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, 1996 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:
Title of each class Name of each exchange on which
registered
Common Stock, par value $.50 per share 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. ( )
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of January 31, 1997, was $3,169,660,087.
The number of shares of Common Stock outstanding as of January 31, 1997, was
94,264,984.
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 1997 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-forming and
inspection equipment and is the largest global supplier of engineered
fastening and assembly 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.
During 1995, the Corporation sold PRC Realty Systems, Inc. (RSI),
and PRC Environmental Management, Inc. (EMI), for aggregate proceeds of
approximately $100 million. In late 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 composed the Corporation's former 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.
In April 1996, the Corporation replaced its former unsecured
revolving credit facility, which was scheduled to expire in 1997, with a
new unsecured revolving credit facility (the Credit Facility), which will
expire in 2001. Under the Credit Facility, which consists of two
individual facilities, the Corporation may borrow up to $1.0 billion. For
additional information about the Credit Facility, see Note 10 of Notes to
Consolidated Financial Statements included in Item 8 of Part II of this
report.
Under terms established upon the original sale of its Series B
Cumulative Convertible Preferred Stock (Series B), the Corporation had
the option, after September 1996, to require the conversion of the Series
B stock into shares of Common Stock under certain circumstances. On
October 14, 1996, the Corporation exercised its conversion option,
issuing 6,350,000 shares of Common Stock in exchange for all previously
outstanding shares of Series B stock. For additional information about
the conversion of the Series B stock and certain related matters, see
Note 15 of Notes to Consolidated Financial Statements included in Item 8
of Part II of this report.
During 1996, the Corporation commenced a restructuring of certain of
its operations and recorded a restructuring charge of $91.3 million
($74.8 million after tax). The major component of the restructuring
charge relates to the Corporation's elimination of approximately 1,500
positions. As a result, an accrual of $74.6 million for severance,
principally associated with the European businesses in the Consumer and
Home Improvement Products segment, is included in the restructuring
charge. For additional information about the restructuring charge, see
Notes 3 and 17 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.
(b) DISCONTINUED OPERATIONS
On February 16, 1996, the Corporation announced that it had completed the
previously announced sale of PRC Inc., the remaining business in the
discontinued PRC segment, for $425.0 million. Earnings from discontinued
operations of $70.4 million for the year ended December 31, 1996,
consisted primarily of the gain on the sale of PRC Inc., net of
applicable income taxes of $55.6 million and related selling expenses.
Revenues and operating income of PRC Inc. for the period from January 1,
1996, through February 15, 1996, were not significant. The terms of the
sale of PRC Inc. provide for an adjustment to the sales price, expected
to be finalized in 1997, based upon the changes in the net assets of PRC
Inc. through February 15, 1996.
The Corporation acquired the former PRC segment through its
acquisition of Emhart Corporation in April 1989. The sale of the PRC
segment has allowed 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 $70.4 million ($.73
per share on a fully diluted basis) in 1996, $38.4 million ($.41 per
share on a fully diluted basis) in 1995, and $37.5 million ($.44 per
share on a fully diluted basis), in 1994. 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 pertains to the
continuing operations of the Corporation and excludes any matters with
respect to 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 and assembly systems and glass
container-forming and inspection equipment. See Note 17 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.
.
Sales from continuing operations by product group within business
segments are presented in the following table.
1996 SALES BY PRODUCT GROUP WITHIN BUSINESS SEGMENTS
(Millions of Dollars)
Year Ended
December 31, 1996
-----------------
Amount %
------ ---
Consumer and Home Improvement Products
Power Tools and Product Service .............. $1,948 40%
Household Products ........................... 788 16
Security Hardware ............................ 567 11
Accessories .................................. 337 7
Outdoor Products ............................. 333 7
Plumbing Products ............................ 239 5
------ ---
Total Consumer and Home Improvement Products.. 4,212 86%
Commercial and Industrial Products .............. 702 14%
------ ---
Total Sales ..................................... $4,914 100%
====== ===
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 sales from continuing operations.
(d) NARRATIVE DESCRIPTION OF THE BUSINESS
Unless otherwise indicated, the following discussion pertains to the
continuing operations of the Corporation and excludes any matters with
respect to 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, and grinders; car care products; Workmate(R) workcenters
and related products; bench and stationary tools; and cordless lighting
products. Accessories include accessories and attachments for power
tools, and a variety of consumer-use fastening products, including
stapling 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; coffeemakers; kettles; toasters and toaster ovens;
wafflebakers; knives; breadmakers; and wet scrubbers. Security hardware
includes both residential and commercial door hardware, including
locksets, high-security and electronic locks and locking devices; door
closers, hinges and exit devices, and master keying systems. Outdoor
products include a variety of both corded and cordless electric lawn and
garden products, such as hedge and yard (string) trimmers, lawn mowers,
edgers, blower/vacuums, and related lawn and garden accessories. Outdoor
products also include recreational products, which consist of a variety
of steel and composite golf club shafts and bicycle and specialty tubing.
Plumbing products include a variety of conventional and decorative
faucets, shower heads, 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,
without limitation, DeWALT, Black & Decker Industry & Construction, Elu,
VersaPak, Proline, Macho, TimberWolf, Cyclone, Trimcat, Scrugun, Wildcat,
Versa-Clutch, Workmate, ShopBox, Alligator, Air Station, Dustbuster,
SnakeLight, Toast-R-Oven, Handy Steamer, FloorBuster, ScumBuster, Quick
`N' Easy, Groom `N' Edge, Hedge Hog, Vac `N' Mulch, Reflex, MasterVac,
B&D, Piranha, Piranha Pro, Bullet, Pilot-Point, Scorpion Anti-Slip,
Master Series, PowerShot, EasyShot, Build-a-Set, and POP. Security
hardware products are marketed under a variety of trademarks and trade
names, including, without limitation, Kwikset, TITAN, TITAN Commercial
Series, Black & Decker, Geo, 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, Assailant, Endurance, and others.
Plumbing products are marketed under the trademarks and trade names Price
Pfister, Black & Decker, The Pfabulous Pfaucet With The Pfunny Name,
Pforever Pfaucet, 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, 1996, there were approximately 170 such
service centers, of which roughly 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, 1996,
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. In addition, through an affiliate in mainland China, the
Corporation carries on manufacturing operations in that country. China
has been granted Most Favored Nation (MFN) status through July 3, 1997,
and currently there are no significant trade restrictions or tariffs
imposed on such products. The Corporation has investigated alternate
sources of supply and production arrangements in case the MFN status is
not extended. Alternative sources of supply are available, or can be
developed, for many of these products; and alternative production
arrangements can be made available at certain of the Corporation's other
manufacturing facilities. 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 over the long term. However, the Corporation believes that,
in the event that China's MFN status is not extended or significant trade
restrictions or tariffs are imposed, the impact would likely have
significant negative effect on the operating results of the Corporation
over the short term.
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
distribution facilities in the United States, other than those located at
the manufacturing facilities listed above, are located in Fort Mill,
South Carolina, and Rancho Cucamonga, California.
Principal manufacturing and assembly facilities outside the United
States are located in Buchlberg and Bruhl, Germany; Molteno and Perugia,
Italy; Spennymoor and Rotherham, England; Brockville, Canada; Queretaro
and Mexicali, Mexico; Jurong Town, Singapore; Kuantan, Malaysia;
Newcastle, Australia; Uberaba, Brazil; and Apeldoorn, Netherlands.
Principal distribution facilities outside the United States, other than
those located at the manufacturing facilities listed above, are located
in Dardilly, France, and Idstein, Germany.
For additional information with respect to these and other
properties owned or leased by the Corporation, see Item 2, "Properties."
In 1996, the Corporation commenced a restructuring of certain of its
operations and recorded a restructuring charge of $91.3 million, of which
$87.7 million relates to the Consumer and Home Improvement Products
segment. For additional information about the restructuring charge, see
Notes 3 and 17 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.
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 sales 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 and assembly systems business manufactures an
extensive line of metal and plastic fasteners and engineered fastening
systems for commercial applications, including blind riveting, stud
welding, and assembly systems; specialty screws; prevailing torque nuts
and assemblies; and insert systems. The fastening and assembly systems
products are marketed under the trademarks and trade names Emhart
Fastening Teknologies, Dodge, Gripco, Gripco Assemblies, HeliCoil, NPR,
POP, Tucker, Warren, Dril-Kwik, Jack Nut, KALEI, Plastifast,
PLASTI-KWICK, POP-matic, POP NUT, WELL-NUT, Parker-Kalon, 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 are also 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 and assembly
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 and assembly
systems business in the United States are located in Danbury and Shelton,
Connecticut; 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 and assembly 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-forming industry, including machines for
supplying molten glass for the feeding and forming processes 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, FLEX-LINE, T-600 Forming
Control System, Verti-Flow Cooling Systems, PowerNET, QualiTrac, TIM, and
Total Inspection Machine.
The Corporation sells glass container-forming and inspection
equipment 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-forming and inspection equipment. However, the
Corporation believes that it is the leading supplier and offers the most
complete line of glass container-forming and inspection machinery, parts,
and service. In recent years, the glass container-forming and inspection
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.
In 1996, the Corporation commenced a restructuring of certain of its
operations and recorded a restructuring charge of $91.3 million, of which
$3.6 million relates to the Commercial and Industrial segment. For
additional information about the restructuring charge, see Notes 3 and 17
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.
The Corporation owns a number of United States and foreign patents,
trademarks, and license rights relating to the glass container-forming
and inspection equipment 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-forming and inspection equipment
manufacturing facility in the United States is located in Windsor,
Connecticut. Principal manufacturing facilities outside the United States
are located in Orebro 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-forming
and inspection 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.
Backlog
-------
The following is a summary of total backlog by business segment as of
the referenced dates.
(Millions of Dollars) December 31,
1996 1995
---- ----
Consumer and Home Improvement Products ......... $ 71 $ 96
Commercial and Industrial Products ............. 145 134
---- ----
Total Backlog ....................... $216 $230
==== ====
None of the backlog at December 31, 1996, or at December 31, 1995,
included unfunded amounts. At December 31, 1996, approximately 84% of the
backlog of the Commercial and Industrial segment is expected to be filled
in 1997, with the balance expected to be filled in 1998.
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; and
Idstein, Germany.
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, 1996, the Corporation employed approximately
29,200 persons in its operations worldwide. Approximately 2,000 employees
in the United States are covered by collective bargaining agreements.
During 1996, 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 1997.
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
seeks to comply fully 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, 1996, the Corporation had been identified as a
potentially responsible party (PRP) in connection with approximately 22
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, 1996, the
Corporation's aggregate probable exposure with respect of environmental
liabilities, for which accruals have been established in the Consolidated
Financial Statements, was $51.5 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,
1996, the Corporation had paid $3.6 million of the claims.
In 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 Environment of the
State of Maryland (MDE), embarked on a program to remediate groundwater
contamination and to prevent the migration of contaminants, 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 (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,
and the Corporation's motion was granted. Plaintiffs have filed an
appeal, which is pending before the United States Court of Appeals for
the Fourth Circuit.
Pending plaintiffs' appeal before the United States Court of Appeals
for the Fourth Circuit, plaintiffs filed a state action in the Circuit
Court for Baltimore County, Maryland (Leister et al. v. Black & Decker
(U.S.) Inc. (03-C-96-005347)) alleging common law claims for strict
liability, negligence, trespass, nuisance, intentional misrepresentation
and negligent misrepresentation arising from the same facts as alleged in
the federal court action. The Corporation filed a motion for dismissal
and/or summary judgment of the state court claims, and summary judgment
was granted on December 23, 1996. Plaintiffs have filed an appeal of this
decision.
The Corporation believes that plaintiffs' claims in both the federal
and state court actions involving the Hampstead facility are without
merit and intends to defend vigorously against the allegations made in
those actions. Management is of the opinion that the ultimate resolution
of those actions will not have a material adverse effect on the
Corporation.
In December 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 Natural Resources Defense Council (NRDC) and the
Environmental Law Foundation (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 and the filing by
plaintiffs and the Corporation of numerous motions, 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 agreement 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.
Following the settlement of these cases the Court of Appeal of the
State of California affirmed the decision of the trial court in rejecting
the Attorney General's claim and in concluding that lead which leaches
from faucets is not a prohibited discharge of lead into a "source of
drinking water." Subsequent to this decision, the NRDC and the ELF as
well as a number of other environmental interest groups filed motions
requesting leave to intervene in the case for purposes of appealing the
decision of the Court of Appeal to the California Supreme Court. In
December 1996, the California Supreme Court reversed the decisions of the
trial court and the Court of Appeal and concluded that a faucet was a
source of drinking water within the meaning of Proposition 65.
Notwithstanding this decision, in light of the previous settlements with
the Attorney General and the NRDC and ELF, management is of the opinion
that the resolution of this matter will not have a material adverse
effect on the Corporation.
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 17 of Notes to Consolidated Financial
Statements, entitled "Business Segments 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 - 53
Chairman, President, and Chief Executive Officer,
January 1990 - present.
Joseph Galli - 38
Executive Vice President and President - Power Tools and Accessories,
December 1996 - present;
Group Vice President and President - Power Tools and Accessories,
March 1996 - December 1996;
Group Vice President and President - Power Tools,
October 1995 - March 1996;
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.
Paul A. Gustafson - 54
Executive Vice President and President - Fastening and
Assembly Systems Group,
December 1996 - present;
Group Vice President and President - Emhart Fastening Teknologies,
July 1996 - December 1996;
President - Emhart Fastening Teknologies,
April 1990 - July 1996.
Dennis G. Heiner - 53
Executive Vice President and President - Security Hardware Group,
January 1992 - present.
Michael P. Hoopis - 45
Executive Vice President and President - Household Products Group,
December 1996 - present;
Group Vice President and President - Worldwide Household Products Group,
July 1996 - December 1996;
President - Price Pfister,
May 1992 - July 1996;
President - Kwikset,
July 1991 - May 1992.
Charles E. Fenton - 48
Senior Vice President and General Counsel,
December 1996 - present;
Vice President and General Counsel,
May 1989 - December 1996.
Barbara B. Lucas - 51
Senior Vice President - Public Affairs and Corporate Secretary,
December 1996 - present;
Vice President - Public Affairs and Corporate Secretary,
July 1985 - December 1996.
Thomas M. Schoewe - 44
Senior Vice President and Chief Financial Officer,
December 1996 - present;
Vice President and Chief Financial Officer,
October 1993 - December 1996;
Vice President - Finance,
January 1990 - October 1993.
Leonard A. Strom - 51
Senior Vice President - Human Resources,
December 1996 - present;
Vice President - Human Resources,
May 1986 - December 1996.
T. Tracy Bilbrough - 40
Vice President and President - Eastern Hemisphere Group,
Power Tools and Accessories,
December 1996 - present;
President - Eastern Hemisphere,
October 1995 - December 1996;
Vice President Marketing and Sales, Professional Products - North
American Power Tools,
September 1992 - October 1995;
Director of Marketing, Professional Products - North American
Power Tools,
August 1990 - September 1992.
Ronald B. Cooper - 42
Vice President and President - Plumbing Products,
December 1996 - present;
President - Price Pfister,
August 1996 - December 1996;
President - Accessories,
March 1996 - August 1996;
President and Chief Executive Officer - Interrealty Company,
March 1995 - September 1995;
President, Commercial Systems Group - PRC,
August 1992 - March 1995;
President and Chief Executive Officer - GE Consulting Services Division,
October 1990 - August 1992.
Scott C. Hennessy - 37
Vice President and President - Recreational Products,
December 1996 - present;
General Manager and President - True Temper Sports,
January 1996 - December 1996;
Vice President Sales and Marketing - True Temper Sports,
August 1994 - January 1996;
Vice President Sales and Marketing - North American Accessories,
October 1990 - August 1994.
Kathleen W. Hyle - 38
Vice President and Treasurer,
May 1994 - present;
Assistant Treasurer, Domestic,
December 1992 - May 1994;
Director, Domestic Finance,
February 1990 - December 1992.
Effective as of February 28, 1997, Mrs. Hyle will be leaving the
Corporation.
Stephen F. Reeves - 37
Vice President and Controller,
September 1996 - present;
Corporate Controller,
May 1994 - September 1996;
Senior Manager - Ernst & Young LLP,
October 1988 - April 1994.
James J. Roberts - 38
Vice President, Vice President/General Manager - U.S. Accessories,
December 1996 - present;
Vice President and General Manager - U.S. Accessories,
August 1996 - December 1996;
Vice President and General Manager - Professional Power Tools, Europe,
April 1994 - August 1996;
Vice President Sales and Marketing - U.S. Consumer Power Tools,
April 1993 - April 1994;
Vice President Marketing - U.S. Power Tools,
June 1991 - April 1993.
Kurt E. Siegenthaler - 54
Vice President and President - Glass Container-Forming and
Inspection Equipment,
December 1996 - present;
President - Emhart Glass,
July 1993 - December 1996;
President - Packaging Technology Division SIG, Schweizerische
Industrie-Gesellschaft,
April 1989 - June 1993.
Ian Stuart - 46
Vice President and President - Latin American Group, Power Tools
and Accessories,
December 1996 - present;
President - Latin American Group,
March 1995 - December 1996;
Vice President and General Manager - Latin American Caribbean Area,
July 1992 - March 1995;
Vice President Marketing - International Group,
January 1991 - July 1992.
ITEM 2. PROPERTIES
The Corporation and its subsidiaries operate 48 manufacturing facilities around
the world, including 25 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; Kuantan, Malaysia; and
Mexicali, Mexico.
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 1996 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. All other claims and lawsuits are handled on a
case-by-case basis.
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. 89Civ 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
later sought 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. The parties
subsequently entered into a number of stipulations and orders amending the date
for the completion of discovery and the date before which the Corporation could
again apply for leave to move for summary judgment. In January 1997, plaintiffs
voluntarily withdrew the Cooperman Complaint.
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 was transferred to the Civil Division of the
Department of Justice. In connection with the Corporation's sale of PRC to
Litton Industries, Inc. in 1996, 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.
In June 1996, Emerson Electric Company ("Emerson") filed suit against the
Corporation in the United States District Court for the Southern District of New
York (Emerson Electric Co. v. Black & Decker Inc. et al., No. 96Civ 4334)
alleging that the Corporation made false representations in connection with the
sale of the Mallory Controls business to Emerson in 1991. Emerson's suit
includes claims for negligent misrepresentation and fraud as well as breach of
contract, and asserts liability for contribution relating to the settlement by
Emerson of a suit arising out of the Mallory Controls business. Emerson seeks
damages in the amount of $15 million on the negligent misrepresentation, fraud
and breach of contract claims, and damages of not less than $8 million on the
contribution claim. The Corporation believes that Emerson's claims are without
merit and intends to defend vigorously against the allegations made in this
matter. In the opinion of management, the ultimate resolution of this matter
will not have a material adverse effect on the Corporation.
In January 1996, Liberty Mutual Insurance Company ("Liberty Mutual") filed
suit in the Superior Court in Massachusetts against the Corporation and certain
of its subsidiaries seeking a declaratory judgment that various insurance
policies issued by Liberty Mutual to the Corporation did not cover liability and
expenses relating to certain on-site and off-site environmental contamination.
The Corporation and subsidiary defendants removed the case to the United States
District Court for the Eastern District of Massachusetts (Liberty Mutual
Insurance Company v. The Black & Decker Corporation et al., No. 96-10804-DPW),
and filed a counterclaim asserting, among other things, bad faith, unlawful
business practices and breach of contract on the part of Liberty Mutual.
In April 1996, the Corporation filed a separate suit in the Circuit Court
for Baltimore County, Maryland against Liberty Mutual and certain other primary
and excess insurance carriers (Black & Decker (U.S.) Inc. et al. v. Liberty
Mutual Insurance Company et al. (03-C-96-003801)) asserting that various
insurance policies issued by Liberty Mutual and the other carriers cover
liability and expenses associated with groundwater and soil contamination claims
alleged to have occurred at the Corporation's Hampstead, Maryland facility. In
December 1996, Liberty Mutual filed a counterclaim with the Circuit Court
incorporating the allegations made in the suit pending in the United States
District Court for the Eastern District of Massachusetts and seeking, in effect,
to transfer the Massachusetts litigation to Baltimore County. The Corporation
has filed a motion to strike the counterclaim or, in the alternative, to dismiss
or stay the counterclaim.
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, 1996, 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.
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:
------------------------------------------------------------------------
Quarter 1996 1995
January to March $38-1/4 to $30-3/4 $29-5/8 to $22-7/8
April to June $44-1/4 to $35-1/8 $33 to $27-1/2
July to September $42-3/8 to $32-7/8 $34-5/8 to $30-1/4
October to December $42-1/2 to $29 $38-1/8 to $32-1/8
-------------------------------------------------------------------------
(b) HOLDERS OF THE CORPORATION'S CAPITAL STOCK
As of January 31, 1997, there were 18,581 holders of record of the
Corporation's Common 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. The
Credit Facility does not restrict the Corporation's ability to pay
regular dividends in the ordinary course of business on the Common Stock.
Quarterly dividends per common share for the most recent two years
are as follows:
------------------------------------------------------------------------
Quarter 1996 1995
------- ---- ----
January to March ....................... $.12 $.10
April to June .......................... .12 .10
July to September ...................... .12 .10
October to December .................... .12 .10
---- ----
$.48 $.40
==== ====
--------------------------------------------------------------------------
For the first three quarters in 1996 and during each of the quarters
in 1995, the Corporation declared a dividend of approximately $2.9 million
on its shares of Series B Cumulative Convertible Preferred Stock (Series
B). On October 14, 1996, the Corporation exercised its conversion option,
issuing 6,350,000 shares of Common Stock in exchange for the 150,000 shares
of Series B stock previously outstanding. Dividends of approximately $.4
million relating to the period from September 29, 1996, through October 13,
1996, were paid to the holder of the Series B 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; 94,248,807 shares
and 86,447,588 shares outstanding as of December 31, 1996
and 1995, respectively.
Preferred Stock: 5,000,000 authorized, without par value; no shares
outstanding as of December 31, 1996; 150,000 shares of
Series B Cumulative Convertible Preferred Stock
outstanding as of December 31, 1995.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
FIVE-YEAR SUMMARY
(Millions of Dollars Except Per Share Data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1996(a) 1995(b) 1994 1993(c) 1992(d)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $4,914.4 $4,766.1 $4,365.2 $4,121.5 $4,045.7
Earnings (loss) from continuing operations 159.2 216.5 89.9 64.1 (95.3)
Earnings from discontinued operations (e) 70.4 38.4 37.5 31.1 22.0
Extraordinary items -- (30.9) -- -- (22.7)
Cumulative effects of changes in
accounting principle -- -- -- (29.2) (237.6)
Net earnings (loss) 229.6 224.0 127.4 66.0 (333.6)
Earnings (loss) per common and common
equivalent share:
Primary:
Continuing operations 1.64 2.33 .93 .63 (1.40)
Discontinued operations .77 .44 .44 .37 .29
Extraordinary items -- (.35) -- -- (.30)
Cumulative effects of
accounting changes -- -- -- (.35) (3.11)
Net earnings (loss) 2.41 2.42 1.37 .65 (4.52)
Assuming full dilution:
Continuing operations 1.65 2.29 .93 .63 (1.40)
Discontinued operations .73 .41 .44 .37 .29
Extraordinary items -- (.33) -- -- (.30)
Cumulative effects of
accounting changes -- -- -- (.35) (3.11)
Net earnings (loss) 2.38 2.37 1.37 .65 (4.52)
Total assets 5,153.5 5,545.3 5,264.3 5,166.8 5,295.0
Long-term debt 1,415.8 1,704.5 1,723.2 2,069.2 2,108.5
Cash dividends per common share .48 .40 .40 .40 .40
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings from continuing operations for 1996 includes a restructuring charge
of $91.3 million before taxes ($74.8 million after taxes) and a $10.6
million reduction in income tax expense as a result of the reversal of a
portion of the Corporation's deferred tax asset valuation allowance.
(b) 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.
(c) 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).
(d) 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).
(e) 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 $229.6 million or $2.38 per share on a
fully diluted basis for the year ended December 31, 1996, compared to net
earnings of $224.0 million or $2.37 per share on a fully diluted basis in 1995.
During 1996, the Corporation commenced a restructuring of certain of its
operations and recorded a restructuring charge of $91.3 million ($74.8 million
after tax). Excluding the effects of the 1996 restructuring and of a $10.6
million and $65.0 million decrease in income tax expense in 1996 and 1995,
respectively, as a result of the Corporation's reduction in its deferred tax
asset valuation allowance, earnings from continuing operations increased from
$151.5 million ($1.60 per share on a fully diluted basis) in 1995 to $223.4
million ($2.32 per share on a fully diluted basis) in 1996. This growth in
earnings from continuing operations in 1996 was a function of a higher level of
sales and operating income, a lower effective tax rate, and lower interest
expense.
During 1996, the Corporation generated free cash flow (cash available for
debt reduction prior to the effects of cash proceeds received from sales of
businesses, issuances of equity, and sales of receivables) of $235.4 million,
compared to free cash flow of $34.7 million in 1995. The increase in free cash
flow in 1996 was primarily the result of improved working capital management.
The combination of strong operating results and free cash flow coupled with
the proceeds received from the sale of discontinued operations in 1996 enabled
the Corporation to reduce its ratio of debt to total capitalization from 62% at
December 31, 1995, to 51% at December 31, 1996.
CONTINUING OPERATIONS
SALES
The following chart sets forth an analysis of the consolidated changes in sales
for the years ended December 31, 1996, 1995, and 1994.
ANALYSIS OF CHANGES IN SALES OF CONTINUING OPERATIONS
For the Year Ended December 31,
(Dollars in Millions) 1996 1995 1994
------- ------- -------
Total sales $ 4,914 $ 4,766 $ 4,365
Unit volume - existing (1) 5% 6% 8%
- disposed (2) --% --% (3)%
Price (1)% 1% 1%
Currency (1)% 2% --%
------- ------- -------
Change in total sales 3% 9% 6%
======= ======= =======
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 sales of continuing operations for
businesses that were included in the prior year's results, but subsequently
have been sold.
Total sales for the year ended December 31, 1996, were $4.9 billion, which
represented a 3% increase over 1995 sales of $4.8 billion. During 1996, existing
unit volume grew 5% over the sales level in 1995. The 1996 growth in unit volume
occurred both in the Consumer and Home Improvement Products (Consumer) segment
and in the Commercial and Industrial Products (Commercial) segment.
Total sales for the year ended December 31, 1995, were $4.8 billion, which
represented a 9% increase over 1994 sales of $4.4 billion, due to growth in both
the Consumer and Commercial segments.
RESTRUCTURING
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 Corporation has undertaken restructuring actions in the past which
generated improvements in its cost structure. Those improvements, however, are
subject to erosion over time as competitive pressures intensify or commodity
prices increase. In order to preserve those improvements, the Corporation
continuously seeks opportunities to further enhance its cost structure. Based
upon a number of factors, including the weak retail environment in Europe which
had begun to soften in the latter part of 1995, the Corporation decided to
intensify its cost reduction efforts and recorded a restructuring charge in the
amount of $81.6 million ($67.0 million after tax) early in 1996. The Corporation
modified portions of the initial restructuring plan later in 1996 as a result of
changed business conditions and the insight of new management in certain
businesses. The net effect of these modifications was to increase the total
restructuring charge recognized in 1996 to $91.3 million ($74.8 million after
tax).
The major component of the $91.3 million restructuring charge relates to
the elimination of approximately 1,500 positions, of which approximately 1,400
are in the Consumer segment. As a result, severance benefits totaling $74.6
million, principally associated with the European Consumer businesses, were
accrued in the restructuring charge. The balance of the restructuring charge
primarily represented non-cash charges associated with the Corporation's
decision to rationalize certain manufacturing operations, principally in the
Consumer businesses in the United States. Such rationalization includes the
outsourcing of certain products currently manufactured by the Corporation and
the closure of several small manufacturing facilities. The principal non-cash
charge consisted of a $6.6 million write-down to fair value of certain land and
buildings affected by the rationalization. The remaining restructuring charge
primarily related to the write-down to fair value of equipment made obsolete or
redundant due to the decision to close certain facilities or outsource certain
production.
The Corporation's restructuring activity during 1996 is summarized below:
<TABLE>
<CAPTION>
Reversal
of Previous
Reserve and Reserve
Reserve Accrual Utilization of Reserve at
(Dollars in as Initially of New Dec. 31,
Millions) Established Reserve Cash Non-Cash 1996
- ------------------ ------------ ----------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Severance benefits $ 62.8 $ 11.8 $ (37.5) $ -- $ 37.1
Write-down of land
and buildings 8.9 (2.3) -- (6.6) --
Other charges 9.9 .2 (1.7) (7.8) .6
------- ------- ------- ------- -------
Total $ 81.6 $ 9.7 $ (39.2) $ (14.4) $ 37.7
======= ======= ======= ======= =======
</TABLE>
The Corporation anticipates that the remaining restructuring reserve of
$37.7 million as of December 31, 1996, will be substantially spent in 1997 as
certain severance actions taken in the European Consumer businesses are subject
to scheduled payouts mandated by local custom or governmental regulations.
The Corporation estimates that the implementation of the restructuring plan
resulted in savings of approximately $10.0 million in 1996 and, based on current
market conditions, will result in savings of approximately $40.0 million in 1997
and $60.0 million annually thereafter.
The Corporation is committed to continuous productivity improvement and, as
part of its periodic strategic planning review, continues to evaluate additional
opportunities for cost reduction. As part of this commitment, the Corporation
has embarked on the specific actions included in the restructuring plan
described above. Many of these actions involve the relocation or consolidation
of production processes. Realization of the savings identified above depends on
the effectiveness and timing of these actions.
EARNINGS
Operating income from continuing operations as a percentage of sales was 7.3%
for 1996 compared to 8.9% and 8.1% for 1995 and 1994, respectively. Excluding
the effects of the $91.3 million restructuring charge recognized in 1996,
operating income from continuing operations as a percentage of sales was 9.1%
for 1996 compared to 8.9% and 8.1% for 1995 and 1994, respectively.
Gross margin as a percentage of sales in 1996 was 35.8% compared to 36.7%
for 1995 and 36.6% for 1994. The decrease in gross margin in 1996 from the prior
year's level was primarily attributable to several factors. First, actions taken
by the Corporation in 1996 to reduce inventories from the high level at the end
of 1995 resulted in lower production levels during 1996, and the associated
lower overhead absorption negatively affected gross margin. Second, competitive
pressures did not permit the Corporation's businesses to institute certain price
increases and, in some cases, caused the businesses to reduce prices from the
prior year's level. Gross margin also was negatively affected by manufacturing
inefficiencies, including those associated with new manufacturing facilities,
and changes in the mix of products sold in 1996.
Gross margin in 1995 was slightly higher than in 1994. 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 in mid-1994.
Selling, general, and administrative expenses as a percentage of sales were
26.6% for 1996 compared to 27.8% for 1995 and 28.5% for 1994. The improvements
in 1996 compared to 1995 and in 1995 compared to 1994 were the result of cost
reduction initiatives and the leverage effects of higher sales volumes on fixed
and semi-fixed costs.
Net interest expense (interest expense less interest income) was $135.4
million in 1996 compared to $184.4 million in 1995 and $187.9 million in 1994.
Net interest expense for 1996 was significantly lower than for 1995, primarily
due to lower debt levels in 1996. Those lower debt levels resulted from debt
repayments, early in 1996, with the sales proceeds of the discontinued PRC
segment and from improved operating cash flow during 1996. 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.
Other expense for 1996, 1995, and 1994 primarily included costs associated
with the sale of receivables program.
As more fully described in Note 13 of Notes to Consolidated Financial
Statements, during 1996 and 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, for 1995, the impact of the
then-pending sale of PRC Inc. The effect of this reduction in the deferred tax
asset valuation allowance was to decrease 1996 and 1995 income tax expense by
$10.6 million and $65.0 million, respectively.
Excluding the effect of the $16.5 million income tax benefit associated
with the restructuring charge in 1996 and the effects of the $10.6 million and
$65.0 million income tax benefits that resulted from the reductions of its
deferred tax asset valuation allowance in 1996 and 1995, respectively, the
Corporation's reported tax rate on continuing operations was 24% in 1996
compared to a rate of 33% in 1995 and 40% in 1994. Contributing to the lower tax
rate both for 1996 compared to 1995 and for 1995 compared to 1994 were higher
taxable earnings in the United States and a change in the mix of operating
income outside the United States from 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. An
analysis of taxes on earnings is included in Note 13 of Notes to Consolidated
Financial Statements.
During 1996, the Corporation fully recognized the benefit of domestic
deferred tax assets, exclusive of foreign tax credits, for financial reporting
purposes. The benefit of the previously unrecognized deferred tax assets has
lowered the domestic portion of tax expense for the past several years. The
Corporation's effective tax rate will be significantly higher in future periods.
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 and
assembly systems and glass container-forming and inspection equipment.
SALES AND OPERATING INCOME BY BUSINESS SEGMENT
For the Year Ended December 31,
-------------------------------
(Millions of Dollars) 1996 1995 1994
------- ------- -------
Consumer and Home Improvement Products
Total sales ................................ $4,212 $4,076 $3,774
Operating income ........................... 273 348 294
Operating income excluding
restructuring costs
and goodwill amortization ............... 411 400 351
Commercial and Industrial Products
Total sales ................................ 702 690 591
Operating income ........................... 76 75 53
Operating income excluding
restructuring costs
and goodwill amortization ............... 96 92 69
Corporate and Eliminations
Operating income ........................... 8 3 5
------ ------ ------
Total sales ................................ $4,914 $4,766 $4,365
Total operating income ..................... $ 357 $ 426 $ 352
Total operating income
excluding restructuring costs
and goodwill amortization ............... $ 515 $ 495 $ 425
====== ====== =======
CONSUMER AND HOME IMPROVEMENT PRODUCTS
The following chart sets forth an analysis of the change in sales for the year
ended December 31, 1996, compared to the year ended December 31, 1995, by
geographic area within the Consumer segment.
United Total
States Europe Other Consumer
------ ------ ----- --------
Existing unit volume ............... 8% --% --% 5%
Price .............................. (1)% (1)% 3% (1)%
Currency ........................... --% (2)% (1)% (1)%
--- --- --- ---
Total Consumer ..................... 7% (3)% 2% 3%
=== === === ===
Total sales in the Consumer segment for 1996 were 3% higher than in 1995,
with existing unit volume up 5% over the 1995 level. Sales in the United States
increased by 7% over the prior year's level, reflecting an 8% increase in
existing unit volume, partially offset by a 1% decline in price. The 1% price
decline from the 1995 level was primarily due to price reductions taken in the
household products and the power tools and accessories businesses. A significant
component of the 1996 price reduction by the household products business related
to a substantial price reduction taken in the latter part of 1996 on the
SnakeLight(R) flexible flashlight, with the balance related to price reductions
taken on various other product lines, predominantly to reduce levels of excess
inventory or in connection with the exit of certain low-margin product lines.
The 1996 price reduction by the power tools and accessories business was
primarily in response to competitive pressures, but also to reduce levels of
excess inventories.
Unit volume in the United States increased by 8% in 1996 over the 1995
level principally as a result of strong unit volume growth in the power tools
and accessories, security hardware, and plumbing products businesses, partially
offset by unit volume declines in the household products business. The 1996 unit
volume growth in the domestic power tools and accessories business was primarily
the result of continued strong demand for DeWALT(R) professional power tools and
accessories as well as the successful expansion of the VersaPak(TM)
interchangeable battery system to outdoor lawn and garden tools. The 1996 unit
volume growth in the domestic security hardware business occurred in virtually
all product categories, and the 1996 unit volume growth in the plumbing products
business occurred in both retail and professional distribution channels. The
1996 unit volume decline in the household products business was in comparison to
a strong 1995, which benefited from pent-up demand for the SnakeLight flexible
flashlight at the end of 1994. While unit sales of the SnakeLight flexible
flashlight during 1996 declined from the 1995 level and unit volume declines
were experienced in other categories due to the exit of certain low-margin
product lines, those declines were substantially offset by unit volume increases
in 1996 resulting from refinements to existing products, such as the global line
of Quick 'N Easy(TM) irons, and from introductions of new products, including
the FloorBuster(TM) cordless room vacuum with full-length upright handle and the
ScumBuster(TM) cordless submersible tub and tile scrubber.
Excluding the negative effects of changes in foreign exchange rates, sales
in the Consumer businesses in Europe decreased by 1% in 1996 from the 1995
level. The 1% decline in sales in 1996 in the European Consumer businesses was
primarily the result of price reductions taken in response to competitive
pressures and to reduce levels of excess inventories. Unit volume in 1996 was
essentially equal to the 1995 level as increased sales of power tools, spurred
by the success of the DeWALT and Elu(R) professional product lines, were offset
by unit volume declines in security hardware, accessories, outdoor products, and
household products. Excluding the negative effects of changes in foreign
exchange rates, some European countries achieved good sales growth in 1996 over
1995 levels; however, this growth was offset by declines in other countries,
most notably Germany and the United Kingdom.
Excluding the negative effects of changes in foreign exchange rates, sales
in the Consumer businesses in other geographic regions increased by 3% in 1996
over the 1995 level due largely to price increases in certain countries,
primarily in Latin America to keep pace with inflation, partially offset by
price reductions in other countries. The 1996 sales growth, exclusive of the
negative effects of changes in foreign exchange rates, was experienced in a
number of countries, most notably in Latin American countries such as Mexico,
Colombia, and Brazil, offset by sales declines in the Far East and certain other
countries, most notably Canada and Australia.
Operating income as a percentage of sales for the Consumer segment was 6.5%
in 1996 compared to 8.6% in 1995. Excluding the effects of goodwill amortization
and the 1996 restructuring charge, operating income as a percentage of sales
would have been 9.7% in 1996 compared to 9.8% in 1995. Operating income as a
percentage of sales, excluding the effects of goodwill amortization and the 1996
restructuring charge, improved in 1996 over the 1995 level in the domestic
security hardware and plumbing products businesses; however, those improvements
were offset by declines in the household products business, the worldwide power
tools and accessories business, and the European security hardware operations.
Excluding the effects of goodwill amortization and the 1996 restructuring
charge, operating income as a percentage of sales for the worldwide power tools
and accessories business in 1996 was below the 1995 level as declines
experienced in the power tools and accessories businesses in the United States,
Latin America, Canada, Australia, and the Far East in 1996 more than offset an
improvement in the power tools and accessories business in Europe. That
profitability improvement in the power tools and accessories business in Europe,
however, was in comparison to an extremely weak 1995, and the European
profitability level in 1996 did not rebound to the 1994 level. The declines in
operating income as a percentage of sales, excluding the effects of goodwill
amortization and the 1996 restructuring charge, in 1996 from 1995 levels in the
power tools and accessories businesses in the United States, Latin America,
Canada, Australia, and the Far East primarily resulted from manufacturing
inefficiencies, including those associated with new manufacturing facilities and
the businesses' efforts to reduce inventory levels in 1996, competitive
pressures which adversely affected pricing, and higher transportation costs,
partially offset by tight controls over selling, general, and administrative
expenses.
While sales of other existing products and new product introductions during
1997 may mitigate the effect, the Corporation believes that comparisons of sales
and profitability in 1997 to 1996 levels will be difficult for the household
products business, particularly in the first half of 1997, based upon the
significance of SnakeLight to sales and profitability of the business in 1996;
reduced demand, which is no longer expected to exceed capacity, as the product
matures; and the price reductions on SnakeLight taken by the business in the
latter part of 1996.
Total sales 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 growth in the domestic 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.
Excluding the substantial positive effects of changes in foreign exchange
rates, sales in the 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, partially offset by decreased sales of outdoor products.
Exclusive of positive effects of changes in foreign exchange rates during 1995,
some European countries achieved results substantially higher than the prior
year's level, and other countries, most notably Germany, the United Kingdom, and
France, reported results essentially equal to or below the prior year's level.
Excluding the negative effects of changes in foreign exchange rates
principally due to the Mexican peso devaluation, sales in the Consumer
businesses in other geographic regions increased by 8% in 1995 over the 1994
level. Sales growth occurred in a number of countries, including Canada, and
most strongly, in Brazil, while sales in other countries were essentially equal
to or below the prior year's level.
Operating income as a percentage of sales 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 sales 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 either to improve profitability or
to 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 principally resulted 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 in
mid-1994 contributed to markedly lower profitability in the 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 sales during 1995 compared to 1994 in the security hardware business, despite
year-to-year sales declines in its domestic operations due to inventory
reductions made by its customers in the latter part of 1995. A decline in
operating income in the plumbing products business in 1995 compared to 1994
resulted from reduced sales and rising material costs.
COMMERCIAL AND INDUSTRIAL PRODUCTS
The following chart sets forth an analysis of the change in sales for the year
ended December 31, 1996, compared to the year ended December 31, 1995, by
geographic area within the Commercial segment.
United Total
States Europe Other Commercial
------ ------ ----- ----------
Existing unit volume ............ 4% 2% 10% 4%
Price ........................... 1% 1% --% 1%
Currency ........................ --% (3)% (11)% (3)%
--- --- --- ---
Total Commercial ................ 5% --% (1)% 2%
=== === === ===
Total sales in the Commercial segment for 1996 were 2% higher than the 1995
level. Excluding the negative effects of changes in foreign exchange rates,
sales in the Commercial segment were 5% higher in 1996 than in 1995. The
fastening systems and assembly (Fastening) business achieved good growth in unit
volume in 1996 as a result of strong sales in the Far East and the continued
strength of sales to the automotive industry in the United States, partially
offset by protracted softness in the domestic industrial market and in Europe.
The glass container-forming and inspection equipment (Glass) business also
experienced solid growth in unit volume in 1996 over 1995. The backlog of orders
in the Glass business at December 31, 1996, was approximately 13% higher than
the 1995 level. Approximately 75% of the Glass backlog at December 31, 1996,
represents orders scheduled for delivery in 1997, with the balance scheduled for
delivery in 1998.
Operating income as a percentage of sales for the Commercial segment was
10.8% for both 1996 and 1995. Excluding the effects of goodwill amortization and
the 1996 restructuring charge, operating income as a percentage of sales would
have been 13.6% in 1996 compared to 13.3% in 1995. Improvements in operating
income as a percentage of sales during 1996 were experienced in both the
Fastening and Glass businesses.
Total sales in the Commercial segment for 1995 were 17% higher than the
1994 level. Excluding the substantial positive effects of changes in foreign
exchange rates, sales in the Commercial segment were 11% higher in 1995 than in
the preceding year. The Fastening business achieved solid unit volume growth in
1995 over the prior year's level, as softening sales to general industry in the
United States and Europe were more than offset by increased automotive sales in
those regions. The Glass business experienced a double-digit rate of growth in
unit volume in 1995 compared to a weak 1994 despite volume declines in the
United States.
Operating income as a percentage of sales 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 sales 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 in 1995.
DISCONTINUED OPERATIONS
Discontinued operations consist of the results of PRC Inc., PRC Realty Systems,
Inc. (RSI), and PRC Environmental Management, Inc. (EMI). Together, PRC Inc.,
RSI, and EMI composed the Corporation's former Information Technology and
Services (PRC) segment. Operating results, net assets, and cash flows of the
discontinued PRC segment have been segregated in the accompanying Consolidated
Financial Statements. The results of the discontinued PRC segment do not reflect
any expense for interest expense allocated by or management fees charged by the
Corporation.
On February 16, 1996, the Corporation completed the sale of PRC Inc., the
remaining business in the discontinued PRC segment. Proceeds of $425.0 million
from the sale of PRC Inc., less cash selling expenses of $11.4 million paid
during 1996, were used to reduce indebtedness. Earnings from discontinued
operations of $70.4 million ($.73 per share on a fully diluted basis) in 1996
primarily consist of the gain on the sale of PRC Inc., net of applicable income
taxes of $55.6 million. The gain is net of provisions for adjustment to the
sales price and retained liabilities. Revenues and operating income of PRC Inc.
for the period from January 1, 1996, through the date of sale were not
significant.
Net earnings of the discontinued PRC segment were $38.4 million ($.41 per
share on a fully diluted basis) in 1995 and $37.5 million ($.44 per share on a
fully diluted basis) in 1994. The Corporation sold RSI on March 31, 1995, and
EMI on September 15, 1995, for aggregate proceeds of $95.5 million.
FINANCIAL CONDITION
Operating activities of continuing operations before the sale of receivables
generated cash of $463.4 million for the year ended December 31, 1996, compared
to $316.9 million for the year ended December 31, 1995. This increase in cash
generation during 1996 was primarily the result of improved working capital
management, principally resulting from actions taken during 1996 to reduce
inventories from the high level that existed at the end of 1995.
In addition to measuring cash flow generation and usage based upon the
operating, investing, and financing classifications included in the Consolidated
Statement of Cash Flows, the Corporation monitors 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, issuances of equity, 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, 1996, the Corporation generated free cash flow of $235.4
million compared to $34.7 million in 1995. The increase in free cash flow in
1996 from the 1995 level was primarily the result of improved working capital
management.
The total amount of receivables sold under the sale of receivables program
at December 31, 1996, was $212.0 million compared to $230.0 million at December
31, 1995. 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 liquidity
facility that supports the sale of receivables program expires in March 1997.
The Corporation expects to be able to extend this facility beyond December 1997.
However, due to its improved leverage, the Corporation expects to reduce the
amount available under the facility to less than $200.0 million and to eliminate
the seasonal expansion feature.
Excluding amounts related to discontinued operations, investing activities
for 1996 used cash of $170.2 million compared to $195.5 million in 1995. Capital
expenditures of $196.3 million during 1996 approximated the 1995 level of $203.1
million. During 1996, approximately 90% 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 1997 to
moderately exceed the 1996 level.
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 more than 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 foreign currency
risks exist are the pound sterling, deutsche mark, Dutch guilder, Canadian
dollar, Swedish krona, Japanese yen, Chinese renminbi, 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 1996,
translation adjustments, recorded in the equity adjustment from translation
component of stockholders' equity, decreased stockholders' equity by $13.6
million compared to an increase of $44.9 million in 1995.
As more fully explained in Note 11 of Notes to Consolidated Financial
Statements, the Corporation historically had hedged a portion of its net
investment in foreign subsidiaries. Beginning in 1995, the Corporation decided
to limit the future hedging of its net investment in foreign subsidiaries. While
this decision may increase the volatility of reported equity, it is expected to
result in more predictable cash flows from hedging activities.
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 1996, these activities netted to a cash outflow of $5.4
million compared to a cash outflow of $4.7 million in 1995. 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, which were
not significant in 1996, decreased stockholders' equity by $8.7 million in 1995.
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 the Corporation's Mexican sales in both 1996 and 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 those years. While the Corporation will take actions to mitigate the
impacts of any future currency devaluations in Mexico or elsewhere, there is no
assurance that such devaluations will not adversely affect the Corporation.
Financing activities for 1996 used cash of $667.3 million compared to
$127.0 million of cash used in 1995. As more fully described in Note 10 of Notes
to Consolidated Financial Statements, the Corporation, during 1996, replaced its
former unsecured revolving credit facility, which was scheduled to expire in
1997, with a new unsecured revolving credit facility, expiring in 2001. Also
during 1996, the Corporation reduced its outstanding borrowings by $635.0
million. This reduction was funded through the proceeds from the sale of
discontinued operations and through improved operating cash flows. 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 in the
aggregate amount of $150.0 million of the 9.25% sinking fund debentures of its
Emhart Corporation subsidiary. 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 described in Note 15 of Notes to Consolidated Financial
Statements, on October 14, 1996, the Corporation, pursuant to its conversion
option, issued 6,350,000 shares of common stock in exchange for the 150,000
shares of Series B cumulative convertible preferred stock previously
outstanding. Because the dividend rate on the common stock is lower than that
which was paid on the preferred stock, the conversion will result in annualized
cash savings to the Corporation, at the current dividend rate, of approximately
$8.6 million. As more fully described in Note 1 of Notes to Consolidated
Financial Statements, the 6,350,000 shares of common stock issued upon
conversion have been considered in the computation of primary earnings per share
through the inclusion of those shares, from their date of issuance, in the
determination of the weighted average shares outstanding. Those 6,350,000 shares
of common stock have been treated as outstanding in the computation of fully
diluted earnings per share for the years ended December 31, 1996 and 1995.
As more fully explained in Note 11 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
variable rate debt to total debt ratio, after taking interest rate hedges into
account, was 35% at December 31, 1996, compared to 43% at December 31, 1995, and
34% at December 31, 1994. At December 31, 1996, average debt maturity was 4.5
years compared to 4.0 years at December 31, 1995, and 4.9 years at December 31,
1994.
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 its unsecured revolving 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, 1996, 1995, and 1994.
Consolidated Balance Sheet
- December 31, 1996 and 1995.
Consolidated Statement of Cash Flows
- years ended December 31, 1996, 1995, and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales ..................................................................... $4,914.4 $ 4,766.1 $4,365.2
Cost of goods sold ..................................................... 3,156.6 3,016.7 2,769.7
Selling, general, and administrative expenses .......................... 1,309.6 1,323.3 1,243.6
Restructuring costs .................................................... 91.3 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income .......................................................... 356.9 426.1 351.9
Interest expense (net of interest income of $4.7
for 1996, $8.6 for 1995, and $6.9 for 1994) .......................... 135.4 184.4 187.9
Other expense .......................................................... 18.8 16.2 15.4
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations Before Income Taxes ................... 202.7 225.5 148.6
Income taxes ........................................................... 43.5 9.0 58.7
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations ....................................... 159.2 216.5 89.9
Earnings from discontinued operations (net of income taxes of
$55.6 for 1996, $8.7 for 1995, and $4.0 for 1994) ...................... 70.4 38.4 37.5
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings Before Extraordinary Item ........................................ 229.6 254.9 127.4
Extraordinary loss from early extinguishment of debt
(net of income tax benefit of $2.6) .................................... -- (30.9) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Earnings .............................................................. $ 229.6 $ 224.0 $ 127.4
====================================================================================================================================
Net Earnings Applicable To Common Shares .................................. $ 220.5 $ 212.4 $ 115.8
====================================================================================================================================
Net Earnings Per Common and Common Equivalent Share:
- ------------------------------------------------------------------------------------------------------------------------------------
Primary:
Earnings from continuing operations .................................... $ 1.64 $ 2.33 $ .93
Earnings from discontinued operations .................................. .77 .44 .44
Extraordinary loss from early extinguishment of debt ................... -- (.35) --
- ------------------------------------------------------------------------------------------------------------------------------------
Primary Earnings Per Share ................................................ $ 2.41 $ 2.42 $ 1.37
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Used In Computing Primary Earnings Per Share
(in Millions) ......................................................... 91.3 87.9 84.3
====================================================================================================================================
Assuming Full Dilution:
Earnings from continuing operations .................................... $ 1.65 $ 2.29 $ .93
Earnings from discontinued operations .................................. .73 .41 .44
Extraordinary loss from early extinguishment of debt ................... -- (.33) --
- ------------------------------------------------------------------------------------------------------------------------------------
Fully Diluted Earnings Per Share .......................................... $ 2.38 $ 2.37 $ 1.37
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Used In Computing Fully Diluted
Earnings Per Share (in Millions) ....................................... 96.3 94.7 84.3
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents .................................................................. $ 141.8 $ 131.6
Trade receivables, less allowances of $44.0 for 1996 and $43.1 for 1995 .................... 672.4 651.3
Inventories ................................................................................ 747.8 855.7
Net assets of discontinued operations ...................................................... -- 302.4
Other current assets ....................................................................... 242.2 165.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current Assets .................................................................... 1,804.2 2,106.6
- ------------------------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment ............................................................. 905.8 866.8
Goodwill ................................................................................... 2,012.2 2,142.0
Other Assets ............................................................................... 431.3 429.9
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5,153.5 $ 5,545.3
====================================================================================================================================
Liabilities and Stockholders' Equity
Short-term borrowings ...................................................................... $ 235.9 $ 599.2
Current maturities of long-term debt ....................................................... 54.1 48.0
Trade accounts payable ..................................................................... 380.7 396.7
Other accrued liabilities .................................................................. 835.9 743.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities ............................................................... 1,506.6 1,786.9
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt ............................................................................. 1,415.8 1,704.5
Deferred Income Taxes ...................................................................... 67.5 52.8
Postretirement Benefits .................................................................... 310.3 307.8
Other Long-Term Liabilities ................................................................ 220.9 270.1
Stockholders' Equity
Convertible preferred stock (outstanding: December 31, 1995--
150,000 shares) ......................................................................... -- 150.0
Common stock (outstanding: December 31, 1996--94,248,807 shares;
December 31, 1995--86,447,588 shares) ................................................... 47.1 43.2
Capital in excess of par value ............................................................. 1,261.7 1,084.5
Retained earnings .......................................................................... 380.2 202.6
Equity adjustment from translation ......................................................... (56.6) (57.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity .............................................................. 1,632.4 1,423.2
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5,153.5 $ 5,545.3
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net earnings ........................................................................... $ 229.6 $ 224.0 $ 127.4
Adjustments to reconcile net earnings to cash flow
from operating activities of continuing operations:
Non-cash charges and credits:
Depreciation and amortization ..................................................... 214.6 206.7 195.4
Restructuring charges ............................................................. 91.3 -- --
Deferred income taxes ............................................................. 2.9 (46.1) 8.9
Extraordinary item ................................................................ -- 26.5 --
Other ............................................................................. 1.2 19.5 1.9
Earnings of discontinued operations ................................................. (70.4) (38.4) (37.5)
Changes in selected working capital items:
Trade receivables ................................................................. (10.0) 14.8 (83.5)
Inventories ....................................................................... 107.5 (138.7) 31.9
Trade accounts payable ............................................................ (21.4) 108.1 58.3
Restructuring ....................................................................... (39.2) -- --
Other assets and liabilities ........................................................ (42.7) (59.5) 1.6
Net (decrease) increase in receivables sold ......................................... (18.0) (14.0) 26.0
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities of
continuing operations .............................................................. 445.4 302.9 330.4
Cash flow from operating activities of
discontinued operations ............................................................ (12.4) 1.5 79.3
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flow From Operating Activities ................................................. 433.0 304.4 409.7
- ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from sale of discontinued operations .......................................... 413.6 95.5 --
Investing activities of discontinued operations ........................................ -- (12.9) (15.5)
Proceeds from disposal of assets and businesses ........................................ 31.5 12.3 12.0
Capital expenditures ................................................................... (196.3) (203.1) (181.5)
Cash inflow from hedging activities .................................................... 392.9 485.6 1,070.4
Cash outflow from hedging activities ................................................... (398.3) (490.3) (1,105.9)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities ................................................. 243.4 (112.9) (220.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flow Before Financing Activities ............................................... 676.4 191.5 189.2
Financing Activities
Net (decrease) increase in short-term borrowings ....................................... (360.9) 47.2 217.4
Proceeds from long-term debt (including revolving
credit facility) ...................................................................... 461.1 274.0 1,226.7
Payments on long-term debt (including revolving
credit facility) ...................................................................... (735.2) (425.2) (1,622.8)
Issuance of equity interest in a subsidiary ............................................ -- -- 4.3
Issuance of common stock ............................................................... 22.3 23.0 8.8
Cash dividends ......................................................................... (54.6) (46.0) (45.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flow From Financing Activities .................................................... (667.3) (127.0) (210.9)
Effect of exchange rate changes on cash ................................................ 1.1 2.1 5.4
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents ....................................... 10.2 66.6 (16.3)
Cash and cash equivalents at beginning of year ......................................... 131.6 65.0 81.3
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year ............................................... $ 141.8 $ 131.6 $ 65.0
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
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: Certain prior years' amounts in the Consolidated Financial
Statements have been reclassified to conform to the presentation used in 1996.
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 located
outside the United States, except those subsidiaries operating in highly
inflationary economies, generally are 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 include 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.
GOODWILL AND OTHER INTANGIBLES: Goodwill and other intangibles are amortized on
the straight-line method over periods of 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 $101.3 million in 1996, $96.1 million in 1995, and $89.2
million in 1994.
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 $258.5 million in 1996, $265.1
million in 1995, and $249.9 million in 1994.
POSTRETIREMENT BENEFITS: The Corporation's pension plans, which cover
substantially all of its employees, consist primarily of non-contributory
defined benefit plans. The defined benefit 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 generally are 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 generally are
covered by government-sponsored programs.
The Corporation uses the corridor approach in the valuation of defined
benefit 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 due to or
from the counterparties are included in other accrued liabilities. Since they
are accounted for as hedges, the fair value of the swap agreements is not
recognized in the Consolidated Financial Statements.
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.
Gains or losses resulting from the early termination of interest rate swaps
or caps are deferred and amortized as an adjustment to the yield of the related
debt instrument over the remaining period originally covered by the terminated
swaps or caps.
Gains and losses on hedges of net investments are reflected in the
Consolidated Balance Sheet in the equity adjustment from translation component
of stockholders' equity, with the related amounts due to or 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 on foreign currency firm commitment hedges and
gains on hedges of forecasted transactions are deferred and included in the
basis of the transactions underlying the commitments.
STOCK-BASED COMPENSATION: As described in Note 16, the Corporation has elected
to follow the accounting provisions of Accounting Principles Board Opinion
(APBO) No. 25 for stock-based compensation and to furnish the pro forma
disclosures required under Statement of Financial Accounting Standards (SFAS)
No. 123.
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary earnings per 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 1996 and 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, these incremental shares were immaterial
and, accordingly, were not considered in the calculation of primary earnings per
share.
In 1996 and 1995, fully diluted earnings per share were computed by
dividing net earnings by the weighted average number of common shares
outstanding during the year plus the incremental shares that would have been
outstanding under certain employee benefit plans, upon the assumed exercise of
dilutive stock options, and, prior to October 1996, upon the assumed conversion
of the preferred shares. In 1994, 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, 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 are not materially different
from primary earnings per share.
As described in Note 15, a total of 6,350,000 shares of common stock were
issued upon conversion of the Corporation's Series B Cumulative Convertible
Preferred Stock (Series B) in October 1996. Those 6,350,000 shares of common
stock were reflected in the computation of primary earnings per share through
the inclusion of such shares, from their date of issuance, in the determination
of the weighted average number of common shares outstanding. On a pro forma
basis, assuming that the 6,350,000 shares of common stock had been issued upon
conversion of the shares of Series B stock as of January 1, 1996, primary
earnings per share for the year ended December 31, 1996, would have been $2.38.
NOTE 2: DISCONTINUED OPERATIONS
Earnings from the discontinued Information Technology and Services (PRC) segment
amounted to $70.4 million in 1996, $38.4 million in 1995, and $37.5 million in
1994, net of applicable income taxes of $55.6 million, $8.7 million, and $4.0
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.
On February 16, 1996, the Corporation completed the sale of PRC Inc., the
remaining business in the discontinued PRC segment, for $425.0 million. Earnings
from discontinued operations in 1996 consisted primarily of the gain on the sale
of PRC Inc., net of selling expenses and applicable income taxes. Revenues and
operating income of PRC Inc. for the period from January 1, 1996, through the
date of sale were not significant. The terms of the sale of PRC Inc. provide for
an adjustment to the sales price, expected to be finalized in 1997, based upon
the changes in the net assets of PRC Inc. through February 15, 1996.
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 from discontinued operations for 1995.
Together, PRC Inc., RSI, and EMI composed the Corporation's discontinued PRC
segment.
Revenues of the discontinued PRC segment were $800.1 million in 1995 and
$883.1 million in 1994. These revenues are not included in sales as reported in
the Consolidated Statement of Earnings.
Net assets of the discontinued PRC segment as of December 31, 1995,
consisted principally of accounts receivable, goodwill, and other assets less
accounts payable and other liabilities.
NOTE 3: RESTRUCTURING
In 1996, the Corporation commenced a restructuring of certain of its operations
and recorded a restructuring charge of $91.3 million.
The major component of the restructuring charge relates to the
Corporation's elimination of approximately 1,500 positions. As a result, an
accrual of $74.6 million for severance, principally associated with the European
businesses in the Consumer and Home Improvement Products (Consumer) segment, was
included in the restructuring charge.
In connection with the restructuring plan, the Corporation also will take
actions to rationalize certain manufacturing and service operations. Such
rationalization, principally associated with the Consumer businesses in the
United States, will include the outsourcing of certain products currently
manufactured by the Corporation and the closure of several small manufacturing
facilities. As a result, the restructuring charge also included a $6.6 million
write-down to fair value of certain land and buildings. The remaining
restructuring charge primarily related to the write-down to fair value of
equipment made obsolete or redundant due to the decision to close certain
facilities or outsource certain production.
NOTE 4: 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, 1996, the Corporation had sold
$212.0 million of receivables under this program compared to $230.0 million at
December 31, 1995. The discount on the sale of receivables is included in other
expense.
NOTE 5: INVENTORIES
The classification of inventories at the end of each year, in millions of
dollars, was as follows:
1996 1995
-------- --------
FIFO cost
Raw materials and work-in-process ................. $ 211.1 $ 231.6
Finished products ................................. 567.7 665.0
-------- --------
778.8 896.6
Excess of FIFO cost over LIFO inventory value ........ (31.0) (40.9)
-------- --------
$ 747.8 $ 855.7
======== ========
The cost of United States inventories stated under the LIFO method was
approximately 42% and 44% of the value of total inventories at December 31, 1996
and 1995, respectively.
NOTE 6: PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at the end of each year, in millions of dollars,
consisted of the following:
1996 1995
-------- --------
Property, plant, and equipment at cost:
Land and improvements ........................ $ 67.2 $ 69.4
Buildings .................................... 341.6 360.7
Machinery and equipment ...................... 1,473.3 1,342.1
-------- --------
1,882.1 1,772.2
Less accumulated depreciation ................ 976.3 905.4
-------- --------
$ 905.8 $ 866.8
======== ========
NOTE 7: GOODWILL
Goodwill at the end of each year, in millions of dollars, was as follows:
1996 1995
-------- --------
Goodwill ..................................... $2,571.5 $2,635.0
Less accumulated amortization ................ 559.3 493.0
-------- --------
$2,012.2 $2,142.0
======== ========
NOTE 8: OTHER ACCRUED LIABILITIES
Other accrued liabilities at the end of each year, in millions of dollars,
included the following:
1996 1995
-------- -------
Salaries and wages ............................... $ 77.6 $ 91.8
Employee benefits ................................ 54.8 66.2
Trade discounts and allowances ................... 98.3 79.8
Restructuring costs .............................. 37.7 --
All other ........................................ 567.5 505.2
-------- -------
$ 835.9 $ 743.0
======== ========
All other at December 31, 1996 and 1995, consisted primarily of accruals
for insurance, warranty costs, advertising, interest, and income and other
taxes.
NOTE 9: SHORT-TERM BORROWINGS
Short-term borrowings in the amounts of $120.9 million and $242.7 million at
December 31, 1996 and 1995, respectively, primarily consisted of borrowings by
subsidiaries located outside the United States under the terms of uncommitted
lines of credit or other short-term borrowing arrangements. Short-term
borrowings at December 31, 1996, also included $115.0 million of borrowings
under the Corporation's unsecured revolving credit facility, as more fully
described in Note 10. Short-term borrowings at December 31, 1995, also included
$150.0 million of competitive-bid rate loans under the Corporation's former
unsecured revolving credit facility, as more fully described in Note 10, and
$206.5 million of unsecured money market loans. The weighted average interest
rate on short-term borrowings outstanding at December 31, 1996 and 1995, was
6.9% and 6.2%, respectively.
Under the terms of uncommitted lines of credit at December 31, 1996,
certain subsidiaries outside the United States may borrow up to an additional
$427.2 million on such terms as may be mutually agreed. These arrangements do
not have termination dates and are reviewed periodically. No material
compensating balances are required or maintained.
NOTE 10: LONG-TERM DEBT
The composition of long-term debt at the end of each year, in millions of
dollars, was as follows:
1996 1995
-------- --------
Revolving credit facility expiring 2001 .......... $ 285.9 $ --
Revolving credit facility expiring 1997 .......... -- 436.8
7.50% notes due 2003 ............................. 440.7 500.0
6.625% notes due 2000 ............................ 250.0 250.0
7.0% notes due 2006 .............................. 207.6 250.0
Medium Term Notes due through 2002 ............... 221.5 236.8
Other loans due through 2006 ..................... 64.2 78.9
Less current maturities of long-term debt ........ (54.1) (48.0)
-------- --------
$ 1,415.8 $ 1,704.5
========= =========
In 1996, the Corporation replaced its former unsecured revolving credit
facility (the Former Credit Facility), which was scheduled to expire in 1997,
with a new unsecured revolving credit facility (the Credit Facility). Under the
Credit Facility, which consists of two individual facilities, the Corporation
may borrow up to $1.0 billion. The amount available for borrowing under the
Credit Facility at December 31, 1996, was $599.1 million.
Borrowing options under the Credit Facility are at the London Interbank
Offered Rate (LIBOR) plus a specified percentage, or at other variable rates set
forth therein. The Credit Facility provides that the interest rate margin over
LIBOR, initially set at .15% and .25%, respectively, for each of the two
individual facilities, will increase or decrease based upon changes in the
ratings of the Corporation's long-term senior unsecured debt. 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. 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,
initially equal to .125% of the amount of each bank's commitment, whether used
or unused. The Credit Facility provides that the facility fee also will increase
or decrease based upon changes in the ratings of the Corporation's long-term
senior unsecured debt.
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 cash
flow to fixed expense coverage ratios. As of December 31, 1996, 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.
Under the Former Credit Facility, the interest rate margin over LIBOR
declined as the Corporation's leverage ratio improved. At December 31, 1994,
borrowings under the Former Credit Facility were at LIBOR plus .4375%, declined
to LIBOR plus .325% effective January 1, 1995, and declined to LIBOR plus .25%
effective January 1, 1996. In addition to interest payable on the principal
amount of indebtedness outstanding under the Former Credit Facility, the
Corporation was required to pay an annual facility fee to each bank equal to
.175% of the amount of the bank's commitment as of December 31, 1994 and 1995.
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 sale during 1995 of portions of the
discontinued PRC segment.
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, 1996, $221.5 million aggregate principal amount of the Medium Term
Notes, issued under this shelf registration statement, were outstanding. Of that
amount, $179.5 million bear interest at fixed rates ranging from 7.22% to 8.95%,
while the remainder bear interest at variable rates. At December 31, 1996, those
variable rates ranged from 6.00% to 6.33%.
Indebtedness of subsidiaries in the aggregate principal amounts of $586.5
million and $759.1 million were included in the Consolidated Balance Sheet at
December 31, 1996 and 1995, 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: $54.1 million in 1997, $61.9 million in 1998, $59.3
million in 1999, $253.9 million in 2000, and $342.4 million in 2001. Interest
payments on all indebtedness were $170.7 million in 1996, $209.0 million in
1995, and $184.9 million in 1994.
NOTE 11: 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.
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 12.
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 and variable rate indebtedness. The
Corporation seeks to issue debt opportunistically, whether at fixed or variable
rates, at the lowest possible costs and then, based upon its assessment of the
future interest rate environment, may convert such debt from fixed to variable
or from variable to fixed interest rates through the use of interest rate
derivatives. 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 the 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 interest rate
derivatives at the end of each year, in millions of dollars, were as follows:
1996 1995
- --------------------------------------------------------------------------------
Interest rate swaps:
Fixed to variable rates ....................... $ 700.0 $ 700.0
Variable to fixed rates ....................... 400.0 450.0
Rate basis swaps .............................. 100.0 150.0
U.S. rates to foreign rates ................... 325.0 175.0
Interest rate caps purchased ..................... 150.0 150.0
- --------------------------------------------------------------------------------
The Corporation's portfolio of interest rate swap instruments as of
December 31, 1996, included $700.0 million notional amounts of fixed to variable
rate swaps with a weighted average fixed rate receipt of 6.04%. The basis of the
variable rates paid is LIBOR. The maturities of these swaps, by notional
amounts, are as follows: $100.0 million in 1998, $150.0 million in 2000, $50.0
million in 2001, and the balance in the years 2003 through 2004. A total of
$300.0 million of these swaps, maturing in 2003, contain provisions that permit
the counterparties to terminate the swaps, without penalty, beginning in 1998.
As of December 31, 1996, the portfolio also included $400.0 million
notional amounts of variable to fixed rate swaps with a weighted average fixed
rate payment of 6.72%. The basis of the variable rates received is LIBOR. Of
these swaps to fixed rates, $150.0 million mature in 1997 and the balance mature
in 1998.
As of December 31, 1996, the portfolio also contained $100.0 million
notional amounts of rate basis swaps, which swap to the higher of a specified
weighted average fixed rate payment of 6.26% or a weighted average variable rate
payment of LIBOR minus 1.55%. The basis of the variable rates received is LIBOR.
Rates received under these rate basis swaps are generally reset every three
months. Of these rate basis swaps, $50.0 million mature in 1997, and the balance
mature in 1998. At December 31, 1996, 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, 1996,
consisted of $325.0 million notional amounts of interest rate 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 6.77%) into fixed rate Japanese yen (with a weighted
average fixed rate of 2.92%). Of the $150.0 million notional amounts swapped
into Japanese yen, $50.0 million mature in 1997, and the balance mature in 1999.
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%). A total of $100.0 million notional amounts of
interest rate swaps maturing in 1999 had been swapped from fixed rate United
States dollars (with a weighted average fixed rate of 6.64%) into fixed rate
deutsche marks (with a weighted average fixed rate of 4.73%). Interest rate
swaps totaling $50.0 million notional amount swapped from fixed rate United
States dollars (with a weighted average fixed rate of 6.77%) into fixed rate
Dutch guilders (with a weighted average fixed rate of 4.58%); these swaps mature
in 1999.
As of December 31, 1996, the Corporation also had $150.0 million notional
amounts of interest rate caps that 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, 1996 and 1995, was $.1 million and $3.5 million, respectively.
Gross deferred gains and losses on the early termination of interest rate swaps
as of December 31, 1996 and 1995, 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) generally are 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
operating 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. Beginning in 1995, the Corporation decided to limit
the future hedging of its net investment in foreign subsidiaries.
Through its foreign currency hedging activities, the Corporation seeks to
minimize the risk that cash flows resulting from the sales of products
manufactured in a currency different from that of the selling subsidiary will be
affected by changes in exchange rates. Management responds to foreign exchange
movements through various means, such as pricing actions, changes in cost
structure, and changes in hedging strategies.
The Corporation hedges its foreign currency transaction and firm sales
commitment exposures, as well as certain forecasted transactions, based on
management's judgment, generally through purchased options with little or no
intrinsic value at the inception of the options and, for transaction and firm
sales commitment exposures, the use of forward exchange contracts. 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. Deferred gains and losses on
hedged firm sales commitments are recognized when the related sales occur.
Deferred gains on options that hedge forecasted transactions, generally related
to inventory 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, 1996 and 1995, in millions of
dollars, including details by major currency as of December 31, 1996. Foreign
currency amounts were 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, 1996 Buy Sell
- --------------------------------------------------------------------------------
United States dollar .................... $ 962.3 $ (561.4)
Pound sterling .......................... 251.7 (65.3)
Deutsche mark ........................... 54.3 (266.7)
Dutch guilder ........................... 22.3 (85.1)
Japanese yen ............................ 34.1 (165.1)
French franc ............................ 60.2 (76.1)
Canadian dollar ......................... 204.8 (204.0)
Italian lira ............................ 21.8 (101.4)
Swiss franc ............................. 47.1 (64.2)
Other ................................... 95.4 (157.9)
- --------------------------------------------------------------------------------
Total ................................... $1,754.0 $(1,747.2)
================================================================================
As of December 31, 1995
- --------------------------------------------------------------------------------
Total ................................... $2,305.8 $(2,322.2)
================================================================================
The contractual amounts of the Corporation's purchased currency options to
buy currencies, predominantly the pound sterling, and to sell various currencies
were $328.5 million and $309.1 million, respectively, at December 31, 1996. The
contractual amounts of 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.
The Corporation's credit exposure on its foreign currency derivatives as of
December 31, 1996 and 1995, was $62.4 million and $28.9 million, respectively.
Gross deferred realized gains and losses on hedges of firm commitments and
forecasted transactions were not significant at December 31, 1996 and 1995.
Substantially all of the amounts deferred at December 31, 1996, are expected to
be recognized in earnings during 1997, when the gains or losses on the
underlying transactions also will be recognized.
NOTE 12: 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:
o 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.
o Long-term debt: Publicly traded debt is valued based on quoted market values.
The amount reported in the Consolidated Balance Sheet for other long-term debt
approximates fair value, since such debt was primarily variable rate debt.
o 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.
o Foreign currency contracts: The fair value of forward exchange contracts and
options is 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 amounts approximate fair values, in millions of dollars:
Assets (Liabilities) Carrying Fair
As of December 31, 1996 Amount Value
- --------------------------------------------------------------------------------
Non-derivatives:
Long-term debt .............................. $(1,415.8) $(1,437.5)
- --------------------------------------------------------------------------------
Derivatives relating to:
Debt
Assets .................................... -- .1
Liabilities ............................... -- (21.8)
Foreign currency
Assets .................................... 39.7 62.4
Liabilities ............................... (21.1) (19.6)
- --------------------------------------------------------------------------------
As of December 31, 1995
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
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 13: INCOME TAXES
Earnings (losses) from continuing operations before income taxes and
extraordinary item, for each year, in millions of dollars, were as follows:
1996 1995 1994
-------- -------- --------
United States .................... $ 121.0 $ 83.5 $ (16.6)
Other countries .................. 81.7 142.0 165.2
-------- -------- --------
$ 202.7 $ 225.5 $ 148.6
======== ======== ========
Significant components of income taxes (benefits) for each year, in
millions of dollars, were as follows:
1996 1995 1994
------- ------- -------
Current:
United States ........................ $ 4.0 $ 20.2 $ 4.7
Other countries ...................... 34.5 33.5 43.7
Withholding on remittances
from other countries ............... 2.1 1.4 1.4
------- ------- -------
40.6 55.1 49.8
------- ------- -------
Deferred:
United States ........................ (10.6) (50.2) 12.0
Other countries ...................... 13.5 4.1 (3.1)
------- ------- -------
2.9 (46.1) 8.9
------- ------- -------
$ 43.5 $ 9.0 $ 58.7
======= ======= =======
During 1996, 1995, and 1994, 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 $19.0 million in 1996,
$21.0 million in 1995, and $15.5 million in 1994.
In 1995, income tax benefits of $2.6 million were recorded in connection
with the extraordinary loss on extinguishment of debt. Income tax expense
recorded directly as an adjustment to equity as a result of hedging activities
in 1996, 1995, and 1994 was not significant.
Income tax payments were $40.8 million in 1996, $56.3 million in 1995, and
$44.5 million in 1994.
Deferred tax assets (liabilities) at the end of each year, in millions of
dollars, were composed of the following:
1996 1995
-------- --------
Deferred tax liabilities:
Fixed assets .................................... $ (47.0) $ (45.8)
Postretirement benefits ......................... (39.1) (32.5)
Other ........................................... (27.7) (8.8)
-------- --------
Gross deferred tax liabilities ..................... (113.8) (87.1)
-------- --------
Deferred tax assets:
Tax loss carryforwards .......................... 98.5 115.9
Tax credit and capital loss
carryforwards ................................. 72.2 58.0
Net assets of discontinued operations ........... -- 40.0
Other ........................................... 124.2 128.0
-------- --------
Gross deferred tax assets .......................... 294.9 341.9
-------- --------
Deferred tax asset valuation allowance ............. (111.5) (187.7)
-------- --------
Net deferred tax assets ............................ $ 69.6 $ 67.1
======== ========
Deferred income taxes are included in the Consolidated Balance Sheet in
other current assets, other accrued liabilities, deferred income taxes, and, for
1995, net assets of discontinued operations.
During the year ended December 31, 1996, the deferred tax asset valuation
allowance decreased by $76.2 million. Included in the decrease was $10.6 million
that resulted from the reversal of a portion of the deferred tax asset valuation
allowance based on the projections of estimable taxable earnings in the United
States. 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, 1995, the deferred tax asset valuation
allowance decreased by $113.5 million. Included in the decrease was $109.0
million that resulted from the 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 then-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.
Tax basis carryforwards at December 31, 1996, consisted of net operating
losses expiring from 1997 to 2012 and other tax credits expiring from 1998 to
2009.
At December 31, 1996, unremitted earnings of subsidiaries outside the
United States were approximately $1.4 billion, on which no United States taxes
have been provided, except that deferred withholding taxes have been provided on
approximately $300.0 million of such unremitted earnings. 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 taxes 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 taxes and offset any foreign
withholding taxes not previously provided.
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:
1996 1995 1994
------- ------- -------
Income taxes at federal statutory rate ........... $ 70.9 $ 78.9 $ 52.0
Lower effective taxes on earnings
in other countries ............................ (10.3) (16.5) (18.7)
Effect of net operating loss carryforwards ....... (52.3) (19.4) (2.7)
Effect of reduction in deferred tax asset
valuation allowance due to projection
of estimable earnings in the United
States, including, for 1995, the
effect of the then-pending sale of
PRC Inc. ...................................... (10.6) (65.0) --
Withholding on remittances from other
countries ..................................... 21.1 1.4 1.4
Amortization and write-off of goodwill ........... 23.6 24.6 24.5
Other-net ........................................ 1.1 5.0 2.2
------- ------- -------
Income taxes ..................................... $ 43.5 $ 9.0 $ 58.7
======= ======= =======
NOTE 14: POSTRETIREMENT BENEFITS
Net pension cost (credit) for all domestic defined benefit plans included the
following components for each year, in millions of dollars:
1996 1995 1994
------- ------- -------
Service cost .............................. $ 16.5 $ 11.3 $ 14.0
Interest cost on projected
benefit obligation ..................... 48.8 47.9 45.6
Actual return on assets ................... (62.0) (108.2) (20.8)
Net amortization and deferral ............. (5.8) 39.3 (38.2)
------- ------- -------
Net pension cost (credit) ................. $ (2.5) $ (9.7) $ .6
======= ======= =======
The funded status of the domestic defined benefit plans at the end of each
year, in millions of dollars, was as follows:
1996 1995
-------- --------
Actuarial present value of benefit obligations:
Vested benefit ................................... $ 569.8 $ 585.2
======== ========
Accumulated benefit .............................. $ 589.4 $ 611.5
======== ========
Projected benefit ................................ $ 631.0 $ 653.0
Plan assets at fair value ........................... 796.2 750.6
-------- --------
Plan assets in excess of projected benefit
obligation ........................................ 165.2 97.6
Unrecognized net loss ............................... 66.2 129.3
Unrecognized prior service cost ..................... 5.3 5.6
Unrecognized net asset at date of adoption,
net of amortization ............................... (3.1) (4.2)
-------- --------
Net pension asset recognized in the
Consolidated Balance Sheet ........................ $ 233.6 $ 228.3
======== ========
Discount rates ...................................... 8.0% 7.75%
Salary scales ....................................... 5.0-6.0% 5.0-6.0%
Expected return on plan assets ...................... 10.5% 10.5%
-------- --------
Net pension expense (credit) for defined benefit pension plans outside the
United States was $.9 million in 1996, $.8 million in 1995, and $(2.0) million
in 1994. The net pension asset recognized in the Consolidated Balance Sheet for
those plans outside the United States where assets exceeded accumulated benefits
was $119.3 million and $102.0 million at December 31, 1996 and 1995,
respectively. Liabilities of these plans were discounted at rates ranging from
4.0% to 8.5% in 1996 and from 4.5% to 9.0% in 1995, and expected returns on
assets of these plans ranged from 5.5% to 10.0% in 1996 and from 5.5% to 10.5%
in 1995. The net pension liability recognized in the Consolidated Balance Sheet
for those plans outside the United States where accumulated benefits exceeded
assets was $71.0 million and $71.7 million at December 31, 1996 and 1995,
respectively. Liabilities of these predominantly unfunded plans were discounted
at rates ranging from 7.0% to 8.0% in 1996 and from 7.0% to 7.75% in 1995.
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 1994 for defined benefit plans
were 10.5% for plans in the United States and ranged from 5.5% to 12.0% for
funded plans outside the United States.
Expense for defined contribution plans amounted to $11.3 million, $11.6
million, and $8.3 million in 1996, 1995, and 1994, 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:
1996 1995 1994
------- ------- -------
Service expense ......................... $ 1.2 $ 1.6 $ 1.8
Interest expense ........................ 11.6 14.0 12.9
Net amortization ........................ (8.8) (7.0) (8.0)
------- ------- -------
Net periodic postretirement
benefit expense ...................... $ 4.0 $ 8.6 $ 6.7
======= ======= =======
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:
1996 1995
------- -------
Accumulated postretirement
benefit obligation:
Retirees ...................................... $ 114.0 $ 129.0
Fully eligible active
participants ................................ 14.9 15.7
Other active participants ..................... 13.5 13.5
------- -------
Total ......................................... 142.4 158.2
------- -------
Unrecognized prior service cost .................... 53.9 59.7
Unrecognized net loss .............................. 36.5 22.3
------- -------
Net postretirement benefit liability
recognized in the Consolidated
Balance Sheet ................................... $ 232.8 $ 240.2
======= =======
The health care cost trend rate used to determine the postretirement
benefit obligation was 9.77% for 1996 and 9.72% for 1997, decreases gradually to
an ultimate rate of 5.25% 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 at December 31,
1996, by approximately $10.4 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 8.0% was
used to measure the accumulated postretirement benefit obligation in 1996
compared to 7.75% used in 1995.
<PAGE>
NOTE 15: STOCKHOLDERS' EQUITY
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Equity
Outstanding Outstanding Capital in Retained Adjustment
Preferred Common Par Excess of Earnings From
Shares Amount Shares Value Par Value (Deficit) Translation
------------ ------- ----------- ------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
Net earnings -- -- -- -- -- 229.6 --
Cash dividends:
Common ($.48 per share) -- -- -- -- -- (42.9) --
Preferred -- -- -- -- -- (9.1) --
Conversion of preferred shares
into common shares (150,000) (150.0) 6,350,000 3.2 146.8 -- --
Common stock issued under
employee benefit plans -- -- 1,451,219 .7 30.4 -- --
Valuation changes, less net
effect of hedging activities -- -- -- -- -- -- .5
------- ------- ---------- ------ --------- -------- --------
Balance at December 31, 1996 -- $ -- 94,248,807 $ 47.1 $ 1,261.7 $ 380.2 $ (56.6)
======= ======= ========== ====== ========= ======== ========
</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).
Under terms established upon the original sale of the Series B stock, the
Corporation had the option, after September 1996, to require the conversion of
the shares of Series B stock into shares of common stock under certain
circumstances. In accordance with the terms of the Series B stock, each share of
Series B stock was convertible into 42-1/3 shares of common stock and was
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 were
subject to adjustment under certain circumstances pursuant to anti-dilution
provisions. On October 14, 1996, the Corporation exercised its conversion
option, issuing 6,350,000 shares of common stock in exchange for all previously
outstanding shares of Series B stock.
In connection with the original sale of the Series B stock, the Corporation
and the purchaser of Series B stock entered into a standstill agreement that
included, 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,
which expires in September 2001, continues to apply to the shares of common
stock issued upon conversion of the Series B stock.
Prior to the conversion in 1996, holders of Series B stock were entitled to
dividends, payable quarterly, at an annual rate of $77.50 per share.
NOTE 16: STOCK-BASED COMPENSATION
The Corporation has elected to follow APBO No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in accounting for its stock-based
compensation because, as discussed below, the alternative fair value accounting
provided for under SFAS No. 123, "Accounting for Stock-Based Compensation,"
requires use of option valuation models that are not appropriate for the
valuation of stock-based compensation arrangements provided to employees.
Further, the dilutive effects of stock-based compensation arrangements are
reflected in the Corporation's computation of earnings per share.
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 value at the date of grant. However, APBO No. 25
requires recognition of compensation expense for variable award plans over the
vesting periods of such plans, based upon the then-current market values of the
underlying stock. In contrast, SFAS No. 123 would require recognition of
compensation expense for grants of stock, stock options, and other equity
instruments, over the vesting periods of such grants, based on the estimated
grant-date fair values of those grants.
Under the Corporation's various stock option plans, options to purchase
common stock may be granted until 2006. 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. Additionally,
certain plans allow for the granting of stock appreciation rights on a
stand-alone basis.
As of December 31, 1996, 5,520,518 non-qualified stock options were
outstanding under domestic plans. There were 131,961 stock options outstanding
under the United Kingdom plan.
Under all plans, there were 1,680,335 shares of common stock reserved for
future grants as of December 31, 1996. Transactions are summarized as follows:
Weighted
Average
Stock Options Exercise
Outstanding Price
------------- ----------
December 31, 1995 ................................. 5,788,688 $ 24.18
Granted ........................................... 1,410,050 33.92
Exercised ......................................... 1,115,328 18.01
Forfeited ......................................... 430,931 26.26
--------- ---------
December 31, 1996 ................................. 5,652,479 $ 24.12
========= =========
Shares exercisable at December 31, 1996 ........... 3,424,497 $ 19.05
--------- ---------
Stock Options Price Range
------------- -----------
Shares exercised during the year
ended December 31, 1995........................ 1,165,152 $9.88-25.25
--------- -----------
Shares exercised during the year
ended December 31, 1994........................ 343,702 9.88-21.63
--------- -----------
Exercise prices for options outstanding as of December 31, 1996, ranged
from $9.88 to $41.00. The following table sets forth certain information with
respect to those stock options outstanding at December 31, 1996:
Weighted
Weighted Average
Stock Average Remaining
Range of Options Exercise Contractual
Exercise Prices Outstanding Price Life
- --------------- ----------- --------- -----------
Under $15.00 ................... 853,527 $ 12.46 4.1
$15.00-$22.49 .................. 2,348,269 20.21 4.6
$22.50-$33.74 .................. 1,483,283 28.11 9.2
Over $33.75 .................... 967,400 37.76 9.3
--------- --------- ---
5,652,479 $ 24.12 6.5
========= ========= ===
The following table sets forth certain information with respect to those
stock options exercisable at December 31, 1996:
Stock Weighted
Range of Options Average
Exercise Prices Exercisable Exercise Price
- --------------- ------------- --------------
Under $15.00 .......................... 853,527 $ 12.46
$15.00-$22.49 ......................... 2,222,898 20.20
$22.50-$33.74 ......................... 230,847 24.06
Over $33.75 ........................... 117,225 35.40
--------- ---------
3,424,497 $ 19.05
========= =========
In electing to continue to follow APBO No. 25 for expense recognition
purposes, the Corporation is obliged to provide the expanded disclosures
required under SFAS No. 123 for stock-based compensation granted in 1995 and
thereafter, including, if materially different from reported results, disclosure
of the Corporation's pro forma net income and earnings per share had
compensation expense relating to 1996 and 1995 grants been measured under the
fair value recognition provisions of SFAS No. 123.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including expected stock price
volatility. The Corporation's stock-based compensation arrangements have
characteristics significantly different from those of traded options, and
changes in the subjective input assumptions used in valuation models can
materially affect the fair value estimate. Therefore, the Corporation is of the
opinion that the existing models do not necessarily provide a reliable single
measure of the fair value of its stock-based compensation.
The weighted-average fair value at date of grant for options granted during
1996 and 1995 was $10.30 and $9.85, respectively, and was estimated using the
Black-Scholes option valuation model with the following weighted-average
assumptions:
1996 1995
- --------------------------------------------------------------------------------
Expected life in years ....................... 5.9 5.7
Interest rate ................................ 6.25% 5.79%
Volatility ................................... 22.2% 22.3%
Dividend yield ............................... 1.43% 1.41%
- --------------------------------------------------------------------------------
The Corporation's pro forma information for 1996 and 1995, prepared in
accordance with the provisions of SFAS No. 123, is set forth below. For purposes
of pro forma disclosures, stock-based compensation is amortized to expense on a
straight-line basis over the vesting period. The following pro forma information
is not representative of the pro forma effect of the fair value provisions of
SFAS No. 123 on the Corporation's net income in future years because pro forma
compensation expense related to grants made prior to 1995 may not be taken into
consideration:
(Dollars in Millions Except Per Share Amounts) 1996 1995
- --------------------------------------------------------------------------------
Pro forma net income ............................. $ 227.5 $ 223.2
Pro forma earnings per share:
Primary ........................................ $ 2.39 $ 2.41
Assuming full dilution ......................... $ 2.36 $ 2.36
- --------------------------------------------------------------------------------
NOTE 17: 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 and
assembly systems and glass container-forming and inspection 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 $366.0 million at
December 31, 1996, $688.1 million at December 31, 1995, and $575.4 million at
December 31, 1994, and principally consist of cash and cash equivalents, other
current assets, property, other sundry assets, and, for 1995 and 1994, 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.
<PAGE>
<TABLE>
BUSINESS SEGMENTS
(Millions of Dollars)
<CAPTION>
Consumer & Commercial &
Home Improvement Industrial Corporate &
1996 Products Products Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 4,212.0 $ 702.4 $ -- $4,914.4
Operating income 273.0 75.7 8.2 356.9
Operating income excluding restructuring costs
and goodwill amortization 410.6 95.7 8.2 514.5
Identifiable assets 5,002.5 1,382.0 (1,231.0) 5,153.5
Capital expenditures 177.5 17.3 1.5 196.3
Depreciation 128.6 16.0 2.8 147.4
1995
- -----------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS
(Millions of Dollars)
United Corporate &
1996 States Europe Other Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 2,726.1 $ 1,466.8 $ 721.5 $ -- $4,914.4
Sales and transfers between geographic areas 246.6 176.4 256.0 (679.0) --
- ----------------------------------------------------------------------------------------------------------------------
Total sales $ 2,972.7 $ 1,643.2 $ 977.5 $ (679.0) $4,914.4
======================================================================================================================
Operating income $ 282.3 $ 67.5 $ (1.1) $ 8.2 $ 356.9
Operating income excluding restructuring costs $ 317.4 $ 117.2 $ 5.4 $ 8.2 $ 448.2
Identifiable assets $ 3,258.5 $ 2,375.9 $ 783.6 $ (1,264.5) $5,153.5
- ----------------------------------------------------------------------------------------------------------------------
1995
- ----------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
In 1996, restructuring costs in the amount of $87.7 million were charged to
the Consumer and Home Improvement Products segment and $3.6 million were charged
to the Commercial and Industrial Products segment.
In the Geographic Areas table, United States includes all domestic
operations and several intercompany manufacturing facilities outside the United
States that manufacture products predominantly for sale in the United States.
Other includes subsidiaries located in Canada, Latin America, Australia, and the
Far East.
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 18: OTHER EXPENSE
Other expense for 1996, 1995, and 1994 primarily included the costs associated
with the sale of receivables program.
NOTE 19: 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 1996, 1995,
and 1994 amounted to $71.2 million, $68.0 million, and $64.9 million,
respectively. Capital leases were immaterial in amount. Future minimum payments
under non-cancelable operating leases with initial or remaining terms of more
than one year as of December 31, 1996, in millions of dollars, were as follows:
1997 ........................................................... $ 48.7
1998 ........................................................... 41.1
1999 ........................................................... 30.6
2000 ........................................................... 22.0
2001 ........................................................... 17.5
Thereafter ..................................................... 50.2
--------
Total .......................................................... $ 210.1
========
NOTE 20: 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 relating to employment matters and commercial disputes. Some of
these lawsuits include claims for punitive as well as compensatory damages.
Using current product sales data and historical trends, the Corporation
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. The Corporation accrues for all other claims
and lawsuits 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, the
Corporation makes an assessment 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, 1996, the Corporation had no known probable but
inestimable exposures that could have a material effect on the Corporation.
<PAGE>
NOTE 21: QUARTERLY RESULTS (UNAUDITED)
(Millions of Dollars Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 First Quarter Second Quarter Third Quarter Fourth Quarter
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,065.0 $1,207.9 $1,186.7 $1,454.8
Gross margin 394.9 426.0 429.2 507.7
Earnings (loss) from continuing operations (32.4) 45.3 55.7 90.6
Earnings from discontinued operations 70.4 -- -- --
Net earnings 38.0 45.3 55.7 90.6
- ---------------------------------------------------------------------------------------------------------------------------
Net earnings per common and common equivalent share:
Primary:
Earnings (loss) from continuing operations $ (.40) $ .47 $ .59 $ .94
Earnings from discontinued operations .79 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Primary earnings per share $ .39 $ .47 $ .59 $ .94
- --------------------------------------------------------------------------------------------------------------------------
Assuming full dilution:
Earnings (loss) from continuing operations $ (.40) $ .47 $ .58 $ .94
Earnings from discontinued operations .79 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Fully diluted earnings per share $ .39 $ .47 $ .58 $ .94
==========================================================================================================================
Year Ended December 31, 1995
- --------------------------------------------------------------------------------------------------------------------------
Sales $1,021.4 $1,135.4 $1,168.9 $1,440.4
Gross margin 378.9 419.2 424.1 527.2
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
==========================================================================================================================
</TABLE>
<PAGE>
Earnings from discontinued operations of $70.4 million, net of applicable
income taxes of $55.6 million, in the first quarter of 1996 primarily consisted
of the gain on the sale of PRC Inc., the remaining business in the discontinued
PRC segment.
Results for the first quarter of 1996 included a restructuring charge of
$81.6 million ($67.0 million net of tax). An additional restructuring charge of
$9.7 million ($7.8 million net of tax) was recognized in the fourth quarter of
1996.
Results for the quarter ended December 31, 1996, included a tax benefit of
$10.6 million ($.11 per share both on a primary and a fully diluted basis)
related to the reduction of the deferred tax asset valuation allowance. Due to a
change in the mix between foreign and domestic earnings during the fourth
quarter of 1996, the Corporation's effective tax rate, exclusive of the tax
benefits of the restructuring charge and the reduction of deferred tax asset
valuation allowance described above, was 24% for the year ended December 31,
1996, compared to 27% for each of the first three quarters in 1996.
Consequently, results for the quarter ended December 31, 1996, included a tax
benefit of $5.6 million ($.06 per share both on a primary and a fully diluted
basis) reflective of the cumulative year-to-date adjustment of the effective tax
rate.
The extraordinary loss recognized in the fourth quarter of 1995 resulted
from the early extinguishment of debt. Results for the quarter 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 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 1996 and 1995 and, with respect to fully
diluted earnings per share for periods prior to October 1996, whether the
assumed conversion of preferred shares was dilutive or anti-dilutive during each
quarter.
<PAGE>
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, 1996 and 1995, and the related
consolidated statements of earnings and cash flows for each of the three years
in the period ended December 31, 1996. 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, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of three
years in the period ended December 31, 1996, 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.
/s/ ERNST & YOUNG LLP
Baltimore, Maryland
January 24, 1997
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
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 22, 1997, under the captions "Election of Directors" and "Board of
Directors - Section 16(a) Beneficial Ownership Reporting Compliance" 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 22, 1997,
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 22, 1997,
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 22, 1997,
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 STATEMENTS 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,
1996, 1995, and 1994.
Consolidated Balance Sheet - December 31, 1996 and 1995.
Consolidated Statement of Cash Flows - years ended December 31,
1996, 1995, and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
(2) List of Financial Statement Schedules
The following financial statement schedules of the Corporation and
its subsidiaries are 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,
included in the Corporation's Quarterly Report
on Form 10-Q for the quarter ended September
29, 1996, is incorporated herein by reference.
4(a) Indenture dated as of March 24, 1993, by and
between the 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) Indenture dated as of September 9, 1994, by
and between the 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.
4(f) Credit Agreement dated as of April 23, 1996,
among the Corporation, Black & Decker Holdings
Inc. and Black & Decker, as Initial Borrowers,
and the initial Lenders named therein, as
Initial Lenders, and Citibank International
plc, as Facility Agent, and Citibank
International plc and Midland Bank plc, as
Co-Arrangers, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, is incorporated herein
by reference.
4(g) Credit Agreement dated as of April 23, 1996,
among the Corporation, Black & Decker Holdings
Inc., Black & Decker, Black & Decker Inter-
national Holdings, B.V., Black & Decker
G.m.b.H, Black & Decker (France) S.A.S., Black
& Decker (Nederland) B.V. and Emhart Glass
S.A., as Initial Borrowers, and the initial
Lenders named therein, as Initial Lenders,
and Credit Suisse, as Administrative Agent,
and Citibank, N.A., as Documentation Agent,
and NationsBank, N.A., as Syndication Agent,
included in the Corporation's Quarterly Report
on Form 10-Q for the quarter ended March 31,
1996, 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.
10(a) The Black & Decker Corporation Deferred Compen-
sation Plan For Non-Employee Directors, as
amended, included in the Corporation's Quar-
terly Report on Form 10-Q for the quarter
ended October 2, 1994, is incorporated herein
by reference.
10(b) The Black & Decker 1986 Stock Option Plan, as
amended.
10(c) The Black & Decker 1986 U.K. Approved Option
Scheme, as amended, included in the Corpora-
tion's Registration Statement on Form S-8
(Reg. No. 33-47651), filed with the Commis-
sion on May 5, 1992, is incorporated herein by
reference.
10(d) The Black & Decker 1989 Stock Option Plan, as
amended.
10(e) The Black & Decker 1992 Stock Option Plan, as
amended.
10(f) The Black & Decker 1995 Stock Option Plan for
Non-Employee Directors, as amended.
10(g) The Black & Decker 1996 Stock Option Plan, as
amended.
10(h) The Black & Decker Performance Equity Plan, as
amended.
10(i) The Black & Decker Executive Annual Incentive
Plan, included in the definitive Proxy
Statement for the 1996 Annual Meeting of
Stockholders of the Corporation dated March 1,
1996, is incorporated herein by reference.
10(j) The Black & Decker Management Annual Incentive
Plan, included in the Corporation's Annual
Report on Form 10-K for the year ended December
31, 1995, is incorporated herein by reference.
10(k) Amended and Restated Employment Agreement,
dated as of November 1, 1995, by and between
the Corporation and Nolan D. Archibald,
included in the Corporation's Annual Report on
Form 10-K for the year ended December 31,
1995, is incorporated herein by reference.
10(l) 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(m) 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(n)(1) The Black & Decker Executive Deferred Compensa-
tion Plan, included in the Corporation's
Quarterly Report on Form 10-Q for the quarter
ended October 3, 1993, is incorporated herein
by reference.
10(n)(2) Amendment to The Black & Decker Executive
Deferred Compensation Plan dated as of July 17,
1996, included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended June
30, 1996, is incorporated herein by reference.
10(o) 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(p) The Black & Decker Supplemental Executive
Retirement Plan, as amended, included in the
Corporation's Annual Report on Form 10-K for
the year ended December 31, 1995, is incor-
porated herein by reference.
10(q) The Black & Decker Executive Life Insurance
Program, as amended, included in the Corpo-
ration's Quarterly Report on Form 10-Q for the
quarter ended April 4, 1993, is incorporated
herein by reference.
10(r) 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(s) 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(t) 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(u) Form of Amendment and Restatement of Severance
Benefits Agreement by and between the Corpora-
tion and approximately 18 of its key employees.
10(v) Amendment and Restatement of Severance Benefits
Agreement, dated January 1, 1997, by and
between the Corporation and Nolan D. Archibald.
10(w) Amendment and Restatement of Severance Benefits
Agreement, dated January 1, 1997, by and
between the Corporation and Joseph Galli.
10(x) Amendment and Restatement of Severance Benefits
Agreement, dated January 1, 1997, by and
between the Corporation and Charles E. Fenton.
10(y) Amendment and Restatement of Severance Benefits
Agreement, dated January 1, 1997, by and
between the Corporation and Dennis G. Heiner.
10(z) Amendment and Restatement of Severance Benefits
Agreement, dated January 1, 1997, by and
between the Corporation and Thomas M. Schoewe.
10(aa) 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(bb) 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 incor-
porated herein by reference.
10(cc) Distribution Agreement dated September 9,
1994, by and between the 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(dd) Stock Purchase Agreement dated as of December
13, 1995, by and among the Corporation,
PRC Investments Inc., PRC Inc. and Litton
Industries, Inc., included in the Corpora-
tion's Annual Report on Form 10-K for the year
ended December 31, 1995, is incorporated
herein by reference.
10(ee)(1) The Black & Decker 1996 Employee Stock Purchase
Plan, included in the definitive Proxy
Statement for the 1996 Annual Meeting of
Stockholders of the Corporation dated March 1,
1996, is incorporated herein by reference.
10(ee)(2) Amendment to The Black & Decker 1996 Employee
Stock Purchase Plan, as adopted on February 12,
1997.
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 did not file any reports on Form 8-K during the twelve
month period ended December 31, 1996.
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
The Financial Statement Schedule required by Regulation S-X is filed
herewith.
<PAGE>
<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, 1996
- ----------------------------
Reserve for doubtful accounts
and cash discounts.............. $ 43.1 $ 58.1 $ 56.7(A) $ (.5)(B) $ 44.0
====== ====== ====== ===== ======
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
====== ====== ====== ===== ======
</TABLE>
(A) Accounts written off during the year and cash discounts taken by customers.
(B) Primarily includes currency translation adjustments.
<PAGE>
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 24, 1997 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 24, 1997, 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 24, 1997
- ---------------------------- -----------------
Nolan D. Archibald Chairman, President, and
Chief Executive Officer
Principal Financial Officer
/s/ THOMAS M. SCHOEWE February 24, 1997
- --------------------------- -----------------
Thomas M. Schoewe Senior Vice President and
Chief Financial Officer
Principal Accounting Officer
/s/ STEPHEN F. REEVES February 24, 1997
- --------------------------- -----------------
Stephen F. Reeves Vice President and
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 Anthony Luiso
Barbara L. Bowles Lawrence R. Pugh
Malcolm Candlish Mark H. Willes
Alonzo G. Decker, Jr. M. Cabell Woodward, Jr.
/s/ NOLAN D. ARCHIBALD Date: February 24, 1997
- ---------------------------
Nolan D. Archibald
Attorney-in-Fact
Exhibit 10(b)
THE BLACK & DECKER 1986 STOCK OPTION PLAN
The proper execution of the duties and responsibilities of the
executive and other key employees of The Black & Decker Corporation and its
subsidiaries is a vital factor in the continued growth and success of the
Corporation. Toward this end, it is necessary to attract and retain effective
and capable employees to assume positions which contribute materially to the
successful operation of the business of the Corporation. It will benefit the
Corporation, therefore, to bind the interests of these persons more closely to
its own interests by offering them an attractive opportunity to acquire a
proprietary interest in the business enterprise and thereby provide them with
added incentive to remain in its employ and to increase the prosperity, growth
and earnings of the Corporation. This stock option plan will serve these
purposes.
ARTICLE 1:00
Definitions
The following terms wherever used herein shall have the following
meanings respectively:
1:01 The term "Corporation" shall mean The Black & Decker
Corporation.
1:02 The term "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any regulation thereto.
1:03 The term "Incentive Stock Option" shall mean any option
granted pursuant to the Plan clearly designated as an
Incentive Stock Option and which satisfies the requirements of
Code Section 422(b).
1:04 The term "Plan" shall mean The Black & Decker 1986 Stock
Option Plan as approved and recommended by the Board of
Directors on October 17, 1985 and as adopted by the
shareholders of the Corporation on January 27, 1986, as the
same may be further amended from time to time.
1:05 The term "Board of Directors" shall mean the Board of
Directors of the Corporation.
1:06 The term "Committee" shall mean a committee to be
appointed by the Board of Directors to consist of two or
more of those members of the Board of Directors who are
Non-Employee Directors within the meaning of Rule 16b-3
promulgated under the Exchange Act and are outside
directors within the meaning of the Section 162(m)
Regulations, as each may be amended from time to time.
<PAGE>
1:07 The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1:08 The term "Nonqualified Stock Option" shall mean an option
granted under the Plan that is not an Incentive Stock Option.
1:09 The term "Section 162(m) Regulations" shall mean the
regulations adopted pursuant to Section 162(m) of the Code.
ARTICLE 2:00
Effective Date of the Plan
2:01 The Plan shall become effective as of January 27, 1986.
ARTICLE 3:00
Administration
3:01 The Plan shall be administered by the Committee.
3:02 The Committee shall establish, from time to time and at
any time, subject to the limitations of the Plan as
hereinafter set forth, such rules and regulations and
amendments and supplements thereto, as it deems necessary
to comply with applicable law and regulation and for the
proper administration of the Plan. A majority of the
members of the Committee shall constitute a quorum. The
vote of a majority of a quorum shall constitute action by
the Committee.
3:03 The Committee shall from time to time submit to the Board
of Directors for its approval the names of those
executives and key managerial personnel who, in its
opinion, should receive options, and shall recommend the
numbers of shares on which options should be granted to
each such person and the nature of the options to be
granted.
3:04 The options shall be granted by the Corporation and shall
become effective only after prior approval of the Board of
Directors, and upon the execution of an Option Agreement
between the Corporation and the option holder.
- 2 -
<PAGE>
ARTICLE 4:00
Participation in the Plan
4:01 Participation in the Plan shall be limited to such
executives and other key managerial personnel of the
Corporation and its subsidiaries who are regular, full-
time employees of the Corporation, or of any of its
subsidiaries, and who from time to time shall be
designated by the Committee and approved by the Board of
Directors.
4:02 No member of the Board of Directors who is not also an
employee shall be eligible to participate in the Plan. No
employee owning a beneficial interest in more than 5% of the
outstanding stock of the Corporation shall be eligible to
participate in the Plan.
ARTICLE 5:00
Stock Subject to the Plan
5:01 There shall be reserved for the granting of options under
the Plan and for issuance and sale pursuant to such
options, 1,800,000 shares of the Common Stock of the
Corporation. In determining the shares available at any
time for granting options, there shall be deducted from
the total number of reserved shares, the number of shares
with respect to which options have been granted under the
Plan which are still outstanding or have been exercised.
The shares subject to option shall be made available from
the authorized and unissued Common Stock or from treasury
shares of the Corporation. If for any reason shares as to
which an option has been granted cease to be subject to
purchase thereunder, then such shares again shall be
available for option under the Plan. However, except as
provided in Section 5:03 to prevent dilution, the
aggregate number of shares subject to options under the
Plan shall not exceed 1,800,000 shares.
5:02 Proceeds of the purchase of optioned shares by any option
holder shall be used for the general business purposes of the
Corporation.
5:03 In the event of reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger,
consolidation, acquisition of property or stock, or any
change in the capital structure of the Corporation, the
Committee shall make such adjustment as may be
appropriate in the number and kind of shares reserved for
purchase by executives or key managerial employees, in
the number, kind and price of shares covered by options
granted but not then exercised, and in the number of
- 3 -
<PAGE>
stock appreciation rights, if any, and in the number of cash
appreciation rights, if any, related to shares covered by
options granted but not then exercised.
ARTICLE 6:00
Terms and Conditions of Options
6:01 Each option granted pursuant to the terms of the Plan shall be
evidenced by an Option Agreement in such form as the Committee
from time to time may determine.
6:02 The option price per share shall be equal to one hundred
percent (100%) of the fair market value of a share of the
Common Stock of the Corporation on the date on which the
option is granted. The fair market value shall be the
closing price per share of the Common Stock of the
Corporation as finally reported in the New York Stock
Exchange Composite Transactions for the New York Stock
Exchange on the date on which the option is granted, or
if shares of the Common Stock of the Corporation are not
sold on such date, the closing price per share of the
Common Stock of the Corporation as finally reported in
the New York Stock Exchange Composite Transactions for
the New York Stock Exchange for the most recent prior
date on which the Common Stock of the Corporation was
sold.
6:03 Each option, subject to the other limitations herein provided,
may extend for a period of up to ten years from the date on
which it is granted. The term of each option shall be
determined by the Committee at the time of grant of the
option.
6:04 Unless otherwise provided by the Board of Directors upon
the recommendation of the Committee, the number of shares
subject to each option shall be divided into four
installments of twenty-five percent each. The first
installment shall be exercisable twelve months after the
date the option was granted, and each succeeding
installment shall be exercisable twelve months after the
date the immediately preceding installment became
exercisable. If the holder of an option does not purchase
the full number of shares which he or she at any time has
become entitled to purchase, the option holder may
purchase all or any part of those shares at any
subsequent time during the term of the option.
6:05 Options shall be non-transferable and non-assignable except
that valid option rights may be transferred by testamentary
instrument or by the laws of descent.
- 4 -
<PAGE>
6:06 Upon voluntary or involuntary termination of an option
holder's employment, his or her option, and all rights
thereunder, shall be terminated except to the extent
previously exercised, and except as provided in Sections 6:07,
6:08 and 6:09.
6:07 In the event an option holder (i) ceases to be a key
employee of the Corporation due to involuntary
termination, or (ii) takes a leave of absence from the
Corporation or any of its subsidiaries for personal
reasons or by entry into the armed forces of the United
States, or any of the departments or agencies of the
United States government, or (iii) terminates employment
by reason of illness, disability or other special
circumstance, the Committee shall consider his or her
case and shall, subject to the approval of the Board of
Directors, take such action with respect to the related
Option Agreement as it may deem appropriate under the
circumstances, including accelerating the time previously
granted options may be exercised and extending the time
following the option holder's termination of employment
during which the option holder is entitled to purchase
shares subject to such options, provided that in no event
may any option be exercised after the expiration of the
term of the option.
6:08 If an option holder dies during the term of his or her
option without having fully exercised the option, the
executor or administrator of his or her estate or the
person who inherits the right to exercise the option by
bequest or inheritance shall have the right within three
years of the option holder's death to purchase the number
of shares which the deceased option holder was entitled
to purchase at the date of death after which the option
shall lapse, provided that in no event may any option be
exercised after the expiration of the term of the option.
6:09 If an option holder's employment is terminated without
having fully exercised the option, and (i) the option
holder is 62 years of age or older, or (ii) the option
holder has been employed by the Corporation or any of its
subsidiaries or affiliates at least 10 years and the
option holder's age plus years of such employment total
not less than 55 years, then such option holder shall
have the right within three years of the option holder's
termination of employment to purchase the number of
shares which the option holder was entitled to purchase
at the date of termination, after which the option shall
lapse, provided that in no event may any option be
exercised after the expiration of the term of the option.
6:10 The granting of an option to purchase shares pursuant to
the Plan shall not constitute or be evidence of any
agreement or understanding, express or implied, on the
- 5 -
<PAGE>
part of the Corporation or any of its subsidiaries, to
employ the option holder for any specified period.
6:11 The aggregate fair market value (as of the date an
Incentive Stock Option is granted) of stock, with respect
to which Incentive Stock Options under this Plan and
"incentive stock options" (within the meaning of Code
Section 422(b)) under all other plans of the Corporation
and its subsidiaries are exercisable for the first time
by an option holder during any calendar year, shall not
exceed $100,000.
ARTICLE 7:00
Methods of Exercise of Option
7:01 The option holder (or other person or persons, if any,
entitled to exercise an option hereunder) desiring to
exercise an option granted under the Plan as to all or
part of the shares covered by the option shall notify the
Corporation in writing at its principal office at 701
East Joppa Road, Towson, Maryland 21286, to that effect,
specifying the number of shares to be purchased and the
method of payment therefor, and make payment or provision
for payment for the shares of Common Stock so purchased
in accordance with this Article 7:00. Such written
notice may be given by means of a facsimile transmission.
If a facsimile transmission is used, the option holder
should mail the original executed copy of the written
notice to the Corporation promptly thereafter.
7:02 An option holder at any time may elect in writing to abandon
an option with respect to the number of shares as to which the
option shall not have been exercised.
7:03 Within 10 days after receipt by the Corporation of the notice
provided in Section 7:01, payment or provision for payment
shall be made as follows:
(a) the option shall be exercised as to the
number of shares specified in the notice by payment
to the Corporation in United States currency of the
purchase price as provided in the option; or
(b) at the election of the option holder,
the option may be exercised as to the number of
shares specified in the notice by tendering to the
Corporation shares of Common Stock of the Corporation
already owned by the option holder which, together
with any cash tendered therewith, shall equal in
value the purchase price. The value of the tendered
shares for this purpose shall be the fair market
value (as defined in Section 6:02)
- 6 -
<PAGE>
of such shares on the date the notice provided in
Section 7:01 is received by the Corporation, and the
option holder shall deliver only that number of
shares which, together with any cash delivered, has
an aggregate value of not less than the purchase
price as provided in the option; or
(c) the option holder shall deliver to the
Corporation an exercise notice together with
irrevocable instructions to a broker to deliver
promptly to the Corporation the amount of sale or
loan proceeds necessary to pay the aggregate purchase
price of the shares of Common Stock as to which such
exercise relates and to sell the shares of Common
Stock to be issued upon exercise of the option and
deliver the cash proceeds less commissions and
brokerage fees to the option holder or to deliver the
remaining shares of Common Stock to the option
holder.
Notwithstanding the foregoing provisions, the Committee, in
processing any purported exercise of an option granted under
the Plan, may refuse to recognize the methods of exercise
selected by the option holder (other than the methods of
exercise set forth in Sections 7:03(a) and 7:03(b)) if, in the
opinion of counsel to the Corporation, (i) the option holder
is or within the six months preceding such exercise was
subject to reporting under Section 16(a) of the Exchange Act
and (ii) there is a substantial likelihood that the method of
exercise selected by the option holder would subject the
option holder to a substantial risk of liability under Section
16 of the Exchange Act. Notwithstanding the foregoing
provisions, no Incentive Stock Option may be exercised in
accordance with the methods of exercise set forth in Section
7:03(c).
7:04 In addition to the alternative methods of exercise set
forth in Section 7:03, holders of Nonqualified Stock
Options shall be entitled, at or prior to the time the
written notice provided for in Section 7:01 is delivered
to the Corporation, to elect to have the Corporation
withhold from the shares of Common Stock to be delivered
upon exercise of the Nonqualified Stock Option that
number of shares of Common Stock (determined based on the
fair market value (as defined in Section 6:02) of a share
of Common Stock on the date the notice set forth in
Section 7:01 is received by the Corporation) necessary to
satisfy any withholding taxes attributable to the
exercise of the Nonqualified Stock Option.
Alternatively, such holder of a Nonqualified Stock Option
may elect to deliver previously owned shares of Common
Stock upon exercise of the Nonqualified Stock Option to
satisfy any withholding taxes attributable to the
- 7 -
<PAGE>
exercise of the Nonqualified Stock Option. The maximum amount
that an option holder may elect to have withheld from the
shares of Common Stock otherwise deliverable upon exercise or
the maximum number of previously owned shares an option holder
may deliver shall be based on the maximum federal, state and
local taxes payable by the option holder. Notwithstanding the
foregoing provisions, the Committee or the Board of Directors
may include in the Option Agreement relating to any such
Nonqualified Stock Option provisions limiting or eliminating
the option holder's ability to pay his or her withholding tax
obligation with shares of Common Stock or, if no such
provisions are included in the Option Agreement but in the
opinion of the Committee such withholding would have an
adverse tax or accounting effect to the Corporation, at or
prior to exercise of the Nonqualified Stock Option the
Committee may so limit or eliminate the option holder's
ability to pay his or her withholding tax obligation with
shares of Common Stock. Notwithstanding the foregoing
provisions, a holder of a Nonqualified Stock Option may not
elect any of the methods of satisfying his or her withholding
tax obligation in respect of any exercise if, in the opinion
of counsel to the Corporation, (i) the holder of the
Nonqualified Stock Option is or within the six months
preceding such exercise was subject to reporting under Section
16(a) of the Exchange Act and (ii) there is a substantial
likelihood that the election or timing of the election would
subject the holder to a substantial risk of liability under
Section 16 of the Exchange Act.
7:05 A holder of an option shall have none of the rights of a
stockholder until the shares covered by the option are issued
upon exercise of the option.
ARTICLE 8:00
Stock Appreciation Rights
8:01 Stock appreciation rights may be granted concurrently
with the grant of stock options at the sole discretion of
the Committee. If the Committee does grant stock
appreciation rights to an option holder, the number of
stock appreciation rights granted to the option holder
shall equal the number of shares granted pursuant to the
related stock option.
8:02 A stock appreciation right shall entitle an option holder
subject to the terms and conditions of the Plan to surrender
to the Corporation for cancellation all or a portion of the
related stock option granted pursuant to the Plan, but only to
the extent that such option is then exercisable, and to be
paid therefor an amount in cash or
- 8 -
<PAGE>
a number of shares of Common Stock having a fair market value
on the date the stock appreciation right is exercised equal to
the increase, if any, of the fair market value of a share of
Common Stock on the date of exercise of the stock appreciation
right over the value of a share of Common Stock on the date of
grant of the related stock option.
8:03 The Committee in its sole discretion shall determine whether a
stock appreciation right will be paid in cash or in shares of
Common Stock.
8:04 Stock appreciation rights may only be exercised prior to
the exercise, termination or cancellation of the related
stock option.
ARTICLE 9:00
Cash Appreciation Rights
9:01 Cash appreciation rights may be granted concurrently with
the grant of stock options at the sole discretion of the
Committee. If the Committee does grant cash appreciation
rights to an option holder, the number of cash
appreciation rights granted to an option holder shall
equal the number of shares granted pursuant to the
related stock option.
9:02 Cash appreciation rights shall entitle an option holder
subject to the terms and conditions of the Plan to
receive from the Corporation or the subsidiary employing
the option holder, upon exercise of all or a portion of
the related stock option granted pursuant to the Plan, or
upon the surrender of all or a portion of the related
stock option granted in exchange for the exercise of
stock appreciation rights, if any, granted to the option
holder pursuant to the Plan, a payment in cash equal to
the sum of (i) the increase in income taxes, if any,
incurred by the option holder as a result of the full or
partial exercise of the related stock option or, if
appropriate, the related stock appreciation right, and
(ii) the increase in income taxes, if any, incurred by
the option holder as a result of receipt of this cash
payment.
9:03 In no event shall the cash payment for a cash
appreciation right exceed the increase, if any, of the
fair market value of a share of Common Stock on the date
of exercise of the related stock option or, if
appropriate, of the related stock appreciation right over
the value of a share of Common Stock on the date of grant
of the related stock option.
- 9 -
<PAGE>
ARTICLE 10:00
Amendments and Discontinuance of the Plan
10:01 The Board of Directors shall have the right at any time
and from time to time to amend, modify or discontinue the
Plan provided that, except as provided in Section 5:03,
no such amendment, modification or discontinuance shall
(i) revoke or alter the terms of any valid option, stock
appreciation right or cash appreciation right previously
granted in accordance with the Plan, (ii) increase the
number of shares to be reserved for issuance and sale
pursuant to options, (iii) change the price determined
pursuant to the provisions of Section 6:02, (iv) change
the class of employee to whom options may be granted
under the Plan, or (v) provide for options exercisable
more than ten years after the date granted.
ARTICLE 11:00
Plan Subject to Governmental Laws and Regulations
11:01 The Plan, and the grant and the exercise of options,
stock appreciation rights and cash appreciation rights
shall be subject to all applicable governmental laws and
regulations. Any other provision of the Plan to the
contrary notwithstanding, the Board of Directors may in
its discretion make such changes in the Plan as may be
required, in their opinion, to conform the Plan to such
laws and regulations.
ARTICLE 12:00
Duration of the Plan
12:01 No option shall be granted pursuant to the Plan after the
close of business on January 26, 1996.
- 10 -
Exhibit 10(d)
THE BLACK & DECKER 1989 STOCK OPTION PLAN
The proper execution of the duties and responsibilities of the
executive and other key employees of The Black & Decker Corporation and its
subsidiaries is a vital factor in the continued growth and success of the
Corporation. Toward this end, it is necessary to attract and retain effective
and capable employees to assume positions that contribute materially to the
successful operation of the business of the Corporation. It will benefit the
Corporation, therefore, to bind the interests of these persons more closely to
its own interests by offering them an attractive opportunity to acquire a
proprietary interest in the Corporation and thereby provide them with added
incentive to remain in its employ and to increase the prosperity, growth, and
earnings of the Corporation.
This stock option plan will serve these purposes.
ARTICLE 1:00
Definitions
The following terms wherever used herein shall have the meanings set
forth below.
1:01 The term "Board of Directors" shall mean the Board of
Directors of the Corporation.
1:02 The term "Cash Appreciation Right" shall mean a right to
receive cash pursuant to Article 10:00 of the Plan.
1:03 The term "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any regulations promulgated thereunder.
1:04 The term "Committee" shall mean a committee to be
appointed by the Board of Directors to consist of two or
more of those members of the Board of Directors who are
Non-Employee Directors within the meaning of Rule 16b-3
promulgated under the Exchange Act and are outside
directors within the meaning of the Section 162(m)
Regulations, as each may be amended from time to time.
1:05 The term "Common Stock" shall mean the shares of common stock,
par value $.50 per share, of the Corporation.
1:06 The term "Corporation" shall mean The Black & Decker
Corporation.
1:07 The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1:08 The term "Fair Market Value of a share of Common Stock"
shall mean the closing price per share of Common Stock as
<PAGE>
finally reported in the New York Stock Exchange Composite
Transactions for the New York Stock Exchange, or if shares of
Common Stock are not sold on such date, the closing price per
share of Common Stock as finally reported in the New York
Stock Exchange Composite Transactions for the New York Stock
Exchange for the most recent prior date on which shares of
Common Stock were sold.
1:09 The term "Incentive Stock Option" shall mean any Option
granted pursuant to the Plan that is designated as an
Incentive Stock Option and which satisfies the requirements of
Section 422(b) of the Code.
1:10 The term "Nonqualified Stock Option" shall mean any Option
granted pursuant to the Plan that is not an Incentive Stock
Option.
1:11 The term "Option" or "Stock Option" shall mean a right granted
pursuant to the Plan to purchase shares of Common Stock, and
shall include the terms Incentive Stock Option and
Nonqualified Stock Option.
1:12 The term "Option Agreement" shall mean the written agreement
representing Options granted pursuant to the Plan as
contemplated by Article 6:00 of the Plan.
1:13 The term "Plan" shall mean The Black & Decker 1989 Stock
Option Plan as approved by the Board of Directors on November
17, 1988, and adopted by the stockholders of the Corporation
on January 30, 1989, as the same may be amended from time to
time.
1:14 The term "Section 162(m) Regulations" shall mean the
regulations adopted pursuant to Section 162(m) of the Code.
1:15 The term "Stock Appreciation Right" shall mean a right to
receive cash or shares of Common Stock pursuant to Article
8:00 of the Plan.
1:16 The term "Stock Appreciation Right Agreement" shall mean the
written agreement representing Stock Appreciation Rights
granted pursuant to the Plan as contemplated by Article 8:00
of the Plan.
1:17 The term "Stock Appreciation Right Base Price" shall mean
the base price for determining the value of a Stock
Appreciation Right under Section 8:02, which Stock
Appreciation Right Base Price shall be established by the
Committee at the time of the grant of Stock Appreciation
Rights pursuant to the Plan and shall not be less than
90% of the Fair Market Value of a share of Common Stock
on the date of grant. If the Committee does not
- 2 -
<PAGE>
establish a specific Stock Appreciation Right Base Price at
the time of grant, the Stock Appreciation Right Base Price
shall be equal to the Fair Market Value of a share of Common
Stock on the date of grant of the Stock Appreciation Right.
1:18 The term "subsidiary" or "subsidiaries" shall mean a
corporation of which capital stock possessing 50% or more of
the total combined voting power of all classes of its capital
stock entitled to vote generally in the election of directors
is owned in the aggregate by the Corporation directly or
indirectly through one or more subsidiaries.
ARTICLE 2:00
Effective Date of the Plan
2:01 The Plan shall become effective upon stockholder
approval, provided that such approval is received on or
before November 16, 1989 and provided further that
Options, Stock Appreciation Rights, or Cash Appreciation
Rights may be granted pursuant to the Plan prior to
stockholder approval if such Options, Stock Appreciation
Rights, or Cash Appreciation Rights by their terms are
contingent upon subsequent stockholder approval of the
Plan.
ARTICLE 3:00
Administration
3:01 The Plan shall be administered by the Committee.
3:02 The Committee may establish, from time to time and at any
time, subject to the limitations of the Plan as set forth
herein, such rules and regulations and amendments and
supplements thereto, as it deems necessary to comply with
applicable law and regulation and for the proper
administration of the Plan. A majority of the members of
the Committee shall constitute a quorum. The vote of a
majority of a quorum shall constitute action by the
Committee.
3:03 The Committee shall from time to time determine the names
of those executives and other key employees who, in its
opinion, should receive Options and/or Stock Appreciation
Rights, and shall determine the numbers of shares on
which Options should be granted or upon which Stock
Appreciation Rights should be based to each such person
and the nature of the Options and/or Stock Appreciation
Rights to be granted.
- 3 -
<PAGE>
3:04 Options and Stock Appreciation Rights shall be granted by the
Corporation only upon the prior approval of the Committee, and
upon the execution of an Option Agreement and/or Stock
Appreciation Right Agreement between the Corporation and the
Option holder and/or the Stock Appreciation Right holder.
3:05 The Committee's interpretation and construction of the
provisions of the Plan and the rules and regulations adopted
by the Committee shall be final. No member of the Committee or
the Board of Directors shall be liable for any action taken or
determination made, in respect of the Plan, in good faith.
ARTICLE 4:00
Participation in the Plan
4:01 Participation in the Plan shall be limited to such executives
and other key employees of the Corporation and its
subsidiaries who are regular, full-time employees of the
Corporation or any of its subsidiaries, and who from time to
time shall be designated by the Committee.
4:02 No member of the Board of Directors who is not also an
employee shall be eligible to participate in the Plan. No
employee who owns beneficially more than 10% of the
outstanding shares of Common Stock shall be eligible to
participate in the Plan.
ARTICLE 5:00
Stock Subject to the Plan
5:01 There shall be reserved for the granting of Options
and/or Stock Appreciation Rights pursuant to the Plan and
for issuance and sale pursuant to such Options and/or
Stock Appreciation Rights 3,400,000 shares of Common
Stock. To determine the number of shares of Common Stock
available at any time for the granting of Options and/or
Stock Appreciation Rights, there shall be deducted from
the total number of reserved shares of Common Stock, the
number of shares of Common Stock in respect of which
Options have been granted pursuant to the Plan that are
still outstanding or have been exercised. The shares of
Common Stock to be issued upon the exercise of Options or
Stock Appreciation Rights granted pursuant to the Plan
shall be made available from the authorized and unissued
shares of Common Stock or from shares of Common Stock
held in treasury. If for any reason shares of Common
Stock as to which an Option has been granted cease to be
subject to purchase thereunder, then such shares of
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<PAGE>
Common Stock again shall be available for issuance pursuant to
the exercise of Options and/or Stock Appreciation Rights
pursuant to the Plan. Except as provided in Section 5:03,
however, the aggregate number of shares of Common Stock that
may be issued upon the exercise of Options and Stock
Appreciation Rights pursuant to the Plan shall not exceed
3,400,000 shares and no more than 3,400,000 Stock Appreciation
Rights shall be granted pursuant to the Plan.
5:02 Proceeds from the purchase of shares of Common Stock upon the
exercise of Options granted pursuant to the Plan shall be used
for the general business purposes of the Corporation.
5:03 In the event of reorganization, recapitalization, stock
split, stock dividend, combination of shares of Common
Stock, merger, consolidation, share exchange, acquisition
of property or stock, or any change in the capital
structure of the Corporation, the Committee shall make
such adjustments as may be appropriate in the number and
kind of shares reserved for purchase by executives or
other key employees, in the number, kind and price of
shares covered by Options and/or Stock Appreciation
Rights granted pursuant to the Plan but not then
exercised, in the number of Stock Appreciation Rights, if
any, granted pursuant to the Plan but not then exercised,
and in the number of Cash Appreciation Rights, if any,
related to Options and/or Stock Appreciation Rights
granted pursuant to the Plan but not then exercised.
ARTICLE 6:00
Terms and Conditions of Options
6:01 Each Option granted pursuant to the Plan shall be
evidenced by an Option Agreement in such form and with
such terms and conditions (including, without limitation,
noncompete, confidentiality or other similar provisions)
as the Committee from time to time may determine. The
right of an Option holder to exercise his or her Option
shall at all times be subject to the terms and conditions
set forth in the respective Option Agreement.
6:02 The exercise price per share for Options shall be
established by the Committee at the time of the grant of
Options pursuant to the Plan and shall not be less than
90% of the Fair Market Value of a share of Common Stock
on the date on which the Option is granted. If the
Committee does not establish a specific exercise price
per share at the time of grant, the exercise price per
share shall be equal to the Fair Market Value of a share
of Common Stock on the date of grant of the Options.
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<PAGE>
6:03 Each Option, subject to the other limitations set forth
in the Plan, may extend for a period of up to 10 years
from the date on which it is granted. The term of each
Option shall be determined by the Committee at the time
of grant of the Option, provided that if no term is
established by the Committee the term of the Option shall
be 10 years from the date on which it is granted.
6:04 Unless otherwise provided by the Committee, the number of
shares of Common Stock subject to each Option shall be
divided into four installments of 25% each. The first
installment shall be exercisable 12 months after the date
the Option was granted, and each succeeding installment
shall be exercisable 12 months after the date the
immediately preceding installment became exercisable. If
an Option holder does not purchase the full number of
shares of Common Stock that he or she at any time has
become entitled to purchase, the Option holder may
purchase all or any part of those shares of Common Stock
at any subsequent time during the term of the Option.
6:05 Options shall be nontransferable and nonassignable, except
that Options may be transferred by testamentary instrument or
by the laws of descent.
6:06 Upon voluntary or involuntary termination of an Option
holder's employment, his or her Option and all rights
thereunder shall be terminated except to the extent previously
exercised and except as provided in Sections 6:07, 6:08, and
6:09.
6:07 In the event an Option holder (i) ceases to be an
executive or other key employee of the Corporation or any
of its subsidiaries due to involuntary termination,
(ii) takes a leave of absence from the Corporation or any
of its subsidiaries for personal reasons or as a result
of entry into the armed forces of the United States, or
any of the departments or agencies of the United States
government, or (iii) terminates employment by reason of
illness, disability, or other special circumstance, the
Committee may consider his or her case and may take such
action in respect of the related Option Agreement as it
may deem appropriate under the circumstances, including
accelerating the time previously granted Options may be
exercised and extending the time following the Option
holder's termination of employment during which the
Option holder is entitled to purchase the shares of
Common Stock subject to such Options, provided that in no
event may any Option be exercised after the expiration of
the term of the Option.
6:08 If an Option holder dies during the term of his or her
Option without having fully exercised the Option, the
executor or administrator of his or her estate or the
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<PAGE>
person who inherits the right to exercise the Option by
bequest or inheritance shall have the right within three years
of the Option holder's death to purchase the number of shares
of Common Stock that the deceased Option holder was entitled
to purchase at the date of death, after which the Option shall
lapse, provided that in no event may any Option be exercised
after the expiration of the term of the Option.
6:09 If an Option holder's employment is terminated without
having fully exercised the Option and (i) the Option
holder is 62 years of age or older, or (ii) the Option
holder has been employed by the Corporation or any of its
subsidiaries for at least 10 years and the Option
holder's age plus years of such employment total not less
than 55 years, then such Option holder shall have the
right within three years of the Option holder's
termination of employment to purchase the number of
shares of Common Stock that the Option holder was
entitled to purchase at the date of termination, after
which the Option shall lapse, provided that in no event
may any Option be exercised after the expiration of the
term of the Option.
6:10 The granting of an Option pursuant to the Plan shall not
constitute or be evidence of any agreement or understanding,
express or implied, on the part of the Corporation or any of
its subsidiaries to employ the Option holder for any specified
period.
6:11 In addition to the general terms and conditions set forth in
this Article 6:00 in respect of Options granted pursuant to
the Plan, Incentive Stock Options granted pursuant to the Plan
shall be subject to the following additional terms and
conditions:
(a) The aggregate fair market value (determined at the
time the Incentive Stock Option is granted) of the
shares of Common Stock in respect of which "incentive
stock options" are exercisable for the first time by
the Option holder during any calendar year (under all
such plans of the Corporation and its subsidiaries)
shall not exceed $100,000; and
(b) The Option Agreement in respect of an Incentive Stock
Option may contain any other terms and conditions
specified by the Committee that are not inconsistent
with the Plan, except that such terms and conditions
must be consistent with the requirements for
"incentive stock options" under Section 422 of the
Code.
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<PAGE>
ARTICLE 7:00
Methods of Exercise of Options
7:01 An Option holder (or other person or persons, if any,
entitled to exercise an Option hereunder) desiring to
exercise an Option granted pursuant to the Plan as to all
or part of the shares of Common Stock covered by the
Option shall (i) notify the Corporation in writing at its
principal office at 701 East Joppa Road, Towson, Maryland
21286, to that effect, specifying the number of shares of
Common Stock to be purchased and the method of payment
therefor, and (ii) make payment or provision for payment
for the shares of Common Stock so purchased in accordance
with this Article 7:00. Such written notice may be given
by means of a facsimile transmission. If a facsimile
transmission is used, the Option holder should mail the
original executed copy of the written notice to the
Corporation promptly thereafter.
7:02 Within 10 days after receipt by the Corporation of the written
notice provided for in Section 7:01, payment or provision for
payment shall be made as follows:
(a) The Option holder shall deliver to the Corporation at
the address set forth in Section 7:01 United States
currency in an amount equal to the aggregate purchase
price of the shares of Common Stock as to which such
exercise relates; or
(b) The Option holder shall tender to the Corporation
shares of Common Stock already owned by the Option
holder that, together with any cash tendered
therewith, have an aggregate fair market value
(determined based on the Fair Market Value of a
share of Common Stock on the date the notice set
forth in Section 7:01 is received by the
Corporation) equal to the aggregate purchase price
of the shares of Common Stock as to which such
exercise relates; or
(c) The Option holder shall tender less than the number
of shares of Common Stock required by Section 7:02(b)
together with written instructions to the Corporation
to reapply continually the shares of Common Stock
received upon each partial exercise of the Option
until the Option shall have been exercised in full;
or
(d) The Option holder shall deliver to the Corporation an
exercise notice requesting the Corporation to issue
to the Option holder the full number of shares of
Common Stock as to which the Option is then
exercisable less the number of shares of
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<PAGE>
Common Stock that have an aggregate fair market value
(determined based on the Fair Market Value of a share
of Common Stock on the date the notice set forth in
Section 7:01 is received by the Corporation) equal to
the aggregate purchase price of the shares of Common
Stock as to which such exercise relates; or
(e) The Option holder shall deliver to the Corporation
an exercise notice together with irrevocable
instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds
necessary to pay the aggregate purchase price of
the shares of Common Stock as to which such
exercise relates and to sell the shares of Common
Stock to be issued upon exercise of the Option and
deliver the cash proceeds less commissions and
brokerage fees to the Option holder or to deliver
the remaining shares of Common Stock to the Option
holder.
Notwithstanding the foregoing provisions, the Committee, in
granting Options pursuant to the Plan, may limit the methods
in which an Option may be exercised by any person and, in
processing any purported exercise of an Option granted
pursuant to the Plan, may refuse to recognize the method of
exercise selected by the Option holder (other than the method
of exercise set forth in Section 7:02(a)) if, in the opinion
of counsel to the Corporation, (i) the Option holder is or
within the six months preceding such exercise was subject to
reporting under Section 16(a) of the Exchange Act and (ii)
there is a substantial likelihood that the method of exercise
selected by the Option holder would subject the Option holder
to a substantial risk of liability under Section 16 of the
Exchange Act. Notwithstanding the foregoing provisions, no
Incentive Stock Option may be exercised in accordance with the
methods of exercise set forth in Section 7:02(d) or Section
7:02(e) unless, in the opinion of counsel to the Corporation,
such exercise would not have a material adverse effect upon
the incentive stock option tax treatment of any outstanding
Incentive Stock Options or Incentive Stock Options that
thereafter may be granted pursuant to the Plan.
Notwithstanding the foregoing provisions, the methods of
exercise set forth in Section 7:02(c) and Section 7:02(d)
shall not be available for Options granted under the Plan on
or after October 17, 1991.
7:03 In addition to the alternative methods of exercise set forth
in Section 7:02, holders of Nonqualified Stock Options shall
be entitled, at or prior to the time the written notice
provided for in Section 7:01 is delivered to the Corporation,
to elect to have the Corporation
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<PAGE>
withhold from the shares of Common Stock to be delivered upon
exercise of the Nonqualified Stock Option that number of
shares of Common Stock (determined based on the Fair Market
Value of a share of Common Stock on the date the notice set
forth in Section 7:01 is received by the Corporation)
necessary to satisfy any withholding taxes attributable to the
exercise of the Nonqualified Stock Option. Alternatively, such
holder of a Nonqualified Stock Option may elect to deliver
previously owned shares of Common Stock upon exercise of the
Nonqualified Stock Option to satisfy any withholding taxes
attributable to the exercise of the Nonqualified Stock Option.
The maximum amount that an Option holder may elect to have
withheld from the shares of Common Stock otherwise deliverable
upon exercise or the maximum number of previously owned shares
an Option holder may deliver shall be based on the maximum
federal, state and local taxes payable by the Option holder.
Notwithstanding the foregoing provisions, the Committee may
include in the Option Agreement relating to any such
Nonqualified Stock Option provisions limiting or eliminating
the Option holder's ability to pay his or her withholding tax
obligation with shares of Common Stock or, if no such
provisions are included in the Option Agreement but in the
opinion of the Committee such withholding would have an
adverse tax or accounting effect to the Corporation, at or
prior to exercise of the Nonqualified Stock Option the
Committee may so limit or eliminate the Option holder's
ability to pay his or her withholding tax obligation with
shares of Common Stock. Notwithstanding the foregoing
provisions, a holder of a Nonqualified Stock Option may not
elect any of the methods of satisfying his or her withholding
tax obligation in respect of any exercise if, in the opinion
of counsel to the Corporation, (i) the holder of the
Nonqualified Stock Option is or within the six months
preceding such exercise was subject to reporting under Section
16(a) of the Exchange Act and (ii) there is a substantial
likelihood that the election or timing of the election would
subject the holder to a substantial risk of liability under
Section 16 of the Exchange Act.
7:04 An Option holder at any time may elect in writing to abandon
an Option in respect of all or part of the number of shares of
Common Stock as to which the Option shall not have been
exercised.
7:05 An Option holder shall have none of the rights of a
stockholder of the Corporation until the shares of Common
Stock covered by the Option are issued upon exercise of the
Option.
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<PAGE>
ARTICLE 8:00
Terms and Conditions of Stock Appreciation Rights
8:01 Each Stock Appreciation Right granted pursuant to the
Plan shall be evidenced by a Stock Appreciation Right
Agreement in such form as the Committee from time to time
may determine. Notwithstanding the foregoing provision,
Stock Appreciation Rights granted in tandem with a
related Option shall be evidenced by the Option Agreement
in respect of the related Option.
8:02 Each Stock Appreciation Right shall entitle the holder,
subject to the terms and conditions of the Plan, to
receive upon exercise of the Stock Appreciation Right an
amount, payable in cash or shares of Common Stock
(determined based on the Fair Market Value of a share of
Common Stock on the date the notice set forth in
Section 9:01 is received by the Corporation), equal to
the Fair Market Value of a share of Common Stock on the
date of receipt by the Corporation of the notice required
by Section 9:01 less the Stock Appreciation Right Base
Price. Notwithstanding the foregoing provision, each
Stock Appreciation Right that is granted in tandem with
a related Option shall entitle the holder, subject to the
terms and conditions of the Plan, to surrender to the
Corporation for cancellation all or a portion of the
related Option, but only to the extent such Stock
Appreciation Right and related Option then are
exercisable, and to be paid therefor an amount, payable
in cash or shares of Common Stock (determined based on
the Fair Market Value of a share of Common Stock on the
date the notice set forth in Section 9:01 is received by
the Corporation), equal to the Fair Market Value of a
share of Common Stock on the date of receipt by the
Corporation of the notice required by Section 9:01 less
the Stock Appreciation Right Base Price.
8:03 Each Stock Appreciation Right, subject to the other
limitations set forth in the Plan, may extend for a
period of up to 10 years from the date on which it is
granted. The term of each Stock Appreciation Right shall
be determined by the Committee at the time of grant of
the Stock Appreciation Right, provided that if no term is
established by the Committee the term of the Stock
Appreciation Right shall be 10 years from the date on
which it is granted.
8:04 Unless otherwise provided by the Committee, the number of
Stock Appreciation Rights granted pursuant to each Stock
Appreciation Right Agreement shall be divided into four
installments of 25% each. The first installment shall be
exercisable 12 months after the date the Stock Appreciation
Right was granted, and each succeeding
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<PAGE>
installment shall be exercisable 12 months after the date the
immediately preceding installment became exercisable. If a
Stock Appreciation Right holder does not exercise the Stock
Appreciation Right to the extent that he or she at any time
has become entitled to exercise, the Stock Appreciation Right
holder may exercise all or any part of the Stock Appreciation
Right at any subsequent time during the term of the Stock
Appreciation Right.
8:05 Stock Appreciation Rights shall be nontransferable and
nonassignable, except that Stock Appreciation Rights may be
transferred by testamentary instrument or by the laws of
descent.
8:06 Upon voluntary or involuntary termination of a Stock
Appreciation Right holder's employment, his or her Stock
Appreciation Right and all rights thereunder shall be
terminated except to the extent previously exercised and
except as provided in Sections 8:07, 8:08, and 8:09.
8:07 In the event a Stock Appreciation Right holder (i) ceases
to be an executive or other key employee of the
Corporation or any of its subsidiaries due to involuntary
termination, (ii) takes a leave of absence from the
Corporation or any of its subsidiaries for personal
reasons or as a result of entry into the armed forces of
the United States, or any of the departments or agencies
of the United States government, or (iii) terminates
employment by reason of illness, disability, or other
special circumstance, the Committee may consider his or
her case and may take such action in respect of the
related Stock Appreciation Right Agreement as it may deem
appropriate under the circumstances, including
accelerating the time previously granted Stock
Appreciation Rights may be exercised and extending the
time following the Stock Appreciation Right holder's
termination of employment during which the Stock
Appreciation Right holder is entitled to exercise the
Stock Appreciation Rights, provided that in no event may
any Stock Appreciation Right be exercised after the
expiration of the term of the Stock Appreciation Right.
8:08 If a Stock Appreciation Right holder dies during the term
of his or her Stock Appreciation Right without having
fully exercised the Stock Appreciation Right, the
executor or administrator of the Stock Appreciation Right
holder's estate or the person who inherits the right to
exercise the Stock Appreciation Right by bequest or
inheritance shall have the right within three years of
the Stock Appreciation Right holder's death to exercise
the Stock Appreciation Rights that the deceased Stock
Appreciation Right holder was entitled to purchase at the
date of death, after which the Stock Appreciation Right
shall lapse, provided that in no event may any Stock
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<PAGE>
Appreciation Right be exercised after the expiration of the
term of the Stock Appreciation Right.
8:09 If a Stock Appreciation Right holder's employment is
terminated without having fully exercised the Stock
Appreciation Right and (i) the Stock Appreciation Right
holder is 62 years of age or older, or (ii) the Stock
Appreciation Right holder has been employed by the
Corporation or any of its subsidiaries for at least 10
years and the Stock Appreciation Right holder's age plus
years of such employment total not less than 55 years,
then such Stock Appreciation Right holder shall have the
right within three years of the Stock Appreciation Right
holder's termination of employment to exercise the Stock
Appreciation Rights that the Stock Appreciation Right
holder was entitled to exercise at the date of
termination, after which the Stock Appreciation Right
shall lapse, provided that in no event may any Stock
Appreciation Right be exercised after the expiration of
the term of the Stock Appreciation Right.
8:10 The granting of a Stock Appreciation Right pursuant to the
Plan shall not constitute or be evidence of any agreement or
understanding, expressed or implied, on the part of the
Corporation or any of its subsidiaries to employ the Stock
Appreciation Right holder for any specified period.
ARTICLE 9:00
Methods of Exercise of Stock Appreciation Rights
9:01 A Stock Appreciation Right holder (or other person or
persons, if any, entitled to exercise a Stock
Appreciation Right hereunder) desiring to exercise a
Stock Appreciation Right granted pursuant to the Plan
shall notify the Corporation in writing at its principal
office at 701 East Joppa Road, Towson, Maryland 21286, to
that effect, specifying the number of Stock Appreciation
Rights to be exercised. Such written notice may be given
by means of a facsimile transmission. If a facsimile
transmission is used, the Stock Appreciation Right holder
should mail the original executed copy of the written
notice to the Corporation promptly thereafter.
9:02 The Committee in its sole discretion shall determine
whether a Stock Appreciation Right shall be settled upon
exercise in cash or in shares of Common Stock. The
Committee, in making such a determination, may from time
to time adopt general guidelines or determinations as to
whether Stock Appreciation Rights shall be settled in
cash or in shares of Common Stock.
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<PAGE>
ARTICLE 10:00
Terms and Conditions of Cash Appreciation Rights
10:01 Cash Appreciation Rights may be granted concurrently with
Options or Stock Appreciation Rights granted pursuant to
the Plan at the discretion of the Committee. If Cash
Appreciation Rights are granted to an Option holder or a
Stock Appreciation Right holder, the number of Cash
Appreciation Rights granted to the Option holder or Stock
Appreciation Right holder shall equal the number of
shares of Common Stock that may be purchased upon
exercise of the related Option or the number of Stock
Appreciation Rights granted, as the case may be.
10:02 Cash Appreciation Rights shall entitle the Option holder
or Stock Appreciation Right holder, as the case may be,
subject to the terms and conditions of the Plan including
but not limited to the limitations set forth in
Section 10:03, to receive from the Corporation or the
subsidiary employing the Option holder or Stock
Appreciation Right holder, as the case may be, upon
exercise of all or part of the related Option or Stock
Appreciation Right, as the case may be, or in the case of
Options granted in tandem with Stock Appreciation Rights
upon the surrender of all or part of the related Option
granted in exchange for the exercise of Stock Apprecia-
tion Rights granted to the Option holder pursuant to the
Plan, a payment in cash equal to the sum of (i) the
increase in income taxes, if any, incurred by the Option
holder or Stock Appreciation Right holder, as the case
may be, as a result of the full or partial exercise of
the related Option or Stock Appreciation Right, as the
case may be, and (ii) the increase in income taxes, if
any, incurred by the Option holder or Stock Appreciation
Right holder, as the case may be, as a result of receipt
of this cash payment.
10:03 In no event shall the payment in respect of a Cash
Appreciation Right exceed the increase, if any, of the
Fair Market Value of a share of Common Stock on the date
of exercise of the related Option or Stock Appreciation
Right, as the case may be, over the exercise price per
share of the related Option or the Stock Appreciation
Right Base Price of the related Stock Appreciation Right,
as the case may be.
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<PAGE>
ARTICLE 11:00
Amendments and Discontinuance of the Plan
11:01 The Board of Directors shall have the right at any time
and from time to time to amend, modify, or discontinue
the Plan provided that, except as provided in
Section 5:03, no such amendment, modification, or
discontinuance of the Plan shall (i) revoke or alter the
terms of any valid Option, Stock Appreciation Right, or
Cash Appreciation Right previously granted pursuant to
the Plan, (ii) increase the number of shares of Common
Stock to be reserved for issuance and sale pursuant to
Options or Stock Appreciation Rights granted pursuant to
the Plan, (iii) decrease the price determined pursuant to
the provisions of Section 6:02 or increase the amount of
cash or shares of Common Stock that a Stock Appreciation
Right holder is entitled to receive upon exercise of a
Stock Appreciation Right, (iv) change the class of
employee to whom Options or Stock Appreciation Rights may
be granted pursuant to the Plan, or (v) provide for
Options or Stock Appreciation Rights exercisable more
than 10 years after the date granted.
ARTICLE 12:00
Plan Subject to Governmental Laws and Regulations
12:01 The Plan and the grant and exercise of Options, Stock
Appreciation Rights, and Cash Appreciation Rights
pursuant to the Plan shall be subject to all applicable
governmental laws and regulations. Notwithstanding any
other provision of the Plan to the contrary, the Board of
Directors may in its discretion make such changes in the
Plan as may be required to conform the Plan to such laws
and regulations.
ARTICLE 13:00
Duration of the Plan
13:01 No Option or Stock Appreciation Right shall be granted
pursuant to the Plan after the close of business on November
16, 1999.
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Exhibit 10(e)
THE BLACK & DECKER 1992 STOCK OPTION PLAN
The proper execution of the duties and responsibilities of the
executive and other key employees of The Black & Decker Corporation and its
subsidiaries is a vital factor in the continued growth and success of the
Corporation. Toward this end, it is necessary to attract and retain effective
and capable employees to assume positions that contribute materially to the
successful operation of the business of the Corporation. It will benefit the
Corporation, therefore, to bind the interests of these persons more closely to
its own interests by offering them an attractive opportunity to acquire a
proprietary interest in the Corporation and thereby provide them with added
incentive to remain in its employ and to increase the prosperity, growth, and
earnings of the Corporation. This stock option plan will serve these purposes.
ARTICLE 1:00
Definitions
The following terms wherever used herein shall have the meanings set
forth below.
1:01 The term "Board of Directors" shall mean the Board of
Directors of the Corporation.
1:02 The term "Cash Appreciation Right" shall mean a right to
receive cash pursuant to Article 11:00 of the Plan.
1:03 The term "Change in Control" shall have the meaning
provided in Section 10:02 of the Plan.
1:04 The term "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any regulations promulgated thereunder.
1:05 The term "Committee" shall mean a committee to be
appointed by the Board of Directors to consist of two or
more of those members of the Board of Directors who are
Non-Employee Directors within the meaning of Rule 16b-3
promulgated under the Exchange Act and are outside
directors within the meaning of the Section 162(m)
Regulations as each may be amended from time to time.
1:06 The term "Common Stock" shall mean the shares of common stock,
par value $.50 per share, of the Corporation.
1:07 The term "Corporation" shall mean The Black & Decker
Corporation.
1:08 The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
<PAGE>
1:09 The term "Fair Market Value of a share of Common Stock"
shall mean the average of the high and low sale price per
share of Common Stock as finally reported in the New York
Stock Exchange Composite Transactions for the New York
Stock Exchange, or if shares of Common Stock are not sold
on such date, the average of the high and low sale price
per share of Common Stock as finally reported in the New
York Stock Exchange Composite Transactions for the New
York Stock Exchange for the most recent prior date on
which shares of Common Stock were sold.
1:10 The term "Incentive Stock Option" shall mean any Option
granted pursuant to the Plan that is designated as an
Incentive Stock Option and which satisfies the requirements of
Section 422(b) of the Code.
1:11 The term "Limited Stock Appreciation Right" shall mean a
limited tandem stock appreciation right that entitles the
holder to receive cash upon a Change in Control pursuant to
Article 10:00 of the Plan.
1:12 The term "Nonqualified Stock Option" shall mean any Option
granted pursuant to the Plan that is not an Incentive Stock
Option.
1:13 The term "Option" or "Stock Option" shall mean a right granted
pursuant to the Plan to purchase shares of Common Stock, and
shall include the terms Incentive Stock Option and
Nonqualified Stock Option.
1:14 The term "Option Agreement" shall mean the written agreement
representing Options granted pursuant to the Plan as
contemplated by Article 6:00 of the Plan.
1:15 The term "Plan" shall mean The Black & Decker 1992 Stock
Option Plan as approved by the Board of Directors on February
20, 1992, and adopted by the stockholders of the Corporation
at the 1992 Annual Meeting of Stockholders, as the same may be
amended from time to time.
1:16 The term "Rights" shall include Stock Appreciation
Rights, Limited Stock Appreciation Rights and Cash
Appreciation Rights.
1:17 The term "Section 162(m) Regulations" shall mean the
regulations adopted pursuant to Section 162(m) of the Code.
1:18 The term "Stock Appreciation Right" shall mean a right to
receive cash or shares of Common Stock pursuant to Article
8:00 of the Plan.
1:19 The term "Stock Appreciation Right Agreement" shall mean
the written agreement representing Stock Appreciation
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<PAGE>
Rights granted pursuant to the Plan as contemplated by Article
8:00 of the Plan.
1:20 The term "Stock Appreciation Right Base Price" shall mean
the base price for determining the value of a Stock
Appreciation Right under Section 8:02, which Stock
Appreciation Right Base Price shall be established by the
Committee at the time of the grant of Stock Appreciation
Rights pursuant to the Plan and shall not be less than
90% of the Fair Market Value of a share of Common Stock
on the date of grant. If the Committee does not
establish a specific Stock Appreciation Right Base Price
at the time of grant, the Stock Appreciation Right Base
Price shall be equal to the Fair Market Value of a share
of Common Stock on the date of grant of the Stock
Appreciation Right.
1:21 The term "subsidiary" or "subsidiaries" shall mean a
corporation of which capital stock possessing 50% or more of
the total combined voting power of all classes of its capital
stock entitled to vote generally in the election of directors
is owned in the aggregate by the Corporation directly or
indirectly through one or more subsidiaries.
ARTICLE 2:00
Effective Date of the Plan
2:01 The Plan shall become effective upon stockholder
approval, provided that such approval is received on or
before May 31, 1992, and provided further that the
Committee may grant Options or Rights pursuant to the
Plan prior to stockholder approval if such Options or
Rights by their terms are contingent upon subsequent
stockholder approval of the Plan.
ARTICLE 3:00
Administration
3:01 The Plan shall be administered by the Committee.
3:02 The Committee may establish, from time to time and at any
time, subject to the limitations of the Plan as set forth
herein, such rules and regulations and amendments and
supplements thereto, as it deems necessary to comply with
applicable law and regulation and for the proper
administration of the Plan. A majority of the members of
the Committee shall constitute a quorum. The vote of a
majority of a quorum shall constitute action by the
Committee.
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3:03 The Committee shall from time to time determine the names
of those executives and other key employees who, in its
opinion, should receive Options or Rights, and shall
determine the numbers of shares on which Options should
be granted or upon which Rights should be based to each
such person and the nature of the Options or Rights to be
granted.
3:04 Options and Rights shall be granted by the Corporation only
upon prior approval of the Committee, and upon the execution
of an Option Agreement or Stock Appreciation Right Agreement
between the Corporation and the Option holder or the Stock
Appreciation Right holder.
3:05 The Committee's interpretation and construction of the
provisions of the Plan and the rules and regulations adopted
by the Committee shall be final. No member of the Committee or
the Board of Directors shall be liable for any action taken or
determination made, in respect of the Plan, in good faith.
ARTICLE 4:00
Participation in the Plan
4:01 Participation in the Plan shall be limited to such executives
and other key employees of the Corporation and its
subsidiaries who at the date of grant of an Option or Right
are regular, full-time employees of the Corporation or any of
its subsidiaries and who shall be designated by the Committee.
4:02 No member of the Board of Directors who is not also an
employee shall be eligible to participate in the Plan. No
employee who owns beneficially more than 10% of the total
combined voting power of all classes of stock of the
Corporation shall be eligible to participate in the Plan.
ARTICLE 5:00
Stock Subject to the Plan
5:01 There shall be reserved for the granting of Options or
Stock Appreciation Rights pursuant to the Plan and for
issuance and sale pursuant to such Options or Stock
Appreciation Rights 2,400,000 shares of Common Stock. To
determine the number of shares of Common Stock available
at any time for the granting of Options or Stock
Appreciation Rights, there shall be deducted from the
total number of reserved shares of Common Stock, the
number of shares of Common Stock in respect of which
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Options have been granted pursuant to the Plan that are still
outstanding or have been exercised. The shares of Common Stock
to be issued upon the exercise of Options or Stock
Appreciation Rights granted pursuant to the Plan shall be made
available from the authorized and unissued shares of Common
Stock. If for any reason shares of Common Stock as to which an
Option has been granted cease to be subject to purchase
thereunder, then such shares of Common Stock again shall be
available for issuance pursuant to the exercise of Options or
Stock Appreciation Rights pursuant to the Plan. Except as
provided in Section 5:03, however, the aggregate number of
shares of Common Stock that may be issued upon the exercise of
Options and Stock Appreciation Rights pursuant to the Plan
shall not exceed 2,400,000 shares and no more than 2,400,000
Stock Appreciation Rights shall be granted pursuant to the
Plan.
5:02 Proceeds from the purchase of shares of Common Stock upon the
exercise of Options granted pursuant to the Plan shall be used
for the general business purposes of the Corporation.
5:03 Subject to the provisions of Section 10:02, in the event
of reorganization, recapitalization, stock split, stock
dividend, combination of shares of Common Stock, merger,
consolidation, share exchange, acquisition of property or
stock, or any change in the capital structure of the
Corporation, the Committee shall make such adjustments as
may be appropriate in the number and kind of shares
reserved for purchase by executives or other key
employees, in the number, kind and price of shares
covered by Options and Stock Appreciation Rights granted
pursuant to the Plan but not then exercised, and in the
number of Rights, if any, granted pursuant to the Plan
but not then exercised.
ARTICLE 6:00
Terms and Conditions of Options
6:01 Each Option granted pursuant to the Plan shall be
evidenced by an Option Agreement in such form and with
such terms and conditions (including, without limitation,
noncompete, confidentiality or other similar provisions)
as the Committee from time to time may determine. The
right of an Option holder to exercise his or her Option
shall at all times be subject to the terms and conditions
set forth in the respective Option Agreement.
6:02 The exercise price per share for Options shall be established
by the Committee at the time of the grant of Options pursuant
to the Plan and shall not be less than
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90% of the Fair Market Value of a share of Common Stock on the
date on which the Option is granted. If the Committee does not
establish a specific exercise price per share at the time of
grant, the exercise price per share shall be equal to the Fair
Market Value of a share of Common Stock on the date of grant
of the Options.
6:03 Each Option, subject to the other limitations set forth
in the Plan, may extend for a period of up to 10 years
from the date on which it is granted. The term of each
Option shall be determined by the Committee at the time
of grant of the Option, provided that if no term is
established by the Committee the term of the Option shall
be 10 years from the date on which it is granted.
6:04 Unless otherwise provided by the Committee, the number of
shares of Common Stock subject to each Option shall be
divided into four installments of 25% each. The first
installment shall be exercisable 12 months after the date
the Option was granted, and each succeeding installment
shall be exercisable 12 months after the date the
immediately preceding installment became exercisable. If
an Option holder does not purchase the full number of
shares of Common Stock that he or she at any time has
become entitled to purchase, the Option holder may
purchase all or any part of those shares of Common Stock
at any subsequent time during the term of the Option.
6:05 Options shall be nontransferable and nonassignable, except
that Options may be transferred by testamentary instrument or
by the laws of descent and distribution.
6:06 Upon voluntary or involuntary termination of an Option
holder's employment, his or her Option and all rights
thereunder shall terminate effective at the close of
business on the date the Option holder ceases to be a
regular, full-time employee of the Corporation or any of
its subsidiaries, except (i) to the extent previously
exercised, (ii) as provided in Sections 6:07, 6:08, and
6:09, and (iii) in the case of involuntary termination of
employment, for a period of 30 days thereafter the Option
holder shall be entitled to exercise that portion of the
Option which was exercisable at the close of business on
the date the Option holder ceased to be a regular, full-
time employee of the Corporation or any of its
subsidiaries.
6:07 In the event an Option holder (i) ceases to be an
executive or other key employee of the Corporation or any
of its subsidiaries due to involuntary termination,
(ii) takes a leave of absence from the Corporation or any
of its subsidiaries for personal reasons or as a result
of entry into the armed forces of the United States, or
any of the departments or agencies of the United States
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government, or (iii) terminates employment by reason of
illness, disability, or other special circumstance, the
Committee may consider his or her case and may take such
action in respect of the related Option Agreement as it may
deem appropriate under the circumstances, including
accelerating the time previously granted Options may be
exercised and extending the time following the Option holder's
termination of employment during which the Option holder is
entitled to purchase the shares of Common Stock subject to
such Options, provided that in no event may any Option be
exercised after the expiration of the term of the Option.
6:08 If an Option holder dies during the term of his or her
Option without having fully exercised the Option, the
executor or administrator of his or her estate or the
person who inherits the right to exercise the Option by
bequest or inheritance shall have the right within three
years of the Option holder's death to purchase the number
of shares of Common Stock that the deceased Option holder
was entitled to purchase at the date of death, after
which the Option shall lapse, provided that in no event
may any Option be exercised after the expiration of the
term of the Option.
6:09 If an Option holder's employment is terminated without
having fully exercised the Option and (i) the Option
holder is 62 years of age or older, or (ii) the Option
holder has been employed by the Corporation or any of its
subsidiaries for at least 10 years and the Option
holder's age plus years of such employment total not less
than 55 years, then such Option holder shall have the
right within three years of the Option holder's
termination of employment to purchase the number of
shares of Common Stock that the Option holder was
entitled to purchase at the date of termination, after
which the Option shall lapse, provided that in no event
may any Option be exercised after the expiration of the
term of the Option.
6:10 The granting of an Option pursuant to the Plan shall not
constitute or be evidence of any agreement or understanding,
express or implied, on the part of the Corporation or any of
its subsidiaries to employ the Option holder for any specified
period.
6:11 In addition to the general terms and conditions set forth in
this Article 6:00 in respect of Options granted pursuant to
the Plan, Incentive Stock Options granted pursuant to the Plan
shall be subject to the following additional terms and
conditions:
(a) The aggregate fair market value (determined at the
time the Incentive Stock Option is granted) of the
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shares of Common Stock in respect of which "incentive
stock options" are exercisable for the first time by
the Option holder during any calendar year (under all
such plans of the Corporation and its subsidiaries)
shall not exceed $100,000; and
(b) The Option Agreement in respect of an Incentive Stock
Option may contain any other terms and conditions
specified by the Committee that are not inconsistent
with the Plan, except that such terms and conditions
must be consistent with the requirements for
"incentive stock options" under Section 422 of the
Code.
ARTICLE 7:00
Methods of Exercise of Options
7:01 An Option holder (or other person or persons, if any,
entitled to exercise an Option hereunder) desiring to
exercise an Option granted pursuant to the Plan as to all
or part of the shares of Common Stock covered by the
Option shall (i) notify the Corporation in writing at its
principal office at 701 East Joppa Road, Towson, Maryland
21286, to that effect, specifying the number of shares of
Common Stock to be purchased and the method of payment
therefor, and (ii) make payment or provision for payment
for the shares of Common Stock so purchased in accordance
with this Article 7:00. Such written notice may be given
by means of a facsimile transmission. If a facsimile
transmission is used, the Option holder should mail the
original executed copy of the written notice to the
Corporation promptly thereafter.
7:02 Payment or provision for payment shall be made as
follows:
(a) The Option holder shall deliver to the Corporation at
the address set forth in Section 7:01 United States
currency in an amount equal to the aggregate purchase
price of the shares of Common Stock as to which such
exercise relates; or
(b) The Option holder shall tender to the Corporation
shares of Common Stock already owned by the Option
holder that, together with any cash tendered
therewith, have an aggregate fair market value
(determined based on the Fair Market Value of a
share of Common Stock on the date the notice set
forth in Section 7:01 is received by the
Corporation) equal to the aggregate purchase price
of the shares of Common Stock as to which such
exercise relates; or
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(c) The Option holder shall deliver to the Corporation
an exercise notice together with irrevocable
instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds
necessary to pay the aggregate purchase price of
the shares of Common Stock as to which such
exercise relates and to sell the shares of Common
Stock to be issued upon exercise of the Option and
deliver the cash proceeds less commissions and
brokerage fees to the Option holder or to deliver
the remaining shares of Common Stock to the Option
holder.
Notwithstanding the foregoing provisions, the Committee, in
granting Options pursuant to the Plan, may limit the methods
in which an Option may be exercised by any person and, in
processing any purported exercise of an Option granted
pursuant to the Plan, may refuse to recognize the method of
exercise selected by the Option holder (other than the method
of exercise set forth in Section 7:02(a)) if, in the opinion
of counsel to the Corporation, (i) the Option holder is or
within the six months preceding such exercise was subject to
reporting under Section 16(a) of the Exchange Act and (ii)
there is a substantial likelihood that the method of exercise
selected by the Option holder would subject the Option holder
to a substantial risk of liability under Section 16 of the
Exchange Act.
7:03 In addition to the alternative methods of exercise set
forth in Section 7:02, holders of Nonqualified Stock
Options shall be entitled, at or prior to the time the
written notice provided for in Section 7:01 is delivered
to the Corporation, to elect to have the Corporation
withhold from the shares of Common Stock to be delivered
upon exercise of the Nonqualified Stock Option that
number of shares of Common Stock (determined based on the
Fair Market Value of a share of Common Stock on the date
the notice set forth in Section 7:01 is received by the
Corporation) necessary to satisfy any withholding taxes
attributable to the exercise of the Nonqualified Stock
Option. Alternatively, such holder of a Nonqualified
Stock Option may elect to deliver previously owned shares
of Common Stock upon exercise of the Nonqualified Stock
Option to satisfy any withholding taxes attributable to
the exercise of the Nonqualified Stock Option. The
maximum amount that an Option holder may elect to have
withheld from the shares of Common Stock otherwise
deliverable upon exercise or the maximum number of
previously owned shares an Option holder may deliver
shall be based on the maximum federal, state and local
taxes payable by the Option holder. Notwithstanding the
foregoing provisions, the Committee may include in the
Option Agreement relating to any such Nonqualified Stock
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<PAGE>
Option provisions limiting or eliminating the Option holder's
ability to pay his or her withholding tax obligation with
shares of Common Stock or, if no such provisions are included
in the Option Agreement but in the opinion of the Committee
such withholding would have an adverse tax or accounting
effect to the Corporation, at or prior to exercise of the
Nonqualified Stock Option the Committee may so limit or
eliminate the Option holder's ability to pay his or her
withholding tax obligation with shares of Common Stock.
Notwithstanding the foregoing provisions, a holder of a
Nonqualified Stock Option may not elect any of the methods of
satisfying his or her withholding tax obligation in respect of
any exercise if, in the opinion of counsel to the Corporation,
(i) the holder of the Nonqualified Stock Option is or within
the six months preceding such exercise was subject to
reporting under Section 16(a) of the Exchange Act and (ii)
there is a substantial likelihood that the election or timing
of the election would subject the holder to a substantial risk
of liability under Section 16 of the Exchange Act.
7:04 An Option holder at any time may elect in writing to abandon
an Option in respect of all or part of the number of shares of
Common Stock as to which the Option shall not have been
exercised.
7:05 An Option holder shall have none of the rights of a
stockholder of the Corporation until the shares of Common
Stock covered by the Option are issued upon exercise of the
Option.
ARTICLE 8:00
Terms and Conditions of Stock Appreciation Rights
8:01 Each Stock Appreciation Right granted pursuant to the
Plan shall be evidenced by a Stock Appreciation Right
Agreement in such form as the Committee from time to time
may determine. Notwithstanding the foregoing provision,
Stock Appreciation Rights granted in tandem with a
related Option shall be evidenced by the Option Agreement
in respect of the related Option.
8:02 Each Stock Appreciation Right shall entitle the holder,
subject to the terms and conditions of the Plan, to
receive upon exercise of the Stock Appreciation Right an
amount, payable in cash or shares of Common Stock
(determined based on the Fair Market Value of a share of
Common Stock on the date the notice set forth in
Section 9:01 is received by the Corporation), equal to
the Fair Market Value of a share of Common Stock on the
date of receipt by the Corporation of the notice required
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by Section 9:01 less the Stock Appreciation Right Base Price.
Notwithstanding the foregoing provision, each Stock
Appreciation Right that is granted in tandem with a related
Option shall entitle the holder, subject to the terms and
conditions of the Plan, to surrender to the Corporation for
cancellation all or a portion of the related Option, but only
to the extent such Stock Appreciation Right and related Option
then are exercisable, and to be paid therefor an amount,
payable in cash or shares of Common Stock (determined based on
the Fair Market Value of a share of Common Stock on the date
the notice set forth in Section 9:01 is received by the
Corporation), equal to the Fair Market Value of a share of
Common Stock on the date of receipt by the Corporation of the
notice required by Section 9:01 less the Stock Appreciation
Right Base Price.
8:03 Each Stock Appreciation Right, subject to the other
limitations set forth in the Plan, may extend for a
period of up to 10 years from the date on which it is
granted. The term of each Stock Appreciation Right shall
be determined by the Committee at the time of grant of
the Stock Appreciation Right, provided that if no term is
established by the Committee the term of the Stock
Appreciation Right shall be 10 years from the date on
which it is granted.
8:04 Unless otherwise provided by the Committee, the number of
Stock Appreciation Rights granted pursuant to each Stock
Appreciation Right Agreement shall be divided into four
installments of 25% each. The first installment shall be
exercisable 12 months after the date the Stock
Appreciation Right was granted, and each succeeding
installment shall be exercisable 12 months after the date
the immediately preceding installment became exercisable.
If a Stock Appreciation Right holder does not exercise
the Stock Appreciation Right to the extent that he or she
at any time has become entitled to exercise, the Stock
Appreciation Right holder may exercise all or any part of
the Stock Appreciation Right at any subsequent time
during the term of the Stock Appreciation Right.
8:05 Stock Appreciation Rights shall be nontransferable and
nonassignable, except that Stock Appreciation Rights may be
transferred by testamentary instrument or by the laws of
descent.
8:06 Upon voluntary or involuntary termination of a Stock
Appreciation Right holder's employment, his or her Stock
Appreciation Right and all rights thereunder shall
terminate effective as of the close of business on the
date the Stock Appreciation Right holder ceases to be a
regular, full-time employee of the Corporation or any of
its subsidiaries, except (i) to the extent previously
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exercised, (ii) except as provided in Sections 8:07, 8:08, and
8:09, and (iii) in the case of involuntary termination of
employment, for a period of 30 days thereafter the Stock
Appreciation Right holder shall be entitled to exercise that
portion of the Stock Appreciation Right which was exercisable
at the close of business on the date the Stock Appreciation
Right holder ceased to be a regular, full-time employee of the
Corporation or any of its subsidiaries.
8:07 In the event a Stock Appreciation Right holder (i) ceases
to be an executive or other key employee of the
Corporation or any of its subsidiaries due to involuntary
termination, (ii) takes a leave of absence from the
Corporation or any of its subsidiaries for personal
reasons or as a result of entry into the armed forces of
the United States, or any of the departments or agencies
of the United States government, or (iii) terminates
employment by reason of illness, disability, or other
special circumstance, the Committee may consider his or
her case and may take such action in respect of the
related Stock Appreciation Right Agreement as it may deem
appropriate under the circumstances, including
accelerating the time previously granted Stock
Appreciation Rights may be exercised and extending the
time following the Stock Appreciation Right holder's
termination of employment during which the Stock
Appreciation Right holder is entitled to exercise his or
her Stock Appreciation Rights, provided that in no event
may any Stock Appreciation Right be exercised after the
expiration of the term of the Stock Appreciation Right.
8:08 If a Stock Appreciation Right holder dies during the term
of his or her Stock Appreciation Right without having
fully exercised the Stock Appreciation Right, the
executor or administrator of the Stock Appreciation Right
holder's estate or the person who inherits the right to
exercise the Stock Appreciation Right by bequest or
inheritance shall have the right within three years of
the Stock Appreciation Right holder's death to exercise
the Stock Appreciation Rights that the deceased Stock
Appreciation Right holder was entitled to purchase at the
date of death, after which the Stock Appreciation Right
shall lapse, provided that in no event may any Stock
Appreciation Right be exercised after the expiration of
the term of the Stock Appreciation Right.
8:09 If a Stock Appreciation Right holder's employment is
terminated without having fully exercised the Stock
Appreciation Right and (i) the Stock Appreciation Right holder
is 62 years of age or older, or (ii) the Stock Appreciation
Right holder has been employed by the Corporation or any of
its subsidiaries for at least 10
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years and the Stock Appreciation Right holder's age plus years
of such employment total not less than 55 years, then such
Stock Appreciation Right holder shall have the right within
three years of the Stock Appreciation Right holder's
termination of employment to exercise the Stock Appreciation
Rights that the Stock Appreciation Right holder was entitled
to exercise at the date of termination, after which the Stock
Appreciation Right shall lapse, provided that in no event may
any Stock Appreciation Right be exercised after the expiration
of the term of the Stock Appreciation Right.
8:10 The granting of a Stock Appreciation Right pursuant to the
Plan shall not constitute or be evidence of any agreement or
understanding, expressed or implied, on the part of the
Corporation or any of its subsidiaries to employ the Stock
Appreciation Right holder for any specified period.
ARTICLE 9:00
Methods of Exercise of Stock Appreciation Rights
9:01 A Stock Appreciation Right holder (or other person or
persons, if any, entitled to exercise a Stock
Appreciation Right hereunder) desiring to exercise a
Stock Appreciation Right granted pursuant to the Plan
shall notify the Corporation in writing at its principal
office at 701 East Joppa Road, Towson, Maryland 21286, to
that effect, specifying the number of Stock Appreciation
Rights to be exercised. Such written notice may be given
by means of a facsimile transmission. If a facsimile
transmission is used, the Stock Appreciation Right holder
should mail the original executed copy of the written
notice to the Corporation promptly thereafter.
9:02 The Committee in its sole and absolute discretion shall
determine whether a Stock Appreciation Right shall be
settled upon exercise in cash or in shares of Common
Stock. The Committee, in making such a determination,
may from time to time adopt general guidelines or
determinations as to whether Stock Appreciation Rights
shall be settled in cash or in shares of Common Stock.
ARTICLE 10:00
Limited Stock Appreciation Rights
10:01 Notwithstanding any other provision of the Plan, the
Committee, in their sole and absolute discretion, may grant
Limited Stock Appreciation Rights entitling Option holders to
receive, in connection with a Change in
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Control (as defined in Section 10:02), a cash payment in
cancellation of all of their Options which are outstanding on
the date the Change in Control occurs (whether or not such
Options are then presently exercisable), which payment shall
be equal to the number of shares covered by the cancelled
Options multiplied by the excess over the exercise price of
the Options of the higher of the (i) Fair Market Value of a
share of Common Stock on the date of the Change in Control or
(ii) the highest per share price paid for the shares of Common
Stock in connection with the Change in Control (with the value
of any noncash consideration paid in connection with the
Change in Control to be determined by the Committee in its
sole and absolute discretion). For purposes of this Section
10:01 as well as the other provisions of this Plan, once an
Option or portion of an Option has terminated, lapsed or
expired, or has been abandoned, in accordance with the
provisions of the Plan, the Option (or the portion of the
Option) that has terminated, lapsed or expired, or has been
abandoned, shall cease to be outstanding. Limited Stock
Appreciation Rights shall not be exercisable at the discretion
of the holder but shall automatically be exercised upon a
Change in Control.
10:02 For purposes of Section 10:01 of the Plan, a "Change in
Control" shall mean a change in control of the
Corporation 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
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; or
(B) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors 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 (C) of this
Section 10.02) whose election by the Board of Directors
or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-
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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; or (C) 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.
ARTICLE 11:00
Terms and Conditions of Cash Appreciation Rights
11:01 Cash Appreciation Rights may be granted concurrently with
Options or Stock Appreciation Rights granted pursuant to
the Plan in the sole and absolute discretion of the
Committee. If Cash Appreciation Rights are granted to an
Option holder or a Stock Appreciation Right holder, the
number of Cash Appreciation Rights granted to the Option
holder or Stock Appreciation Right holder shall equal the
number of shares of Common Stock that may be purchased
upon exercise of the related Option or the number of
Stock Appreciation Rights granted, as the case may be.
11:02 Cash Appreciation Rights shall entitle the Option holder
or Stock Appreciation Right holder, as the case may be,
subject to the terms and conditions of the Plan including
but not limited to the limitations set forth in Section
11:03, to receive from the Corporation or the subsidiary
employing the Option holder or Stock Appreciation Right
holder, as the case may be, upon exercise of all or part
of the related Option or Stock Appreciation Right, as the
case may be, or in the case of Options granted in tandem
with Stock Appreciation Rights upon the surrender of all
or part of the related Option granted in exchange for the
exercise of Stock Appreciation Rights granted to the
Option holder pursuant to the Plan, a payment in cash
equal to the sum of (i) the increase in income taxes, if
any, incurred by the Option holder or Stock Appreciation
Right holder, as the case may be, as a result of the full
or partial exercise of the related Option or Stock
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Appreciation Right, as the case may be, and (ii) the increase
in income taxes, if any, incurred by the Option holder or
Stock Appreciation Right holder, as the case may be, as a
result of receipt of this cash payment.
11:03 In no event shall the payment in respect of a Cash
Appreciation Right exceed the increase, if any, of the
Fair Market Value of a share of Common Stock on the date
of exercise of the related Option or Stock Appreciation
Right, as the case may be, over the exercise price per
share of the related Option or the Stock Appreciation
Right Base Price of the related Stock Appreciation Right,
as the case may be.
ARTICLE 12:00
Amendments and Discontinuance of the Plan
12:01 The Board of Directors shall have the right at any time
and from time to time to amend, modify, or discontinue
the Plan provided that, except as provided in
Section 5:03, no such amendment, modification, or discon-
tinuance of the Plan shall (i) revoke or alter the terms
of any valid Option, Stock Appreciation Right, Limited
Stock Appreciation Right, or Cash Appreciation Right
previously granted pursuant to the Plan, (ii) increase
the number of shares of Common Stock to be reserved for
issuance and sale pursuant to Options or Stock
Appreciation Rights granted pursuant to the Plan, (iii)
decrease the price determined pursuant to the provisions
of Section 6:02 or increase the amount of cash or shares
of Common Stock that a Stock Appreciation Right holder is
entitled to receive upon exercise of a Stock Appreciation
Right, (iv) change the class of employee to whom Options
or Stock Appreciation Rights may be granted pursuant to
the Plan, or (v) provide for Options or Stock
Appreciation Rights exercisable more than 10 years after
the date granted.
ARTICLE 13:00
Plan Subject to Governmental Laws and Regulations
13:01 The Plan and the grant and exercise of Options, Stock
Appreciation Rights, Limited Stock Appreciation Rights,
and Cash Appreciation Rights pursuant to the Plan shall
be subject to all applicable governmental laws and
regulations. Notwithstanding any other provision of the
Plan to the contrary, the Board of Directors may in its
sole and absolute discretion make such changes in the
Plan as may be required to conform the Plan to such laws
and regulations.
- 16 -
<PAGE>
ARTICLE 14:00
Duration of the Plan
14:01 No Option or Stock Appreciation Right shall be granted
pursuant to the Plan after the close of business on February
19, 2002.
- 17 -
Exhibit 10(f)
THE BLACK & DECKER CORPORATION
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Attracting and retaining qualified individuals to serve as non-employee
directors is vital to the continued success of The Black & Decker Corporation.
To that end and to bind the interests of those individuals to the interests of
the Corporation and its stockholders, this stock option plan offers them an
attractive opportunity to acquire a proprietary interest in the Corporation.
ARTICLE 1:00
Definitions
1:01 The term "Board of Directors" shall mean the Board of
Directors of the Corporation.
1:02 The term "Change in Control" shall have the meaning
provided in Section 7:02 of the Plan.
1:03 The term "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any regulations promulgated thereunder.
1:04 The term "Common Stock" shall mean the shares of common stock,
par value $.50 per share, of the Corporation.
1:05 The term "Corporation" shall mean The Black & Decker
Corporation.
1:06 The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1:07 The term "Fair Market Value of a share of Common Stock"
shall mean the average of the high and low sale price per
share of Common Stock as finally reported in the New York
Stock Exchange Composite Transactions for the New York
Stock Exchange, or if shares of Common Stock are not sold
on such date, the average of the high and low sale price
per share of Common Stock as finally reported in the New
York Stock Exchange Composite Transactions for the New
York Stock Exchange for the most recent prior date on
which shares of Common Stock were sold.
1:08 The term "Limited Stock Appreciation Right" shall mean a
limited tandem stock appreciation right that entitles the
holder to receive cash upon a Change in Control pursuant to
Article 7:00 of the Plan.
1:09 The term "Option" or "Stock Option" shall mean a right granted
pursuant to the Plan to purchase shares of Common Stock.
<PAGE>
1:10 The term "Option Agreement" shall mean the written agreement
representing Options granted pursuant to the Plan as
contemplated by Article 5:00 of the Plan.
1:11 The term "Plan" shall mean The Black & Decker Corporation 1995
Stock Option Plan for Non-Employee Directors as approved by
the Board of Directors on December 8, 1994, and adopted by the
stockholders of the Corporation at the 1995 Annual Meeting of
Stockholders, as the same may be amended from time to time.
ARTICLE 2:00
Effective Date of the Plan
2:01 The Plan shall become effective upon stockholder approval,
provided that such approval is received on or before May 31,
1995.
ARTICLE 3:00
Participation in the Plan
3:01 Participation in the Plan shall be limited to individuals who
are directors of the Corporation but not full-time employees
of the Corporation on the date of grant of an Option.
3:02 No member of the Board of Directors who is a full-time
employee shall be eligible to participate in the Plan. No
director who owns beneficially more than 10% of the total
combined voting power of all classes of stock of the
Corporation shall be eligible to participate in the Plan.
3:03 Upon initial election to the Board of Directors, a
director who on the date of election is not a full-time
employee of the Corporation shall automatically receive
an Option to purchase 2,000 shares of Common Stock. Upon
each reelection, a director who on the date of reelection
is not a full-time employee of the Corporation shall
automatically receive an Option to purchase 1,500 shares
of Common Stock. For the purpose of this Section,
election or reelection at the 1995 Annual Meeting of
Stockholders shall be deemed an "initial election."
ARTICLE 4:00
Stock Subject to the Plan
4:01 There shall be reserved for the granting of Options
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<PAGE>
pursuant to the Plan and for issuance and sale pursuant to
such Options 150,000 shares of Common Stock. To determine the
number of shares of Common Stock available at any time for the
granting of Options, there shall be deducted from the total
number of reserved shares of Common Stock the number of shares
of Common Stock in respect of which Options have been granted
pursuant to the Plan that are still outstanding or have been
exercised. The shares of Common Stock to be issued upon the
exercise of Options granted pursuant to the Plan shall be made
available from the authorized and unissued shares of Common
Stock. If for any reason shares of Common Stock as to which an
Option has been granted cease to be subject to purchase
thereunder, then such shares of Common Stock again shall be
available for issuance pursuant to the Plan. Except as
provided in Section 4:03, however, the aggregate number of
shares of Common Stock that may be issued upon the exercise of
Options pursuant to the Plan shall not exceed 150,000 shares.
4:02 Proceeds from the purchase of shares of Common Stock upon the
exercise of Options granted pursuant to the Plan shall be used
for the general business purposes of the Corporation.
4:03 Subject to the provisions of Section 7:02, in the event
of reorganization, recapitalization, stock split, stock
dividend, combination of shares of Common Stock, merger,
consolidation, share exchange, acquisition of property or
stock, or any change in the capital structure of the
Corporation, the number and kind of shares reserved for
the granting of Options and the number, kind and price of
shares covered by Options granted pursuant to the Plan
but not then exercised shall be adjusted appropriately by
resolution of the Board.
ARTICLE 5:00
Terms and Conditions of Options
5:01 Each Option granted pursuant to the Plan shall be evidenced by
an Option Agreement in such form as the Board of Directors
from time to time may determine.
5:02 The exercise price per share for Options shall be equal to the
Fair Market Value of a share of Common Stock on the date of
grant of the Options.
5:03 Subject to the other limitations set forth in the Plan, the
term of the Option shall be 10 years from the date on which it
is granted.
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<PAGE>
5:04 Unless otherwise provided by the Board of Directors, each
Option shall become exercisable on the date of the first
Annual Meeting of Stockholders following the date the
Option was granted. If an Option holder does not
purchase the full number of shares of Common Stock that
he or she at any time has become entitled to purchase, he
or she may purchase all or any part of those shares of
Common Stock at any subsequent time during the term of
the Option.
5:05 Options shall be nontransferable and nonassignable,
except that Options may be transferred by testamentary
instrument or by the laws of descent and distribution and
may be transferred pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code
of 1986, as amended, or Title I of the Employee
Retirement Income Security Act.
5:06 If an Option holder ceases to be a director of the
Corporation, his or her Option and all rights thereunder
shall terminate effective at the close of business on the
date the Option holder ceases to be a director of the
Corporation, except (i) to the extent previously
exercised, (ii) as provided in Sections 5:07 and 5:08 and
(iii) for a period of 30 days after he or she ceases to
be a director of the Corporation, the Option holder shall
be entitled to exercise any Option that was exercisable
at the close of business on the date the Option holder
ceased to be a director of the Corporation.
5:07 If an Option holder dies during the term of his or her
Option without having fully exercised the Option, the
executor or administrator of his or her estate or the
person who inherits the right to exercise the Option by
bequest or inheritance shall have the right within three
years of the Option holder's death to purchase the number
of shares of Common Stock that the deceased Option holder
was entitled to purchase at the date of his or her death,
after which the Option shall lapse, provided that in no
event may any Option be exercised after the expiration of
the term of the Option.
5:08 If an Option holder ceases to be a director of the
Corporation without having fully exercised his or her
Option and (i) the Option holder is 65 years of age or
older, or (ii) the Option holder has been a director of
the Corporation or any of its subsidiaries for at least
5 years, then the Option holder shall have the right
within three years of the Option holder's termination as
a director to purchase the number of shares of Common
Stock that the Option holder was entitled to purchase at
the date of termination, after which the Option shall
lapse, provided that in no event may any Option be
exercised after the expiration of the term of the Option.
-4-
<PAGE>
5:09 The granting of an Option pursuant to the Plan shall not
constitute or be evidence of any agreement or understanding,
express or implied, on the part of the Corporation to continue
the Option holder as a director for any specified period.
ARTICLE 6:00
Methods of Exercise of Options
6:01 An Option holder (or other person or persons, if any,
entitled to exercise an Option hereunder) desiring to
exercise an Option granted pursuant to the Plan as to all
or part of the shares of Common Stock covered by the
Option shall (i) notify the Corporation in writing at its
principal office at 701 East Joppa Road, Towson, Maryland
21286, to that effect, specifying the number of shares of
Common Stock to be purchased and the method of payment
therefor, and (ii) make payment or provision for payment
for the shares of Common Stock so purchased in accordance
with this Article 6:00. Such written notice may be given
by means of a facsimile transmission. If a facsimile
transmission is used, the Option holder should mail the
original executed copy of the written notice to the
Corporation promptly thereafter.
6:02 Payment or provision for payment shall be made as
follows:
(a) The Option holder shall deliver to the Corporation at
the address set forth in Section 6:01 United States
currency in an amount equal to the aggregate purchase
price of the shares of Common Stock as to which such
exercise relates; or
(b) The Option holder shall tender to the Corporation
shares of Common Stock already owned by the Option
holder that, together with any cash tendered
therewith, have an aggregate fair market value
(determined based on the Fair Market Value of a
share of Common Stock on the date the notice set
forth in Section 6:01 is received by the
Corporation) equal to the aggregate purchase price
of the shares of Common Stock as to which such
exercise relates; or
(c) The Option holder shall deliver to the Corporation an
exercise notice together with irrevocable
instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds
necessary to pay the aggregate purchase price of the
shares of Common Stock as to which such exercise
relates and to sell the shares of Common
-5-
<PAGE>
Stock to be issued upon exercise of the Option and
deliver the cash proceeds less commissions and
brokerage fees to the Option holder or to deliver the
remaining shares of Common Stock to the Option
holder. Notwithstanding the foregoing provisions, the
Board of Directors may limit the methods in which an
Option may be exercised by any person and, in
processing any purported exercise of an Option
granted pursuant to the Plan, may refuse to recognize
the method of exercise selected by the Option holder
(other than the method of exercise set forth in
Section 6:02(a)) if, in the opinion of counsel to the
Corporation, (i) the Option holder is or within the
six months preceding such exercise was subject to
reporting under Section 16(a) of the Exchange Act and
(ii) there is a substantial likelihood that the
method of exercise selected by the Option holder
would subject the Option holder to a substantial risk
of liability under Section 16 of the Exchange Act.
6:03 In addition to the alternative methods of exercise set
forth in Section 6:02, the Option holder shall be
entitled, at or prior to the time the written notice
provided for in Section 6:01 is delivered to the
Corporation, to elect to have the Corporation withhold
from the shares of Common Stock to be delivered upon
exercise of the Option that number of shares of Common
Stock (determined based on the Fair Market Value of a
share of Common Stock on the date the notice set forth
in Section 6:01 is received by the Corporation) necessary
to satisfy any withholding taxes attributable to the
exercise of the Option. Alternatively the holder may
elect to deliver previously owned shares of Common Stock
upon exercise of the Stock Option to satisfy any
withholding taxes attributable to the exercise of the
Stock Option. The maximum amount that an Option holder
may elect to have withheld from the shares of Common
Stock otherwise deliverable upon exercise or the maximum
number of previously owned shares an Option holder may
deliver shall be equal to his or her federal and state
withholding. Notwithstanding the foregoing provisions,
the Board of Directors may include in the Option
Agreement relating to any such Option provisions
limiting or eliminating the Option holder's ability to
pay his or her withholding tax obligation with shares of
Common Stock or, if no such provisions are included in
the Option Agreement but in the opinion of the Board of
Directors such withholding would have an adverse tax or
accounting effect to the Corporation, at or prior to
exercise of the Option, the Board of Directors may so
limit or eliminate the Option holder's ability to pay
withholding tax obligations with shares of Common Stock.
Notwithstanding the foregoing provisions, a holder of an
-6-
<PAGE>
Option may not elect any of the methods of satisfying his or
her withholding tax obligation in respect of any exercise if,
in the opinion of counsel to the Corporation, (i) the holder
of the Stock Option is or within the six months preceding such
exercise was subject to reporting under Section 16(a) of the
Exchange Act and (ii) there is a substantial likelihood that
the election or timing of the election would subject the
holder to a substantial risk of liability under Section 16 of
the Exchange Act.
6:04 An Option holder at any time may elect in writing to abandon
an Option in respect of all or part of the number of shares of
Common Stock as to which the Option shall not have been
exercised.
6:05 An Option holder shall have none of the rights of a
stockholder of the Corporation until the shares of Common
Stock covered by the Option are issued upon exercise of the
Option.
ARTICLE 7:00
Limited Stock Appreciation Rights
7:01 Option holders shall have Limited Stock Appreciation
Rights entitling Option holders to receive, in connection
with a Change in Control (as defined in Section 7:02), a
cash payment in cancellation of all of their Options that
are outstanding on the date the Change in Control occurs
(whether or not such Options are then presently
exercisable), which payment shall be equal to the number
of shares covered by the cancelled Options multiplied by
the excess over the exercise price of the Options of the
higher of (i) the Fair Market Value of a share of Common
Stock on the date of the Change in Control or (ii) the
highest per share price paid for the shares of Common
Stock in connection with the Change in Control (with the
value of any noncash consideration paid in connection
with the Change in Control to be determined by the Board
of Directors in its sole and absolute discretion). For
purposes of this Section 7:01 as well as the other
provisions of this Plan, once an Option or portion of an
Option has terminated, lapsed or expired, or has been
abandoned, in accordance with the provisions of the Plan,
the Option (or the portion of the Option) that has
terminated, lapsed or expired, or has been abandoned,
shall cease to be outstanding. Limited Stock
Appreciation Rights shall not be exercisable at the
discretion of the holder but shall automatically be
exercised upon a Change in Control.
7:02 For purposes of Section 7:01, a "Change in Control" shall
-7-
<PAGE>
mean a change in control of the Corporation 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
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; or (B)
during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors
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 (C) of
this Section 7:02) whose election by the Board of Directors 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; or (C) 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.
ARTICLE 8:00
Amendments and Discontinuance of the Plan
8:01 The Board of Directors shall have the right at any time
-8-
<PAGE>
and from time to time to amend, modify, or discontinue the
Plan provided that, except as provided in Section 4:03, no
such amendment, modification, or discontinuance of the Plan
shall (i) revoke or alter the terms of any valid Option or
Limited Stock Appreciation Right previously granted pursuant
to the Plan, (ii) increase the number of shares of Common
Stock to be reserved for issuance and sale pursuant to Options
or Stock Appreciation Rights granted pursuant to the Plan,
(iii) decrease the price determined pursuant to the provisions
of Section 5:02 or increase the amount of cash that a holder
of a Limited Stock Appreciation Right is entitled to receive
upon exercise of a Limited Stock Appreciation Right, (iv)
change the class of individuals to whom Options or Limited
Stock Appreciation Rights may be granted pursuant to the Plan,
or (v) provide for Options or Limited Stock Appreciation
Rights exercisable more than 10 years after the date granted.
Notwithstanding the foregoing, the provisions of the Plan that
determine the amount, price or timing of benefits or the grant
or exercise of Options as Limited Stock Appreciation Rights
shall not be amended more than once every six months, unless
the amendment would be consistent with the provisions of Rule
16b3(c)(2)(ii) promulgated under the Exchange Act (or any
successor provision thereto).
ARTICLE 9:00
Plan Subject to Governmental Laws and Regulations
9:01 The Plan and the grant and exercise of Options and
Limited Stock Appreciation Rights pursuant to the Plan
shall be subject to all applicable governmental laws and
regulations. Notwithstanding any other provision of the
Plan to the contrary, the Board of Directors may in its
sole and absolute discretion make such changes in the
Plan as may be required to conform the Plan to such laws
and regulations.
ARTICLE 10:00
Duration of the Plan
10:01 No Option or Limited Stock Appreciation Right shall be granted
pursuant to the Plan after the close of business on April 30,
2005.
-9-
Exhibit 10(g)
THE BLACK & DECKER 1996 STOCK OPTION PLAN
The proper execution of the duties and responsibilities of the
executive and other key employees of The Black & Decker Corporation and its
subsidiaries is a vital factor in the continued growth and success of the
Corporation. Toward this end, it is necessary to attract and retain effective
and capable employees to assume positions that contribute materially to the
successful operation of the business of the Corporation. It will benefit the
Corporation, therefore, to bind the interests of these persons more closely to
its own interests by offering them an attractive opportunity to acquire a
proprietary interest in the Corporation and thereby provide them with added
incentive to remain in its employ and to increase the prosperity, growth, and
earnings of the Corporation.
This stock option plan will serve these purposes.
ARTICLE 1:00
Definitions
The following terms wherever used herein shall have the meanings set
forth below.
1:01 The term "Board of Directors" shall mean the Board of
Directors of the Corporation.
1:02 The term "Change in Control" shall have the meaning
provided in Section 10:02 of the Plan.
1:03 The term "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any regulations promulgated thereunder.
1:04 The term "Committee" shall mean a committee to be
appointed by the Board of Directors to consist of two or
more of those members of the Board of Directors who are
Non-Employee Directors within the meaning of Rule 16b-3
promulgated under the Exchange Act and are outside
directors within the meaning of the Section 162(m)
Regulations, as each may be amended from time to time.
1:05 The term "Common Stock" shall mean the shares of common stock,
par value $.50 per share, of the Corporation.
1:06 The term "Corporation" shall mean The Black & Decker
Corporation.
1:07 The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1:08 The term "Fair Market Value of a share of Common Stock"
shall mean the average of the high and low sale price per
<PAGE>
share of Common Stock as finally reported in the New York
Stock Exchange Composite Transactions for the New York Stock
Exchange, or if shares of Common Stock are not sold on such
date, the average of the high and low sale price per share of
Common Stock as finally reported in the New York Stock
Exchange Composite Transactions for the New York Stock
Exchange for the most recent prior date on which shares of
Common Stock were sold.
1:09 The term "Incentive Stock Option" shall mean any Option
granted pursuant to the Plan that is designated as an
Incentive Stock Option and which satisfies the requirements of
Section 422(b) of the Code.
1:10 The term "Limited Stock Appreciation Right" shall mean a
limited tandem stock appreciation right that entitles the
holder to receive cash upon a Change in Control pursuant to
Article 10:00 of the Plan.
1:11 The term "Nonqualified Stock Option" shall mean any Option
granted pursuant to the Plan that is not an Incentive Stock
Option.
1:12 The term "Option" or "Stock Option" shall mean a right granted
pursuant to the Plan to purchase shares of Common Stock, and
shall include the terms Incentive Stock Option and
Nonqualified Stock Option.
1:13 The term "Option Agreement" shall mean the written agreement
representing Options granted pursuant to the Plan as
contemplated by Article 6:00 of the Plan.
1:14 The term "Plan" shall mean The Black & Decker 1996 Stock
Option Plan as approved by the Board of Directors on February
14, 1996, and adopted by the stockholders of the Corporation
at the 1996 Annual Meeting of Stockholders, as the same may be
amended from time to time.
1:15 The term "Rights" shall include Stock Appreciation Rights
and Limited Stock Appreciation Rights.
1:16 The term "Section 162(m) Regulations" shall mean the
regulations adopted pursuant to Section 162(m) of the Code.
1:17 The term "Stock Appreciation Right" shall mean a right to
receive cash or shares of Common Stock pursuant to Article
8:00 of the Plan.
1:18 The term "Stock Appreciation Right Agreement" shall mean the
written agreement representing Stock Appreciation Rights
granted pursuant to the Plan as contemplated by Article 8:00
of the Plan.
- 2 -
<PAGE>
1:19 The term "Stock Appreciation Right Base Price" shall mean
the base price for determining the value of a Stock
Appreciation Right under Section 8:02, which Stock
Appreciation Right Base Price shall be established by the
Committee at the time of the grant of Stock Appreciation
Rights pursuant to the Plan and shall not be less than
the Fair Market Value of a share of Common Stock on the
date of grant. If the Committee does not establish a
specific Stock Appreciation Right Base Price at the time
of grant, the Stock Appreciation Right Base Price shall
be equal to the Fair Market Value of a share of Common
Stock on the date of grant of the Stock Appreciation
Right.
1:20 The term "subsidiary" or "subsidiaries" shall mean a
corporation of which capital stock possessing 50% or more of
the total combined voting power of all classes of its capital
stock entitled to vote generally in the election of directors
is owned in the aggregate by the Corporation directly or
indirectly through one or more subsidiaries.
ARTICLE 2:00
Effective Date of the Plan
2:01 The Plan shall become effective upon stockholder
approval, provided that such approval is received on or
before May 31, 1996, and provided further that the
Committee may grant Options or Rights pursuant to the
Plan prior to stockholder approval if such Options or
Rights by their terms are contingent upon subsequent
stockholder approval of the Plan.
ARTICLE 3:00
Administration
3:01 The Plan shall be administered by the Committee.
3:02 The Committee may establish, from time to time and at any
time, subject to the limitations of the Plan as set forth
herein, such rules and regulations and amendments and
supplements thereto, as it deems necessary to comply with
applicable law and regulation and for the proper
administration of the Plan. A majority of the members of
the Committee shall constitute a quorum. The vote of a
majority of a quorum shall constitute action by the
Committee.
3:03 The Committee shall from time to time determine the names of
those executives and other key employees who, in its opinion,
should receive Options or Rights, and shall
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<PAGE>
determine the numbers of shares on which Options should be
granted or upon which Rights should be based to each such
person and the nature of the Options or Rights to be granted.
3:04 Options and Rights shall be granted by the Corporation only
upon the prior approval of the Committee and upon the
execution of an Option Agreement or Stock Appreciation Right
Agreement between the Corporation and the Option holder or the
Stock Appreciation Right holder.
3:05 The Committee's interpretation and construction of the
provisions of the Plan and the rules and regulations adopted
by the Committee shall be final. No member of the Committee or
the Board of Directors shall be liable for any action taken or
determination made, in respect of the Plan, in good faith.
ARTICLE 4:00
Participation in the Plan
4:01 Participation in the Plan shall be limited to such executives
and other key employees of the Corporation and its
subsidiaries who at the date of grant of an Option or Right
are regular, full-time employees of the Corporation or any of
its subsidiaries and who shall be designated by the Committee.
4:02 No member of the Board of Directors who is not also an
employee shall be eligible to participate in the Plan. No
employee who owns beneficially more than 10% of the total
combined voting power of all classes of stock of the
Corporation shall be eligible to participate in the Plan.
4:03 No employee may be granted, in any calendar year, Options or
Stock Appreciation Rights exceeding 100,000 in the aggregate.
ARTICLE 5:00
Stock Subject to the Plan
5:01 There shall be reserved for the granting of Options or
Stock Appreciation Rights pursuant to the Plan and for
issuance and sale pursuant to such Options or Stock
Appreciation Rights 2,400,000 shares of Common Stock. To
determine the number of shares of Common Stock available
at any time for the granting of Options or Stock
Appreciation Rights, there shall be deducted from the
total number of reserved shares of Common Stock, the
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<PAGE>
number of shares of Common Stock in respect of which Options
have been granted pursuant to the Plan that are still
outstanding or have been exercised. The shares of Common Stock
to be issued upon the exercise of Options or Stock
Appreciation Rights granted pursuant to the Plan shall be made
available from the authorized and unissued shares of Common
Stock. If for any reason shares of Common Stock as to which an
Option has been granted cease to be subject to purchase
thereunder, then such shares of Common Stock again shall be
available for issuance pursuant to the exercise of Options or
Stock Appreciation Rights pursuant to the Plan. Except as
provided in Section 5:03, however, the aggregate number of
shares of Common Stock that may be issued upon the exercise of
Options and Stock Appreciation Rights pursuant to the Plan
shall not exceed 2,400,000 shares and no more than 2,400,000
Stock Appreciation Rights shall be granted pursuant to the
Plan.
5:02 Proceeds from the purchase of shares of Common Stock upon the
exercise of Options granted pursuant to the Plan shall be used
for the general business purposes of the Corporation.
5:03 Subject to the provisions of Section 10:02, in the event
of reorganization, recapitalization, stock split, stock
dividend, combination of shares of Common Stock, merger,
consolidation, share exchange, acquisition of property or
stock, or any change in the capital structure of the
Corporation, the Committee shall make such adjustments as
may be appropriate in the number and kind of shares
reserved for purchase by executives or other key
employees, in the number, kind and price of shares
covered by Options and Stock Appreciation Rights granted
pursuant to the Plan but not then exercised, and in the
number of Rights, if any, granted pursuant to the Plan
but not then exercised.
ARTICLE 6:00
Terms and Conditions of Options
6:01 Each Option granted pursuant to the Plan shall be
evidenced by an Option Agreement in such form and with
such terms and conditions (including, without limitation,
noncompete, confidentiality or other similar provisions)
as the Committee from time to time may determine. The
right of an Option holder to exercise his or her Option
shall at all times be subject to the terms and conditions
set forth in the respective Option Agreement.
6:02 The exercise price per share for Options shall be
established by the Committee at the time of the grant of
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Options pursuant to the Plan and shall not be less than the
Fair Market Value of a share of Common Stock on the date on
which the Option is granted. If the Committee does not
establish a specific exercise price per share at the time of
grant, the exercise price per share shall be equal to the Fair
Market Value of a share of Common Stock on the date of grant
of the Options.
6:03 Each Option, subject to the other limitations set forth
in the Plan, may extend for a period of up to 10 years
from the date on which it is granted. The term of each
Option shall be determined by the Committee at the time
of grant of the Option, provided that if no term is
established by the Committee the term of the Option shall
be 10 years from the date on which it is granted.
6:04 Unless otherwise provided by the Committee, the number of
shares of Common Stock subject to each Option shall be
divided into four installments of 25% each. The first
installment shall be exercisable 12 months after the date
the Option was granted, and each succeeding installment
shall be exercisable 12 months after the date the
immediately preceding installment became exercisable. If
an Option holder does not purchase the full number of
shares of Common Stock that he or she at any time has
become entitled to purchase, he or she may purchase all
or any part of those shares of Common Stock at any
subsequent time during the term of the Option.
6:05 Options shall be nontransferable and nonassignable, except
that Options may be transferred by testamentary instrument or
by the laws of descent and distribution.
6:06 Upon voluntary or involuntary termination of an Option
holder's employment, his or her Option and all rights
thereunder shall terminate effective at the close of
business on the date the Option holder ceases to be a
regular, full-time employee of the Corporation or any of
its subsidiaries, except (i) to the extent previously
exercised, (ii) as provided in Sections 6:07, 6:08, and
6:09, and (iii) in the case of involuntary termination of
employment, for a period of 30 days thereafter the Option
holder shall be entitled to exercise that portion of the
Option which was exercisable at the close of business on
the date the Option holder ceased to be a regular, full-
time employee of the Corporation or any of its
subsidiaries.
6:07 In the event an Option holder (i) ceases to be an executive or
other key employee of the Corporation or any of its
subsidiaries due to involuntary termination, (ii) takes a
leave of absence from the Corporation or any of its
subsidiaries for personal reasons or as a result of entry into
the armed forces of the United States, or
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<PAGE>
any of the departments or agencies of the United States
government, or (iii) terminates employment by reason of
illness, disability, or other special circumstance, the
Committee may consider his or her case and may take such
action in respect of the related Option Agreement as it may
deem appropriate under the circumstances, including
accelerating the time previously granted Options may be
exercised and extending the time following the Option holder's
termination of employment during which the Option holder is
entitled to purchase the shares of Common Stock subject to
such Options, provided that in no event may any Option be
exercised after the expiration of the term of the Option.
6:08 If an Option holder dies during the term of his or her
Option without having fully exercised the Option, the
executor or administrator of his or her estate or the
person who inherits the right to exercise the Option by
bequest or inheritance shall have the right within three
years of the Option holder's death to purchase the number
of shares of Common Stock that the deceased Option holder
was entitled to purchase at the date of death, after
which the Option shall lapse, provided that in no event
may any Option be exercised after the expiration of the
term of the Option.
6:09 If an Option holder's employment is terminated without
having fully exercised his or her Option and (i) the
Option holder is 62 years of age or older, or (ii) the
Option holder has been employed by the Corporation or any
of its subsidiaries for at least 10 years and the Option
holder's age plus years of such employment total not less
than 55 years, then such Option holder shall have the
right within three years of the Option holder's
termination of employment to purchase the number of
shares of Common Stock that the Option holder was
entitled to purchase at the date of termination, after
which the Option shall lapse, provided that in no event
may any Option be exercised after the expiration of the
term of the Option.
6:10 The granting of an Option pursuant to the Plan shall not
constitute or be evidence of any agreement or understanding,
express or implied, on the part of the Corporation or any of
its subsidiaries to employ the Option holder for any specified
period.
6:11 In addition to the general terms and conditions set forth in
this Article 6:00 in respect of Options granted pursuant to
the Plan, Incentive Stock Options granted pursuant to the Plan
shall be subject to the following additional terms and
conditions:
(a) The aggregate fair market value (determined at the
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time the Incentive Stock Option is granted) of the
shares of Common Stock in respect of which "incentive
stock options" are exercisable for the first time by
the Option holder during any calendar year (under all
such plans of the Corporation and its subsidiaries)
shall not exceed $100,000; and
(b) The Option Agreement in respect of an Incentive Stock
Option may contain any other terms and conditions
specified by the Board of Directors that are not
inconsistent with the Plan, except that such terms
and conditions must be consistent with the
requirements for "incentive stock options" under
Section 422 of the Code.
ARTICLE 7:00
Methods of Exercise of Options
7:01 An Option holder (or other person or persons, if any,
entitled to exercise an Option hereunder) desiring to
exercise an Option granted pursuant to the Plan as to all
or part of the shares of Common Stock covered by the
Option shall (i) notify the Corporation in writing at its
principal office at 701 East Joppa Road, Towson, Maryland
21286, to that effect, specifying the number of shares of
Common Stock to be purchased and the method of payment
therefor, and (ii) make payment or provision for payment
for the shares of Common Stock so purchased in accordance
with this Article 7:00. Such written notice may be given
by means of a facsimile transmission. If a facsimile
transmission is used, the Option holder should mail the
original executed copy of the written notice to the
Corporation promptly thereafter.
7:02 Payment or provision for payment shall be made as
follows:
(a) The Option holder shall deliver to the Corporation at
the address set forth in Section 7:01 United States
currency in an amount equal to the aggregate purchase
price of the shares of Common Stock as to which such
exercise relates; or
(b) The Option holder shall tender to the Corporation
shares of Common Stock already owned by the Option
holder that, together with any cash tendered
therewith, have an aggregate fair market value
(determined based on the Fair Market Value of a
share of Common Stock on the date the notice set
forth in Section 7:01 is received by the
Corporation) equal to the aggregate purchase price
of the shares of Common Stock as to which such
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<PAGE>
exercise relates; or
(c) The Option holder shall deliver to the Corporation
an exercise notice together with irrevocable
instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds
necessary to pay the aggregate purchase price of
the shares of Common Stock as to which such
exercise relates and to sell the shares of Common
Stock to be issued upon exercise of the Option and
deliver the cash proceeds less commissions and
brokerage fees to the Option holder or to deliver
the remaining shares of Common Stock to the Option
holder.
Notwithstanding the foregoing provisions, the Committee, in
granting Options pursuant to the Plan, may limit the methods
in which an Option may be exercised by any person and, in
processing any purported exercise of an Option granted
pursuant to the Plan, may refuse to recognize the method of
exercise selected by the Option holder (other than the method
of exercise set forth in Section 7:02(a)) if, (A) in the
opinion of counsel to the Corporation, (i) the Option holder
is or within the six months preceding such exercise was
subject to reporting under Section 16(a) of the Exchange Act
and (ii) there is a substantial likelihood that the method of
exercise selected by the Option holder would subject the
Option holder to a substantial risk of liability under Section
16 of the Exchange Act, or (B) in the opinion of the
Committee, the method of exercise could have an adverse tax or
accounting effect to the Corporation.
7:03 In addition to the alternative methods of exercise set
forth in Section 7:02, holders of Nonqualified Stock
Options shall be entitled, at or prior to the time the
written notice provided for in Section 7:01 is delivered
to the Corporation, to elect to have the Corporation
withhold from the shares of Common Stock to be delivered
upon exercise of the Nonqualified Stock Option that
number of shares of Common Stock (determined based on the
Fair Market Value of a share of Common Stock on the date
the notice set forth in Section 7:01 is received by the
Corporation) necessary to satisfy any withholding taxes
attributable to the exercise of the Nonqualified Stock
Option. Alternatively, such holder of a Nonqualified
Stock Option may elect to deliver previously owned shares
of Common Stock upon exercise of the Nonqualified Stock
Option to satisfy any withholding taxes attributable to
the exercise of the Nonqualified Stock Option. The
maximum amount that an Option holder may elect to have
withheld from the shares of Common Stock otherwise
deliverable upon exercise or the maximum number of
previously owned shares an Option holder may deliver
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<PAGE>
shall be based on the maximum federal, state and local taxes
payable by the Option holder. Notwithstanding the foregoing
provisions, the Committee may include in the Option Agreement
relating to any such Nonqualified Stock Option provisions
limiting or eliminating the Option holder's ability to pay his
or her withholding tax obligation with shares of Common Stock
or, if no such provisions are included in the Option Agreement
but in the opinion of the Committee such withholding could
have an adverse tax or accounting effect to the Corporation,
at or prior to exercise of the Nonqualified Stock Option the
Committee may so limit or eliminate the Option holder's
ability to pay his or her withholding tax obligation with
shares of Common Stock. Notwithstanding the foregoing
provisions, a holder of a Nonqualified Stock Option may not
elect any of the methods of satisfying his or her withholding
tax obligation in respect of any exercise if, in the opinion
of counsel to the Corporation, (i) the holder of the
Nonqualified Stock Option is or within the six months
preceding such exercise was subject to reporting under Section
16(a) of the Exchange Act and (ii) there is a substantial
likelihood that the election or timing of the election would
subject the holder to a substantial risk of liability under
Section 16 of the Exchange Act.
7:04 An Option holder at any time may elect in writing to abandon
an Option in respect of all or part of the number of shares of
Common Stock as to which the Option shall not have been
exercised.
7:05 An Option holder shall have none of the rights of a
stockholder of the Corporation until the shares of Common
Stock covered by the Option are issued upon exercise of the
Option.
ARTICLE 8:00
Terms and Conditions of Stock Appreciation Rights
8:01 Each Stock Appreciation Right granted pursuant to the
Plan shall be evidenced by a Stock Appreciation Right
Agreement in such form and with such terms and conditions
(including, without limitation, noncompete,
confidentiality or other similar provisions) as the
Committee from time to time may determine.
Notwithstanding the foregoing provision, Stock
Appreciation Rights granted in tandem with a related
Option shall be evidenced by the Option Agreement in
respect of the related Option. The right of a Stock
Appreciation Right holder to exercise his or her Stock
Appreciation Rights shall at all times be subject to the
terms and conditions set forth in the respective Stock
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<PAGE>
Appreciation Right Agreement.
8:02 Each Stock Appreciation Right shall entitle the holder,
subject to the terms and conditions of the Plan, to
receive upon exercise of the Stock Appreciation Right an
amount, payable in cash or shares of Common Stock
(determined based on the Fair Market Value of a share of
Common Stock on the date the notice set forth in
Section 9:01 is received by the Corporation), equal to
the Fair Market Value of a share of Common Stock on the
date of receipt by the Corporation of the notice required
by Section 9:01 less the Stock Appreciation Right Base
Price. Notwithstanding the foregoing provision, each
Stock Appreciation Right that is granted in tandem with
a related Option shall entitle the holder, subject to the
terms and conditions of the Plan, to surrender to the
Corporation for cancellation all or a portion of the
related Option, but only to the extent such Stock
Appreciation Right and related Option then are
exercisable, and to be paid therefor an amount, payable
in cash or shares of Common Stock (determined based on
the Fair Market Value of a share of Common Stock on the
date the notice set forth in Section 9:01 is received by
the Corporation), equal to the Fair Market Value of a
share of Common Stock on the date of receipt by the
Corporation of the notice required by Section 9:01 less
the Stock Appreciation Right Base Price.
8:03 Each Stock Appreciation Right, subject to the other
limitations set forth in the Plan, may extend for a
period of up to 10 years from the date on which it is
granted. The term of each Stock Appreciation Right shall
be determined by the Committee at the time of grant of
the Stock Appreciation Right, provided that if no term is
established by the Committee the term of the Stock
Appreciation Right shall be 10 years from the date on
which it is granted.
8:04 Unless otherwise provided by the Committee, the number of
Stock Appreciation Rights granted pursuant to each Stock
Appreciation Right Agreement shall be divided into four
installments of 25% each. The first installment shall be
exercisable 12 months after the date the Stock
Appreciation Right was granted, and each succeeding
installment shall be exercisable 12 months after the date
the immediately preceding installment became exercisable.
If a Stock Appreciation Right holder does not exercise
the Stock Appreciation Right to the extent that he or she
at any time has become entitled to exercise, the Stock
Appreciation Right holder may exercise all or any part of
the Stock Appreciation Right at any subsequent time
during the term of the Stock Appreciation Right.
8:05 Stock Appreciation Rights shall be nontransferable and
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<PAGE>
nonassignable, except that Stock Appreciation Rights may be
transferred by testamentary instrument or by the laws of
descent.
8:06 Upon voluntary or involuntary termination of a Stock
Appreciation Right holder's employment, his or her Stock
Appreciation Right and all rights thereunder shall
terminate effective as of the close of business on the
date the Stock Appreciation Right holder ceases to be a
regular, full-time employee of the Corporation or any of
its subsidiaries, except (i) to the extent previously
exercised, (ii) except as provided in Sections 8:07,
8:08, and 8:09, and (iii) in the case of involuntary
termination of employment, for a period of 30 days
thereafter the Stock Appreciation Right holder shall be
entitled to exercise that portion of the Stock
Appreciation Right which was exercisable at the close of
business on the date the Stock Appreciation Right holder
ceased to be a regular, full-time employee of the
Corporation or any of its subsidiaries.
8:07 In the event a Stock Appreciation Right holder (i) ceases
to be an executive or other key employee of the
Corporation or any of its subsidiaries due to involuntary
termination, (ii) takes a leave of absence from the
Corporation or any of its subsidiaries for personal
reasons or as a result of entry into the armed forces of
the United States, or any of the departments or agencies
of the United States government, or (iii) terminates
employment by reason of illness, disability, or other
special circumstance, the Committee may consider his or
her case and may take such action in respect of the
related Stock Appreciation Right Agreement as it may deem
appropriate under the circumstances, including
accelerating the time previously granted Stock
Appreciation Rights may be exercised and extending the
time following the Stock Appreciation Right holder's
termination of employment during which the Stock
Appreciation Right holder is entitled to exercise his or
her Stock Appreciation Rights, provided that in no event
may any Stock Appreciation Right be exercised after the
expiration of the term of the Stock Appreciation Right.
8:08 If a Stock Appreciation Right holder dies during the term
of his or her Stock Appreciation Right without having
fully exercised the Stock Appreciation Right, the
executor or administrator of his or her estate or the
person who inherits the right to exercise the Stock
Appreciation Right by bequest or inheritance shall have
the right within three years of the Stock Appreciation
Right holder's death to exercise the Stock Appreciation
Rights that the deceased Stock Appreciation Right holder
was entitled to purchase at the date of death, after
which the Stock Appreciation Right shall lapse, provided
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<PAGE>
that in no event may any Stock Appreciation Right be exercised
after the expiration of the term of the Stock Appreciation
Right.
8:09 If a Stock Appreciation Right holder's employment is
terminated without having fully exercised his or her
Stock Appreciation Right and (i) the Stock Appreciation
Right holder is 62 years of age or older, or (ii) the
Stock Appreciation Right holder has been employed by the
Corporation or any of its subsidiaries for at least 10
years and the Stock Appreciation Right holder's age plus
years of such employment total not less than 55 years,
then such Stock Appreciation Right holder shall have the
right within three years of the Stock Appreciation Right
holder's termination of employment to exercise the Stock
Appreciation Rights that the Stock Appreciation Right
holder was entitled to exercise at the date of
termination, after which the Stock Appreciation Right
shall lapse, provided that in no event may any Stock
Appreciation Right be exercised after the expiration of
the term of the Stock Appreciation Right.
8:10 The granting of a Stock Appreciation Right pursuant to the
Plan shall not constitute or be evidence of any agreement or
understanding, expressed or implied, on the part of the
Corporation or any of its subsidiaries to employ the Stock
Appreciation Right holder for any specified period.
ARTICLE 9:00
Methods of Exercise of Stock Appreciation Rights
9:01 A Stock Appreciation Right holder (or other person or
persons, if any, entitled to exercise a Stock
Appreciation Right hereunder) desiring to exercise a
Stock Appreciation Right granted pursuant to the Plan
shall notify the Corporation in writing at its principal
office at 701 East Joppa Road, Towson, Maryland 21286, to
that effect, specifying the number of Stock Appreciation
Rights to be exercised. Such written notice may be given
by means of a facsimile transmission. If a facsimile
transmission is used, the Stock Appreciation Right holder
should mail the original executed copy of the written
notice to the Corporation promptly thereafter.
9:02 The Committee in its sole and absolute discretion shall
determine whether a Stock Appreciation Right shall be
settled upon exercise in cash or in shares of Common
Stock. The Committee, in making such a determination,
may from time to time adopt general guidelines or
determinations as to whether Stock Appreciation Rights
shall be settled in cash or in shares of Common Stock.
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<PAGE>
ARTICLE 10:00
Limited Stock Appreciation Rights
10:01 Notwithstanding any other provision of the Plan, the
Committee, in its sole and absolute discretion, may grant
Limited Stock Appreciation Rights entitling Option
holders to receive, in connection with a Change in
Control (as defined in Section 10:02), a cash payment in
cancellation of all of their Options which are
outstanding on the date the Change in Control occurs
(whether or not such Options are then presently
exercisable), which payment shall be equal to the number
of shares covered by the cancelled Options multiplied by
the excess over the exercise price of the Options of the
higher of the (i) Fair Market Value of a share of Common
Stock on the date of the Change in Control or (ii) the
highest per share price paid for the shares of Common
Stock in connection with the Change in Control (with the
value of any noncash consideration paid in connection
with the Change in Control to be determined by the
Committee in its sole and absolute discretion). For
purposes of this Section 10:01 as well as the other
provisions of this Plan, once an Option or portion of an
Option has terminated, lapsed or expired, or has been
abandoned, in accordance with the provisions of the Plan,
the Option (or the portion of the Option) that has
terminated, lapsed or expired, or has been abandoned,
shall cease to be outstanding. Limited Stock Apprecia-
tion Rights shall not be exercisable at the discretion of
the holder but shall automatically be exercised upon a
Change in Control.
10:02 For purposes of Section 10:01 of the Plan, a "Change in
Control" shall mean a change in control of the
Corporation 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
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; or
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<PAGE>
(B) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors 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 (C) of this Section 10.02) whose election by the Board
of Directors 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; or (C) 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.
ARTICLE 11:00
Amendments and Discontinuance of the Plan
11:01 The Board of Directors shall have the right at any time
and from time to time to amend, modify, or discontinue
the Plan provided that, except as provided in Section
5:03, no such amendment, modification, or discontinuance
of the Plan shall (i) revoke or alter the terms of any
valid Option, Stock Appreciation Right, or Limited Stock
Appreciation Right previously granted pursuant to the
Plan, (ii) increase the number of shares of Common Stock
to be reserved for issuance and sale pursuant to Options
or Stock Appreciation Rights granted pursuant to the
Plan, (iii) decrease the price determined pursuant to the
provisions of Section 6:02 or increase the amount of cash
or shares of Common Stock that a Stock Appreciation Right
holder is entitled to receive upon exercise of a Stock
Appreciation Right, (iv) change the class of employee to
whom Options or Stock Appreciation Rights may be granted
pursuant to the Plan, or (v) provide for Options or Stock
Appreciation Rights exercisable more than 10 years after
the date granted.
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<PAGE>
ARTICLE 12:00
Plan Subject to Governmental Laws and Regulations
12:01 The Plan and the grant and exercise of Options, Stock
Appreciation Rights, and Limited Stock Appreciation
Rights pursuant to the Plan shall be subject to all
applicable governmental laws and regulations.
Notwithstanding any other provision of the Plan to the
contrary, the Board of Directors may in its sole and
absolute discretion make such changes in the Plan as may
be required to conform the Plan to such laws and
regulations.
ARTICLE 13:00
Duration of the Plan
13:01 No Option or Stock Appreciation Right shall be granted
pursuant to the Plan after the close of business on February
13, 2006.
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Exhibit 10(h)
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) Non-Employee Directors 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
<PAGE>
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
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<PAGE>
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
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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.
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(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
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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.
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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
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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
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(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
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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.
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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.
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Exhibit 10(u)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
Telex 87-930
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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
<PAGE>
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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 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, 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.
<PAGE>
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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 or Disability, (B) by the Corporation for Cause, or (C) by you other than
for Good Reason.
(i) Disability. 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."
(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 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
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Page 4
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) Executive Annual Incentive
Plan or other annual incentive compensation plan ("AIP"); (ii)
Performance Equity Plan or other long-term incentive compensation plan
("PEP"); (iii) stock option plans; (iv) retirement and savings plans;
(v) Supplemental Executive Retirement Plan ("SERP"); (vi) Supplemental
Pension Plan; (vii) Supplemental Retirement Savings Plan; and (viii)
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
<PAGE>
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Page 5
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.
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
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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 15 nor more than 60 days, respectively, from the date
such Notice of Termination is given); provided that if within 15 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 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
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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 you other than for Good Reason 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 or death, 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 retirement, insurance and other compensation
programs 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 or death 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 paragraphs (C) and (D) 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.
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(C) In lieu of shares of common stock of the
Corporation (the "Shares") issuable upon exercise of outstanding
options, if any, granted to you under the Corporation's stock option
plans ("Options"), which Options (and any related limited stock
appreciation rights) shall be cancelled upon the making of the payment
referred to below, you shall receive an amount in cash equal to the
product of (i) the excess of the higher of the closing price of the
Shares as reported on 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 trading volume in the Shares is highest), and
the highest per share price for the Shares actually paid in connection
with any change in control of the Corporation, over the per share
exercise price of each Option held by you (whether or not then fully
exercisable) plus the amount, if any, of any applicable cash
appreciation rights, times (ii) the number of the Shares covered by
each such Option.
(D) 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.
(E) 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).
(F) If the payments provided under paragraphs (B),
(C) and (D) 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 (G) 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 Payments 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
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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 shall be 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
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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.
(G) The payments provided for in paragraphs (B), (C),
(D) and (F) 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 (E) 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 or death 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.
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(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, The Black & Decker
Supplemental Pension Plan, 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
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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 25, 1995. 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
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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 as of the -----
day of ------------------
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Exhibit 10(v)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
Telex 87-930
January 1, 1997
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
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Mr. Nolan D. Archibald
January 1, 1997
Page 2
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 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 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, 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
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Mr. Nolan D. Archibald
January 1, 1997
Page 3
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.
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 or Disability, (B) by the Corporation for Cause, or (C) by you other than
for Good Reason.
(i) Disability. 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."
(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
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Mr. Nolan D. Archibald
January 1, 1997
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 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;
(C) your relocation to a location not within 25
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Mr. Nolan D. Archibald
January 1, 1997
Page 5
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) Executive Annual Incentive
Plan or other annual incentive compensation plan ("AIP"); (ii)
Performance Equity Plan or other long-term incentive compensation plan
("PEP"); (iii) stock option plans; (iv) retirement and savings plans;
(v) Supplemental Executive Retirement Plan ("SERP"); (vi) Supplemental
Pension Plan; (vii) Supplemental Retirement Savings Plan; and (viii)
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
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Mr. Nolan D. Archibald
January 1, 1997
Page 6
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.
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 15 nor more than 60 days, respectively, from the date
such Notice of
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Mr. Nolan D. Archibald
January 1, 1997
Page 7
Termination is given); provided that if within 15 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 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 you other than for Good Reason
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 or death, 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
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Mr. Nolan D. Archibald
January 1, 1997
Page 8
the time Notice of Termination is given, plus all other amounts to which you are
entitled under any retirement, insurance and other compensation programs 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 or death 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 paragraphs (C) and (D) 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) In lieu of shares of common stock of the
Corporation (the "Shares") issuable upon exercise of outstanding
options, if any, granted to you under the Corporation's stock option
plans ("Options"), which Options (and any related limited stock
appreciation rights) shall be cancelled upon the making of the payment
referred to below, you shall receive an amount in cash equal to the
product of (i) the excess of the higher of the closing price of the
Shares as reported on 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 trading volume in the Shares is highest), and
the highest per share
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Mr. Nolan D. Archibald
January 1, 1997
Page 9
price for the Shares actually paid in connection with any change in
control of the Corporation, over the per share exercise price of each
Option held by you (whether or not then fully exercisable) plus the
amount, if any, of any applicable cash appreciation rights, times (ii)
the number of the Shares covered by each such Option.
(D) 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.
(E) 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).
(F) If the payments provided under paragraphs (B),
(C) and (D) 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 (G) 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 Payments 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
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Mr. Nolan D. Archibald
January 1, 1997
Page 10
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 shall be 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 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.
<PAGE>
Mr. Nolan D. Archibald
January 1, 1997
Page 11
(G) The payments provided for in paragraphs (B), (C),
(D) and (F) 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 (E) 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 or death 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 benefits payable to you under The Black &
Decker Executive Salary Continuance Plan, the SERP, The Black & Decker
Supplemental Pension Plan, or any plan or agreement sponsored by the Corporation
or any of its subsidiaries relating to retirement
<PAGE>
Mr. Nolan D. Archibald
January 1, 1997
Page 12
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.
<PAGE>
Mr. Nolan D. Archibald
January 1, 1997
Page 13
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 25, 1995. 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.
<PAGE>
Mr. Nolan D. Archibald
January 1, 1997
Page 14
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 as of the 1st
day of January 1997
/S/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Exhibit 10(w)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
Telex 87-930
January 1, 1997
Mr. Joseph Galli
c/o The Black & Decker Corporation
701 East Joppa Road, TW445
Towson, Maryland 21286
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
<PAGE>
Mr. Joseph Galli
January 1, 1997
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 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, 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 3
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 or Disability, (B) by the Corporation for Cause, or (C) by you other than
for Good Reason.
(i) Disability. 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."
(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 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 4
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) Executive Annual Incentive
Plan or other annual incentive compensation plan ("AIP"); (ii)
Performance Equity Plan or other long-term incentive compensation plan
("PEP"); (iii) stock option plans; (iv) retirement and savings plans;
(v) Supplemental Executive Retirement Plan ("SERP"); (vi) Supplemental
Pension Plan; (vii) Supplemental Retirement Savings Plan; and (viii)
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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 5
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.
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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 6
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 15 nor more than 60 days, respectively, from the date
such Notice of Termination is given); provided that if within 15 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 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 7
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 you
other than for Good Reason 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 or death, 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 retirement, insurance and other compensation
programs 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 or death
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 paragraphs (C) and (D) 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 8
Section 4(iii)(B) shall not in any way affect your rights under the
Corporation's stock option plans or the PEP.
(C) In lieu of shares of common stock of the
Corporation (the "Shares") issuable upon exercise of outstanding
options, if any, granted to you under the Corporation's stock option
plans ("Options"), which Options (and any related limited stock
appreciation rights) shall be cancelled upon the making of the payment
referred to below, you shall receive an amount in cash equal to the
product of (i) the excess of the higher of the closing price of the
Shares as reported on 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 trading volume in the Shares is highest), and
the highest per share price for the Shares actually paid in connection
with any change in control of the Corporation, over the per share
exercise price of each Option held by you (whether or not then fully
exercisable) plus the amount, if any, of any applicable cash
appreciation rights, times (ii) the number of the Shares covered by
each such Option.
(D) 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.
(E) 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).
(F) If the payments provided under paragraphs (B),
(C) and (D) 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 (G) 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 Payments 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,
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 9
(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 shall
be 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 10
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.
(G) The payments provided for in paragraphs (B), (C),
(D) and (F) 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 (E) 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 or death 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
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, The Black & Decker
Supplemental Pension Plan, 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 12
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 25, 1995. 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
<PAGE>
Mr. Joseph Galli
January 1, 1997
Page 13
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/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to as of the 1st
day of January 1997
/S/ JOSEPH GALLI
Joseph Galli
Exhibit 10(x)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
Telex 87-930
January 1, 1997
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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
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 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, 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.
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
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 or Disability, (B) by the Corporation for Cause, or (C) by you other than
for Good Reason.
(i) Disability. 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."
(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 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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 4
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) Executive Annual Incentive
Plan or other annual incentive compensation plan ("AIP"); (ii)
Performance Equity Plan or other long-term incentive compensation plan
("PEP"); (iii) stock option plans; (iv) retirement and savings plans;
(v) Supplemental Executive Retirement Plan ("SERP"); (vi) Supplemental
Pension Plan; (vii) Supplemental Retirement Savings Plan; and (viii)
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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 5
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.
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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 6
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 15 nor more than 60 days, respectively, from the date
such Notice of Termination is given); provided that if within 15 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 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
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Mr. Charles E. Fenton
January 1, 1997
Page 7
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 you other than for Good Reason 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 or death, 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 retirement, insurance and other compensation
programs 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 or death 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 paragraphs (C) and (D) 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.
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 8
(C) In lieu of shares of common stock of the
Corporation (the "Shares") issuable upon exercise of outstanding
options, if any, granted to you under the Corporation's stock option
plans ("Options"), which Options (and any related limited stock
appreciation rights) shall be cancelled upon the making of the payment
referred to below, you shall receive an amount in cash equal to the
product of (i) the excess of the higher of the closing price of the
Shares as reported on 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 trading volume in the Shares is highest), and
the highest per share price for the Shares actually paid in connection
with any change in control of the Corporation, over the per share
exercise price of each Option held by you (whether or not then fully
exercisable) plus the amount, if any, of any applicable cash
appreciation rights, times (ii) the number of the Shares covered by
each such Option.
(D) 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.
(E) 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).
(F) If the payments provided under paragraphs (B),
(C) and (D) 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 (G) 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 Payments 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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 9
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 shall be 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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 10
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.
(G) The payments provided for in paragraphs (B), (C),
(D) and (F) 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 (E) 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 or death 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.
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 11
(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, The Black & Decker
Supplemental Pension Plan, 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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 12
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 25, 1995. 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
<PAGE>
Mr. Charles E. Fenton
January 1, 1997
Page 13
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/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to as of the 1st
day of January 1997
/S/ CHARLES E. FENTON
Charles E. Fenton
Exhibit 10(y)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
Telex 87-930
January 1, 1997
Mr. Dennis G. Heiner
8 Searidge
Laguna Niguel, California 92677
Dear Dennis:
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
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
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 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, 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.
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
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 or Disability, (B) by the Corporation for Cause, or (C) by you other than
for Good Reason.
(i) Disability. 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."
(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 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
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 4
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) Executive Annual Incentive
Plan or other annual incentive compensation plan ("AIP"); (ii)
Performance Equity Plan or other long-term incentive compensation plan
("PEP"); (iii) stock option plans; (iv) retirement and savings plans;
(v) Supplemental Executive Retirement Plan ("SERP"); (vi) Supplemental
Pension Plan; (vii) Supplemental Retirement Savings Plan; and (viii)
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
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 5
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.
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
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Mr. Dennis G. Heiner
January 1, 1997
Page 6
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 15 nor more than 60 days, respectively, from the date
such Notice of Termination is given); provided that if within 15 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 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
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Mr. Dennis G. Heiner
January 1, 1997
Page 7
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 you other than for Good Reason 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 or death, 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 retirement, insurance and other compensation
programs 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 or death 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 paragraphs (C) and (D) 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.
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 8
(C) In lieu of shares of common stock of the
Corporation (the "Shares") issuable upon exercise of outstanding
options, if any, granted to you under the Corporation's stock option
plans ("Options"), which Options (and any related limited stock
appreciation rights) shall be cancelled upon the making of the payment
referred to below, you shall receive an amount in cash equal to the
product of (i) the excess of the higher of the closing price of the
Shares as reported on 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 trading volume in the Shares is highest), and
the highest per share price for the Shares actually paid in connection
with any change in control of the Corporation, over the per share
exercise price of each Option held by you (whether or not then fully
exercisable) plus the amount, if any, of any applicable cash
appreciation rights, times (ii) the number of the Shares covered by
each such Option.
(D) 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.
(E) 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).
(F) If the payments provided under paragraphs (B),
(C) and (D) 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 (G) 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 Payments 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
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 9
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 shall be 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
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 10
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.
(G) The payments provided for in paragraphs (B), (C),
(D) and (F) 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 (E) 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 or death 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.
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 11
(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, The Black & Decker
Supplemental Pension Plan, 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
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 12
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 25, 1995. 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
<PAGE>
Mr. Dennis G. Heiner
January 1, 1997
Page 13
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/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to as of the 1st
day of January 1997
/S/ DENNIS G. HEINER
Dennis G. Heiner
Exhibit 10(z)
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
410-716-3900
Telex 87-930
January 1, 1997
Mr. Thomas M. Schoewe
4001 Cloverland Drive
Phoenix, Maryland 21131
Dear Tom:
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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
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 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, 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.
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
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 or Disability, (B) by the Corporation for Cause, or (C) by you other than
for Good Reason.
(i) Disability. 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."
(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 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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 4
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) Executive Annual Incentive
Plan or other annual incentive compensation plan ("AIP"); (ii)
Performance Equity Plan or other long-term incentive compensation plan
("PEP"); (iii) stock option plans; (iv) retirement and savings plans;
(v) Supplemental Executive Retirement Plan ("SERP"); (vi) Supplemental
Pension Plan; (vii) Supplemental Retirement Savings Plan; and (viii)
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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 5
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.
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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 6
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 15 nor more than 60 days, respectively, from the date
such Notice of Termination is given); provided that if within 15 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 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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 7
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 you other than for Good Reason 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 or death, 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 retirement, insurance and other compensation
programs 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 or death 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 paragraphs (C) and (D) 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.
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 8
(C) In lieu of shares of common stock of the
Corporation (the "Shares") issuable upon exercise of outstanding
options, if any, granted to you under the Corporation's stock option
plans ("Options"), which Options (and any related limited stock
appreciation rights) shall be cancelled upon the making of the payment
referred to below, you shall receive an amount in cash equal to the
product of (i) the excess of the higher of the closing price of the
Shares as reported on 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 trading volume in the Shares is highest), and
the highest per share price for the Shares actually paid in connection
with any change in control of the Corporation, over the per share
exercise price of each Option held by you (whether or not then fully
exercisable) plus the amount, if any, of any applicable cash
appreciation rights, times (ii) the number of the Shares covered by
each such Option.
(D) 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.
(E) 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).
(F) If the payments provided under paragraphs (B),
(C) and (D) 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 (G) 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 Payments 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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 9
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 shall be 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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 10
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.
(G) The payments provided for in paragraphs (B), (C),
(D) and (F) 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 (E) 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 or death 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.
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 11
(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, The Black & Decker
Supplemental Pension Plan, 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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 12
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 25, 1995. 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
<PAGE>
Mr. Thomas M. Schoewe
January 1, 1997
Page 13
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/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President and
Chief Executive Officer
Agreed to as of the 1st
day of January 1997
/S/ THOMAS M. SCHOEWE
Thomas M. Schoewe
Exhibit 10(ee)(2)
AMENDMENT TO
THE BLACK & DECKER
1996 EMPLOYEE STOCK PURCHASE PLAN
Pursuant to the powers of amendment reserved under Section 11 of The
Black & Decker 1996 Employee Stock Purchase Plan (the "Plan"), The Black &
Decker Corporation (the "Corporation") hereby amends the Plan as follows,
effective as of the dates specified below:
FIRST CHANGE
Effective as of the first Offering Date following the date of execution
hereof, Section 1(e) of the Plan is amended in its entirety to read as follows:
(e) "Eligible Employees" as of any applicable Offering Date,
shall mean all Employees who are employed by a Participating
Corporation on the Offering Date, and who have been, at any time, in
the employ of the Corporation or any of its Subsidiaries continuously
for at least one year, other than (i) persons who are officers of the
Corporation within the meaning of the Exchange Act on the applicable
Offering Date, unless they are not "highly compensated employees" as
defined in Section 414(q) of the Code; and (ii) persons who after
purchasing shares of Common Stock under the Plan would own shares of
capital stock possessing five percent or more of the total combined
voting power or value of all classes of outstanding capital stock of
the Corporation or any of its Subsidiaries. For purposes of the
preceding sentence, capital stock that any person may purchase under
outstanding stock options shall be treated as owned by the person and
the provisions of Section 425(b) of the Code shall apply.
SECOND CHANGE
Effective as of the original Offering Date under the Plan, Section 1(f)
of the Plan is amended in its entirety to read as follows:
(f) "Employee" shall mean each person who, on the applicable
Offering Date, is classified by the Corporation or any of its
Subsidiaries as an active, regular full-time or an active, regular
part-time employee of the Corporation or any of its Subsidiaries,
including, but not limited to, officers of the Corporation and its
Subsidiaries, provided that such employee's normal work week is at
least twenty hours per week, and provided further that the
<PAGE>
term "Employee" shall not include any person who is on leave or layoff
status or is otherwise inactive.
THIRD CHANGE
Effective as of the first Offering Date following the date of execution
hereof, Section 1 of the Plan is amended by the addition of the following as new
Section 1(l), and the remaining subsections thereunder are redesignated
accordingly:
(l) "Participating Corporation" as of any applicable Offering
Date shall mean the Corporation and all Subsidiaries, other then those
entities that are designated by the Vice President of Human Resources
of the Corporation as being ineligible to participate. A Participating
Corporation shall continue as such until the Vice President of Human
Resources of the Corporation changes the designation.
FOURTH CHANGE
Effective as of the first Offering Date following the date of execution
hereof, Subsection 1(p) of the Plan (formerly Subsection 1(o) of the Plan) is
hereby amended in its entirety to read as follows:
(p) "Subsidiaries" shall mean a corporation of which capital
stock possessing more than 50% of the total combined voting power of
all classes of its capital stock entitled to vote generally in the
election of directors is owned in the aggregate by the Corporation,
directly or indirectly, through one or more Subsidiaries. The term
"Subsidiaries" shall also mean an entity that is wholly owned, directly
or indirectly, by the Corporation, the existence of which is
disregarded for U.S. income tax purposes.
FIFTH CHANGE
Effective as of the original Offering Date under the Plan, Section 2 of
the Plan is amended by the addition of a new Subsection (c) thereunder, which
shall read as follows:
(c) Any person may, by written notice to the Vice President of
Human Resources of the Corporation or his or her designee, or to the
Corporation or any of its Subsidiaries, waive his or her right to
participate in the Plan.
- 2 -
<PAGE>
SIXTH CHANGE
Effective as of the original Offering Date under the Plan, Section 10
of the Plan is amended in its entirety to read as follows:
10. Administration.
The Plan shall be administered by the Vice President of Human
Resources of the Corporation, who shall have full authority, consistent
with the Plan, to interpret the Plan, to promulgate such rules and
regulations with respect to the Plan as he or she deems desirable,
including, but not limited to, designating those Subsidiaries that
qualify as Participating Corporations, and determining the eligibility
of any person to participate in the Plan. All decisions, determinations
and interpretations of the Vice President of Human Resources or his or
her designee shall be binding upon all persons and shall be made in his
or her sole and absolute discretion.
The Plan, as amended by the foregoing changes, is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
executed by its duly authorized officers on this 12th day of
February, 1997.
WITNESS/ATTEST: THE BLACK & DECKER CORPORATION
/s/ LOWELL R. BOWEN By: /s/ CHARLES E. FENTON
Lowell R. Bowen Charles E. Fenton
Senior Vice President
- 3 -
<TABLE>
Exhibit 11(a)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Millions Except Per Share Data)
<CAPTION>
For The Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
Amount Per Share Amount Per Share Amount Per Share
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Primary:
Average shares outstanding 88.9 85.7 84.3
Dilutive stock options and stock issuable
under employee benefit plans--based on
the Treasury stock method using the
average market price 2.4 2.2 (Note 1)
------ ------ -----
Adjusted shares outstanding 91.3 87.9 84.3
====== ====== ======
Earnings from continuing operations $159.2 $216.5 $ 89.9
Less preferred stock dividend 9.1 11.6 11.6
------ ------- ------
Earnings from continuing operations
attributable to common stock $150.1 $1.64 $204.9 $2.33 $ 78.3 $.93
====== ===== ====== ===== ====== ====
Assuming full dilution:
Average shares outstanding 88.9 85.7 84.3
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 2.4 2.6 (Note 1)
------ ------ --------
Adjusted shares outstanding 91.3 88.3 84.3
Average shares assumed to be converted
through convertible preferred stock 5.0 (Note 4) 6.4 (Note 3) 6.3 (Note 2)
------ ------ ------
Fully diluted average shares outstanding 96.3 94.7 90.6
====== ====== ======
Earnings from continuing operations $159.2 $1.65 $216.5 $2.29 $ 89.9 $.99
====== ===== ====== ===== ====== ====
</TABLE>
Notes: 1. Dilutive effect of common stock equivalents is less than 3% for
the year ended December 31, 1994, 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.
4. Represents the dilutive effect of convertible preferred stock
prior to its conversion into common stock on October 14, 1996.
<PAGE>
<TABLE>
Exhibit 11(b)
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Millions Except Per Share Data)
<CAPTION>
For The Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
Amount Per Share Amount Per Share Amount Per Share
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Average shares outstanding 88.9 85.7 84.3
Dilutive stock options and stock issuable
under employee benefit plans--based on
the Treasury stock method using the
average market price 2.4 2.2 (Note 1)
----- ------ --------
Adjusted shares outstanding 91.3 87.9 84.3
===== ====== ======
Net earnings $229.6 $224.0 $127.4
Less preferred stock dividend 9.1 11.6 11.6
------ ------ ------
Net earnings attributable to common stock $220.5 $2.41 $212.4 $2.42 $115.8 $1.37
====== ===== ====== ===== ====== =====
Assuming fully dilution:
Average shares outstanding 88.9 85.7 84.3
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 2.4 2.6 (Note 1)
------ ------ --------
Adjusted shares outstanding 91.3 88.3 84.3
Average shares assumed to be converted
through convertible preferred stock 5.0 (Note 4) 6.4 (Note 3) 6.3 (Note 2)
------ ------ ------
Fully diluted average shares outstanding 96.3 94.7 90.6
====== ====== ======
Net earnings $229.6 $2.38 $224.0 $2.37 $127.4 $1.41
====== ===== ====== ===== ====== =====
</TABLE>
Notes: 1. Dilutive effect of common stock equivalents is less than 3% for
the year ended December 31, 1994, 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.
4. Represents the dilutive effect of convertible preferred stock
prior to its conversion into common stock on October 14, 1996.
EXHIBIT 12
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars Except Ratios)
Three Months Ended Twelve Months Ended
December 31, 1996 December 31, 1996
------------------ ------------------
EARNINGS:
Earnings from continuing operations
before income taxes (Note 1) $ 98.5 $ 202.7
Interest expense 28.5 140.1
Portion of rent expense representative
of an interest factor 5.9 23.5
------- -------
Adjusted earnings from continuing
operations before taxes and
fixed charges (Note 1) $ 132.9 $ 366.3
======= =======
FIXED CHARGES:
Interest expense $ 28.5 $ 140.1
Portion of rent expense representative
of an interest factor 5.9 23.5
------- -------
Total fixed charges $ 34.4 $ 163.6
======= =======
RATIO OF EARNINGS TO FIXED
CHARGES (Note 1) 3.86 2.24
======= =======
Note 1: Excludes earnings from discontinued operations. Included in
earnings from continuing operations before income taxes for the
three months and twelve months ended December 31, 1996, is a
restructuring charge in the amount of $9.7 and $91.3, respectively.
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, 1996,
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
Price Pfister, Inc. 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
Black & Decker Werkzeuge Vertriebs-Gesellschaft m.b.H AUSTRIA
DOM Sicherheitstechnik G.m.b.H. AUSTRIA
Black & Decker (Belgium) N.V. BELGIUM
Black & Decker De Brasil 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 (SUZ HOU) Power Tools Co., LTD. CHINA
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
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
TECHNOLOCK, 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 Asia Pacific Pte. Ltd. SINGAPORE
Emhart Fastening Teknologies Korea, Inc. SOUTH KOREA
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 Aktiebolag SWEDEN
DOM AG Sicherheitstechnik SWITZERLAND
Black & Decker (Switzerland) S.A. SWITZERLAND
Emhart Glass SA SWITZERLAND
Black & Decker (Thailand) Limited THAILAND
Black & Decker ITHALAT Limited SIRKETI TURKEY
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 24, 1997, 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, 1996.
Registration Statement Number Description
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
33-39608 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
333-03593 Form S-8
333-03595 Form S-8
/s/ ERNST & YOUNG LLP
Baltimore, Maryland
February 24, 1997
Exhibit 24
POWER OF ATTORNEY
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, 1996, and any and all
amendments thereto.
/s/ NOLAN D. ARCHIBALD Director, Chairman, February 19, 1997
Nolan D. Archibald President, and Chief
Executive Officer
(Principal Executive
Officer)
/s/ BARBARA L. BOWLES Director February 19, 1997
Barbara L. Bowles
/s/ MALCOLM CANDLISH Director February 19, 1997
Malcolm Candlish
/s/ ALONZO G. DECKER, JR. Director February 19, 1997
Alonzo G. Decker, Jr.
/s/ ANTHONY LUISO Director February 19, 1997
Anthony Luiso
/s/ LAWRENCE R. PUGH Director February 19, 1997
Lawrence R. Pugh
/s/ MARK H. WILLES Director February 19, 1997
Mark H. Willes
/s/ M. CABELL WOODWARD, JR. Director February 19, 1997
M. Cabell Woodward, Jr.
/s/ THOMAS M. SCHOEWE Senior Vice President and February 19, 1997
Thomas M. Schoewe Chief Financial Officer
(Principal Financial
Officer)
/s/ STEPHEN F. REEVES Vice President and February 19, 1997
Stephen F. Reeves Controller
(Principal Accounting
Officer)
<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, 1996, 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> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 141,800
<SECURITIES> 0
<RECEIVABLES> 716,400
<ALLOWANCES> 44,000
<INVENTORY> 747,800
<CURRENT-ASSETS> 1,804,200
<PP&E> 1,882,100
<DEPRECIATION> 976,300
<TOTAL-ASSETS> 5,153,500
<CURRENT-LIABILITIES> 1,506,600
<BONDS> 1,415,800
0
0
<COMMON> 47,100
<OTHER-SE> 1,585,300
<TOTAL-LIABILITY-AND-EQUITY> 5,153,500
<SALES> 4,914,400
<TOTAL-REVENUES> 4,914,400
<CGS> 3,156,600
<TOTAL-COSTS> 4,557,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140,100
<INCOME-PRETAX> 202,700
<INCOME-TAX> 43,500
<INCOME-CONTINUING> 159,200
<DISCONTINUED> 70,400
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229,600
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 2.38
</TABLE>
