termination, the
Corporation shall arrange to provide you with life, disability, accident,
medical, dental and health insurance benefits substantially similar to those
that you are receiving immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced
to the extent comparable benefits are actually received by you from another
employer during the 36- month period following your termination, and any such
benefits actually received by you shall be reported to the Corporation.
(v) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise except as
specifically provided in this Section 4.
(vi) In addition to all other amounts payable to
you under this Section 4, you shall be entitled to receive all
Mr. Don R. Graber
October 25, 1995
Page 11
benefits payable to you under The Black & Decker Executive Salary Continuance
Plan, the SERP, or any plan or agreement sponsored by the Corporation or any of
its subsidiaries relating to retirement benefits.
5. Successors; Binding Agreement.
(i) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, share exchange, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Corporation to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason following
a change in control of the Corporation, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your legatee or other designee or, if there is no
such designee, to your estate.
(iii) In the event that you are employed by a
subsidiary of the Corporation, wherever in this Agreement reference is made to
the "Corporation," unless the context otherwise requires, such reference shall
also include such subsidiary. The Corporation shall cause such subsidiary to
carry out the terms of this Agreement insofar as they relate to the employment
relationship between you and such subsidiary, and the Corporation shall
indemnify you and save you harmless from and against all liability and damage
you may suffer as a consequence of such subsidiary's failure to perform and
carry out such terms. Wherever reference is made to any benefit program of the
Corporation, such reference shall include, where appropriate, the corresponding
benefit program of such subsidiary if you were a participant in such benefit
program on the date a change in control of the Corporation has occurred.
Mr. Don R. Graber
October 25, 1995
Page 12
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
7. Miscellaneous. This Agreement amends and restates the agreement
between the parties dated October 18, 1990. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Maryland. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. The obligations of the Corporation under Section 4 hereof shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the State of Maryland, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid
Mr. Don R. Graber
October 25, 1995
Page 13
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
THE BLACK & DECKER CORPORATION
By /s/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to this 18th day of
November 1995
/S/ DON R. GRABER
Don R. Graber
Exhibit 10(ff)
STOCK PURCHASE AGREEMENT
Dated as of December 13, 1995
By and Among
THE BLACK & DECKER CORPORATION
("Seller's Parent")
PRC INVESTMENTS INC.
("Seller")
PRC INC.
("PRC")
and
LITTON INDUSTRIES, INC.
("Buyer")
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (together with the Schedules and Exhibits
hereto, this "Agreement") is made as of this 13th day of December, 1995, by and
among PRC Investments Inc., a Delaware corporation with its principal office at
Drummond Plaza Office Park, 1423 Kirkwood Highway, Newark, Delaware 19711
("Seller"), The Black & Decker Corporation, a Maryland corporation with its
principal office at 701 East Joppa Road, Towson, Maryland 21286 ("Seller's
Parent"), PRC Inc., a Delaware corporation with its principal office at 1500 PRC
Drive, McLean, Virginia 22102 ("PRC"), and Litton Industries, Inc., a Delaware
corporation with its principal office at 21240 Burbank Boulevard, Woodland
Hills, California 91367 ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding shares
of capital stock of PRC;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, in accordance with the terms and conditions of this Agreement, all
of the issued and outstanding shares of capital stock of PRC; and
WHEREAS, Seller's Parent and PRC desire to join in this Agreement for
the purpose of making certain representations, warranties, covenants and
agreements;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Section 1.1. Action. "Action" means any action, complaint, petition,
investigation, suit or other proceeding, whether civil or criminal, in law or in
equity, or before any arbitrator or Governmental Entity.
Section 1.2. Affiliate. "Affiliate" shall mean any Person that directly
or indirectly controls, is controlled by, or is under common control with the
Person in question. For purposes of determining whether a Person is an
Affiliate, the term "control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of securities, contract or otherwise.
Section 1.3. Affiliated Groups. "Affiliated Groups" shall have the
meaning set forth in Section 3.16.
Section 1.4. Allocation. "Allocation" shall have the meaning set forth
in Section 11.2.
Section 1.5. Benefit Arrangements. "Benefit Arrangements" shall mean
all life and health insurance, hospitalization, savings, bonus, deferred
compensation, incentive compensation, severance pay, disability, and fringe
benefit plans, individual employment and severance contracts and other policies
and practices providing employee or executive compensation or benefits to
Employees or their dependents, maintained or contributed to by any of the PRC
Companies, other than Employee Benefit Plans.
Section 1.6. Bid. "Bid" shall mean any quotation, bid or proposal
made by Seller, Seller's Parent or any PRC Company that, if accepted or awarded,
would lead to a contract with the U.S. Government for the design, manufacture
and sale of products or the provision of services by any PRC Company.
Section 1.7. Bridge Period. "Bridge Period" shall have the meaning set
forth in Section 11.1.
Section 1.8. Buyer. "Buyer" shall have the meaning set forth above.
Section 1.9. Buyer Group. "Buyer Group" shall have the meaning set
forth in Section 11.1.
Section 1.10. Buyer Period. "Buyer Period" shall have the
meaning set forth in Section 11.1.
Section 1.11. Carpal Tunnel Litigation. "Carpal Tunnel Litigation"
means any pending or threatened action against any of the PRC Companies arising
out of or relating to (i) carpal tunnel syndrome, or (ii) cumulative trauma
disorder, tendinitis, nerve entrapment, repetitive motion or stress injury or
any similar illness or ailment causing injury or damage to an individual's hand,
wrist or arm.
Section 1.12. Closing. "Closing" shall mean the consummation
of the events described in ARTICLE IX.
Section 1.13. Closing Date. "Closing Date" shall mean the
date on which the Closing shall occur.
<PAGE>
Section 1.14. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.15 Competing Business. "Competing Business" shall have the
meaning set forth in Section 5.10.
Section 1.16. Confidentiality Agreement. "Confidentiality Agreement" shall
mean the agreement dated October 24, 1995, between PRC and Buyer relating to,
among other things, the confidential nature of certain information in respect of
PRC shared by PRC with Buyer.
Section 1.17. Consolidated Returns. "Consolidated Returns" shall have the
meaning set forth in Section 3.16.
Section 1.18. Consolidated Taxes. "Consolidated Taxes" shall have the
meaning set forth in Section 3.16.
Section 1.19. Contest. "Contest" shall mean any administrative or judicial
Tax or foreign Tax audit, examination, proceeding or litigation involving any
Tax Authority.
Section 1.20. Contract Loss. "Contract Loss" shall exist with respect to a
contract or Bid (i) if in the case of a Government Contract, after consideration
of existing reserves, the sales price therefor is more than $100,000 less than
the sum of the cost incurred to date and the estimated cost to complete, with
all costs determined in accordance with GAAP on a basis consistent with prior
periods, or (ii) if in the case of a contract involving the business of PRC
Public Sector, Inc., the expected gross margin for the contract for the year
ending December 31, 1995 is less than 20%.
Section 1.21. DOL. "DOL" shall mean the United States Department of Labor.
<PAGE>
Section 1.22. ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.23. ERISA Affiliate."ERISA Affiliate," as applied to any Person,
shall mean (i) any corporation which is a member of a controlled group of
corporations within the meaning of Section 414(b) of the Code of which that
Person is a member; (ii) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Code of which that Person is a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Code of which that Person, any corporation described in
clause (i) above or any trade or business described in clause (ii) above is a
member. Any former ERISA Affiliate of a Person shall continue to be considered
an ERISA Affiliate within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of such Person and with respect to
liabilities arising after such period for which such Person could be liable
under the Code or ERISA.
Section 1.24. Emhart. "Emhart" shall mean Emhart Corporation, a Virginia
corporation with its principal office at 701 East Joppa Road, Towson, Maryland
21286.
Section 1.25. Employee Benefit Plan. "Employee Benefit Plan" shall mean
each "employee benefit plan," as defined in Section 3(3) of ERISA, maintained or
contributed to by any of the PRC Companies, which provides or may provide
benefits to Employees or their dependents but excluding Multiemployer Plans.
<PAGE>
Section 1.26. Employees. "Employees" shall mean all current employees,
former employees and retired employees of the PRC Companies.
Section 1.27. Environmental Laws. "Environmental Laws" shall mean all Laws
relating to the protection of human health, safety or the environment including:
(i) all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature; and (ii) all requirements pertaining to the protection of the
health and safety of employees or the public.
Section 1.28. Final Net Asset Amount. "Final Net Asset Amount" shall have
the meaning set forth in Section 2.3.
Section 1.29. Financial Statements. "Financial Statements" shall mean
the unaudited Special Purpose Statements of Net Assets of PRC, exclusive of PRC
Environmental Management, Inc. and PRC Realty Systems, Inc., formerly wholly
owned subsidiaries of PRC, as of September 30, 1995 and December 31, 1994, and
the Special Purpose Statements of Operating Income for the years ended December
31, 1994, 1993 and 1992, and for the nine months ended
<PAGE>
September 30, 1995 and 1994, together with all notes thereto, copies of which is
attached hereto as Exhibit A.
Section 1.30. GAAP. "GAAP" shall mean generally accepted accounting
principles.
Section 1.31. Government Contract. "Government Contract" means any
prime contract, subcontract, teaming agreement or arrangement, joint venture,
basic ordering agreement, letter contract, purchase order, delivery order, Bid,
change order or other legally binding commitment of any kind relating to any
business between any PRC Company and (i) the U.S. Government, (ii) any prime
contractor of the U.S. Government to the extent it relates to such prime
contract, or (iii) any subcontractor with respect to any contract described in
clauses (i) or (ii).
Section 1.32. Government Contract Novation. "Government Contract
Novation" shall mean, with respect to a Prime Government Contract, an instrument
reasonably satisfactory in form and substance to Buyer and Seller pursuant to
which all of PRC's rights, claims, benefits and liabilities thereunder shall
have been validly conveyed, transferred, assigned, assumed and novated to Buyer
by all parties thereto.
Section 1.33. Governmental Entity. "Governmental Entity" means any
government or any agency, bureau, board, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
Section 1.34. Guarantees. "Guarantees" shall mean any obligations,
contingent or otherwise, of a Person in respect of any indebtedness, obligation
or liability (including assumed
<PAGE>
indebtedness, obligations or liabilities) of another Person, including but not
limited to direct or indirect guarantees, endorsements (except for collection or
deposit in the ordinary course of business), notes co-made or discounted,
recourse agreements, take-or-pay agreements, keep-well agreements, agreements to
purchase or repurchase such indebtedness, obligation or liability or any
security therefor or to provide funds for the payment or discharge thereof,
agreements to maintain solvency, assets, level of income, or other financial
condition, agreements to make payment other than for value received and any
other financial accommodations.
Section 1.35. Hazardous Substances. "Hazardous Substances" shall mean
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
Section 1.36. H-S-R Act. "H-S-R Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
Section 1.37. IRS. "IRS" shall mean the Internal Revenue Service.
Section 1.38. Incentive Compensation Plans. "Incentive Compensation Plans"
shall mean any cash bonus or other incentive
<PAGE>
compensation plan or arrangement maintained or contributed to by any of the PRC
Companies or Seller's Parent, and any successor plan or arrangement covering
Employees for 1995 or thereafter.
Section 1.39. Income Taxes. "Income Taxes" shall mean any income, gross
receipts, gains, net worth, surplus, franchise or with respect to any interest,
dividends or royalties, withholding taxes (including interest, penalties or
other additions to Tax) imposed by a Tax Authority, payable by any PRC Company
for federal, state, local or foreign income Tax purposes (as the context
requires) with respect to any Pre-Closing Period or any Post-Closing Period.
Section 1.40. Indemnified Party. "Indemnified Party" shall have the meaning
set forth in Section 11.5.
Section 1.41. Indemnifying Party. "Indemnifying Party" shall have the
meaning set forth in Section 11.5
Section 1.42. Individual Returns. "Individual Returns" shall have the
meaning set forth in Section 3.16.
Section 1.43. Individual Taxes. "Individual Taxes" shall have the meaning
set forth in Section 3.16.
Section 1.44. Intellectual Property. "Intellectual Property" shall mean
all brand names, corporate names, copyrights, patents, service marks,
trademarks, trade names, know-how, trade secrets, and all registrations or
applications for registration of any of the foregoing, that are (a) owned by or
licensed to a PRC Company (other than generally available software licensed from
third parties) and (b) used in the operation of the business of a PRC Company.
<PAGE>
Section 1.45. Law. "Law" or "Laws" means any valid constitutional
provision, statute, ordinance or other law (including common law), rule,
regulation or interpretation of any Governmental Entity and any Order, as any of
these may be in effect from time to time.
Section 1.46. Loss. "Loss" means any action, claim, cost, damage,
disbursement, expense, liability, loss, deficiency, obligation, sanction or
penalty of any kind or nature, whether foreseeable or unforeseeable, including
but not limited to interest, judgments, reasonable legal, accounting and other
professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified Person.
Section 1.47. Material Adverse Effect. "Material Adverse Effect" when used
with reference to a Person or Persons shall mean a material adverse effect on
the business, operations or financial condition of the Person or Persons.
Section 1.48. Material Contract. "Material Contract" shall mean (i) any
contract, agreement, commitment or other arrangement (oral or written) to which
a PRC Company is party and which reasonably could be expected to result in
revenues to the PRC Companies over the expected term of such contract,
agreement, commitment or arrangement in excess of $2,000,000 and (ii) those
contracts defined to be material in Section 3.13.
Section 1.49. Multiemployer Plan. "Multiemployer Plan" shall mean a plan
described in Sections 3(37) and 4001(a)(3) of ERISA to
<PAGE>
which any of the PRC Companies has an obligation to contribute or had an
obligation to contribute within the past five years.
Section 1.50. Net Assets. "Net Assets" shall mean total assets minus total
liabilities, calculated in accordance with Section 2.3.
Section 1.51. OCI Clause. "OCI Clause" means any clause or provision of
any agreement providing for compliance with the Organizational Conflict of
Interest ("OCI") rules of Subpart 9.5 of the Federal Acquisition Regulations, as
they may be amended or modified from time to time, whether or not the agreement
makes explicit reference to Subpart 9.5 of the Federal Acquisition Regulations.
Section 1.52. Order. "Order" means any decree, injunction, judgment, order,
ruling, assessment or writ.
Section 1.53. PBGC. "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
Section 1.54. PRC. "PRC" shall have the meaning set forth above.
Section 1.55. PRC Companies. "PRC Companies" shall mean PRC and the PRC
Subsidiaries.
Section 1.56. PRC Shares. "PRC Shares" shall mean all of the issued and
outstanding shares of common stock, par value $.01 per share, of PRC.
Section 1.57. PRC Subsidiaries. "PRC Subsidiaries" shall mean the
Subsidiaries of PRC listed in Schedule 3.4 and PRC Aviation LLC, a Virginia
limited liability company.
<PAGE>
Section 1.58. Pension Plan. "Pension Plan shall mean any Employee Benefit
Plan that is an "employee pension benefit plan" as defined in Section 3(2) of
ERISA.
Section 1.59. Person. "Person" shall mean any individual, corporation,
unincorporated association, business trust, estate, partnership, limited
liability company, limited liability partnership, trust, state, the United
States or any other entity.
Section 1.60. Post-Closing Claims. "Post-Closing Claims" means any
Action or Order, or any third party claim which would reasonably be expected to
lead to an Action by such third party if not otherwise resolved or settled with
such party, relating to the PRC Companies to the extent arising from facts or
circumstances that occurred after the Closing.
Section 1.61. Pre-Closing Claims. "Pre-Closing Claims" means any
pending or threatened Action or Order, or any third party claim which would
reasonably be expected to lead to an Action by such third party if not otherwise
resolved or settled with such party, relating to the PRC Companies to the extent
arising from facts or circumstances that occurred on or prior to the Closing,
whether pending or threatened at the Closing or thereafter.
Section 1.62. Post-Closing Period. "Post-Closing Period" shall have the
meaning set forth in Section 11.1.
Section 1.63. Pre-Closing Period. "Pre-Closing Period" shall have the
meaning set forth in Section 11.1.
Section 1.64. Prime Government Contract. "Prime Government Contract" shall
mean any Government Contract the parties to which include (i) any PRC Company
and (ii) the U.S. Government.
<PAGE>
Section 1.65. Proposed Final Net Asset Amount. "Proposed Final Net Asset
Amount" shall have the meaning set forth in Section 2.3.
Section 1.66. Purchase Price. "Purchase Price" shall have the meaning set
forth in Section 2.2.
Section 1.67. Section 338(h)(10) Election. "Section 338(h)(10) Election"
shall have the meaning set forth in Section 11.2.
Section 1.68. Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended.
Section 1.69. Seller. "Seller" shall have the meaning set forth above.
Section 1.70. Seller Group. "Seller Group" shall have the meaning set forth
in Section 11.3.
Section 1.71. Seller Period. "Seller Period" shall have the meaning set
forth in Section 11.1.
Section 1.72. Seller's Parent. "Seller's Parent" shall have the meaning set
forth above.
Section 1.73. Special Severance Plans. "Special Severance Plans" shall mean
the PRC Inc. Special Severance Plan and the PRC Inc. Senior Management Severance
Plan, copies of which are attached hereto as Exhibit B.
Section 1.74. Subsidiary. "Subsidiary," as it relates to any Person,
shall mean any other corporation, unincorporated association, business trust,
partnership, limited liability company or limited liability partnership (other
than any such entity formed as part of a teaming arrangement or other venture
for the purpose of pursuing or performing a contract in the ordinary course of
<PAGE>
business) more than 50% of whose outstanding securities such Person has the
right, other than as affected by events of default, directly or indirectly, to
vote generally.
Section 1.75. Tax Authority. "Tax Authority" shall mean a foreign or United
States federal, state, or local Governmental Entity having jurisdiction over the
assessment, determination, collection or imposition of any Tax, as the context
requires.
Section 1.76. Tax Returns. "Tax Returns" shall mean all returns (including
information returns), declarations, reports, estimates and statements regarding
Taxes, required to be filed with any Tax Authority.
Section 1.77. Taxes. "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Tax Authority.
Section 1.78. U.S. Government. "U.S. Government" shall mean the United
States Government, including any agencies, commissions, branches,
instrumentalities and departments thereof.
ARTICLE II
PURCHASE AND SALE OF PRC SHARES
Section 2.1. Sale of PRC Shares. On the terms and subject to the conditions
set forth in this Agreement, Seller hereby agrees
<PAGE>
to sell, transfer, assign and deliver to Buyer, and Buyer hereby agrees to
purchase from Seller, the PRC Shares on the Closing Date.
Section 2.2. Purchase Price and Payment for PRC Shares. The consideration
to be paid by Buyer to Seller in exchange for the sale, transfer, assignment and
delivery to Buyer of the PRC Shares shall be $425,000,000 (the "Purchase
Price"), which shall be paid by Buyer to Seller at the time of Closing by wire
transfer of immediately available funds into an account designated in writing by
Seller to Buyer at least two days prior to the Closing Date. The Purchase Price
shall be subject to adjustment as provided in Section 2.3.
Section 2.3. Adjustment of Purchase Price.
(a) As promptly as practicable following the Closing
Date, but in no event later than 90 days after the Closing Date, Seller shall
prepare and submit to Buyer an audited schedule setting forth, in reasonable
detail, Seller's calculation of the Net Assets of PRC immediately prior to the
Closing (the "Proposed Final Net Asset Amount") certified by Ernst & Young LLP.
Buyer shall cause personnel of the PRC Companies to be reasonably available to
assist Ernst & Young LLP in its preparation of the Proposed Final Net Asset
Amount. In the event Buyer disputes the correctness of the Proposed Final Net
Asset Amount, Buyer shall notify Seller of its objections within six months of
the Closing Date and shall set forth, in reasonable detail, the reasons for
Buyer's objections. If Buyer fails to deliver such notice within such time,
Buyer shall be deemed to have accepted Seller's calculation. Buyer and Seller
shall endeavor in good faith to resolve any disputed items within 20 days after
Seller's receipt of
<PAGE>
Buyer's notice of objections. If they are unable to do so, Seller's Parent and
Buyer shall select a nationally known independent accounting firm to resolve the
dispute, and the determination of such firm in respect of the correctness of
each item remaining in dispute shall be conclusive and binding on Buyer and
Seller. The amount of Net Assets immediately prior to the Closing, as finally
determined pursuant to this Section 2.3(a) (whether by failure of Buyer to
deliver notice of objection, by agreement of the parties or by determination of
the accountants selected as set forth above), is referred to herein as the
"Final Net Asset Amount."
(b) The Proposed Final Net Asset Amount and the Final Net
Asset Amount shall be determined in accordance with GAAP (except as otherwise
set forth in the Financial Statements), in a manner consistent with the Special
Purpose Statement of Net Assets as of September 30, 1995, and as provided in the
Financial Statements. The accounting firm selected to resolve any disputes will
be instructed to determine the Final Net Asset Amount in the same manner.
(c) If the Final Net Asset Amount is greater than
$205,333,000, the difference shall be paid to Seller by Buyer with interest
thereon from the Closing Date to the date of payment at a rate per annum equal
to the per annum interest rate announced from time to time by Citibank, N.A. as
its prime rate in effect. If the Final Net Asset Amount is less than
$205,333,000, the difference shall be paid to Buyer by Seller with interest
thereon from the Closing Date to the date of payment at a rate per annum equal
to the per annum interest rate announced from time to time by
<PAGE>
Citibank, N.A. as its prime rate in effect. Such payment shall be made in
immediately available funds not later than two business days after the
determination of the Final Net Asset Amount by wire transfer to a bank account
designated by the party entitled to receive the payment.
(d) The fees and expenses, if any, of the accounting firm
selected to resolve any disputes between Buyer and Seller in accordance with
Section 2.3(a) shall be paid one-half by Seller and one-half by Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PARENT
Seller and Seller's Parent jointly and severally represent and warrant to
and for the benefit of Buyer as follows:
Section 3.1.Organization and Good Standing. Each of Seller and Seller's
Parent, and each of the PRC Companies, is a corporation or other entity duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and has full corporate power and authority to
carry on its business as it is now being conducted. Schedule 3.1 sets forth the
jurisdiction in which each PRC Company was organized and each jurisdiction in
which each PRC Company is qualified or licensed to do business as a foreign
Person. Each of the PRC Companies is qualified as a foreign corporation or other
entity and is in good standing under the laws of each jurisdiction in which the
conduct of its business or the ownership of its properties requires such
qualification, except as set forth in Schedule 3.1 and except where the failure
to be so qualified would not have a Material Adverse Effect on the PRC Companies
taken as a whole. Schedule 3.1
<PAGE>
correctly lists the current directors and executive officers of each PRC Company
as of the date hereof. True, correct and complete copies of the respective
charter documents of each of the PRC Companies as in effect on the date hereof
have been delivered or otherwise made available to Buyer.
Section 3.2. Capitalization. The authorized capital stock of PRC
consists of 1,000 shares of common stock, par value $.01 per share, all of which
are outstanding. Each of the PRC Shares has been validly issued, is fully paid
and nonassessable and was issued in conformity with applicable Laws. No shares
of capital stock of PRC are held in treasury, and there are no other issued or
outstanding equity securities of PRC and no other issued or outstanding
securities of PRC convertible or exercisable at any time into equity securities
of PRC. PRC is subject to no commitment or obligation that would require the
issuance or sale of additional shares of capital stock of PRC at any time under
options, subscriptions, warrants, rights or any other obligations.
Section 3.3. Ownership of PRC Shares. Seller is the record and
beneficial owner of the PRC Shares, which are free of any lien, security
interest, charge, encumbrance or claim whatsoever. At the Closing, Buyer will
acquire good and marketable title to and complete ownership of the PRC Shares,
free of any lien, security interest, charge, encumbrance or claim whatsoever.
Section 3.4. PRC Subsidiaries. Schedule 3.4 sets forth the authorized
capital stock and the record ownership of the outstanding shares of capital
stock of each of the PRC Subsidiaries, and a brief summary of each PRC
Subsidiary's business. PRC's ownership of shares of the capital stock of the
<PAGE>
PRC Subsidiaries as shown on Schedule 3.4 is free of any lien, security
interest, charge, encumbrance or claim whatsoever. PRC does not have any
Subsidiaries other than the PRC Subsidiaries. All of the outstanding shares of
capital stock of each of the PRC Subsidiaries have been validly issued and are
fully paid and nonassessable and were issued in conformity with applicable Laws.
Other than as set forth in Schedule 3.4, there are no other issued or
outstanding equity securities of any of the PRC Subsidiaries and there are no
other issued or outstanding securities of any of the PRC Subsidiaries
convertible or exercisable at any time into equity securities of any of the PRC
Subsidiaries. None of the PRC Subsidiaries is subject to any commitment or
obligation that would require the issuance or sale of additional shares of its
capital stock at any time under options, subscriptions, warrants, rights or any
other obligations. Except as described in Schedule 3.4, PRC does not own any
equity securities of any Person that is not a Subsidiary.
Section 3.5.Execution and Effect of Agreement. Each of Seller and Seller's
Parent has all necessary corporate power and authority to execute, deliver and
perform this Agreement and any related agreements to which it is a party. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Boards of
Directors of Seller and Seller's Parent and by all other necessary corporate
action of Seller and Seller's Parent. This Agreement has been duly executed and
delivered by Seller and Seller's Parent and constitutes a legal, valid and
binding obligation of Seller and Seller's Parent, enforceable against Seller and
Seller's Parent in
<PAGE>
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other Laws affecting the
rights of creditors generally.
Section 3.6. Restrictions. Except as set forth in Schedule 3.6, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any of the provisions of the
charter or by-laws of Seller, Seller's Parent or any PRC Company, (b) violate
any Law, (c) result in the imposition of any lien, security interest, charge,
encumbrance or claim whatsoever against any asset or property of any PRC
Company, or (d) conflict with or result in a breach of, or give rise to a right
of termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Seller, Seller's Parent or any PRC Company is a party or
to which it or its property is subject, or constitute a default thereunder
(whether or not any such conflict, breach, right of termination, acceleration or
default will occur only upon lapse of time and/or the occurrence of any act or
event or otherwise), except where such conflict, breach, right of termination,
acceleration or default (i) arises out of any OCI Clauses as a result of the
consummation of the transactions contemplated by this Agreement and the business
of the Buyer and its Affiliates on the one hand and the PRC Companies on the
other hand or (ii) except with respect to clause (a) above, would not have a
Material Adverse Effect on Seller's Parent and its Subsidiaries taken as a whole
or the PRC Companies taken as a whole, as the case may be.
<PAGE>
Section 3.7. Consents. Except (a) for filings, consents, approvals and
authorizations that the failure to obtain or make would not have a Material
Adverse Effect on the PRC Companies taken as a whole, (b) as set forth in
Schedule 3.6 or Schedule 3.7 or referred to in Section 3.6, or (c) for filings,
consents, waivers, approvals or authorizations pursuant to the H-S-R Act, no
filing, consent, waiver, approval or authorization of any Governmental Entity or
of any third party on the part of Seller, Seller's Parent or any of the PRC
Companies is required in connection with the execution and delivery by Seller,
Seller's Parent and PRC of this Agreement or any instrument contemplated hereby
or the consummation of any of the transactions contemplated hereby.
Section 3.8. Financial Statements. Except as set forth in the Notes to
the Financial Statements, the Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis and present fairly the
financial position of the PRC Companies at the dates and for the periods set
forth therein. The Financial Statements have been certified by the chief
financial officer of PRC. Seller has made available to Buyer copies of each
management letter or other letter delivered to Seller, Seller's Parent or any
PRC Company by such accountants in connection with the Financial Statements or
relating to any review by such accountants of the internal controls of any PRC
Company for the periods covered by the Financial Statements, and has made
available for inspection, or will make available for inspection upon request,
all reports and working papers produced or developed by Ernst & Young LLP or
management in connection with their review of such Financial Statements, as well
as all such reports and working
<PAGE>
papers for prior periods for which any tax liability of any PRC Company has not
been finally determined or barred by applicable statutes of limitation. Since
January 1, 1992, there has been no change in any of the significant accounting
policies, practices or procedures of any PRC Company that would be required by
GAAP to be disclosed in the Financial Statements.
Section 3.9. No Undisclosed Liabilities. Except as (a) set forth or
reserved against in the Financial Statements, (b) set forth in Schedule 3.9, (c)
incurred since September 30, 1995 in compliance with Section 5.2 hereof (as if
such Section was in effect since September 30, 1995), or (d) arising under this
Agreement, the PRC Companies do not have as of the date hereof, and will not
have as of the Closing Date, any liabilities whatsoever of a type required to be
accrued for in accordance with GAAP.
Section 3.10. Litigation. Except as set forth in Schedule 3.10, there
is no Order or Action pending, or to the knowledge of Seller, Seller's Parent or
any of the PRC Companies threatened, against Seller, Seller's Parent or any of
the PRC Companies in respect of this Agreement or any of the transactions
contemplated hereby that could reasonably be expected to prevent the
consummation of any of the transactions contemplated hereby. Except as set forth
in Schedule 3.10, there is no Order or Action pending, or to the knowledge of
Seller, Seller's Parent or any of the PRC Companies threatened, against or
involving any of the businesses, properties, rights or assets of any of the PRC
Companies which (i) reasonably could be expected to have a Material Adverse
Effect on the PRC Companies taken as a whole or (ii) as of the date of this
Agreement, involves a claim or potential claim
<PAGE>
that reasonably could be expected to have aggregate liability to the PRC
Companies in excess of $100,000, or that enjoins or compels or seeks to enjoin
or to compel any activity by any PRC Company. Except as set forth in Schedule
3.10, there is no matter as to which any PRC Company has received any notice,
claim or assertion, or, to the knowledge of Seller, Seller's Parent and the PRC
Companies, which otherwise has been threatened against or affecting any
director, officer, employee, agent or representative of any PRC Company or any
other Person, nor to the knowledge of Seller, Seller's Parent and the PRC
Companies is there any reasonable basis therefor, in connection with which any
such Person has or may reasonably be expected to have any right to be
indemnified by any PRC Company, except as could not reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole.
Section 3.11. Real and Personal Property.
(a) None of the PRC Companies owns any real property.
Schedule 3.11 sets forth a complete list of all real property leased by the PRC
Companies as of the date of this Agreement. All leasehold properties listed on
Schedule 3.11 are held by PRC Companies under valid, binding and enforceable
leases. None of the PRC Companies is in default, or has received written notice
of default, under any lease of real property, which default reasonably could be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole. There is no Action pending or, to the knowledge of Seller, Seller's
Parent and the PRC Companies, threatened that could reasonably be expected to
materially interfere with the quiet enjoyment of any of the leasehold properties
listed on Schedule 3.11.
<PAGE>
(b) Except as could not reasonably be expected to have a
Material Adverse Effect on the PRC Companies taken as a whole, the PRC Companies
have good and marketable title to all owned assets and properties used in their
business, including but not limited to all assets that they respectively purport
to own as of September 30, 1995, as reflected in the Financial Statements. All
owned assets and property as are material to the business of the PRC Companies,
including but not limited to all assets that they respectively purport to own as
of September 30, 1995 as reflected in the Financial Statements, are held free of
any liens, security interests, charges, encumbrances or claims, except for liens
for Taxes not yet due and except for liens, security interests, charges,
encumbrances or claims that could not reasonably be expected to have a Material
Adverse Effect on the PRC Companies taken as a whole. All material tangible
properties of the PRC Companies are in a good state of maintenance and repair
(except for ordinary wear and tear).
(c) The assets of the PRC Companies are sufficient for
the conduct of their business and operations.
Section 3.12. Intellectual Property. Schedule 3.12 sets forth, as of
the date of this Agreement, a complete list of all Intellectual Property (except
for brand names, know-how, unregistered copyrights, unregistered service marks,
unregistered trademarks, unregistered tradenames and trade secrets and except
for licensed Intellectual Property). Except as otherwise indicated in Schedule
3.12 and except as could not reasonably be expected to have a Material Adverse
Effect on the PRC Companies taken as a whole, (x) the PRC Companies own or
license the Intellectual
<PAGE>
Property free and clear of any royalty, lien, encumbrance or charge, subject in
the case of licensed Intellectual Property to the terms of the respective
license agreements, and (y) all such Intellectual Property is valid and
enforceable. Except as set forth in Schedule 3.12 and except as could not
reasonably be expected to have a Material Adverse Effect on the PRC Companies
taken as a whole, none of the PRC Companies has received any notice or claim
that any Intellectual Property is not valid or enforceable, or of any
infringement upon or conflict with any patent, trademark, service mark,
copyright, trade name, trade secret or other proprietary right of any third
party by the PRC Companies or of any claim by any third party alleging any such
infringement or conflict. Except as set forth in Schedule 3.12 and except as
could not reasonably be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole, no PRC Company has any knowledge of any infringement
by any third party upon any of the Intellectual Property listed in Schedule
3.12. Except as set forth in Schedule 3.12 and except as could not reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole, as of the Closing Date the PRC Companies will not be infringing any third
party's patent, copyright, trademark, service mark, trade name, know-how, trade
secret or other intellectual property rights.
Section 3.13. Material Contracts. Schedule 3.13 sets forth, as of the
date of this Agreement, a list of or brief description of all Material Contracts
(other than Material Contracts that the PRC Companies are limited by applicable
Laws or Orders or by contract from disclosing to Buyer and other than leases of
real property).
<PAGE>
Each contract, agreement, commitment or other arrangement (oral or written) to
which any of the PRC Companies is a party or by which any of the PRC Companies
is obligated, embodying or evidencing any of the following transactions shall be
deemed to be a Material Contract and is identified on Schedule 3.13: (a)
guarantees by any of the PRC Companies of any obligations other than guarantees
of obligations of other PRC Companies; (b) indentures, notes, mortgages,
installment obligations, capital leases or other instruments relating to the
borrowing of money in excess of $250,000; (c) agreements or contracts that
involved the receipt of monies by any of the PRC Companies and constituted the
(i) 20 largest contracts or agreements by revenue of the PRC Companies as a
whole for the year ended December 31, 1994, and for the nine months ended
September 30, 1995, (ii) 10 largest contracts or agreements by revenue of the
Information Technologies Group of the PRC Companies for the year ended December
31, 1994, and for the nine months ended September 30, 1995, (iii) 10 largest
contracts or agreements by revenue of the Information Systems Group of the PRC
Companies for the year ended December 31, 1994, and for the nine months ended
September 30, 1995, (iv) 10 largest contracts or agreements by revenue of the
Systems Integration Group of the PRC Companies for the year ended December 31,
1994, and for the nine months ended September 30, 1995 and (v) 10 largest
contracts or agreements by revenue of the Applied Engineering Group of the PRC
Companies for the year ending December 31, 1994 and for the nine months ended
September 30, 1995; (d) contracts or agreements (including subcontracts) that
involved the payment of at least $250,000 by any of the PRC Companies during the
nine months ended
<PAGE>
September 30, 1995; (e) contracts or agreements limiting or restricting the
ability of any PRC Company to compete or otherwise to conduct any business in
any manner or place other than those relating to OCI Clauses and provisions of
teaming and other similar agreements relating to the pursuit or performance of a
contract; (f) grants of power of attorney, agency or similar authority to
another Person (other than to a PRC Company or any director, officer or employee
of a PRC Company); (g) contracts or agreements containing a right of first
refusal; (h) any contract or agreement to which any Affiliate, officer or
director of Seller, Seller's Parent, or any PRC Company is party (other than
those constituting an Employee Benefit Plan or Benefit Arrangement); (i) any
sales, marketing or international consulting or similar contract or agreement
and any lobbying agreement; (j) any material distributor or sales representative
contract or agreement (other than those where the PRC Company is the distributor
or sales representative); and (k) any contract or agreement not made in the
ordinary course of business that was entered into by a PRC Company in 1995 or
that involves an executory obligation on the part of a PRC Company on the date
of this Agreement or hereafter. Except as set forth on Schedule 3.13, to the
knowledge of Seller, Seller's Parent and the PRC Companies, each Material
Contract is valid and subsisting, and none of the PRC Companies is in default
under any Material Contract, has waived any material rights under any Material
Contract (other than releases executed in the ordinary course of business in
connection with closing contracts or task orders) or has knowledge or notice
that any party with whom it has a Material Contract is in default in a material
respect under the Material
<PAGE>
Contract. Unless otherwise so noted on Schedule 3.13, each Material Contract was
entered into in the ordinary course of business. True copies of the Material
Contracts, including all amendments and supplements, have been delivered or
otherwise will be made available to Buyer.
Section 3.14. Employee Benefit Matters.
(a) Schedule 3.14 sets forth, as of the date of this
Agreement, a list of all Employee Benefit Plans, all Multiemployer Plans and all
collective bargaining agreements of the PRC Companies, and all material Benefit
Arrangements. Except as set forth in Schedule 3.14, with respect to each of such
Employee Benefit Plans, Multiemployer Plans, collective bargaining agreements
and Benefit Arrangements, Seller has delivered or made available to Buyer, as
applicable, copies of (i) the text of the formal plan document or other
agreements, written policies or guidelines actually maintained by Seller's
Parent, Seller, PRC or any of their Affiliates evidencing the terms of such
Employee Benefit Plans and Benefit Arrangements, including amendments and, if
applicable, the summary plan description, (ii) in the case of a collective
bargaining agreement, the text of the collective bargaining agreement, (iii) in
the case of a Pension Plan that is intended to qualify under Section 401 of the
Code, the most recent IRS determination letter relating to the Pension Plan's
qualification under Section 401 of the Code and the related trust's
qualification under Section 501 of the Code, (iv) the trust agreements,
insurance contracts or other documents that constitute all or a part of the
funding vehicle, and (v) the most recent annual reports (IRS Form 5500s),
including the schedules thereto.
<PAGE>
(b) Except as set forth in Schedule 3.14, all Employee Benefit
Plans comply in all material respects with ERISA, the Code and any other
applicable Law, each Benefit Arrangement has been maintained in material
compliance with its terms and all applicable Laws, and the PRC Companies have
performed in all material respects their obligations under each Employee Benefit
Plan and Benefit Arrangement.
(c) Except as set forth in Schedule 3.14, there are no Actions
or Orders pending, or to the knowledge of Seller, Seller's Parent or PRC,
threatened, including proceedings before the IRS, the DOL or the PBGC, against
any Employee Benefit Plan, Benefit Arrangement or any administrator or fiduciary
thereof, and, to the best knowledge of Seller and Seller's Parent, no facts
exist which could give rise to any such Actions or Orders, other than benefit
claims arising in the normal course of operation of such Employee Benefit Plans
or Benefit Arrangements.
(d) Except as set forth in Schedule 3.14, no PRC Company has
any current or projected liability for any unfunded post-retirement medical or
life insurance benefits in connection with any Employee of any of the PRC
Companies.
(e) Except as set forth in Schedule 3.14, none of the PRC
Companies and, to the knowledge of Seller, Seller's Parent and the PRC
Companies, no other Person has engaged in any non-exempt "Prohibited
Transaction," as defined in Section 406 of ERISA or Section 4975 of the Code,
with respect to any Employee Benefit Plan.
(f) Except as set forth in Schedule 3.14, none of the
PRC Companies has incurred an outstanding "Accumulated Funding
<PAGE>
Deficiency," as defined in Section 302(a) of ERISA or Section 412(a) of the
Code, with respect to any Pension Plan, nor is any Pension Plan subject to Title
IV of ERISA.
(g) Except as set forth in Schedule 3.14, none of the PRC
Companies nor their ERISA Affiliates has incurred a "withdrawal" or "partial
withdrawal," as defined in Section 4203 and 4205 of ERISA, from any
Multiemployer Plan, which has resulted in an unpaid liability or could
reasonably be expected to result in a liability of any of the PRC Companies.
Section 3.15. Guarantees by Others. Schedule 3.15 sets forth a complete
list of all Guarantees of Seller's Parent (or any of its Affiliates (other than
a PRC Company)) for the benefit of Persons doing business with any of the PRC
Companies.
Section 3.16. Tax Matters.
(a) Each of the affiliated groups (as that term is defined in
Section 1504(a) of the Code) of corporations of which the PRC Companies were
members prior to and subsequent to April 28, 1989 (the "Affiliated Groups"), has
filed consolidated federal Income Tax Returns and state Income Tax Returns filed
on a consolidated or combined basis (the "Consolidated Returns") for all taxable
years (other than years beginning on or after January 1, 1995) during which the
PRC Companies were members of the Affiliated Groups. The Affiliated Groups have
paid or adequately provided for (or will adequately provide for) all federal
Income Taxes, state Income Taxes with respect to Tax Returns filed on a
consolidated or combined basis, additions to tax, penalties and interest
(collectively, the "Consolidated Taxes") applicable to the Affiliated Groups or
to any members thereof, and the affiliated
<PAGE>
group of corporations of which the PRC Companies are members as of the date of
this Agreement has adequately provided (or will adequately provide for) for all
Consolidated Taxes that would be due if the current tax period ended at the
close of business on the Closing Date. Other than the PRC Companies' membership
in the Affiliated Groups, the PRC Companies have not been members of any
affiliated group for any period not barred by the statute of limitations.
(b) Except as set forth in Schedule 3.16, each of the PRC
Companies has filed all federal, state, local and other Tax Returns (other than
Consolidated Returns) (the "Individual Returns") required to be filed by it
under applicable Laws, including estimated tax returns and reports, and each of
the PRC Companies has paid all required federal, state and local income (other
than Consolidated Taxes) and other taxes, additions to taxes, penalties and
interest (the "Individual Taxes") due and payable on or before the date hereof
(and will duly and timely pay all such amounts required to be paid between he
date hereof and the Closing Date), except where such failure to file the
Individual Returns or pay the Individual taxes would not have a Material Adverse
Effect on the PRC Companies taken as a whole. Each of the PRC Companies has
paid, withheld or adequately provided for (or will adequately provide for) any
and all Individual Taxes in respect of the conduct of its business or the
ownership of its property and in respect of any transaction for which such taxes
are due or would be due if the current tax period ended at the close of business
on the Closing Date.
<PAGE>
(c) The federal Income Tax Returns of Seller, Seller's Parent
and the PRC Companies have been audited by the IRS (or the time for the IRS to
make an assessment for additional federal Income Taxes has expired) for the
taxable years ended on or before September 30, 1990, but no taxable years ending
thereafter. Except as set forth in Schedule 3.16, all deficiencies asserted as a
result of such examinations have been paid or finally settled and no issue has
been raised by the IRS on audit or otherwise that, by application of the same or
similar principles, might result in a proposed deficiency affecting any of the
PRC Companies for any other period not so examined.
(d) Except as set forth in Schedule 3.16, no material proposed
Taxes, addition to tax, interest, or penalties have been asserted against the
Affiliated Groups or any member of the Affiliated Groups including any of the
PRC Companies, except those that have been paid in full and those that would not
have a Material Adverse Effect on the PRC Companies taken as a whole. Except as
set forth in Schedule 3.16, there are no material agreements, waivers, or other
arrangements providing for extensions of time in respect of the assessment or
collection of any material unpaid Tax against the Affiliated Groups or any
member of the Affiliated Groups affecting any of the PRC Companies, except those
that would not have a Material Adverse Effect on the PRC Companies taken as a
whole.
(e) No election or consent under Section 341(f) of the Code
has been made or shall be made on or prior to the Closing Date by or on behalf
of any of the PRC Companies. None of the PRC Companies has made any payments, is
obligated to make any payments,
<PAGE>
or is a party to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible under Section 280G of the
Code. None of the PRC Companies has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Each of the
PRC Companies has disclosed on its federal Income Tax Returns all positions
taken therein that could give rise to a substantial understatement of federal
Income Tax within the meaning of Section 6662 of the Code. Except as set forth
on Schedule 3.16, none of the PRC Companies is a party to any Tax allocation or
sharing agreement. None of the PRC Companies has any liability for the Taxes of
any Person (other than any of the PRC Companies or the Affiliated Groups) under
Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or foreign
Law), as a transferee or successor, by contract, or otherwise.
Section 3.17. Environmental Matters.
(a) Except as set forth in Schedule 3.17 and except as
would not have a Material Adverse Effect on the PRC Companies taken as a whole,
each of the PRC Companies is in compliance with all applicable environmental
Laws. Except as set forth in Schedule 3.17, the PRC Companies have obtained all
permits, licenses and other authorizations that are required under applicable
Laws relating to the protection of the environment, except where the failure to
obtain such permits, licenses and other authorizations could not reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole. Except as set forth in Schedule 3.17, the PRC Companies are in compliance
<PAGE>
with the terms and conditions under which the permits, licenses and other
authorizations referenced in the preceding sentence were issued or granted,
except where the failure to be in compliance could not reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole.
(b) Except as set forth on Schedule 3.17 and except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, (i)
none of the PRC Companies has generated, used, transported, treated, stored,
released or disposed of, or has suffered or permitted anyone else to generate,
use, transport, treat, store, release or dispose of any Hazardous Substance in
violation of any Laws; (ii) there has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with the conduct of the business of any PRC Company or
in connection with the conduct of the business of any PRC Company or in
connection with the use of any current or former property or facility of any PRC
Company, which has created or might reasonably be expected to create any
condition or liability under any Laws or which would require investigation by,
reporting to or notification of any Governmental Entity; (iii) no asbestos or
polychlorinated biphenyl or underground storage tank is or has been contained in
or located at any facility of any PRC Company; and (iv) any Hazardous Substance
handled or dealt with in any way in connection with the businesses of the PRC
Companies, whether before or during Seller's ownership thereof, has been and is
being handled or dealt with in all respects in compliance with applicable Laws.
<PAGE>
Section 3.18. Insurance. The PRC Companies are, and at all times during
the past five years have been, insured with reputable insurers against all risks
normally insured against by companies in similar lines of business of a similar
size, except for professional liability insurance. Schedule 3.18 sets forth a
list of the material insurance coverage in effect as of the date of this
Agreement. None of the insurance carriers listed on Schedule 3.18 are related to
or affiliated with Seller, Seller's Parent or the PRC Companies (other than
Shenandoah Insurance, Inc.). None of the PRC Companies is in default under any
of its insurance policies. None of Seller, Seller's Parent or any PRC Company
has received notice or other indication from any insurer or agent of any intent
to cancel or not so renew any of such insurance policies, except for
cancellations deemed to occur as a result of the Closing of the transactions
contemplated by this Agreement. Each of the PRC Companies has complied with and
implemented all outstanding (i) requirements of and recommendations of any
insurance company that has issued a policy to it and (ii) requirements and
recommendations of the Board of Fire Underwriters or any other body exercising
similar functions or any Governmental Entity with respect to any such insurance
policy.
Section 3.19. Banks. Schedule 3.19 sets forth, as of the date of this
Agreement, the names and locations of all banks, trust companies, savings and
loan associations and other financial institutions at which the PRC Companies
maintain safe deposit boxes or accounts of any nature, and the names of all
Persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.
<PAGE>
Section 3.20. Extraordinary Transactions and Material Adverse Effects.
Except as set forth in Schedule 3.20, since September 30, 1995, (x) none of the
PRC Companies has taken any action which would have required the consent of
Buyer under Section 5.2 had such Section been in effect since September 30,
1995, (y) whether or not in the ordinary course of business, there has not been,
occurred or arisen any change in or event affecting any of the PRC Companies
that has had or could reasonably be expected to have a Material Adverse Effect
on the PRC Companies taken as a whole, and (z) none of the PRC Companies has
made any management decisions involving any material change in its policies with
regard to the provision of services, sales, purchasing or other business,
financial, accounting (including reserves and amounts thereof, but excluding
those required by GAAP) or Tax policies or practices.
Section 3.21. Licenses; Permits. Except as set forth in Schedule 3.21,
the PRC Companies have all licenses and permits (except as may be required under
federal or state Tax Laws) of all Governmental Entities necessary to the conduct
of the business of the PRC Companies on the date hereof, except where the
failure to obtain such licenses or permits could not reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole. Except as
set forth in Schedule 3.21, all such licenses and permits are valid and in full
force and effect and will remain so upon consummation of the transactions
contemplated by this Agreement. To the best knowledge of Seller, Seller's Parent
and the PRC Companies, no suspension, cancellation or termination of any of such
licenses or permits is threatened or imminent that
<PAGE>
could reasonably be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole.
Section 3.22. Brokerage Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements, written or oral, made by or on behalf of Seller or Seller's Parent,
or by or on behalf of any director, officer, employee, agent or Affiliate of
Seller or Seller's Parent.
Section 3.23. Government Contracts.
(a) During the past five (5) years no payment has been
made by PRC or by any Person authorized to act on its behalf, to any Person in
connection with any Government Contracts, in violation of applicable procurement
Laws or in violation of (or requiring disclosure pursuant to) the Foreign
Corrupt Practices Act or other Laws.
(b) Except as set forth in Schedule 3.23, PRC's cost
accounting and procurement systems with respect to Government Contracts are in
compliance in all material respects with all applicable Laws.
(c) Except as set forth on Schedule 3.23 and except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, with
respect to each and every Government Contract or Bid (including any exception
taken therein), of the PRC Companies: (i) the PRC Companies have complied in all
respects with all terms and conditions of each Government Contract and Bid,
including all clauses, provisions and requirements incorporated expressly, by
reference or by operation of Law therein; (ii) the PRC Companies
<PAGE>
have complied in all respects with all requirements of all applicable Law or
agreements pertaining to each Government Contract or Bid; (iii) all statements
representations and certifications executed, acknowledged or set forth in, or
pertaining to each Government Contract or Bid were, when given, complete and
correct in all respects as of their effective date, and the PRC Companies have
complied in all respects with all such statements, representations and
certifications; (iv) neither the U.S. Government nor any prime contractor,
subcontractor or other Person has notified the PRC Companies, either orally or
in writing, that the PRC Companies have breached or violated any applicable Law,
certification, representation or requirement pertaining to any Government
Contract or Bid; (v) no termination for convenience, termination for default,
cure notice or show cause notice is currently in effect pertaining to any
Government Contract; (vi) no Governmental Entity has provided the PRC Companies
with written notice of any cost incurred by the PRC Companies pertaining to such
Government Contract which has been questioned, challenged or disallowed or has
been the subject of any investigation; and (vii) no money due to the PRC
Companies under any Government Contract has been (or has been attempted to be)
withheld or set off, except for amounts withheld under contracts in the ordinary
course of business.
(d) Except as set forth in Schedule 3.23, neither the PRC
Companies nor, to the best knowledge of Seller and Seller's Parent, any of their
directors, officers, employees, consultants or agents engaged in the business of
the PRC Companies is (or during the last three years has been) under
administrative, civil or
<PAGE>
criminal investigation, indictment or information or equivalent official
governmental charge or allegation by any Governmental Entity with respect to any
alleged irregularity, misstatement or omission or other matter arising under or
relating to any Government Contract. Except as previously disclosed to Buyer in
a writing by the PRC Companies specifically referencing this Section, (i) during
the last two years, the PRC Companies have not conducted or initiated any
internal investigation or made a voluntary disclosure to the U.S. Government,
with respect to any alleged irregularity, misstatement, omission or other matter
arising under or relating to any Government Contract or Bid (other than those
relating to employment and other similar Laws), and (ii) there is no
irregularity, misstatement or omission or other matter arising under or relating
to any Government Contract or Bid that has led or could reasonably be expected
to lead, either before or after the Closing Date, to any of the consequences set
forth in clause (i) of this sentence or the immediately preceding sentence or
any other damage, penalty, assessment recoupment of payment or disallowance of
cost that would have a Material Adverse Effect on the PRC Companies taken as a
whole.
(e) Except as set forth on Schedule 3.23 and except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, there
exist (i) no outstanding claims, requests for equitable adjustment or other
contractual action for relief against the PRC Companies, either by the U.S.
Government or by any prime contractor, subcontractor, vendor or other Person,
arising under or relating to any Government Contract or Bid and (ii) no disputes
between the PRC Companies and the U.S. Government under the
<PAGE>
Contract Disputes Act or any other federal statute or between any PRC Company
and any prime contractor, subcontractor, vendor or other Person arising under or
relating to any Government Contract or Bid. To the best knowledge of Seller and
Seller's Parent, except as set forth in Schedule 3.23 and except as would not
have a Material Adverse Effect on the PRC Companies taken as a whole, no PRC
Company has any interest in any pending or potential claim under the Contract
Disputes Act against the U.S. Government or any prime contractor, subcontractor
or vendor arising under or relating to any Government Contract or Bid.
(f) Except as set forth on Schedule 3.23, no PRC Company nor,
to the best knowledge of Seller and Seller's Parent, any of their directors,
officers, employees, consultants or agents is (or during the last three years
has been) suspended or debarred from doing business with any Governmental Entity
or is (or during such period was) the subject of a finding of nonresponsibility
or ineligibility for contracting with any Governmental Entity.
(g) The Government Contracts that contain OCI Clauses or other
similar provisions that might restrict or preclude Buyer or any of its
Affiliates from supplying products or services to any Governmental Entity or
supplier thereto are set forth on Schedule 3.23.
Section 3.24. Certain Labor Matters. Except as set forth on Schedule
3.24, there is no organized labor strike, dispute, slowdown or stoppage, or
collective bargaining or unfair labor practice claim pending or to the best
knowledge of Seller, Seller's Parent and the PRC Companies, threatened against
or affecting any PRC Company.
<PAGE>
Section 3.25. Minute Books. The minute books of the PRC Companies
accurately reflect all actions and proceedings taken to date by the respective
shareholders, boards of directors and committees of the PRC Companies. The stock
record books of the PRC Companies reflect accurately all transactions in their
respective capital stock of all classes.
Section 3.26. Compliance with Law. Except as disclosed in the Schedules
to this Agreement and except as would not have a Material Adverse Effect, the
PRC Companies have conducted their respective businesses in accordance with
applicable Laws in all respects, the forms, procedures and practices of the PRC
Companies are in compliance with applicable Laws in all respects, and the use
and operation of the assets of the PRC Companies are in compliance with
applicable Laws in all respects.
Section 3.27. Certain Interests. Except as set forth on Schedule 3.14
or 3.27 or disclosed in the Financial Statements, no Affiliate of Seller,
Seller's Parent or any PRC Company, nor any officer or director of any thereof,
has any material interest in any property used in or pertaining to the PRC
Companies; no such Person is indebted or otherwise obligated to any PRC Company;
and no PRC Company is indebted or otherwise obligated to any such Person, except
for amounts due under normal arrangements applicable to all employees generally
as to salary or reimbursement of ordinary business expenses not unusual in
amount or significance. Except as set forth on Schedule 3.27, the consummation
of the transactions contemplated by this Agreement will not (either alone, or
upon the occurrence of any act or event, or with the lapse of time, or both)
result in any benefit or payment (severance or
<PAGE>
other) arising or becoming due from any PRC Company or the successor or assign
of any thereof to any Person.
Section 3.28. Intercompany Transactions. Except as set forth on
Schedule 3.28 or disclosed in the Financial Statements, (x) no PRC Company has
engaged in any transaction with Seller or Seller's Parent, (y) no PRC Company
has any liabilities or obligations to Seller or Seller's Parent and (z) neither
Seller or Seller's Parent has any obligations to any PRC Company. Except as set
forth on Schedule 3.27 or as otherwise expressly provided for in this Agreement,
the consummation of the transactions contemplated by this Agreement will not
(either alone, or upon the occurrence of any act or event, or with the lapse of
time, or both) result in any payment arising or becoming due from any PRC
Company or the successor or assign of any thereof to Seller or Seller's Parent.
Section 3.29. Accuracy of Information. None of the information supplied
or to be supplied by or on behalf of Seller, Seller's Parent or any PRC Company
to any Person for inclusion in any document or application filed with any
Governmental Entity having jurisdiction over or in connection with the
transactions contemplated by this Agreement did contain, or at the respective
times such information is or was delivered, will contain any untrue statement of
a material fact, or omitted or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of the
Closing Date, Seller shall have notified Buyer of any such information that
shall have become untrue or misleading in any material respect subsequent to
delivery, and shall have notified Buyer in writing of the reason
<PAGE>
for such change. All documents required to be filed by Seller, Seller's Parent,
or any PRC Company with any Governmental Entity in connection with this
Agreement or the transactions contemplated by this Agreement will comply in all
material respects with the provisions of applicable Law.
Section 3.30. Inventories; Receivables; Loss Contracts.
(a) Except as set forth or reserved against in the
Financial Statements, all inventories of the PRC Companies are of good
merchantable quality and salable or currently usable in the ordinary course of
business.
(b) All receivables of the PRC Companies arose from bona fide
transactions in the normal and ordinary course of business consistent with past
practice and, except as set forth or reserved against in the Financial
Statements, are the valid and legally binding obligations of the Persons
obligated to pay such accounts receivable.
(c) Except as set forth on Schedule 3.30 or as set forth or
reserved against in the Financial Statements, no Contract Loss exists with
respect to any Government Contracts or other contracts to which any PRC Company
is a party or with respect to any Bids. Those Government Contracts, contracts or
Bids for which a Contract Loss is not deemed to exist because, after
consideration of existing reserves, the sales price therefor is equal to or less
than $100,000 less than the sum of the cost incurred to date and the expected
cost to complete, with all costs determined in accordance with GAAP on a basis
consistent with prior periods, could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole.
<PAGE>
Section 3.31. Bids. Except as disclosed in Schedule 3.31, no PRC
Company has submitted any Bid relating to its business which is currently
outstanding and which, if accepted or awarded, would result in a Government
Contract where the volume of purchases of materials, supplies, goods, services,
equipment or other assets from such PRC Company in connection with its business
under any such resulting Government Contract could be reasonably expected to
exceed $2,000,000. Schedule 3.31 identifies each such Bid. All cost or pricing
data submitted or certified in connection with Bids are current, accurate and
complete in accordance with the Truth in Negotiations Act, as amended, and the
rules and regulations thereunder.
Section 3.32. Customer-Furnished Property or Equipment. Except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, all
personal property, equipment and fixtures loaned, bailed or otherwise furnished
to a PRC Company by or on behalf of the U.S. Government that are or should be in
the possession of a PRC Company ("Customer-Furnished Items") are in a good state
of maintenance and repair (except for ordinary wear and tear), have been
regularly and appropriately maintained and repaired in accordance with all
contractual, legal and regulatory requirements and, unless returned to the U.S.
Government, shall be in the possession of a PRC Company on the Closing Date.
Except as would not have a Material Adverse Effect on the PRC Companies taken as
a whole, each PRC Company has complied in all respects with all of its
obligations relating to the Customer-Furnished Items, and upon the return
thereof to the U.S. Government in the condition thereof on the date hereof,
would have no liability to the U.S.
<PAGE>
Government with respect thereto. Except as would not have a Material Adverse
Effect on the PRC Companies taken as a whole, Buyer will incur no liability to
the U.S. Government as a result of any PRC Company's failure to keep records,
maintain or possess property furnished to a PRC Company by or on behalf of the
U.S. Government.
Section 3.33. Product Warranty; Product Liability. Except as set forth on
Schedule 3.33 or provided for in the Financial Statements, no PRC Company has
committed any act, and there has been no omission by any PRC Company, which may
reasonably be expected to result in, and there has been no occurrence relating
to any product or service of any PRC Company which may reasonably be expected to
result in product liability or liability for breach of warranty (whether covered
by insurance or not) on the part of any PRC Company, with respect to products
designed, manufactured, assembled, repaired, maintained, delivered or installed
or services rendered prior to or on the Closing Date, except where such act,
omission or occurrence would not have a Material Adverse Effect on the PRC
Companies taken as a whole.
Section 3.34. Backlog. PRC has provided to Buyer a copy of its written
policies and procedures concerning backlog. Schedule 3.34 sets forth the backlog
of the PRC Companies as of September 30, 1995, together with the dollar amount
of the backlog that is characterized as "funded" in accordance with PRC's
policies and procedures.
Section 3.35. Clearances. Each PRC Company and each officer, director,
employee, consultant or agent (to the extent such agent or consultant is
material to the performance by a PRC Company of
<PAGE>
any contract) has all facility clearances or personnel clearances, as the case
may be, that, if transferred to Buyer, are sufficient to allow Buyer to conduct
each PRC Company's business as now conducted by such PRC Company. Except as
disclosed in Schedule 3.35, Seller has no knowledge of any proposed or
threatened termination of any material personnel or facility security clearance
relating to the business of any PRC Company (whether or not such clearance is
collateral or special access).
Section 3.36. Government Contracting Audits. Schedule 3.36 sets forth a
list and description of each open audit or investigation report, or in the
absence thereof, a draft thereof, received by any PRC Company by any
Governmental Entity (other than routine audits by resident auditors, none of
which is material to the business or prospects of the business of the PRC
Companies), which pertains to any Government Contract and which has resulted in
an allegation or a notice of violation of any applicable Law or Government
Contract or of any violation of or deficiency in company policies or procedures
by any PRC Company, and which has not been closed or otherwise resolved.
Section 3.37. Government Contracting Audits Settlement Agreements.
Schedule 3.37 sets forth a list and description of each settlement agreement
between any PRC Company and the U.S. Government which will have a binding effect
on any PRC Company after the Closing Date, and under which any PRC Company has
material unperformed obligations.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to and for the benefit of Seller and
Seller's Parent as follows:
Section 4.1.Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of its state of
incorporation, and has full corporate power and authority to carry on its
businesses as it is now being conducted. Buyer is qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
the conduct of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on Buyer and its Subsidiaries taken as a whole.
Section 4.2. Investment Representation. Buyer is aware that the PRC
Shares are not registered under the Securities Act. Buyer possesses such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its investments hereunder. Buyer is acquiring
the PRC shares for its own account, for investment purposes only and not with a
view to the distribution thereof. Buyer agrees that the PRC Shares will not be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of without registration under the Securities Act, except pursuant to a valid
exemption from registration under the Securities Act.
Section 4.3. Execution and Effect of Agreement. Buyer has the corporate
power and authority to enter into this Agreement, and the execution and delivery
of this Agreement and the consummation
<PAGE>
of the transactions and contemplated hereby have been duly authorized by all
necessary corporate action of Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other Laws affecting the rights of creditors
generally.
Section 4.4. Restrictions. Except as set forth in Schedule 4.4, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any of the provisions of the
charter or by-laws of Buyer, or (b) conflict with or result in a beach of, or
give rise to a right of termination of, or accelerate the performance required
by the terms of any judgment, court order or consent decree, or any agreement,
indenture, mortgage or instrument to which Buyer is a party or to which it or
its property is subject, or constitute a default thereunder, except where such
conflict, breach, right of termination or default would not have a Material
Adverse Effect on Buyer.
Section 4.5. Consents. Except (a) for filing, consents, approvals and
authorizations the failure to obtain or make would not have a Material Adverse
Effect on Buyer and its Subsidiaries taken as a whole, (b) as set forth in
Schedule 4.4 or Schedule 4.5, and (c) for filings, consents, approvals and
authorizations pursuant to the H-S-R Act, no filing, consent, approval or
authorization of any Governmental Entity or of any third party on the part of
Buyer is required in connection with the execution and
<PAGE>
delivery of this Agreement or any instrument contemplated hereby or the
consummation of any of the transactions contemplated hereby.
Section 4.6. Litigation. Except as set forth in Schedule 4.6, there is
no action at law or in equity, arbitration proceeding or a governmental
investigation pending, or to the knowledge of Buyer threatened, against Buyer in
respect of this Agreement or any of the Transactions contemplated hereby that
would prevent the consummation of any of the transactions contemplated hereby.
Section 4.7. Financing. Buyer has available to it sufficient financing to
enable it to consummate the transaction contemplated by this Agreement.
Section 4.8. Brokerage Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements, written or oral, made by or on behalf of Buyer or by or on behalf of
any director, officer, employee, agent or Affiliate of Buyer.
ARTICLE V
COVENANTS AND AGREEMENTS OF SELLER AND SELLER'S PARENT
Seller and Seller's Parent jointly and severally covenant and agree for
the benefit of Buyer as follows:
Section 5.1. Access to Information. Except as prohibited or limited by
Law, Seller and Seller's Parent shall cause the PRC Companies, from and after
the date of this Agreement and until the Closing Date, to give Buyer and its
employees, counsel and advisors, full and complete access upon reasonable notice
during normal business hours, to all properties, agreements, books,
<PAGE>
records and all other information (including any routinely prepared reports and
financial information) with respect to the business of the PRC Companies as
Buyer may from time to time request, and to make copies of such books, records
and other documents and to discuss their respective businesses with such other
Persons as Buyer considers necessary or appropriate for the purposes of
familiarizing itself with the business of the PRC Companies, obtaining any
necessary approvals of or permits for the transactions contemplated by this
Agreement and conducting an evaluation of the organization and business of the
PRC Companies.
Section 5.2. Conduct and Preservation of Business Prior to Closing.
(a) Except as contemplated by this Agreement, Seller and
Seller's Parent shall use their best efforts to preserve the business of each of
the PRC Companies and to preserve the goodwill of customers, suppliers and
others having business relations with the PRC Companies. Seller will consult
with Buyer concerning, and Seller will cooperate to keep available to Buyer, the
services of the officers and employees of the PRC Companies that Buyer may wish
to have the PRC Companies retain. Nothing in this Section shall obligate Buyer
or the PRC Companies after the Closing to retain or offer employment to any
officer or employee of the PRC Companies.
(b) Seller agrees that the business of the PRC Companies will
be conducted in the ordinary course and, except as required by this Agreement or
pursuant to the written consent of Buyer (which consent shall not be
unreasonably withheld), the PRC Companies shall not:
<PAGE>
(i) amend their charters or by-laws (or other
similar organizational document);
(ii) except (x) as required by applicable Laws or
existing collective bargaining agreements, Employee Benefit Plans, Multiemployer
Plans or Benefit Arrangements or (y) as otherwise required by this Agreement or
the Schedules hereto, enter into or amend any collective bargaining agreement,
Employee Benefit Plan, Multiemployer Plan or Benefit Arrangements;
(iii) sell, mortgage, pledge, or otherwise dispose
of any substantial portion of their assets or properties;
(iv) merge or consolidate with, or agree to merge
or consolidate with, or purchase or agree to purchase all or
substantially all of the assets of, or otherwise acquire, any other
business entity;
(v) authorize for issuance, issue or sell any
additional shares of their capital stock or any securities or obligations
convertible into shares of their capital stock or issue or grant any option,
warrant or other right to purchase any shares of its capital stock;
(vi) except for any indebtedness or obligations
that will be eliminated or cancelled in accordance with Section 5.6, incur or
agree to incur any obligation for borrowed money;
(vii) except as required by their terms, amend in
any material respect, terminate, renew/fail to renew or renegotiate in any
material respect any Material Contract, or default (or take or omit to take any
action that, with or without the giving of notice or passage of time, would
constitute a default) in any of
<PAGE>
its obligations under any Material Contract or enter into any new Material
Contract other than pursuant to a Bid outstanding as the date of this Agreement,
or take any action that would jeopardize the continuance of its material
supplier or customer relationships;
(viii) terminate, amend or fail to renew any
existing insurance coverage;
(ix) terminate or fail to renew or preserve any
material permits, except to the extent such permit is no longer
required;
(x) except pursuant to an Employee Benefit Plan or
Benefit Arrangement in effect on the date of this Agreement and except for any
indebtedness or obligations that will be eliminated or cancelled in accordance
with Section 5.6, make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of credit, to
or for the benefit of any director, officer, employee, stockholder or any of
their respective associates or Affiliates;
(xi) except for cash dividends or distributions,
declare, issue, make or pay any dividend or other distribution of assets to its
shareholders, or split, combine, dividend, distribute or reclassify any shares
of its equity securities;
(xii) make any capital expenditures or commitments
with respect thereto aggregating more than $7,000,000;
(xiii) except in the ordinary course of business in
connection with the performance of a contract, dispose of, license or permit to
lapse any rights to the use of any Intellectual Property or dispose of, license
or disclose any Intellectual Property not a matter of public knowledge;
<PAGE>
(xiv) make any Tax election or make any change in
any method or period of accounting or in any accounting policy, practice or
significant procedure; or
(xv) agree to or make any commitment to take any
actions prohibited by this Section 5.2.
Section 5.3. Public Statements. Neither Seller nor Seller's Parent, nor
any of their Affiliates, shall release any information concerning this Agreement
or the transactions contemplated hereby that is intended for or may result in
general public dissemination thereof without the prior consent of Buyer, unless
(a) in the opinion of counsel to Seller and Seller's Parent, the release of such
information is required by Law, and (b) prior to the release of such information
Seller's Parent shall provide Buyer with a copy of such counsel's opinion.
Section 5.4. H-S-R Act. Seller and Seller's Parent shall promptly make
any and all filings that are or may be required under the H-S-R Act. Seller
shall cooperate and use reasonable efforts to ensure that any pre-acquisition
waiting period required by the H-S-R Act expires or is otherwise terminated, and
shall cause the PRC Companies to comply promptly with any requests made pursuant
to such act or the regulations thereunder.
Section 5.5. Consents. Seller and Seller's Parent each shall use
reasonable efforts to obtain all consents, waivers and authorizations and make
all filings with and give all notices that may be necessary or reasonably
required to consummate the transactions contemplated hereby. If as a condition
to receiving any such consents, waivers or authorizations money must be paid to
<PAGE>
any third party, Seller and Seller's Parent shall be responsible for one-half of
all such amounts.
Section 5.6. Certain Indebtedness and Intercompany Accounts. On or
before the Closing Date, Seller's Parent shall cause Seller and each of Seller's
Parent's Subsidiaries to contribute to the equity of PRC all net intercompany
amounts due between Seller's Parent and its Subsidiaries (other than the PRC
Companies) on the one hand, and the PRC Companies on the other hand (including
but not limited to amounts relating to intercompany accounts receivable and
promissory notes but excluding amounts relating to intercompany accounts that
are of a type included in the Financial Statements as Corporate Pass Through
Charges and contemplated by Note 2 to the Financial Statements), and shall cause
such intercompany amounts to be eliminated or cancelled on or prior to the
Closing Date. The transactions contemplated by this Section will have no
Material Adverse Effect on any PRC Company.
Section 5.7. Delivery of Information After Closing. Within 30 days of
the Closing Date, Seller and Seller's Parent shall deliver to Buyer all books
and records of PRC in Seller's and Seller's Parent's possession.
Section 5.8. Use of Certain Words, Trademarks and Tradenames. Within 30
calendar days after the Closing Date, Seller and Seller's Parent shall cause
Seller, Seller's Parent and their Affiliates not to use the letters PRC. In
addition, neither Seller nor Seller's Parent, or any of their Affiliates, shall
use any trademark, logo or tradename of PRC or any Affiliate of PRC, or any
trademarks, logos or tradenames that are confusingly similar thereto or that are
a translation or transliteration thereof into
<PAGE>
any language or alphabet on any of its signs, products, correspondence, forms,
manuals, shipping cartons, buildings or vehicles, or any other manner
whatsoever. Within 60 calendar days after the Closing, Seller shall take and
cause to be taken all action necessary to change Seller's corporate name to
delete "PRC" therefrom.
Section 5.9. Notification of Certain Matters. Seller will promptly notify
Buyer of any event of which Seller obtains knowledge which has had or could
reasonably be expected to have a Material Adverse Effect on the PRC Companies
taken as a whole or which if known as of the date hereof would have been
required to be disclosed to Buyer. Seller will promptly notify Buyer of (i) the
occurrence, or failure to occur, of any event that would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Closing Date and (ii) any failure of Seller to comply with or satisfy, in
any material respect, any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement. No such notification shall affect the
representations or warranties of Seller or the conditions to Buyer's obligations
hereunder.
Section 5.10. Noncompetition.
(a) Restrictions on Competitive Activities. Seller agrees that
after the Closing Buyer and PRC shall be entitled to the goodwill and going
concern value of the business of the PRC Companies and to protect and preserve
the same to the maximum extent permitted by Law. Seller also acknowledges that
its management contributions to the business of the PRC Companies have
<PAGE>
been uniquely valuable and involve proprietary information that would be
competitively unfair to make available to any competitor of the PRC Companies.
For these and other reasons and as an inducement to Buyer to enter into this
Agreement, Seller agrees that for a period of three years after the date hereof
neither Seller nor any of Seller's Affiliates will, directly or indirectly, for
its own benefit or as agent for another carry on or participate in the
ownership, management or control of, or the financing of, or allow its name or
reputation to be used in or by any other present or future business enterprise
that competes with Buyer or the PRC Companies in activities in which any of the
PRC Companies is engaged as of the Closing Date (a "Competing Business").
(b) Exceptions. Nothing contained herein shall limit the right
of Seller as an investor to hold and make investments in securities of any
corporation or limited partnership that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded in a
generally recognized over-the-counter market, provided Seller's equity interest
therein does not exceed 5% of the outstanding shares or interests in such
corporation or partnership. Notwithstanding any provisions of this Section 5.10
to the contrary, if Seller's Parent or any of its Affiliates acquires any Person
that is engaged in a Competing Business, Seller's Parent and its Affiliates
shall not be deemed to be in violation of this Section 5.10 provided that (i)
the Competing Business represents less than one-third of the gross revenues of
the acquired Person for the acquired Person's most recent completed fiscal year
and (ii) Seller's Parent or its Affiliates use reasonable and diligent efforts
to divest the
<PAGE>
operations of such Competing Business subsequent to such acquisition.
(c) Restrictions on Soliciting Employees. In addition, to
protect Buyer against any efforts by Seller or any of Seller's Affiliates to
cause employees of the PRC Companies as of the date of this Agreement to
terminate their employment, Seller agrees that for a period of three years
following the Closing Date, neither Seller nor any of its Affiliates will,
directly or indirectly (i) induce any employee of the PRC Companies as of the
date of this Agreement with a then current compensation of more than $50,000
annually to leave any of the PRC Companies or to accept any other employment or
position, or (ii) assist (other than normal employment recommendations) any
other Person in hiring any such employee.
(d) Special Remedies and Enforcement. Seller recognizes and
agrees that a breach by Seller or any of its Affiliates of any of the covenants
set forth in this Section 5.10 could cause irreparable harm to Buyer, that
Buyer's remedies at law in the event of such breach would be inadequate, and
that, accordingly, in the event of such breach a restraining order or injunction
or both may be issued against Seller and its Affiliates, in addition to any
other rights and remedies which are available to Buyer. If this Section 5.10 is
more restrictive than permitted by the Laws of the jurisdiction in which Buyer
seeks enforcement hereof, this Section 5.10 shall be limited to the extent
required to permit enforcement under such Laws.
Section 5.11. Nondisclosure of Proprietary Data. Neither Seller nor
any of its Affiliates or representatives shall, at any
<PAGE>
time, make use of, divulge or otherwise disclose, directly or indirectly, any
trade secret or other proprietary data (including, but not limited to, any
customer list, record or financial information) concerning the business or
policies of the PRC Companies that Seller or any Affiliate or representative of
Seller may have learned as a shareholder, employee, officer or director of the
PRC Companies. In addition, except as required by Law or legal process neither
Seller nor any of its Affiliates or representatives shall make use of, divulge
or otherwise disclose, directly or indirectly, to persons other than Buyer, any
confidential information concerning the business or policies of the PRC
Companies which may have been learned in any such capacity.
Section 5.12. No Solicitation. From the date of this Agreement to the
Closing Date or earlier termination of this Agreement, Seller and its Affiliates
and representatives will not directly or indirectly make, entertain, solicit or
encourage inquiries or proposals, enter into or conduct discussions, or
negotiate or enter into an agreement with any party other than Buyer for the
divestiture of any or all of the PRC Companies or their respective assets,
whether by way of an asset or stock sale, partnership, joint venture, merger,
consolidation or other transaction.
Section 5.13. Novations. In the event any Governmental Entity requires
Government Contract Novations, Seller and Seller's Parent shall cooperate with
the PRC Companies to promptly obtain such Government Contract Novations and
shall execute the novation agreements required by any Governmental Entity.
<PAGE>
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees for the benefit of Seller and Seller's
Parent as follows:
Section 6.1. Public Statements. Buyer shall not release any information
concerning this Agreement or the transactions contemplated hereby that is
intended for or may result in general public dissemination thereof without the
prior consent of Seller's Parent, unless (a) in the opinion of counsel to Buyer,
the release of such information is required by Law, and (b) prior to the release
of such information Buyer shall provide Seller's Parent with a copy of such
counsel's opinion.
Section 6.2. H-S-R Act. Buyer shall promptly make any and all filings
that are or may be required under the H-S-R Act. Buyer shall cooperate and use
reasonable efforts to ensure that any pre-acquisition waiting period required by
the H-S-R Act expires or is otherwise terminated, and shall comply promptly with
any requests made pursuant to the H-S-R Act or the regulations thereunder.
Section 6.3. Consents. Buyer shall use reasonable efforts to obtain all
consents, waivers and authorizations and make all filings with and give all
notices that may be necessary or reasonably required to consummate the
transactions contemplated hereby. If as a condition to receiving any such
consents, waivers or authorizations money must be paid to any third party, Buyer
shall be responsible for one-half of all such amounts.
Section 6.4. Guarantees. Buyer shall take all steps reasonably necessary to
provide Guarantees for or on all contracts, documents, instruments and other
agreements or obligations for
<PAGE>
which Seller's Parent or any of its Subsidiaries (other than Subsidiaries that
are PRC Companies) has issued Guarantees for the benefit of Persons doing
business with any of the PRC Companies that are listed in Schedule 3.15 and any
such Guarantees executed by Seller's Parent or any of its Subsidiaries (other
than Subsidiaries that are PRC Companies) subsequent to the date of this
Agreement and prior to Closing in compliance with Section 5.2. Buyer will
endeavor to provide all such Guarantees within 60 days of the Closing Date.
Buyer shall use reasonable efforts to assist Seller's Parent and its
Subsidiaries (other than Subsidiaries that are PRC Companies) to obtain full and
complete releases on each of the Guarantees referenced in the preceding
sentence, which reasonable efforts shall include but not be limited to providing
any financial information about Buyer reasonably requested by the Persons for
whose benefit the respective Guarantees were made. The provisions of this
Section 6.4 shall not apply to any Guarantees relating to payments under the
"PRC Supplemental Executive Retirement Plan."
Section 6.5. Certain Employee Benefit Matters.
(a) Buyer shall take all action required or appropriate
to cause each of the PRC Companies to fulfill its obligations under all Benefit
Arrangements, Employee Benefit Plans and Multiemployer Plans listed in Schedule
3.14 that are sponsored or maintained by any of the PRC Companies for so long as
any such Arrangements and Plans are sponsored or maintained by any of the PRC
Companies.
(b) Buyer acknowledges that certain Employees of the PRC
Companies may be entitled to benefits under the Incentive Compensation Plans,
the Special Severance Plans or other Benefit
<PAGE>
Arrangements involving severance or termination benefits. Buyer assumes the
obligations of Seller's Parent and the PRC Companies under the Incentive
Compensation Plans, the Special Severance Plans and such other Benefit
Arrangements in respect of the Employees and agree to pay any benefits to the
Employees that the Employees may be entitled to receive under the Incentive
Compensation Plans, the Special Severance Plans and such other Benefit
Arrangements. Buyer shall not assume or have any obligations with respect to (x)
the "Black & Decker -- PRC Inc. Change in Control Agreements" and (y) the "PRC
Supplemental Executive Retirement Plan."
(c) For at least 12 months following the Closing Date, Buyer
will ensure that the PRC Companies continue to provide benefits that are, in the
aggregate, substantially comparable to those provided under the Employee Benefit
Plans and Benefit Arrangements as in effect immediately prior to the Closing
Date for the benefit of all eligible Employees and their dependents. Nothing in
this Section 6.5 shall obligate Buyer or any PRC Company to sponsor or maintain
any specific Employee Benefit Plan or Benefit Arrangement for any period of time
after the Closing Date.
Section 6.6. Preservation of and Access to Certain Information After
Closing. Except as prohibited or limited by Law, Buyer shall cause the PRC
Companies, until three years after the Closing Date or, with respect to Tax
matters, until the expiration of the applicable statute of limitations
(including any extensions thereof), to give Seller and Seller's Parent, and
Seller's and Seller's Parent's employees, counsel and advisors, full and
complete access upon reasonable notice during normal business
<PAGE>
hours, to all properties, agreements, records and affairs of the PRC Companies,
and will provide copies of such information concerning the PRC Companies (with
respect to periods prior to the Closing) as Seller and Seller's Parent may
reasonably request, including but not limited to full and complete access in
connection with the preparation and determination of the Proposed Net Asset
Amount and the Final Net Asset Amount (and the resolution of any disputes in
respect thereof), or the preparation of any Tax Returns for the Affiliated
Groups, or in connection with or in anticipation of any audit by any federal,
state or local Tax Authorities of the Affiliated Groups. From and after the
Closing Date, Buyer shall preserve all books and records of PRC in Buyer or any
of the PRC Companies' possession for a period of eight years, provided, however,
that Buyer shall not destroy or dispose of such books and records without giving
notice to Seller and Seller's Parent of such pending destruction or disposal and
offering Seller and Seller's Parent the right and opportunity to copy such books
and records.
Section 6.7. Use of Certain Words, Trademarks and Tradenames. Whether
or not Buyer or any of the PRC Companies has obtained, directly or indirectly,
any right, title or interest in or to the use of the words "The Black & Decker
Corporation" or "Emhart Corporation," or any derivatives thereof, or the letters
B&D, by virtue of Buyer's purchase of the PRC Shares or otherwise, neither Buyer
nor any of the PRC Companies shall use, and Buyer and each of the PRC Companies
shall cause after the Closing Date the PRC Companies not to use, the words "The
Black & Decker Corporation" or "Emhart Corporation," or any derivative thereof,
or the letters B&D. In addition, neither Buyer nor any of the PRC
<PAGE>
Companies shall use, and Buyer and each of the PRC Companies shall cause within
90 calendar days after the Closing Date the PRC Companies not to use, any
trademark, logo or tradename of Seller's Parent or Emhart, or any Affiliate of
Seller's Parent or Emhart (other than those relating exclusively to the business
of the PRC Companies and transferred to Buyer or the PRC Companies under the
terms of this Agreement), or any trademarks, logos or tradenames that are
confusingly similar thereto or that are a translation or transliteration thereof
into any language or alphabet on any of its signs, products, correspondence,
forms, manuals, shipping cartons, buildings or vehicles, or in any other manner
whatsoever.
Section 6.8. Intercompany Accounts. Buyer shall take, and shall cause
PRC and its successors and Subsidiaries to take, all actions and to do, or cause
to be done, all things necessary, proper and appropriate to give effect to the
contribution to the equity of PRC all net intercompany amounts contemplated to
be contributed, eliminated or cancelled on or prior to the Closing Date by
Section 5.6.
Section 6.9. Notification of Certain Matters. Buyer shall give prompt
notice to Seller of (i) the occurrence, or failure to occur, of any event that
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Closing Date and (ii) any failure of Buyer to
comply with or satisfy, in any material respect, any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement. No such
notification shall affect the
<PAGE>
representations or warranties of Buyer or the conditions to Buyer's
obligations hereunder.
ARTICLE VII
CONDITIONS OF OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the purchase of the PRC Shares
on the Closing Date and to perform their other covenants and agreements in
accordance with the terms and conditions of this Agreement are subject to each
of the conditions set forth below:
Section 7.1. Representations and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for representations and
warranties that by their terms speak only as of a specified date, each of the
representations and warranties of Seller and Seller's Parent contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though made on and as of the Closing Date.
Section 7.2. Covenants and Agreements -- No Default. Neither Seller nor
Seller's Parent shall be in material default in respect of any obligation under
this Agreement and Seller and Seller's Parent shall have performed or complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by Seller or Seller's Parent prior to
or as of the Closing Date.
Section 7.3. No Material Adverse Change. Since the date of this Agreement,
none of the PRC Companies shall have suffered a change in its business or
financial condition that has had or could reasonably be expected to have a
Material Adverse Effect on the PRC Companies taken as a whole
<PAGE>
Section 7.4. H-S-R Act. All applicable waiting periods in respect of
the transactions contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
Section 7.5. Consents. Seller and Seller's Parent shall have obtained all
third-party and governmental consents required for the consummation of the
transactions contemplated by this Agreement that are set forth in Schedule 7.5.
Section 7.6. Closing Documents. Seller and Seller's Parent shall have
provided Buyer with all of the documents required by Section 9.2 to be delivered
at Closing by Seller.
Section 7.7. No Orders; Legal Proceedings. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any Governmental
Entity which prohibits or restricts the transfer of the PRC Shares. No Action
shall be pending or threatened by any Governmental Entity (i) challenging or
seeking to make illegal or otherwise directly or indirectly restrain or prohibit
or make materially more costly the consummation of the transactions contemplated
hereby, or seeking to obtain material damages in connection with such
transactions or (ii) which has had or would be reasonably likely to have a
Material Adverse Effect on the PRC Companies taken as a whole, and no Order
shall have been issued which would have the effect of or require anything set
forth in clause (i) or clause (ii) above.
Section 7.8. Resignation of Directors. Any directors of the PRC
Companies who are also employees or officers of Seller's Parent or any of its
Affiliates (other than the PRC Companies) shall have submitted their
resignations in writing to such PRC Companies.
<PAGE>
Such resignations of directors (in such capacity) shall be effective as of the
Closing.
Section 7.9. Resignation of Officers. Any officers or employees of the
PRC Companies who are also employees or officers of Seller's Parent or any of
its Affiliates (other than the PRC Companies) shall have submitted their
resignations in writing to such PRC Companies. Such resignations of officers and
employees (in such capacity) shall be effective as of the Closing.
Section 7.10 OCI Clauses. The OCI Clauses contained in contracts or
agreements to which any of the PRC Companies is a party or by which any of the
PRC Companies is obligated could not reasonably be expected in the aggregate to
have a Material Adverse Effect on either the PRC Companies taken as a whole or
any significant business division or line of business of Buyer and its
Subsidiaries.
ARTICLE VIII
CONDITIONS OF OBLIGATIONS OF SELLER AND SELLER'S PARENT
The obligation of Seller and Seller's Parent to consummate the sale of
the PRC Shares on the Closing Date and to perform its other covenants and
agreements in accordance with the terms and conditions of this Agreement are
subject to each of the conditions set forth below.
Section 8.1. Representations and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for representations and
warranties that by their terms speak only as of a specified date, each of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in
<PAGE>
all material respects on and as of the Closing Date as though made on and as of
the Closing Date.
Section 8.2. Covenants and Agreements -- No Default. Buyer shall not be
in material default in respect of any obligation under this Agreement and Buyer
shall have performed or complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by Buyer
prior to or as of the Closing Date.
Section 8.3. H-S-R Act. All applicable waiting periods in respect of
the transactions contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
Section 8.4. Consents. Buyer shall have obtained all third-party and
governmental consents required for the consummation of the transactions
contemplated by this Agreement that are set forth in Schedule 8.4.
Section 8.5. Closing Documents. Buyer shall have provided Seller with all
of the documents required by Section 9.3 to be delivered at Closing by Buyer.
Section 8.6. No Orders; Legal Proceedings. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity
which prohibits or restricts the transfer of the PRC Shares. No Action shall be
pending or threatened by any Governmental Entity challenging or seeking to make
illegal or otherwise directly or indirectly restrain or prohibit or make
materially more costly the consummation of the transactions contemplated hereby,
or seeking to obtain material damages in connection with such transactions and
no Order shall
<PAGE>
have been issued which would have the effect of or require anything set forth
above.
ARTICLE IX
CLOSING
Section 9.1. Closing. The Closing shall take place at the offices of
O'Melveny & Myers, 555 13th Street, N.W., Washington, D.C. 20004, at 10:00 a.m.,
on January 31, 1996, or at such other place and at such other time and date as
may be mutually agreed upon by Buyer and Seller, upon fulfillment of (a) all the
conditions set forth in ARTICLE VII that have not been waived by Buyer, and (b)
all the conditions set forth in ARTICLE VIII that have not been waived by
Seller. If such conditions have not been fulfilled or waived by such date, the
Closing shall take place within five business days after fulfillment or waiver
of all such conditions but in no event later than March 31, 1996, unless
otherwise mutually agreed to in writing by Buyer and Seller. All proceedings to
be taken and all documents to be executed and delivered by Seller and Seller's
Parent in connection with the consummation of the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to Buyer and its
counsel. All proceedings to be taken and all documents to be executed and
delivered by Buyer in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Seller and its counsel. All proceedings to be taken and all documents to be
executed and delivered at the Closing shall be deemed to have been taken and
executed simultaneously, and no proceedings shall be deemed taken
<PAGE>
nor any documents executed or delivered until all have been taken, executed or
delivered.
Section 9.2. Documents to be Delivered by Seller and Seller's Parent. At
the Closing, Seller and Seller's Parent shall deliver, or shall cause to be
delivered, to Buyer the following:
(a) Certificates representing the PRC Shares, which
certificates shall be duly endorsed in blank or, in lieu thereof, shall have
affixed thereto stock powers executed in blank and in proper form for transfer
on the books of PRC;
(b) A certificate of the Secretary or an Assistant Secretary
of each of Seller and Seller's Parent, dated the Closing Date, setting forth the
resolutions of the Boards of Directors of Seller and Seller's Parent,
respectively, authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and certifying that such
resolutions have not been amended or rescinded and are in full force and effect;
(c) A certificate of a senior executive officer of each of
Seller and Seller's Parent certifying that (i) except as otherwise permitted or
contemplated by this Agreement and except for representations and warranties
that by their terms speak as of a specified date other than the Closing Date
each of the representations and warranties of Seller and Seller's Parent
contained in this Agreement are true and correct in all material respects on and
as of the Closing Date as though made on and as of the Closing Date and (ii)
neither Seller nor Seller's Parent is in material default in respect of any
obligation under this Agreement and Seller and Seller's Parent have performed or
complied in all
<PAGE>
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by Seller or Seller's Parent prior to or as of
the Closing Date;
(d) A good standing certificate and certified charter
documents, dated as of a date reasonably close to the Closing Date,
in respect of PRC;
(e) Modifications to Schedules 3.10, 3.12 and 3.13 reflecting
events occurring subsequent to the date hereof, provided that (i) no item may be
added to Schedule 3.10 unless (x) Seller confirms in writing that such item is a
Pre-Closing Claim subject to Section 11.4 hereof and (y) Seller acknowledges in
writing that Buyer may assert such item, alone or together with other matters,
as the basis of a material adverse change as contemplated by Section 7.3 (it
being understood that such acknowledgement is not a concession by Seller that
such item constitutes a material adverse change as contemplated by Section 7.3),
(ii) no item may be deleted from Schedule 3.12, and (iii) no Material Contract
shall be added to or deleted from Schedule 3.13 unless a PRC Company entered
into or terminated such Material Contract, or permitted such Material Contract
to expire, in compliance with Section 5.2; and
(f) Such other documents, instruments or agreements as
may be reasonably requested by Buyer to effectuate the transactions
contemplated by this Agreement.
Section 9.3. Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver, or cause to be delivered, to Seller and Seller's Parent the
following:
<PAGE>
(a) A wire transfer of funds to the account designated
by Seller in an amount equal to the Purchase Price, as provided in
Section 2.2;
(b) A certificate of the Secretary or an Assistant Secretary
of Buyer, dated the Closing Date, setting forth copies of the resolutions of the
Board of Directors of Buyer authorizing the execution and delivery of this
Agreement and the Consummation of the transactions contemplated hereby, and
certifying that such resolutions have not been amended or rescinded and are in
full force and effect;
(c) A certificate of a senior executive officer of each of
Buyer certifying that (i) except as otherwise permitted or contemplated by this
Agreement and except for representations and warranties that by their terms
speak as of a specified date other than the Closing Date, each of the
representations and warranties of Buyer contained in this Agreement are true and
correct in all material respects on and as of the Closing Date as though made on
and as of the Closing Date and (ii) Buyer is not in material default in respect
of any obligation under this Agreement and Buyer has performed or complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by Buyer prior to or as of the
Closing Date; and
(d) Such other documents, instruments or agreements as may be
reasonably requested by Seller and Seller's Parent to effectuate the
transactions contemplated by this Agreement.
ARTICLE X
TERMINATION
<PAGE>
Section 10.1. Right to Terminate Agreement. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to Closing only as follows:
(a) by mutual written consent of Buyer and Seller and
Seller's Parent; and
(b) by any of the parties to this Agreement, upon written
notice to the other parties, at any time after March 31, 1996, except that the
right to terminate this Agreement pursuant to this Section 10.1(b) shall not be
available to (i) Seller and Seller's Parent if the failure to consummate the
Closing on or before such date was caused by or resulted from Seller's or
Seller's Parent's failure to fulfill any of its obligations under this Agreement
or (ii) Buyer if the failure to consummate the Closing on or before such date
was caused by or resulted from Buyer's failure to fulfill any of their
obligations under this Agreement.
Section 10.2.Effect of Termination.
(a) In the event this Agreement is terminated pursuant
to Section 10.1(a), then all further obligations of the parties hereto shall
become null and void and no party shall have any liability to any other party.
(b) In the event this Agreement is terminated by Buyer
pursuant to Section 10.1(b) at a time when any of the conditions to its
obligations set forth in ARTICLE VII shall not have been satisfied or waived in
writing, then Buyer shall be entitled to pursue all legal and equitable remedies
for breach of contract and damages, including but not limited to any
out-of-pocket expenses actually incurred by Buyer.
<PAGE>
(c) In the event this Agreement is terminated by Seller and
Seller's Parent pursuant to Section 10.1(b) at a time when any of the conditions
to their obligations set forth in ARTICLE VIII shall not have been satisfied or
waived in writing, then Seller and Seller's Parent shall be entitled to pursue
all legal and equitable remedies for breach of contract and damages, including
but not limited to any out-of-pocket expenses actually incurred by Seller and
Seller's Parent.
(d) Notwithstanding the provisions of this Section 10.2, the
obligations of the parties hereto under the Confidentiality Agreement shall
survive any termination of this Agreement by either party to this Agreement.
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS; INDEMNIFICATION
Section 11.1. Taxes.
(a) Seller's Parent or Seller (on behalf of the PRC Companies)
shall timely and accurately file or cause to be filed all Tax Returns for Income
Taxes and all foreign Taxes (including the filing of any state or local Tax
Returns that include the result of the Section 338(h)(10) Election) of the PRC
Companies due after the date hereof for any taxable year or taxable period
ending on or before the Closing Date, including any taxable period that ends at
the end of the Closing Date as a result of the Section 338(h)(10) Election (a
"Pre-Closing Period").
(b) Subject to the provisions of Section 11.1(c), Seller's
Parent and Seller shall pay and be responsible for, shall indemnify and hold
harmless Buyer and the PRC Companies (the "Buyer Group") against, and shall be
entitled to all refunds and credits
<PAGE>
of, (i) Income Taxes and all foreign Taxes (together with reasonable attorneys'
fees and any legal or other expenses for investigating or defending any actions
with respect to such Taxes) with respect to the PRC Companies for any
Pre-Closing Period, including any liability for Income Taxes and all foreign
Taxes arising out of the inclusion of any of the PRC Companies in any
Consolidated Returns, and further including any liability for Income Taxes
arising as a result of the Section 338(h)(10) Election, and (ii) all Taxes
(together with reasonable attorneys' fees and any legal or other expenses for
investigating or defending any actions with respect to Taxes) with respect to
Seller's Parent and any member of the Affiliated Groups (other than the PRC
Companies) for all taxable periods whatsoever. Buyer shall, promptly after the
receipt thereof, remit to Seller's Parent any Income Tax or foreign Tax refund
received by Buyer, Buyer's Parent or any of the PRC Companies to the extent such
refund relates to a Pre-Closing Period. Seller's Parent or Seller shall
promptly, after the receipt thereof, remit to Buyer any Tax refund received by
Seller's Parent or Seller to the extent such refund relates to any Tax paid by
or on behalf of the PRC Companies, other than an Income Tax or foreign Tax
refund related to a Pre-Closing Period. Notwithstanding the provision of this
Section 11.1(b), neither Seller nor Seller's Parent shall be responsible for or
shall be required to indemnify or hold harmless Buyer or any of the PRC
Companies for any Taxes that are reimbursed under any contracts of any of the
PRC Companies; provided, however, that Buyer shall cause the appropriate PRC
Company to use its reasonable best efforts to seek reimbursement for such Taxes
under the applicable contract.
<PAGE>
(c) No member of the Buyer Group shall be entitled to
indemnification under Section 11.1(b) for any Taxes for which a reserve with
respect to such Taxes is included in or taken into account in the calculation or
determination of the Final Net Asset Amount, except for the Taxes exceeding the
amount of such reserve.
(d) Buyer shall be responsible for, and shall indemnify and
hold harmless Seller and Seller's Parent against, (i) the Taxes described in
Section 12.3, (ii) the timely preparation and filing of all Tax Returns of the
PRC Companies for any taxable year or taxable period beginning after the Closing
Date (the "Post-Closing Period"), and (iii) the preparation and filing of all
Tax Returns required to be filed by any of the PRC Companies after the Closing
Date other than those Tax Returns for Income Taxes and all foreign Taxes
described in Section 11.1(a).
(e) Buyer shall pay and be responsible for, shall indemnify
and hold harmless Seller and Seller's Parent against, and shall be entitled to
all refunds and credits of, all Taxes (together with reasonable attorneys' fees
and any legal or other expenses for investigating or defending any actions with
respect to Taxes) with respect to the PRC Companies for any Post-Closing Period.
(f) Subject to the provisions of Section 11.2, if, for any
federal, State or local Income Tax or foreign Tax purpose, a taxable year or
taxable period of any of the PRC Companies which begins before the Closing Date
and ends after the Closing Date (a "Bridge Period") does not terminate on the
Closing Date, and Buyer has the responsibility to pay Taxes for all or a portion
of the Bridge Period, the parties hereto will, to the extent permitted by
<PAGE>
applicable Law, elect with the relevant Tax Authority to treat the portion of
the Bridge Period on or before the Closing Date (a "Seller Period") for all
purposes as a short taxable period ending as of the close of the Closing Date
and such short taxable period shall be treated as a Pre-Closing Period for
purposes of this Agreement and the portion of the Bridge Period after the
Closing Date (the "Buyer Period") shall be treated as a Post-Closing Period for
purposes of this Agreement. In any case where applicable Law does not permit
such an election to be made, then, for purposes of this Agreement, Income Taxes
and all foreign Taxes for the Bridge Period shall be allocated between the
Seller Period and the Buyer Period using an interim-closing-of-the-books method
assuming that such taxable period ended at the close of business on the Closing
Date, except that exemptions, allowances or deductions that are calculated on an
annual basis (such as the deduction for depreciation) shall be apportioned on a
per diem basis.
(g) Buyer shall cause the PRC Companies to prepare and file
all Tax Returns and pay all Taxes due, if any, with respect to the PRC Companies
for any Bridge Period that does not terminate on the Closing Date, for which it
is responsible to pay Taxes in whole or in part, provided that Seller satisfies
its obligations as set forth in this Section 11.1(g). Seller shall promptly
deliver to Buyer work papers relating to Taxes due for the Seller Period,
certified by a duly authorized officer of Seller, setting forth in detail all
information required to complete the applicable Tax Returns. Upon notice from
Buyer, Seller shall pay to Buyer the Income Taxes and all foreign Taxes for the
Seller Period on or before the second business day prior to the due date for the
<PAGE>
payment of such Income Taxes and all foreign Taxes, by wire transfer of
immediately available funds to the account designated by Buyer. In the event
that Seller fails to make the payments required by this Section 11.1(g) to Buyer
prior to the date any payment for Income Taxes and all foreign Taxes as
described in this Section 11.1(g) is due, such required payment shall bear
interest from such due date until paid, at the underpayment rate of interest
determined under Section 6621 of the Code.
(h) Buyer shall have exclusive control over and responsibility
to conduct any Contest for a Post-Closing Period and for a Bridge Period if the
Contest for a Bridge Period relates solely to the Buyer; provided, however, that
Buyer shall not enter into any agreement in compromise or settlement of such
Contest which could affect a Pre-Closing Period or a Seller Period without the
written consent of Seller.
(i) Unless Buyer agrees in writing to waive any claim for
indemnification under Section 11.1(b) with respect thereto, Seller and Seller's
Parent shall have exclusive control over and responsibility to conduct any
Contest for a Pre-Closing Period and for a Bridge Period if the Contest for a
Bridge Period relates solely to the Seller Period; provided, however, that
neither Seller not Seller's Parent shall enter into any agreement in compromise
or settlement of such Contest which could affect a Post-Closing Period or a
Buyer Period without the written consent of Buyer.
(j) Buyer shall notify Seller's Parent in writing promptly
upon receipt by any PRC Company of notice of any Contest or assessment relating
thereto for Pre-Closing Period or a Bridge Period. Failure of Buyer to so notify
Seller's Parent shall not
<PAGE>
relieve Seller's Parent or Seller from any liability under this Section 11.1,
except to the extent it is proven that Seller's Parent or Seller suffered actual
prejudice in connection with or in defending against a Contest. Seller or
Seller's Parent shall notify Buyer in writing promptly upon receipt by Seller or
Seller's Parent of notice of any Contest or assessment relating to a
Post-Closing Period or a Bridge Period.
(k) Buyer and Seller agree to jointly control and conduct any
Contest for a Bridge Period that relates to both the Seller Period and the Buyer
Period. Seller, Seller's Parent and Buyer agree to cooperate fully with each
other with respect to defending or answering any such Contest and to provide
each other with all materials, information and documents as reasonably requested
by the other. Neither Buyer, Seller, nor Seller's Parent shall be liable for any
portion of any settlement of any Contest for a Bridge Period that relates to
both the Seller Period and the Buyer Period effected without its written
consent, provided such consent was not unreasonably withheld.
(l) Except as otherwise provided in this Agreement and subject
to the allocation of liabilities for Taxes, Seller, Seller's Parent and Buyer
agree to cooperate fully with each other with respect to the preparation of all
Tax Returns and with respect to all matters relating to Taxes, and to keep each
other advised as to any issue relating to Taxes which could have a bearing on
such other party's responsibilities hereunder.
(m) In any Contest controlled by Seller, Buyer will take, and
will cause each PRC Company to take, such action as Seller may by written notice
reasonably request in connection with
<PAGE>
such Contest (including the payment of a Tax preparatory to filing a claim for
refund of such Tax; provided that Seller shall first pay the amount of such Tax
to Buyer).
Section 11.2. Section 338(h)(10) Election.
(a) Seller, Seller's Parent, and each of the PRC
Companies agree, if so directed by the Buyer, to join with Buyer in making an
election under Section 338(h)(10) of the Code (and any corresponding elections
under state, local or foreign tax law) (collectively, a "Section 338(h)(10)
Election") with respect to the purchase and sale of the stock of the PRC
Companies hereunder. Seller will pay any Income Tax, including any liability of
the PRC Companies for Income Tax resulting from the application to it of Treas.
Reg. ss. 1.338(h)(10)-1(f)(5), attributable to the making of the Section
338(h)(10) Election (but only to the extent that application causes an increase
in taxable gain resulting from the deemed purchase of assets pursuant to Section
338 of the Code) and will indemnify the Buyer and the PRC Companies against any
Material Adverse Effect arising out of any failure to pay such Income Tax. If
the Section 338(h)(10) Election is made, Seller and Seller's Parent will also
pay any state, local or foreign Income Tax (and indemnify Buyer and the PRC
Companies against any Material Adverse Effect arising out of any failure to pay
such Income Tax) attributable to an election under state, local, or foreign law
similar to the election available under Section 338(g) of the Code (or which
results from the making of an election under Section 338(g) of the Code) with
respect to the purchase and sale of the stock of the PRC Companies hereunder.
<PAGE>
(b) Except as provided below, on or before the date that is 60
days after the Closing Date, Buyer shall prepare a schedule, in the form of
Exhibit C, which reflects an allocation (the "Allocation") of Buyer's "adjusted
grossed-up basis" and Seller's "deemed sale price" among the Class I, Class II,
Class III and Class IV Assets (as such terms are defined in Section 338 of the
Code and the Department of Treasury regulations thereunder). Provided the
Allocation is reasonable, Seller's Parent agrees to accept the Allocation. Buyer
shall be under no obligation to have the Allocation prepared or approved by an
independent appraiser. Buyer shall be responsible for the preparation of all
forms and filings required to be filed with any Tax Authority to claim the
Section 338(h)(10) Election and Buyer and Seller's Parent shall reflect the
Allocation in all Income Tax returns in which the Section 338(h)(10) Election is
relevant, the effect of which is to treat the purchase of the shares of PRC by
Buyer as the purchase of the assets of PRC by Buyer. If the Final Net Asset
Amount is not determined within 60 days of the Closing Date, then Exhibit C
shall be prepared promptly after the Final Net Asset Amount is determined.
Section 11.3. Indemnification by Buyer. Buyer agrees to indemnify,
defend and hold harmless Seller, Seller's Parent and their respective directors,
officers, employees, Affiliates, agents, successors and assigns from and against
any and all Losses suffered or incurred by an Indemnified Party resulting from,
related to or arising out of:
<PAGE>
(a) any inaccuracy in any of the representations and
warranties made by Buyer in this Agreement or in any agreement or
certificate delivered pursuant hereto or in connection herewith;
(b) any breach or nonperformance of any of the covenants of
Buyer or its Affiliates contained in this Agreement (including those in Sections
8.1 and 8.2) or in any agreement or document delivered pursuant hereto or in
connection herewith;
(c) any Post-Closing Claim, but only to the extent that the
Losses suffered or incurred result from facts and circumstances that occurred
after the Closing Date (excluding Losses suffered or incurred resulting from
facts or circumstances that occur after the Closing Date but which relate to
Hazardous Substances present at properties or facilities of the PRC Companies on
the Closing Date); and
(d) any Guarantees (other than those relating to payments
under the "PRC Supplemental Executive Retirement Plan") of Seller's Parent (or
any of its Affiliates) to the extent they were issued for the benefit of Persons
doing business with any of the PRC Companies. To the extent, but only to the
extent, that any Loss for which Buyer has indemnification obligations under
Section 11.3(c) arises as a result of any fact, circumstance or condition that
also causes the inaccuracy of any representation or warranty of Seller, Seller's
Parent or PRC contained in this Agreement or in any agreement or certificate
delivered pursuant hereto or in connection herewith, or otherwise is the basis
for an indemnification claim by Buyer under Section 11.4, Buyer shall not have
liability under Section 11.3(c).
<PAGE>
Section 11.4. Indemnification by Seller and Seller's Parent. Seller and
Seller's Parent agree, jointly and severally, to indemnify, defend and hold
harmless Buyer, the PRC Companies and their respective directors, officers,
employees, Affiliates, agents, successors and assigns from and against any and
all Losses suffered or incurred by an Indemnified Party resulting from, relating
to, or arising out of:
(a) any inaccuracy in any of the representations and
warranties made by Seller, Seller's Parent or the PRC Companies in this
Agreement or in any agreement or certificate delivered pursuant hereto or in
connection herewith;
(b) any breach or nonperformance of any of the covenants of
Seller, Seller's Parent or the PRC Companies or their Affiliates contained in
this Agreement (including those in Sections 8.1 and 8.2) or in any agreement or
document delivered pursuant hereto or in connection herewith;
(c) any Pre-Closing Claim (including Pre-Closing Claims listed
on, or arising from matters listed on, Schedules to this Agreement), but only to
the extent that the Losses suffered or incurred result from facts and
circumstances that occurred on or prior to the Closing Date;
(d) any divestitures, sales or other dispositions by any PRC
Company of divisions, product lines, businesses, real property or intellectual
property (other than dispositions of Intellectual Property in the ordinary
course of business in connection with the provision of products or services to
customers of the PRC Companies), Subsidiaries and interests in other Persons
effected prior to the Closing Date, whether as a result of breaches of
<PAGE>
purchase or sales agreements, under indemnification provisions, under guarantees
by a PRC Company not yet assumed by the purchaser in such divestitures, sales or
dispositions, or otherwise;
(e) actions taken by Buyer and the PRC Companies after the
Closing Date to bring into compliance with Environmental Laws as in effect at
the Closing Date any violation or noncompliance existing as of the Closing Date,
and from Losses arising from the operations of any PRC Company subsequent to the
Closing Date and prior to the correction of such items of noncompliance as a
result of such violation or noncompliance; provided that, as to Losses arising
from the operations of any PRC Company subsequent to the Closing Date action is
taken to correct such noncompliance reasonably promptly upon discovery of such
noncompliance by Buyer or any of the PRC Companies;
(f) the following employee benefit matters: (x) the
maintenance of or contribution to a Pension Plan subject to Title IV of ERISA,
or obligation to contribute to a Multiemployer Plan, by an ERISA Affiliate of
any of the PRC Companies (which ERISA Affiliate is not itself one of the PRC
Companies), (y) any post-retirement medical or life insurance benefits and (z)
any "change of control" or similar payments to be made to Employees of PRC
Companies as a result of the transactions contemplated hereby (other than any
such payments made under plans or Benefit Arrangements assumed by Buyer pursuant
to Section 6.5);
(g) the "PRC Supplemental Executive Retirement Plan"
referred to in Schedule 3.14 and the Financial Statements; and
(h) the conduct of the business of Seller, Seller's
Parent and any of its Affiliates other than the PRC Companies.
<PAGE>
For purposes of Section 11.4(a), all such representations and warranties shall
be read as if references therein to the materiality to the PRC Companies or any
of them of any condition, fact, statement, event or act (including without
limitation all references to "Material Adverse Effects" and "in all material
respects") were deleted and the effect of any such references were eliminated
altogether. Thus, for example: (i) any representation that a statement is true
and correct in all material respects shall be read as a representation that the
statement is true and correct; (ii) any representation that a condition exists
except to the extent that its failure to exist would not have a Material Adverse
Effect on the PRC Companies shall be read as a representation that such
condition exists; and (iii) any representation that no incidents of a specific
nature have occurred that would have a Material Adverse Effect on the PRC
Companies shall be read as a representation that no incidents of such nature
have occurred.
Section 11.5. Procedure.
(a) Promptly after acquiring knowledge of any claim in respect
of which a party (the "Indemnified Party") may seek indemnification from the
other party (the "Indemnifying Party") hereunder, the Indemnified Party shall
give written notice thereof to the Indemnifying Party describing such claim and
demanding indemnification hereunder. Notwithstanding the foregoing, failure to
provide the aforementioned notice will not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party under this Agreement, except
to the extent that (i) such failure to provide notice causes the amounts paid by
the Indemnifying Party to be greater than they would have been had such
<PAGE>
notice been given on a reasonably timely basis or (ii) such notice is not
delivered to the Indemnifying Party prior to the expiration of any applicable
survival period under Section 11.6. The Indemnifying Party will be entitled to
assume control of the defense of any claim, and to settle or compromise such
claim in its discretion, subject to the provisions of Sections 11.5(b) and
11.5(c). After written notice by the Indemnifying Party to the Indemnified Party
of its election to assume control of the defense of any such action, the
Indemnifying Party shall not be liable to such Indemnified Party hereunder for
any legal expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof. Notwithstanding anything in this Section 11.5 to the
contrary, if the Indemnifying Party does not promptly assume control of the
defense of such action as provided in this Section 11.5, the Indemnified Party
shall have the right to defend such action in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor
(subject, if applicable, to the limitations contained in Section 11.7). An
Indemnifying Party may, at its option and expense, participate in the defense of
any indemnifiable claim.
(b) To the extent that any of the Losses by any of the Persons
entitled to indemnification under Section 11.3 or Section 11.4 relate to facts
and circumstances that occur both prior to and after the Closing, or relate to
both a Pre-Closing Claim and a Post-Closing Claim, then the Indemnifying Party
and the Indemnified Party shall jointly determine at all times thereafter the
actions
<PAGE>
to be taken with respect to such claims and the control, investigation,
prosecution, defense and settlement thereof.
(c) Neither the Indemnifying Party nor the Indemnified Party
shall, without the written consent of the other party, settle or compromise any
indemnifiable claim or permit a default or consent to entry of any judgment. If
a settlement offer solely for money damages is made by the applicable third
party claimant, and the Indemnifying Party notifies the Indemnified Party in
writing of the Indemnifying Party's willingness to accept the settlement offer
and pay the amount called for by such offer without reservation of any rights or
defenses against the Indemnified Party, the Indemnified Party may withhold its
consent and continue to contest such claim, free of any participation by the
Indemnifying Party, and the amount of any ultimate liability with respect to
such indemnifiable claim that the Indemnifying Party shall have an obligation to
pay thereunder (regardless of the ultimate Loss sustained by the Indemnified
Party) shall be equal to the amount of the settlement offer that the Indemnified
Party declined to accept plus the previously unpaid Losses of the Indemnified
Party relating to such indemnifiable claim through the date of its rejection of
the settlement offer. If the Indemnifying Party makes any payment on any
indemnifiable claim, the Indemnifying Party shall be subrogated, to the extent
of such payment, to all rights and remedies of the Indemnified Party to any
insurance benefits or other claims of the Indemnified Party with respect to such
claim.
(d) With respect to any claim for which Seller or Seller's
Parent is the Indemnifying Party and for which the Indemnifying Party has
assumed control of the defense, Buyer shall
<PAGE>
make employees of the PRC Companies reasonably available to assist the
Indemnifying Party in defending such claim, provided that the costs of providing
such assistance are paid by the Indemnifying Party or, if paid by Buyer or any
PRC Company, reimbursed to Buyer or the PRC Company, as appropriate, by the
Indemnifying Party.
(e) Any amounts to which an Indemnified Party is entitled
under this Article shall be paid by the Indemnifying Party promptly upon
request.
Section 11.6. Survival.
(a) The representations and warranties contained in or made
pursuant to this Agreement (other than those set forth in Section 3.30) shall
survive the Closing as provided in this Section 11.6(a). The representations and
warranties contained in or made pursuant to Section 3.30 shall expire on the
Closing Date. The representations and warranties contained (w) in Sections 3.1,
3.2 and 3.3, shall survive indefinitely, (x) in Sections 3.12 and 3.26 shall
expire on the third anniversary of the Closing Date, (y) in Section 3.16 shall
expire at the end of the applicable statute of limitations period (including
extensions) for the Tax matters referenced therein, and (z) in Section 3.17
shall expire on the fifth anniversary of the Closing Date. Except as otherwise
provided in this Section 11.6, all other representations and warranties set
forth in this Agreement or in any agreement or certificate delivered pursuant
hereto or in connection herewith shall expire on the second anniversary of the
Closing Date. The indemnifications set forth in Sections 11.1 and 11.2 shall
survive until the end of the applicable statute of limitations period (including
extensions) for the Tax matters referenced therein. The
<PAGE>
indemnification set forth in Sections 11.3(a) and 11.4(a) shall survive for as
long as the pertinent representation and warranty survives. The indemnification
set forth in Sections 11.3(c), 11.4(c) and 11.4(f) shall survive until the third
anniversary of the Closing Date. The indemnification set forth in Section
11.4(e) shall survive until the fifth anniversary of the Closing Date. The
indemnification set forth in Sections 11.3(b), 11.3(d), 11.4(b), 11.4(d),
11.4(g) and 11.4(h) shall survive indefinitely.
(b) Except as set forth in this Section 11.6(b), any matter as to which
a claim has been asserted by notice to the other party that is pending or
unresolved at the end of any applicable limitation or survival period, including
any matter disclosed in this Agreement, shall continue to be covered by this
Article XI notwithstanding any applicable statute of limitations or the
expiration of any survival period until such matter is finally terminated or
resolved. Notwithstanding the previous sentence, the indemnification obligations
of Seller and Seller's Parent under Section 11.4(c) shall not survive beyond the
third anniversary of the Closing Date unless an Action shall have been commenced
as of the third anniversary of the Closing Date. Notice demanding
indemnification for the items set forth on Schedule 3.10 (as modified under
Section 9.2(e)) is acknowledged by the parties to have been given as of the
Closing Date.
Section 11.7. Limitations on Indemnification.
(a) Buyer shall not be required to indemnify Seller,
Seller's Parent or any of their Affiliates under Section 11.3(a) unless the
aggregate of all amounts for which indemnity would otherwise be payable
thereunder exceeds $1,500,000, and, in such
<PAGE>
event, Buyer shall be responsible for only the amount in excess of such
$1,500,000. The total indemnification that Buyer may be required to pay under
Section 11.3(a) shall not exceed $100,000,000.
(b) Seller and Seller's Parent shall not be required to
indemnify Buyer or any of its Affiliates under Sections 11.4(a) and 11.4(e)
unless the aggregate of all amounts for which indemnity would otherwise be
payable thereunder exceeds $1,500,000 (for both such Sections in the aggregate),
and, in such event, Seller and Seller's Parent shall be responsible for only the
amount in excess of such $1,500,000. The total indemnification that Seller and
Seller's Parent may be required to pay under Sections 11.4(a) and 11.4(e) (in
the aggregate) shall not exceed $100,000,000.
(c) Seller and Seller's Parent shall not be required to
indemnify Buyer or any of its Affiliates under Section 11.4(c) (other than those
items set forth on Schedule 3.10 (or which otherwise were pending as of the
Closing Date) and any Carpal Tunnel Litigation) unless the aggregate of all
amounts for which indemnity would otherwise be payable thereunder exceeds
$1,500,000, and, in such event, Seller and Seller's Parent shall be responsible
for only the amount in excess of such $1,500,000. No credit will be given to
Seller and Seller's Parent for any reserves for litigation set forth on the
Financial Statements or included in the calculation of the Final Net Asset
Amount. Those items set forth on Schedule 3.10 and all Carpal Tunnel Litigation
are indemnifiable from the first dollar of Loss by Buyer or any of its
Affiliates.
(d) For purposes of Section 11.4(g), no credit will be
given to Seller and Seller's Parent for any reserves for the "PRC
<PAGE>
Supplemental Executive Retirement Plan" set forth on the Financial Statements or
included in the calculation of the Final Net Asset Amount.
(e) For purposes of Section 11.3, any claim for
indemnification that might be brought under more than one provision of Section
11.3 may be brought under any applicable provision at Seller's discretion. For
purposes of Section 11.4, any claim for indemnification that might be brought
under more than one provision of Section 11.4 may be brought under any
applicable provision at Buyer's discretion.
(f) Losses for which an Indemnified Party shall be indemnified
hereunder shall be net of any insurance proceeds received by the Indemnified
Party from insurance companies, including affiliated insurance companies.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Limitation of Representations and Warranties.
(a) The parties hereto acknowledge and agree that
neither Seller nor Seller's Parent makes, and neither Seller nor Seller's Parent
has made, any representations or warranties relating to Seller, Seller's Parent
or any of the PRC Companies, or any of the transactions contemplated by this
Agreement, other than the representations and warranties expressly set forth in
this Agreement or in any agreement or certificate delivered pursuant hereto or
in connection herewith. Without limiting the generality of the disclaimer set
forth in the preceding sentence, other than the representations and warranties
expressly set forth in this Agreement or in any agreement or certificate
delivered pursuant
<PAGE>
hereto or in connection herewith, neither Seller nor Seller's Parent makes, has
made or shall be deemed to have made any representations or warranties, in any
presentation or written information relating to the business of any of the PRC
Companies given or to be given in connection with the transactions contemplated
by this Agreement, in any filing made or to be made by or on behalf of any of
the PRC Companies with any Governmental Entity, and no statement, made in any
such presentation or written materials, made in any such filing or contained in
any such other information shall be deemed a representation or warranty
hereunder or otherwise. No Person has been authorized by Seller, Seller's Parent
or any of the PRC Companies to make any representation or warranty in respect of
Seller, Seller's Parent or any of the PRC Companies, or in connection with the
transactions contemplated by this Agreement, unless contained in this Agreement.
(b) Whenever any statement herein or in any schedule,
exhibit, certificate or other document delivered to any party pursuant to this
Agreement is made "to [its] knowledge" or "to [its] best knowledge" or words of
similar intent or effect of any party or its representative, such statement
shall be deemed to be made to the best knowledge of (x) with respect to the PRC
Companies, Senior Vice Presidents or higher ranking officials of PRC, (y) with
respect to Seller and Seller's Parent, the President, Vice President and Chief
Financial Officer and Vice President and General Counsel of Seller's Parent, and
shall be deemed to include a representation that a reasonable investigation of
the subject matter thereof has been conducted, and (z) with respect to Buyer,
Senior Vice Presidents or higher ranking officials of Buyer. With
<PAGE>
respect to Seller and Seller's Parent, a reasonable investigation shall mean
that senior management of the pertinent corporation have shown the Employees set
forth on Schedule 12.1(b) hereto the relevant statement and have consulted with
such individuals as to whether they have knowledge of any fact or circumstance
that would make such statement untrue.
Section 12.2. Disclosure. Certain information set forth in the
Schedules has been included and disclosed solely for informational purposes and
may not be required to be disclosed pursuant to the terms and conditions of this
Agreement. The disclosure of any such information shall not be deemed to
constitute an acknowledgement or agreement that the information is required to
be disclosed in connection with the representations and warranties made in this
Agreement or that the information is material, nor shall any information so
included and disclosed be deemed to establish a standard of materiality or
otherwise used to determine whether any other information is material.
Section 12.3. Expenses; Certain Taxes. Except as otherwise contemplated
by Section 10.2, all legal, accounting and other costs and fees incurred by
Seller or Seller's Parent in connection with the transactions contemplated by
this Agreement shall be borne and paid for by Seller or Seller's Parent. Except
as otherwise contemplated by Section 10.2, all legal, accounting and other costs
and fees incurred by Buyer in connection with the transactions contemplated by
this Agreement shall be borne and paid for by Buyer. All Taxes (other than taxes
on, relating to or measured by income or gains), stamp duties, notarial,
registration and recording fees and similar Taxes resulting from or relating to
the
<PAGE>
transfer of the PRC Shares to Buyer shall be borne one-half by Buyer and
one-half by Seller (including any Taxes (other than Income Taxes) on the deemed
sale of assets under the Section 338(h)(10) Election). Buyer and Seller agree to
treat the transactions contemplated by this Agreement as a sale of the PRC
Shares for purposes of such Taxes.
Section 12.4. Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties hereto in respect of the matters
set forth herein, and all prior negotiations, writings and understandings
relating to the subject matter of this Agreement, other than the Confidentiality
Agreement, are merged herein and are superseded and cancelled by this Agreement.
Other than as set forth in this Agreement, no representations, warranties,
covenants, agreements or conditions, express or implied, whether by statute or
otherwise, have been made by the parties hereto.
Section 12.5. Amendment and Waiver. This Agreement may be amended,
modified, supplemented or changed in whole or in part only by an agreement in
writing making specific reference to this Agreement and executed by each of the
parties hereto. Any of the terms and conditions of this Agreement may be waived
in whole or in part, but only by an agreement in writing making specific
reference to this Agreement and executed by the party that is entitled to the
benefit thereof.
Section 12.6. Binding Agreement and Successors. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that this
Agreement and the rights of
<PAGE>
the parties hereunder may not be assigned, and the obligations of the parties
hereunder may not be delegated, in whole or in part, without the prior written
consent of the other party hereto, except that Buyer may assign its rights
hereunder to any wholly-owned Subsidiary of Buyer so long as Buyer is not
released from its obligations hereunder. If Seller's Parent in one or a series
of transactions sells, disposes of or otherwise transfers all or substantially
all of its assets, prior to any such sales, dispositions or transfers, Seller's
Parent shall, without being released from its obligations hereunder, cause the
transferee to assume the obligations of Seller's Parent under this Agreement.
Section 12.7. No Third Party Beneficiaries. Other than as specifically
provided in Sections 11.3 and 11.4, nothing in this Agreement is intended or
shall be construed to confer upon any Person other than the parties hereto and
their Subsidiaries and Affiliates any rights or remedies.
Section 12.8. Notices. Any notice, request, instruction or other
document or communication required or permitted to be given under this Agreement
shall be in writing and shall be deemed to be given upon delivery in person or
by telecopier, three business days after being deposited in the mail, postage
prepaid, for mailing by certified or registered mail, or one business day after
being deposited with an overnight courier, charges prepaid, as follows:
If to Seller or Seller's Parent, delivered or mailed to:
c/o The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Charles E. Fenton, Esquire
Vice President and General Counsel
Telecopier No.: (410) 716-2660
<PAGE>
with a copy delivered or mailed to:
Glenn C. Campbell, Esquire
Miles & Stockbridge,
a Professional Corporation
10 Light Street
Baltimore, Maryland 21202
Telecopier No.: (410) 385-3700
If to Buyer (or, after the Closing, any of the PRC Companies),
delivered or mailed to:
Litton Industries, Inc.
21240 Burbank Boulevard
Woodland Hills, California 91367
Attention: John E. Preston, Esquire
Senior Vice President and
General Counsel
Telecopier No.: (818) 598-2025
With a copy delivered or mailed to:
David G. Pommerening, Esquire
O'Melveny & Myers
555 13th Street, N.W.
Washington, D.C 20004
Telecopier No.: (202) 383-5414
or to such other address or addresses as may be specified in writing at any time
or from time to time by either party to the other party hereto.
Section 12.9. Further Assurances. The parties hereto each agree to
execute, make, acknowledge, and deliver such instruments, agreements and other
documents as may be reasonably required to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
Section 12.10. Article and Section Headings. The Article and Section
headings contained in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning or interpretation of this
Agreement or any of its terms and conditions.
<PAGE>
Section 12.11. Governing Law. This Agreement shall be construed and
enforced in accordance with and shall be governed by the Laws of the State of
Delaware, without regard to the conflict of laws and principles thereof.
Section 12.12. Construction. As used in this Agreement, any reference
to the masculine, feminine or neuter gender shall include all genders, the
plural shall include the singular, and the singular shall include the plural.
With regard to each and every term and condition of this Agreement and any and
all agreements and instruments subject to the terms hereof, the parties hereto
understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties hereto desire or are
required to interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the issue of which
party hereto actually prepared, drafted or requested any term or condition of
this Agreement or any agreement or instrument subject hereto.
Section 12.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
Section 12.14. Reference of Disputes to Senior Officers. Any dispute
between Seller and Seller's Parent, on the one hand, and Buyer, on the other
hand, arising out of or in connection with this Agreement or any alleged breach
hereof may, at the option of either Seller or Buyer, be submitted for discussion
and possible resolution by senior officers of Seller's Parent and Buyer, as
<PAGE>
designated by their respective chief executive officers, for a period of 30 days
(or such longer period as the parties may in particular cases so decide) before
initiating any arbitration pursuant to Section 12.15.
Section 12.15. Arbitration. Except as specifically provided for
elsewhere in this Agreement, all claims and controversies arising out of or in
connection with this Agreement shall be subject to binding arbitration in
Virginia by a single arbitrator in accordance with the commercial arbitration
rules of the American Arbitration Association ("AAA") or the existing Rules of
Practice and Procedures of the Judicial Arbitration and Mediation Services, Inc.
("JAMS"), and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. The party filing the arbitration shall
have the right to select either AAA or JAMS. The parties shall be entitled to
discovery in accordance with the provisions of Virginia law. The prevailing
party in any arbitration proceeding hereunder as determined by the arbitrator or
in any legal proceedings or actions arising from or in connection with this
Agreement shall be entitled to recover reasonable attorneys' fees and costs.
Nothing herein shall prohibit a party from seeking equitable relief in a court
of law to maintain the status quo while an arbitration is pending hereunder. The
parties agree that the arbitrator shall not have the right to award punitive
damages.
<PAGE>
IN WITNESS WHEREOF, Seller, Seller's Parent, PRC and Buyer have
executed this Agreement as of the day and year first above written.
THE BLACK & DECKER CORPORATION
By: /s/ Charles E. Fenton
Title: Vice President and General
Counsel
PRC INVESTMENTS INC.
By: /s/ Charles E. Fenton
Title: Vice President
PRC INC.
By: /s/ Charles E. Fenton
Title: Vice President
LITTON INDUSTRIES, INC.
By: /s/ H. Thomas Hicks
Title: Vice President
Schedules and Exhibits omitted.
<PAGE>
<TABLE>
Exhibit 11(a)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Millions of Dollars Except Per Share Data)
<CAPTION>
For The Year Ended
-----------------------------------------------------------------------
December 31,1995 December 31,1994 December 31,1993
---------------- ---------------- -----------------
Per Per Per
Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Primary:
- -------
Average shares outstanding 85.7 84.3 83.6
Dilutive stock options and stock
issuable under employee benefit plans--based on
the Treasury stock method using the average
market price 2.2 (Note 1) (Note 1)
---- ------ ------
Adjusted shares outstanding 87.9 84.3 83.6
==== ==== ====
Earnings from continuing operations $216.5 $ 89.9 $ 64.1
Less preferred stock dividend 11.6 11.6 11.6
------ ------ ------
Earnings from continuing operations
attributable to common stock $204.9 $2.33 $ 78.3 $ .93 $ 52.5 $ .63
====== ===== ====== ===== ====== =====
Fully Diluted:
- -------------
Average shares outstanding 85.7 84.3 83.6
Dilutive stock options and stock
issuable under employee benefit plans--based
on the Treasury stock method using the higher
of the average market price or
ending market price 2.6 (Note 1) (Note 1)
---- ------ ------
Adjusted shares outstanding 88.3 84.3 83.6
Average shares assumed to be
converted through convertible
preferred stock (Note 3) 6.4 6.3 (Note 2) 6.4 (Note 2)
---- ---- ----
Fully diluted average
shares outstanding 94.7 90.6 90.0
==== ==== ====
Earnings from continuing operations $216.5 $2.29 $ 89.9 $ .99 $ 64.1 $ .71
====== ===== ====== ===== ====== =====
Notes: 1. Dilutive effect of common stock equivalents is less than 3% for the years ended December 31, 1994 and 1993 and has
not been shown.
2. The assumed conversion of convertible preferred stock is anti-dilutive and, therefore, is not used in the
calculation of fully diluted earnings per share included in the financial statements.
3. Difference from prior year is due to rounding.
</TABLE>
<TABLE>
Exhibit 11(b)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Millions of Dollars Except Per Share Data)
<CAPTION>
For The Year Ended
-----------------------------------------------------
December 31,1995 December 31,1994 December 31,1993
---------------- ---------------- -----------------
Per Per Per
Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Primary:
- -------
Average shares outstanding 85.7 84.3 83.6
Dilutive stock options and stock issuable
under employee benefit plans--based on
the Treasury stock method using the average
market price 2.2 (Note 1) (Note 1)
---- ------ ------
Adjusted shares outstanding 87.9 84.3 83.6
==== ==== ====
Net earnings $224.0 $127.4 $ 66.0
Less preferred stock dividend 11.6 11.6 11.6
------ ------ ------
Net earnings attributable to
common stock $212.4 $2.42 $115.8 $1.37 $ 54.4 $ .65
====== ===== ====== ===== ====== =====
Fully Diluted:
- -------------
Average shares outstanding 85.7 84.3 83.6
Dilutive stock options and stock issuable
under employee benefit plans--based on
the Treasury stock method using the higher
of the average market price or
ending market price 2.6 (Note 1) (Note 1)
---- ------ ------
Adjusted shares outstanding 88.3 84.3 83.6
Average shares assumed to be
converted through convertible
preferred stock (Note 3) 6.4 6.3 (Note 2) 6.4 (Note 2)
---- ---- ----
Fully diluted average
shares outstanding 94.7 90.6 90.0
==== ==== ====
Net earnings $224.0 $2.37 $127.4 $1.41 $ 66.0 $ .73
====== ===== ====== ===== ====== =====
Notes: 1. Dilutive effect of common stock equivalents is less than 3% for the years ended December 31, 1994 and 1993 and
has not been shown.
2. The assumed conversion of convertible preferred stock is anti-dilutive and, therefore, is not used in the
calculation of fully diluted earnings per share included in the financial statements.
3. Difference from prior year is due to rounding.
</TABLE>
<TABLE>
EXHIBIT 12
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
(Millions of Dollars Except Ratios)
<CAPTION>
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, 1995 December 31, 1995
----------------- -----------------
<S> <C> <C>
EARNINGS:
Earnings from continuing operations
before income taxes (Note 1) $102.3 $225.5
Interest expense 45.4 193.0
Portion of rent expense representative
of an interest factor 5.6 22.4
------ ------
Adjusted earnings from continuing
operations before taxes and
fixed charges (Note 1) $153.3 $440.9
====== ======
FIXED CHARGES:
Interest expense $ 45.4 $193.0
Portion of rent expense representative
of an interest factor 5.6 22.4
------ ------
Total fixed charges $ 51.0 $215.4
====== ======
RATIO OF EARNINGS TO FIXED CHARGES 3.01 2.05
==== ====
Note 1. Amounts exclude earnings from discontinued operations and
extraordinary loss from early extinguishment of debt.
</TABLE>
EXHIBIT 21
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
LIST OF SUBSIDIARIES
--------------------
Listed below are the subsidiaries of The Black & Decker Corporation, all of
which are either directly or indirectly 100% owned as of December 31, 1995,
except as otherwise noted. Names of certain inactive, liquidated, or minor
subsidiaries have been omitted.
Black & Decker Inc. UNITED STATES
Black & Decker (U.S.) Inc. UNITED STATES
Black & Decker Funding Corporation UNITED STATES
Black & Decker Group Inc. UNITED STATES
Black & Decker Holdings Inc. UNITED STATES
Black & Decker Investment Company UNITED STATES
Black & Decker (Ireland) Inc. UNITED STATES
Black & Decker India Inc. UNITED STATES
Black & Decker Investments (Australia) Limited UNITED STATES
Black & Decker (Puerto Rico) Inc. UNITED STATES
Corbin Co. UNITED STATES
Emhart Corporation UNITED STATES
Emhart Credit Corporation UNITED STATES
Emhart Far East Corporation UNITED STATES
Emhart Glass Machinery Investments Inc. UNITED STATES
Emhart Glass Machinery (U.S.) Inc. UNITED STATES
Emhart Glass Research, Inc. UNITED STATES
Emhart Inc. UNITED STATES
Emhart Industries, Inc. UNITED STATES
Kwikset Corporation UNITED STATES
Openware, Inc. UNITED STATES
Price Pfister, Inc. UNITED STATES
Advanced Information Systems, Inc. UNITED STATES
PRC Inc. UNITED STATES
PRC Investments Inc. UNITED STATES
PRC Public Sector, Inc. UNITED STATES
PRC Technology Services 1 of Virginia, Inc. UNITED STATES
PRC Technology Services 2, Inc. UNITED STATES
PRC Commercial Systems, Inc. UNITED STATES
PRC Engineering Systems, Inc. UNITED STATES
Planning Research Corporation International, Ltd. UNITED STATES
Shenandoah Insurance, Inc. UNITED STATES
True Temper Sports, Inc. UNITED STATES
Black & Decker Argentina S.A. ARGENTINA
Black & Decker (Australasia) Pty. Ltd. AUSTRALIA
Black & Decker Distribution Pty. Ltd. AUSTRALIA
Black & Decker Finance (Australia) Ltd. AUSTRALIA
Black & Decker Holdings (Australia) Pty. Ltd. AUSTRALIA
Dereham Pty. Ltd. AUSTRALIA
Emhart Australia Pty. Ltd. AUSTRALIA
PRC International Pty. Ltd. AUSTRALIA
Black & Decker Werkzeuge
Vertriebs-Gesellschaft m.b.H AUSTRIA
DOM Sicherheitstechnik G.m.b.H. AUSTRIA
Black & Decker (Belgium) N.V. BELGIUM
B&D Eletrodomesticos Ltda. BRAZIL
Black & Decker Canada Inc. CANADA
Black & Decker Holdings (Canada) Inc. CANADA
Black & Decker Cono Sur, S.A. CHILE
Maquinas y Herramientas Black & Decker
de Chile S.A. CHILE
Black & Decker de Colombia S.A. COLOMBIA
B&D de Costa Rica, S.A. COSTA RICA
Harttung Fasteners A/S DENMARK
Black & Decker de El Salvador, S.A. de C.V. EL SALVADOR
Black & Decker Oy FINLAND
Black & Decker Finance S.A.R.L. FRANCE
Black & Decker (France) S.A.S. FRANCE
DOM S.A.R.L. FRANCE
Emhart S.A.R.L. FRANCE
BAND Aussenhandel G.m.b.H. GERMANY
B. B. W. Bayrische Bohrerwerke G.m.b.H. GERMANY
Black & Decker G.m.b.H. GERMANY
DOM Sicherheitstechnik G.m.b.H. GERMANY
DOM Sicherheitstechnik G.m.b.H. & Co. KG GERMANY
Emhart Deutschland G.m.b.H. GERMANY
Tucker G.m.b.H. GERMANY
Black & Decker (HELLAS) S.A. GREECE
Black & Decker Hong Kong Limited HONG KONG
Emhart Asia Limited HONG KONG
Far East Power Equipment Ltd. HONG KONG
Baltimore Financial Services Company * IRELAND
Baltimore Insurance Limited IRELAND
Belco Investments Company IRELAND
Black & Decker Capital (Denmark) Company IRELAND
Black & Decker (Ireland) IRELAND
Gamrie Limited IRELAND
Black & Decker Italia S.P.A. ITALY
Emhart S.r.l. ITALY
Tatry Officina Meccanica S.r.l. ITALY
Fasteners & Tools, Ltd. JAPAN
Nippon Pop Rivets & Fasteners Ltd. JAPAN
Black & Decker (Overseas) A.G. LIECHTENSTEIN
Black & Decker Luxembourg S.A. LUXEMBOURG
Black & Decker Asia Pacific (Malaysia) Sdn. Bhd. MALAYSIA
Black & Decker (Malaysia) Sdn. Bhd. MALAYSIA
Black & Decker, S.A. de C.V. MEXICO
Price-Pfister de Mexico, S.A. de C.V. MEXICO
BD Power Tools Mexicana S.A. de C.V. MEXICO
Nemef B.V. NETHERLANDS
Black & Decker (Nederland) B.V. NETHERLANDS
Black & Decker International Holdings B.V. NETHERLANDS
Black & Decker (New Zealand) Limited NEW ZEALAND
Black & Decker (Norge) A/S NORWAY
Sjong Fasteners A/S NORWAY
Black & Decker de Panama, S.A. PANAMA
Black & Decker International Corporation PANAMA
Black & Decker (Panama) Investments S.A. PANAMA
Black & Decker Asia Pacific Pte. Ltd. SINGAPORE
Black & Decker Iberica S.C.A. SPAIN
Aktiebolaget Sundsvalls Verkstader SWEDEN
Black & Decker Aktiebolag SWEDEN
Emhart Sweden Aktiebolag SWEDEN
Emhart Sweden Holdings Aktiebolag SWEDEN
Emhart Teknik Akteibolag SWEDEN
DOM AG Sicherheitstechnik SWITZERLAND
Black & Decker (Switzerland) S.A. SWITZERLAND
Emhart Glass SA SWITZERLAND
Black & Decker (Thailand) Limited THAILAND
Aven Tools Limited UNITED KINGDOM
Bandhart UNITED KINGDOM
Bandhart Overseas UNITED KINGDOM
Black & Decker Finance UNITED KINGDOM
Black & Decker International UNITED KINGDOM
Black & Decker UNITED KINGDOM
Black & Decker Europe UNITED KINGDOM
Emhart (Colchester) Limited UNITED KINGDOM
Emhart International Limited UNITED KINGDOM
Emhart (U.K.) Limited UNITED KINGDOM
Tucker Fasteners Limited UNITED KINGDOM
United Marketing (Leicester) UNITED KINGDOM
Black & Decker de Venezuela, C.A. VENEZUELA
Black & Decker Holdings de Venezuela VENEZUELA
Emhart Foreign Sales Corporation VIRGIN ISLANDS (US)
* 14.3% of the voting stock is owned by The Black & Decker Corporation
through its wholly owned subsidiaries.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of our report dated January 31, 1996 with respect to the consolidated
financial statements and schedule of The Black & Decker Corporation included in
the Annual Report (Form 10-K) for the year ended December 31, 1995.
Registration Statement Number Description
- ----------------------------- -----------
2-75916 Form S-8
33-6610 Form S-8
33-6612 Form S-8
33-26917 Form S-8
33-26918 Form S-8
33-33251 Form S-8
33-39607 Form S-8
33-39608 Form S-3
33-47651 Form S-8
33-47652 Form S-8
33-53807 Form S-3
33-58795 Form S-8
33-65013 Form S-8
/s/ ERNST & YOUNG LLP
Baltimore, Maryland
February 26, 1996
POWER OF ATTORNEY Exhibit 24
We, the undersigned Directors and Officers of The Black & Decker
Corporation (the "Corporation"), hereby constitute and appoint Nolan D.
Archibald, Thomas M. Schoewe and Charles E. Fenton, and each of them, with power
of substitution, our true and lawful attorneys-in-fact with full power to sign
for us, in our names and in the capacities indicated below, the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995, and any and all
amendments thereto.
/s/ NOLAN D. ARCHIBALD Director, Chairman, February 29, 1996
Nolan D. Archibald President, and Chief
Executive Officer
(Principal Executive
Officer)
/s/ BARBARA L. BOWLES Director February 29, 1996
Barbara L. Bowles
/s/ MALCOLM CANDLISH Director February 29, 1996
Malcolm Candlish
/s/ ALONZO G. DECKER, JR. Director February 29, 1996
Alonzo G. Decker, Jr.
/s/ ANTHONY LUISO Director February 29, 1996
Anthony Luiso
/s/ J. DEAN MUNCASTER Director February 29, 1996
J. Dean Muncaster
/s/ LAWRENCE R. PUGH Director February 29, 1996
Lawrence R. Pugh
/s/ MARK H. WILLES Director February 29, 1996
Mark H. Willes
/s/ M. CABELL WOODWARD, JR. Director February 29, 1996
M. Cabell Woodward, Jr.
/s/ THOMAS M. SCHOEWE Vice President and February 29, 1996
Thomas M. Schoewe Chief Financial
Officer
(Principal Financial
Officer)
/s/ STEPHEN F. REEVES Corporate Controller February 29, 1996
Stephen F. Reeves (Principal Accounting
Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Corporation's
audited financial statements as of and for the year ended December 31, 1995,
and the accompanying footnotes and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000012355
<NAME> THE BLACK & DECKER CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 131,600
<SECURITIES> 0
<RECEIVABLES> 694,400
<ALLOWANCES> 43,100
<INVENTORY> 855,700
<CURRENT-ASSETS> 2,106,600
<PP&E> 1,772,200
<DEPRECIATION> 905,400
<TOTAL-ASSETS> 5,545,300
<CURRENT-LIABILITIES> 1,786,900
<BONDS> 1,704,500
0
150,000
<COMMON> 43,200
<OTHER-SE> 1,230,000
<TOTAL-LIABILITY-AND-EQUITY> 5,545,300
<SALES> 4,766,100
<TOTAL-REVENUES> 4,766,100
<CGS> 3,016,700
<TOTAL-COSTS> 4,340,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193,000
<INCOME-PRETAX> 225,500
<INCOME-TAX> 9,000
<INCOME-CONTINUING> 216,500
<DISCONTINUED> 38,400
<EXTRAORDINARY> (30,900)
<CHANGES> 0
<NET-INCOME> 224,000
<EPS-PRIMARY> 2.42
<EPS-DILUTED> 2.37
</TABLE>
