-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LPjcyYhRcIY5OK7bYPtzNGjZ75/v5UyvPdKISQse+dpXkWBfl7K2ZaRdJPDo8KHs GRLldlk1WSjsfVa8fF/cDw== /in/edgar/work/20001103/0000012355-00-000029/0000012355-00-000029.txt : 20001106 0000012355-00-000029.hdr.sgml : 20001106 ACCESSION NUMBER: 0000012355-00-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20001001 FILED AS OF DATE: 20001103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK & DECKER CORP CENTRAL INDEX KEY: 0000012355 STANDARD INDUSTRIAL CLASSIFICATION: [3540 ] IRS NUMBER: 520248090 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-03593 FILM NUMBER: 752881 BUSINESS ADDRESS: STREET 1: 701 E JOPPA RD CITY: TOWSON STATE: MD ZIP: 21286 BUSINESS PHONE: 4107163900 MAIL ADDRESS: STREET 1: 701 EAST JOPPA ROAD STREET 2: MAIL STOP TW 290 CITY: TOWSON STATE: MD ZIP: 21286 FORMER COMPANY: FORMER CONFORMED NAME: BLACK & DECKER MANUFACTURING CO DATE OF NAME CHANGE: 19850206 10-Q 1 0001.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 1, 2000 ------------------------------------------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- -------------------------- Commission File Number: 1-1553 -------------------------------------------------------- THE BLACK & DECKER CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 52-0248090 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 701 East Joppa Road Towson, Maryland 21286 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (410) 716-3900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report.) 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 12 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. X YES NO ----- ------ The number of shares of Common Stock outstanding as of October 29, 2000: 81,287,552 - ---------- The exhibit index as required by item 601(a) of Regulation S-K is included in this report. -2- THE BLACK & DECKER CORPORATION INDEX - FORM 10-Q October 1, 2000 Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statement of Earnings (Unaudited) For the Three Months and Nine Months Ended October 1, 2000 and October 3, 1999 3 Consolidated Balance Sheet October 1, 2000 (Unaudited) and December 31, 1999 4 Consolidated Statement of Stockholders' Equity (Unaudited) For the Nine Months Ended October 1, 2000 and October 3, 1999 5 Consolidated Statement of Cash Flows (Unaudited) For the Nine Months Ended October 1, 2000 and October 3, 1999 6 Notes to Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 PART II - OTHER INFORMATION Item 1. Legal Proceedings 23 Item 2. Changes in Securities and Use of Proceeds 24 Item 6. Exhibits and Reports on Form 8-K 24 SIGNATURES 25 -3- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF EARNINGS (Unaudited) The Black & Decker Corporation and Subsidiaries (Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - --------------------------------------------------------------------------------------------------------------- Sales $1,133.2 $1,110.6 $3,297.2 $3,173.3 Cost of goods sold 707.3 694.0 2,081.6 1,993.4 Selling, general, and administrative expenses 277.7 278.9 833.3 836.7 Gain on sale of business - - 20.1 - - --------------------------------------------------------------------------------------------------------------- Operating Income 148.2 137.7 402.4 343.2 Interest expense (net of interest income) 26.5 26.2 75.7 70.9 Other income (expense) 1.6 (.8) 2.6 - - --------------------------------------------------------------------------------------------------------------- Earnings Before Income Taxes 123.3 110.7 329.3 272.3 Income taxes 37.0 35.4 99.8 87.1 - --------------------------------------------------------------------------------------------------------------- Net Earnings $ 86.3 $ 75.3 $ 229.5 $ 185.2 =============================================================================================================== Net Earnings Per Common Share -- Basic $ 1.04 $ .87 $ 2.71 $ 2.13 =============================================================================================================== Shares Used in Computing Basic Earnings Per Share (in Millions) 83.2 87.0 84.6 87.1 =============================================================================================================== Net Earnings Per Common Share -- Assuming Dilution $ 1.03 $ .85 $ 2.69 $ 2.09 =============================================================================================================== Shares Used in Computing Diluted Earnings Per Share (in Millions) 83.8 88.3 85.3 88.4 =============================================================================================================== Dividends Per Common Share $ .12 $ .12 $ .36 $ .36 =============================================================================================================== See Notes to Consolidated Financial Statements (Unaudited)
-4- CONSOLIDATED BALANCE SHEET The Black & Decker Corporation and Subsidiaries (Dollars in Millions Except Per Share Amount)
- ------------------------------------------------------------------------------------------ October 1, 2000 (Unaudited) December 31, 1999 - ------------------------------------------------------------------------------------------ ASSETS Cash and cash equivalents $ 138.2 $ 147.3 Trade receivables 859.9 823.2 Inventories 906.6 751.0 Other current assets 243.2 189.9 - ------------------------------------------------------------------------------------------ Total Current Assets 2,147.9 1,911.4 - ------------------------------------------------------------------------------------------ Property, Plant, and Equipment 749.0 739.6 Goodwill 711.1 743.4 Other Assets 624.2 618.3 - ------------------------------------------------------------------------------------------ $4,232.2 $4,012.7 ========================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings $ 428.3 $ 183.2 Current maturities of long-term debt 249.0 213.2 Trade accounts payable 436.6 367.3 Other accrued liabilities 757.9 809.0 - ------------------------------------------------------------------------------------------ Total Current Liabilities 1,871.8 1,572.7 - ------------------------------------------------------------------------------------------ Long-Term Debt 806.0 847.1 Deferred Income Taxes 241.5 243.8 Postretirement Benefits 240.4 246.3 Other Long-Term Liabilities 303.5 301.7 Stockholders' Equity Common stock, par value $.50 per share 41.2 43.6 Capital in excess of par value 660.5 843.3 Retained earnings 221.1 21.9 Accumulated other comprehensive income (loss) (153.8) (107.7) - ------------------------------------------------------------------------------------------ Total Stockholders' Equity 769.0 801.1 - ------------------------------------------------------------------------------------------ $4,232.2 $4,012.7 ========================================================================================== See Notes to Consolidated Financial Statements (Unaudited)
-5- CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) The Black & Decker Corporation and Subsidiaries (Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------------------------------------------- Accumulated Outstanding Capital in Retained Other Com- Total Common Par Excess of Earnings prehensive Stockholders' Shares Value Par Value (Deficit) Income (Loss) Equity - --------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 87,498,424 $43.7 $871.4 $(236.6) $(104.5) $574.0 Comprehensive income: Net earnings -- -- -- 185.2 -- 185.2 Foreign currency translation adjustments, less effect of hedging activities (net of tax) -- -- -- -- (11.5) (11.5) - --------------------------------------------------------------------------------------------------------------------- Comprehensive income -- -- -- 185.2 (11.5) 173.7 - --------------------------------------------------------------------------------------------------------------------- Cash dividends ($.36 per share) -- -- -- (31.3) -- (31.3) Purchase and retirement of common stock (1,015,900) (.5) (52.8) -- -- (53.3) Common stock issued under employee benefit plans 365,408 .2 13.0 -- -- 13.2 - --------------------------------------------------------------------------------------------------------------------- Balance at October 3, 1999 86,847,932 $43.4 $831.6 $ (82.7) $(116.0) $676.3 ===================================================================================================================== Balance at December 31, 1999 87,190,240 $43.6 $843.3 $ 21.9 $(107.7) $801.1 Comprehensive income: Net earnings -- -- -- 229.5 -- 229.5 Foreign currency translation adjustments, less effect of hedging activities (net of tax) -- -- -- -- (46.1) (46.1) - --------------------------------------------------------------------------------------------------------------------- Comprehensive income -- -- -- 229.5 (46.1) 183.4 - --------------------------------------------------------------------------------------------------------------------- Cash dividends ($.36 per share) -- -- -- (30.3) -- (30.3) Purchase and retirement of common stock (net of 144,416 shares issued under forward purchase contracts) (5,056,584) (2.5) (189.4) -- -- (191.9) Common stock issued under employee benefit plans 220,673 .1 6.6 -- -- 6.7 - --------------------------------------------------------------------------------------------------------------------- Balance at October 1, 2000 82,354,329 $41.2 $660.5 $ 221.1 $(153.8) $769.0 ===================================================================================================================== See Notes to Consolidated Financial Statements (Unaudited)
-6- CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) The Black & Decker Corporation and Subsidiaries (Dollars in Millions)
- ------------------------------------------------------------------------------------------------ Nine Months Ended October 1, 2000 October 3, 1999 - ------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net earnings $229.5 $185.2 Adjustments to reconcile net earnings to cash flow from operating activities: Gain on sale of business (20.1) - Non-cash charges and credits: Depreciation and amortization 123.3 117.7 Other (10.7) (6.3) Changes in selected working capital items: Trade receivables (61.2) (80.9) Inventories (182.7) (246.8) Trade accounts payable 80.2 87.3 Restructuring spending (9.2) (17.2) Changes in other assets and liabilities (54.8) (26.1) - ------------------------------------------------------------------------------------------------ Cash Flow From Operating Activities 94.3 12.9 - ------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Proceeds from sale of business 25.0 - Purchase of business (7.8) (3.2) Proceeds from disposal of assets 3.3 23.4 Capital expenditures (149.7) (111.4) Cash inflow from hedging activities 135.7 510.3 Cash outflow from hedging activities (135.5) (478.2) - ------------------------------------------------------------------------------------------------ Cash Flow From Investing Activities (129.0) (59.1) - ------------------------------------------------------------------------------------------------ Cash Flow Before Financing Activities (34.7) (46.2) FINANCING ACTIVITIES Net increase in short-term borrowings 250.5 244.0 Payments on long-term debt (4.7) (64.6) Purchase of common stock (191.9) (53.3) Issuance of common stock 9.2 9.9 Cash dividends (30.3) (31.3) - ------------------------------------------------------------------------------------------------ Cash Flow From Financing Activities 32.8 104.7 Effect of exchange rate changes on cash (7.2) (3.9) - ------------------------------------------------------------------------------------------------ (Decrease) Increase In Cash And Cash Equivalents (9.1) 54.6 Cash and cash equivalents at beginning of period 147.3 87.9 - ------------------------------------------------------------------------------------------------ Cash And Cash Equivalents At End Of Period $138.2 $142.5 ================================================================================================ See Notes to Consolidated Financial Statements (Unaudited)
-7- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Black & Decker Corporation and Subsidiaries NOTE 1: BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation of the financial position and the results of operations. Operating results for the three- and nine-month periods ended October 1, 2000, are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and notes included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999. Certain amounts presented for the nine months ended October 3, 1999, have been reclassified to conform with the 2000 presentation. Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, requires that, as part of a full set of financial statements, entities must present comprehensive income, which is the sum of net income and other comprehensive income. Other comprehensive income represents total non-stockholder changes in equity. For the nine months ended October 1, 2000, and October 3, 1999, the Corporation has presented comprehensive income in the accompanying Consolidated Statement of Stockholders' Equity. Comprehensive income for the three months ended October 1, 2000, and October 3, 1999, was $84.8 million and $78.3 million, respectively. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which is required to be adopted for years beginning after June 15, 2000. Early adoption of SFAS No. 133 is permitted as of the beginning of any fiscal quarter after its issuance. SFAS No. 133 will require the Corporation to recognize all derivatives on the balance sheet at fair value. Derivatives that do not qualify as hedges under the new standard must be adjusted to fair value through income. If a derivative qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in value will be immediately recognized in earnings. The Corporation has not yet determined what effect SFAS No. 133 will have on its earnings and financial position. -8- NOTE 2: GAIN ON SALE OF BUSINESS In connection with the recapitalization of its recreational products business, True Temper Sports, in 1998, the Corporation retained approximately 6% of preferred and common stock of the recapitalized company, now known as True Temper Corporation (True Temper), valued at approximately $4 million. In addition, the Corporation received a senior, increasing-rate discount note payable by True Temper, in an initial accreted amount of $25.0 million. Due to True Temper's highly leveraged position and the lack of an active market for its note, the Corporation established a full reserve for the note. For further information about the recapitalization of True Temper, see Note 2 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999. During the first quarter of 2000, the Corporation sold its remaining interest in True Temper, together with the note payable by True Temper, for $25.0 million and recognized a pre-tax gain of $20.1 million. NOTE 3: INVENTORIES The components of inventory at the end of each period, in millions of dollars, consisted of the following:
- ---------------------------------------------------------------------------------------- October 1, 2000 December 31, 1999 - ---------------------------------------------------------------------------------------- FIFO cost: Raw materials and work-in-process $227.0 $171.3 Finished products 683.3 584.5 - ---------------------------------------------------------------------------------------- 910.3 755.8 Excess of FIFO cost over LIFO inventory value (3.7) (4.8) - ---------------------------------------------------------------------------------------- $906.6 $751.0 ========================================================================================
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. NOTE 4: GOODWILL Goodwill at the end of each period, in millions of dollars, was as follows:
- ---------------------------------------------------------------------------------------- October 1, 2000 December 31, 1999 - ---------------------------------------------------------------------------------------- Goodwill $1,288.1 $1,301.3 Less accumulated amortization 577.0 557.9 - ---------------------------------------------------------------------------------------- $ 711.1 $ 743.4 ========================================================================================
NOTE 5: LONG-TERM DEBT Indebtedness of subsidiaries of the Corporation in the aggregate principal amounts of $563.8 million and $435.4 million were included in the Consolidated Balance Sheet at October 1, 2000, and December 31, 1999, respectively, under the captions short-term borrowings, current maturities of long-term debt, and long-term debt. -9- NOTE 6: INTEREST EXPENSE (NET OF INTEREST INCOME) Interest expense (net of interest income) for each period, in millions of dollars, consisted of the following:
- ------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - ------------------------------------------------------------------------------------------------- Interest expense $37.2 $33.1 $108.3 $93.0 Interest (income) (10.7) (6.9) (32.6) (22.1) - ------------------------------------------------------------------------------------------------- $26.5 $26.2 $75.7 $70.9 =================================================================================================
NOTE 7: BUSINESS SEGMENTS The following table provides selected financial data for the Corporation's business segments (in millions of dollars):
Reportable Business Segments ------------------------------------------------- Power Hardware Fastening Currency Corporate, Tools & & Home & Assembly Translation Adjustments, Three Months Ended October 1, 2000 Accessories Improvement Systems Total Adjustments & Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $ 816.8 $217.6 $126.8 $1,161.2 $(28.0) $ - $1,133.2 Segment profit (loss) (for Consolidated, operating income) 103.6 31.2 20.7 155.5 (2.0) (5.3) 148.2 Depreciation and amortization 22.3 7.7 4.1 34.1 (.8) 6.6 39.9 Capital expenditures 32.0 7.7 5.7 45.4 (.8) .1 44.7 Three Months Ended October 3, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $ 769.3 $220.1 $119.4 $1,108.8 $ 1.8 $ - $1,110.6 Segment profit (loss) (for Consolidated, operating income) 95.3 33.1 19.5 147.9 - (10.2) 137.7 Depreciation and amortization 18.3 8.0 3.9 30.2 - 6.9 37.1 Capital expenditures 27.3 8.7 7.4 43.4 .1 - 43.5 Nine Months Ended October 1, 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $2,325.6 $638.1 $394.5 $3,358.2 $(61.0) $ - $3,297.2 Segment profit (loss) (for Consoli- dated, operating income before gain on sale of business) 262.5 78.4 67.1 408.0 (4.4) (21.3) 382.3 Depreciation and amortization 65.7 26.8 12.4 104.9 (1.5) 19.9 123.3 Capital expenditures 108.6 22.8 19.1 150.5 (1.4) .6 149.7 Nine Months Ended October 3, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Sales to unaffiliated customers $2,137.1 $638.0 $372.7 $3,147.8 $ 25.5 $ - $3,173.3 Segment profit (loss) (for Consolidated, operating income) 218.5 86.1 62.2 366.8 1.9 (25.5) 343.2 Depreciation and amortization 59.5 25.1 11.6 96.2 .6 20.9 117.7 Capital expenditures 69.5 25.1 16.0 110.6 .6 .2 111.4
-10- The Corporation operates in three reportable business segments: Power Tools and Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems. The Power Tools and Accessories segment has worldwide responsibility for the manufacture and sale of consumer and professional power tools and accessories, electric cleaning and lighting products, and electric lawn and garden tools, as well as for product service. In addition, the Power Tools and Accessories segment has responsibility for the sale of security hardware to customers in Mexico, Central America, the Caribbean, and South America; for the sale of plumbing products to customers outside the United States and Canada; and for sales of the retained portion of the household products business. The Hardware and Home Improvement segment has worldwide responsibility for the manufacture and sale of security hardware (except for the sale of security hardware in Mexico, Central America, the Caribbean, and South America). It also has responsibility for the manufacture of plumbing products and for the sale of plumbing products to customers in the United States and Canada. The Fastening and Assembly Systems segment has worldwide responsibility for the manufacture and sale of fastening and assembly systems. The Corporation assesses the performance of its reportable business segments based upon a number of factors, including segment profit. In general, segments follow the same accounting policies as those described in Note 1 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999, except with respect to foreign currency translation and except as further indicated below. The financial statements of a segment's operating units located outside the United States, except units operating in highly inflationary economies, are generally measured using the local currency as the functional currency. For these units located outside the United States, segment assets and elements of segment profit are translated using budgeted rates of exchange. Budgeted rates of exchange are established annually and, once established, all prior period segment data is updated to reflect the translation of segment assets and elements of segment profit at the current year's budgeted rates of exchange. The amounts included in the preceding segment table under the captions "Reportable Business Segments" and "Corporate, Adjustments, & Eliminations" are reflected at the Corporation's budgeted rates of exchange for 2000. The amounts included in the preceding segment table under the caption "Currency Translation Adjustments" represent the difference between consolidated amounts determined using the budgeted rates of exchange for 2000 and those determined based upon the rates of exchange applicable under accounting principles generally accepted in the United States. Segment profit excludes interest income and expense, non-operating income and expense, goodwill amortization, adjustments to eliminate intercompany profit in inventory, and income tax expense. In addition, segment profit excludes the gain on sale of business. For certain operations located in Brazil, Mexico, Venezuela, and Turkey, segment profit is reduced by net interest expense and non-operating expenses. In determining segment profit, expenses relating to pension and other postretirement benefits are based solely upon estimated service costs. Corporate expenses are allocated to each segment based upon budgeted amounts. While sales and transfers between segments are accounted for at cost plus a reasonable profit, the effects of intersegment sales are excluded from the computation of segment profit. Intercompany profit in inventory is excluded from segment assets and is recognized as a reduction of cost of sales by the selling segment when the related inventory is sold to an unaffiliated customer. Because the Corporation compensates the management of its various businesses on, among other factors, segment profit, the Corporation may elect to record certain segment-related expense items of an unusual or nonrecurring nature in -11- consolidation rather than reflect such items in segment profit. In addition, certain segment-related items of income or expense may be recorded in consolidation in one period and transferred to the Corporation's various segments in a later period. The reconciliation of segment profit to the Corporation's earnings before income taxes for each period, in millions of dollars, is as follows:
- -------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - -------------------------------------------------------------------------------------------------------------------------------- Segment profit for total reportable business segments $155.5 $147.9 $408.0 $366.8 Items excluded from segment profit: Adjustment of budgeted foreign exchange rates to actual rates (2.0) - (4.4) 1.9 Depreciation of Corporate property and amortization of goodwill (6.6) (6.9) (19.9) (20.9) Adjustment to businesses' postretirement benefit expenses booked in consolidation 9.0 5.2 27.2 21.8 Adjustment to eliminate net interest and non-operating expenses from results of certain operations in Brazil, Mexico, Venezuela, and Turkey .1 .1 .3 1.2 Other adjustments booked in consolidation directly related to reportable business segments (2.0) (6.4) (14.7) (10.0) Amounts allocated to businesses in arriving at segment profit in excess of (less than) Corporate center operating expenses, eliminations, and other amounts identified above (5.8) (2.2) (14.2) (17.6) - -------------------------------------------------------------------------------------------------------------------------------- Operating income before gain on sale of business 148.2 137.7 382.3 343.2 Gain on sale of business - - 20.1 - - -------------------------------------------------------------------------------------------------------------------------------- Operating income 148.2 137.7 402.4 343.2 Interest expense, net of interest income 26.5 26.2 75.7 70.9 Other income (expense) 1.6 (.8) 2.6 - - -------------------------------------------------------------------------------------------------------------------------------- Earnings before income taxes $123.3 $110.7 $329.3 $272.3 ================================================================================================================================
-12- NOTE 8: EARNINGS PER SHARE The computations of basic and diluted earnings per share for each period are as follows:
- ------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended (Amounts in Millions Except Per Share Data) October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - ------------------------------------------------------------------------------------------------------------------------- Numerator: Net earnings $86.3 $75.3 $229.5 $ 185.2 ========================================================================================================================= Denominator: Average number of common shares outstanding for basic earnings per share 83.2 87.0 84.6 87.1 Employee stock options and stock issuable under employee benefit plans .6 1.3 .7 1.3 - ------------------------------------------------------------------------------------------------------------------------- Average number of common shares outstanding for diluted earnings per share 83.8 88.3 85.3 88.4 ========================================================================================================================= Basic earnings per share $1.04 $ .87 $ 2.71 $ 2.13 ========================================================================================================================= Diluted earnings per share $1.03 $ .85 $ 2.69 $ 2.09 =========================================================================================================================
As of October 1, 2000, approximately 6.9 million options to purchase shares of common stock, with a weighted-average exercise price of $46.45, were outstanding, but were not included in the computation of diluted earnings per share because the effect would be anti-dilutive. These options were anti-dilutive because the related exercise price was greater than the average market price of the common shares for the three months ended October 1, 2000. NOTE 9: STOCKHOLDERS' EQUITY As more fully discussed in Note 14 of Notes to Consolidated Financial Statements included in Item 8 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999, the Corporation has entered into two agreements (the "Agreements") under which the Corporation may enter into forward purchase contracts on its common stock. The Agreements provide the Corporation with two purchase alternatives: a standard forward purchase contract and a forward purchase contract subject to a cap (a "capped forward contract"). During the nine months ended October 1, 2000, quarterly settlements occurred on standard forward purchase contracts with respect to 1,316,870 shares of the Corporation's common stock, resulting in a net receipt of 13,981 shares of common stock. In addition, during the nine months ended October 1, 2000, settlements occurred on capped forward contracts with respect to 1,850,000 shares of the Corporation's common stock, resulting in a net issuance of 158,397 shares of its common stock. At each settlement date, the Corporation elected net share settlement. -13- At October 1, 2000, standard forward purchase contracts with respect to 494,021 shares of the Corporation's common stock, with a weighted-average forward price of $42.05 per share, were outstanding under the Agreements. These contracts mature in February 2002. Additionally, capped forward contracts with respect to 650,000 shares of the Corporation's common stock, with a weighted-average strike price of $38.39 per share and a weighted-average cap price of $44.50 per share, were outstanding under the Agreements. These contracts settle in the fourth quarter of 2000. During the nine months ended October 1, 2000, the Corporation repurchased 5,201,000 shares of its common stock at an aggregate cost of $191.9 million. During the comparable period in 1999, the Corporation repurchased 1,015,900 shares of its common stock at an aggregate cost of $53.3 million. -14- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Corporation reported net earnings of $86.3 million or $1.03 per share on a diluted basis for the three months ended October 1, 2000, compared to net earnings of $75.3 million or $.85 per share on a diluted basis for the three months ended October 3, 1999. Earnings per diluted share for the third quarter of 2000 increased by 21% over the corresponding period in 1999, reflecting improved operating performance, lower average outstanding shares of the Corporation's common stock due to a stock repurchase program, and a lower effective tax rate. For the nine months ended October 1, 2000, the Corporation reported net earnings of $229.5 million or $2.69 per share on a diluted basis. As more fully described in Note 2 of Notes to Consolidated Financial Statements, earnings for the nine-month period ended October 1, 2000, included a pre-tax gain of $20.1 million ($13.1 million net of tax, or $.15 per share on a diluted basis) related to the 1998 recapitalization of True Temper Sports. Excluding this nonrecurring gain, net earnings for the nine-month period ended October 1, 2000, would have been $216.4 million or $2.54 per share on a diluted basis, compared to net earnings of $185.2 million or $2.09 per share on a diluted basis for the corresponding period of 1999. In the discussion and analysis of financial condition and results of operations that follows, the Corporation generally attempts to list contributing factors in order of significance to the point being addressed. STRATEGIC REPOSITIONING As more fully described in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999, in Note 2 of Notes to Consolidated Financial Statements and in Management's Discussion and Analysis of Financial Condition and Results of Operations under the caption "Strategic Repositioning," by the end of 1999, the Corporation neared completion of the comprehensive strategic repositioning plan approved by the Board of Directors on January 26, 1998. The plan included the following components: (i) the divestiture of non-strategic businesses; (ii) the repurchase of approximately 10% of the Corporation's outstanding common stock over a two-year period; and (iii) a restructuring of remaining operations. As part of its divestitures of non-strategic businesses under the strategic repositioning plan, the Corporation recapitalized its recreational products business, True Temper Sports, in September 1998. At the time of the recapitalization, the Corporation retained approximately 6% of preferred and common stock of the recapitalized company, now known as True Temper Corporation (True Temper), valued at approximately $4 million. In addition to cash proceeds received as part of the True Temper recapitalization, the Corporation received a senior, increasing-rate discount note in an initial accreted amount of $25.0 million. Because True Temper was a highly leveraged entity and there was no active market for the note, the Corporation fully reserved the $25.0 million note at the time of the divestiture and continued to reserve the note through December 31, 1999. During the first quarter of 2000, the Corporation sold the note, together with its remaining interest in True Temper, for $25.0 million and recognized a pre-tax gain of $20.1 million ($13.1 million after tax). -15- A summary of activity during the nine-month period ended October 1, 2000, in the restructuring element of the Corporation's strategic repositioning plan is as follows (in millions of dollars):
Utilization of Reserve Reserve at ---------------------------- Reserve at December 31, 1999 Cash Non-Cash October 1, 2000 - ------------------------------------------------------------------------------------------------------------------ Severance benefits and cost of voluntary retirement program $18.7 $(7.4) $ -- $11.3 Other charges 3.7 (1.8) (.6) 1.3 - ------------------------------------------------------------------------------------------------------------------ Total $22.4 $(9.2) $ (.6) $12.6 ==================================================================================================================
The Corporation remains committed to continuous productivity improvement and continues to evaluate opportunities to reduce fixed costs and eliminate excess capacity. The Corporation currently anticipates recognizing an additional restructuring charge, expected to approximate $25 million. RESULTS OF OPERATIONS SALES The following chart sets forth an analysis of the consolidated changes in sales for the three- and nine-month periods ended October 1, 2000, and October 3, 1999:
ANALYSIS OF CHANGES IN SALES - ------------------------------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended (Dollars in Millions) October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - ------------------------------------------------------------------------------------------------------------------------ Total sales $1,133.2 $1,110.6 $3,297.2 $3,173.3 Unit volume - existing (a) 7 % 10 % 8 % 10 % - disposed (b) --% (7)% --% (10)% Price (2)% (1)% (1)% (1)% Currency (3)% (2)% (3)% (2)% - ------------------------------------------------------------------------------------------------------------------------ Change in total sales 2 % --% 4 % (3)% ======================================================================================================================== (a) Represents change in unit volume for businesses where period-to-period comparability exists. (b) Represents change in unit volume for businesses that were included in prior year results but were sold or recapitalized in 1998.
Total consolidated sales for the three and nine months ended October 1, 2000, increased by 2% and 4%, respectively, over the corresponding 1999 levels, as unit volume growth more than offset negative pricing and currency effects. Total unit volume increased 7% and 8% during the three- and nine-month periods ended October 1, 2000, respectively, over the corresponding periods in 1999. Pricing actions had a negative 2% and a negative 1% effect on sales for the three and nine months ended October 1, 2000, respectively, as compared to the corresponding periods in 1999. The negative effects of a stronger United States dollar compared to other foreign currencies caused a 3% decrease in the Corporation's consolidated sales from the prior year's levels for both the three- and nine-month periods ended October 1, 2000. -16- EARNINGS Operating income for the three months ended October 1, 2000, was $148.2 million, or 13.1% of sales, compared to operating income of $137.7 million, or 12.4% of sales, for the corresponding period in 1999. Operating income for the nine months ended October 1, 2000, of $402.4 million included a gain on sale of business of $20.1 million recognized in the first quarter. Excluding the gain on sale of business, operating income for the first nine months of 2000 was $382.3 million, or 11.6% of sales, compared to operating income of $343.2 million, or 10.8% of sales, for the first nine months of 1999. Gross margin as a percentage of sales was 37.6% and 37.5% for the three-month periods ended October 1, 2000, and October 3, 1999, respectively, and was 36.9% and 37.2% for the nine-month periods ended October 1, 2000, and October 3, 1999, respectively. While the results of the Corporation's Six Sigma and other productivity initiatives and restructuring actions positively impacted gross margin during the three and nine months ended October 1, 2000, certain negative factors offset that favorability. Those negative factors included: (i) pricing actions taken, in response to both customer and competitive pressures; and (ii) currency-related cost pressures that resulted from stronger currencies in countries in which certain products are manufactured relative to currencies of countries in which those products are sold. Those currency-related cost pressures have been partially mitigated by the hedge program more fully described in Item 7 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999, under the caption "Hedging Activities." Selling, general, and administrative expenses as a percentage of sales improved from 25.1% for the quarter ended October 3, 1999, to 24.5% for the quarter ended October 1, 2000. For the nine months ended October 1, 2000, selling, general, and administrative expenses as a percentage of sales was 25.3%, reflecting an improvement from the prior year level of 26.4%. The improvement for 2000 was the result of cost containment efforts, as the Corporation leveraged slightly lower selling, general, and administrative expenses during the three- and nine-month periods ended October 1, 2000, over a higher sales base. Net interest expense (interest expense less interest income) for the three months ended October 1, 2000, was $26.5 million compared to net interest expense of $26.2 million for the three months ended October 3, 1999. Net interest expense was $75.7 million for the nine months ended October 1, 2000, compared to net interest expense of $70.9 million for the corresponding period of 1999. The higher level of net interest expense in the three and nine months ended October 1, 2000, as compared to the corresponding periods in 1999, was primarily the result of higher interest rates partially offset by lower average borrowing levels during 2000. The Corporation recognized income tax expense of $37.0 million on pre-tax earnings of $123.3 million, which equates to a reported tax rate of 30%, for the third quarter of 2000. The Corporation recognized income tax expense of $35.4 million on pre-tax earnings of $110.7 million, which equates to a reported tax rate of 32%, for the third quarter of 1999. For the nine months ended October 1, 2000, the Corporation recognized income tax expense of $99.8 million on pre-tax earnings of $329.3 million, which equates to an effective tax rate of 30.3%. Excluding the income tax expense of $7.0 million recognized on the $20.1 million gain on sale of business, the Corporation's effective tax rate would have been 30% for the nine months ended October 1, 2000. This compares to income tax expense of $87.1 million on pre-tax earnings of $272.3 million, which equates to an effective tax rate of 32%, for the nine months ended October 3, 1999. The -17- decrease in the effective tax rate from 32% in 1999 to 30% (excluding the gain on sale of business) in 2000 is a result of anticipated higher earnings in lower tax rate jurisdictions outside the United States during 2000 as compared to 1999. The Corporation reported net earnings of $86.3 million, or $1.03 per share on a diluted basis, for the three months ended October 1, 2000, compared to net earnings of $75.3 million, or $.85 per share on a diluted basis, for the three months ended October 3, 1999. The Corporation reported net earnings of $229.5 million, or $2.69 per share on a diluted basis, for the nine months ended October 1, 2000. Excluding the after-tax gain on sale of business of $13.1 million recognized in the first quarter of 2000, net earnings were $216.4 million, or $2.54 per diluted share, for the nine months ended October 1, 2000, compared to net earnings of $185.2 million, or $2.09 per share on a diluted basis, for the comparable period of 1999. In addition to the impact of the operational improvements and lower effective tax rate previously described, earnings per share for the three and nine months ended October 1, 2000, also benefited from lower shares outstanding as a result of a stock repurchase program. BUSINESS SEGMENTS As more fully described in Note 7 of Notes to Consolidated Financial Statements, the Corporation operates in three reportable business segments: Power Tools and Accessories, Hardware and Home Improvement, and Fastening and Assembly Systems. Power Tools and Accessories - --------------------------- Segment sales and profit for the Power Tools and Accessories segment, determined on the basis described in Note 7 of Notes to Consolidated Financial Statements, were as follows (in millions of dollars):
- ---------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - ---------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $816.8 $769.3 $2,325.6 $2,137.1 Segment profit 103.6 95.3 262.5 218.5 - ----------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers in the Power Tools and Accessories segment during the third quarter of 2000 increased 6% over the 1999 level. Sales of power tools and accessories in North America increased at a high single-digit rate over the comparable quarter in 1999. Sales in North America during the third quarter of 2000 benefited from high single-digit rates of growth in sales of professional power tools, as well as double-digit rates of sales growth in consumer power tools and outdoor products. Sales of accessories in North America for the quarter ended October 1, 2000, grew at a low single-digit rate over the corresponding period in 1999 despite significant price reductions taken in response to customer and competitive pressures. Sales in Europe in the third quarter of 2000 approximated the prior year level despite adverse effects caused by fuel strikes in parts of Europe. Sales of professional power tools in Europe increased at a high single-digit rate during the third quarter of 2000 due to expansion of the DeWALT(R) professional power tool line across Europe. That growth, however, was offset by mid single-digit rate declines in sales of consumer power tools, outdoor products, home products, and accessories in the third quarter of 2000 from the 1999 level. Sales of consumer power tools were adversely impacted by competition from low- priced imports. -18- Sales in other geographic areas increased at a double-digit rate in the third quarter of 2000 over the 1999 levels, driven by strong sales growth in Mexico, Central America, South America, and Asia. Sales to unaffiliated customers in the Power Tools and Accessories segment during the first nine months of 2000 increased 9% over the 1999 level. Sales of power tools and accessories in North America increased at a double-digit rate for the nine months ended October 1, 2000, over the comparable period of 1999. Sales in North America benefited from double-digit rates of growth in sales of DeWALT professional power tools, outdoor products, and home products. Sales of consumer power tools increased at a high single-digit rate over the 1999 level. In addition, sales of accessories in North America during the nine months ended October 1, 2000, increased at a mid single-digit rate over the 1999 level. Sales in Europe during the first nine months of 2000 increased at a low single-digit rate over the 1999 level. That increase stemmed from a double-digit growth rate in sales of professional power tools and a mid single-digit growth rate in sales of outdoor products, but was partially offset by sales declines in consumer power tools as competition by low-priced imports had an adverse effect on the business. Sales in other geographic areas increased at a double-digit rate in the first nine months of 2000 over the 1999 levels. This sales growth was driven by strong results in Mexico, Central America, South America, and Asia. Segment profit as a percentage of sales for the Power Tools and Accessories segment was 12.7% and 11.3% for the three- and nine-month periods ended October 1, 2000, respectively, compared to 12.4% and 10.2%, for the three- and nine-month periods ended October 3, 1999, respectively. The leveraging of selling, general and administrative costs over a higher sales base drove this improvement, more than offsetting lower gross margin. Gross margin as a percentage of sales declined in the three- and nine-month periods ended October 1, 2000, compared to the corresponding periods in 1999, as a result of pricing actions, currency pressures in Europe, and inventory management initiatives. Hardware and Home Improvement - ----------------------------- Segment sales and profit for the Hardware and Home Improvement segment, determined on the basis described in Note 7 of Notes to Consolidated Financial Statements, were as follows (in millions of dollars):
- ---------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - ---------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $217.6 $220.1 $638.1 $638.0 Segment profit 31.2 33.1 78.4 86.1 - ----------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers in the Hardware and Home Improvement segment decreased by 1% for the three months ended October 1, 2000, from the 1999 level. Sales of plumbing products in North America increased at a high single-digit rate in the third quarter of 2000 over the corresponding period in 1999. That increase was more than offset by a mid single-digit rate decrease in sales of security hardware in North America and a low single-digit rate decrease in sales of security hardware in Europe in the third quarter of 2000 from the corresponding period in -19- 1999. The decrease in sales of security hardware in North America is due, in part, to lost listings of Titan(R) product as a result of a line review at a major customer during the first quarter of 2000 and to competition by low cost imports in retail channels. Sales to unaffiliated customers in the Hardware and Home Improvement segment for the nine months ended October 1, 2000, approximated the 1999 level. Sales of plumbing products in North America increased at a double-digit rate over the corresponding period in 1999. That growth was offset by decreased sales of security hardware in North America, which were negatively impacted during the first nine months of 2000 by the lost listings of TITAN product previously described. The effect of the lost TITAN listings is expected to be partially mitigated during the balance of 2000 by new listings gained by the business in other product lines. Sales of security hardware in Europe for the first nine months of 2000 approximated the prior year's level. Segment profit as a percentage of sales for the Hardware and Home Improvement segment was 14.3% and 12.3% for the three and nine months ended October 1, 2000, respectively, compared to 15.0% and 13.5% for the three and nine months ended October 3, 1999, respectively. Segment profit as a percentage of sales in both the three and nine months ended October 1, 2000, declined from the 1999 levels due to decreased profitability with respect to security hardware products resulting from the impact of lower sales volumes in North America. In addition, profitability was negatively impacted by transitional costs related to the closing of a plant in Anaheim, California, and the cost of moving a pack-to-order operation to a Fort Mill, North Carolina facility. The decrease in profitability in security hardware products was partially offset by profitability gains in plumbing products, which stemmed from Six Sigma and other productivity initiatives and improved manufacturing absorption due to higher sales levels, as well as higher margin new products. Fastening and Assembly Systems - ------------------------------ Segment sales and profit for the Fastening and Assembly Systems segment, determined on the basis described in Note 7 of Notes to Consolidated Financial Statements, were as follows (in millions of dollars):
- ---------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999 - ---------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $126.8 $119.4 $394.5 $372.7 Segment profit 20.7 19.5 67.1 62.2 - ----------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers in the Fastening and Assembly Systems segment increased by 6% for both the three- and nine-month periods ended October 1, 2000, over the corresponding 1999 levels, due, in part, to strong sales to industrial customers in North America and to strong growth in Asia. That growth was partially offset by lower sales in the North American automotive sector. Sales for both the three- and nine-month periods ended October 1, 2000, benefited from sales of a fastening business in South America, acquired late in 1999. Segment profit as a percentage of sales for the Fastening and Assembly Systems segment was 16.3% for both the three months ended October 1, 2000, and October 3, 1999. Segment profit as a percentage of sales was 17.0% for the nine months ended October 1, 2000, compared to 16.7% for the comparable period last year. The increased profitability during the nine months ended -20- October 1, 2000, stemmed from Six Sigma and other productivity initiatives, as well as higher margin new products FINANCIAL CONDITION Operating activities provided cash of $94.3 million for the nine months ended October 1, 2000, compared to $12.9 million of cash provided for the corresponding period in 1999. The increase in cash generation during the nine months ended October 1, 2000, was primarily driven by decreased investment in inventories in 2000. During the nine months ended October 3, 1999, the Corporation had increased inventory levels significantly over the 1998 year-end level to improve service levels. Cash flow from operating activities for the nine months ended October 1, 2000, also benefited from the timing of certain interest and tax payments. As part of its capital management, the Corporation reviews certain working capital metrics. For example, the Corporation evaluates its accounts receivable and inventory levels through the computation of days sales outstanding and inventory turnover ratio, respectively. At October 1, 2000, days sales outstanding improved by approximately three days from the corresponding period in 1999; however, average inventory turns decreased slightly from the corresponding period in 1999. Investing activities for the nine months ended October 1, 2000, used cash of $129.0 million compared to $59.1 million of cash used for the corresponding period in 1999. The increase in cash usage during 2000 was partially driven from higher capital expenditures during the first nine months of 2000 compared to the corresponding period in 1999. In addition, the Corporation had a net cash inflow from hedging activities of $.2 million for the first nine months of 2000, compared to a net cash inflow from hedging activities of $32.1 million for the first nine months of 1999. The main contributor to the net cash inflow from hedging activities during 1999 was the maturation of certain interest rate swaps that swapped from fixed United States dollars to fixed foreign currencies. Cash flow from investing activities was also impacted by lower cash proceeds from disposal of assets during 2000 than in the comparable period in 1999. Benefiting cash flow from investing activities in 2000 was the Corporation's receipt of $25.0 million related to the True Temper recapitalization more fully described in Note 2 of Notes to Consolidated Financial Statements. Investing activities for the nine months ended October 1, 2000, included a $7.8 million payment related to the purchase of Momentum Laser. Momentum Laser, purchased by the Power Tools and Accessories segment in June 2000, develops and sells laser levels for use on commercial and residential job sites. The results of Momentum Laser, included in the consolidated financial statements from the date of acquisition, were not material. Under the terms of the purchase agreement, additional purchase consideration of up to $7.0 million and $15.0 million, respectively, may be payable based on the income of Momentum Laser in the first and second years following the acquisition. Financing activities provided cash of $32.8 million for the nine-month period ended October 1, 2000, compared to cash provided of $104.7 million during the first nine months of 1999. The decrease in cash from financing activities principally resulted from higher cash expenditures for stock repurchases during the first nine months of 2000. During the nine months ended October 1, 2000, the Corporation repurchased 5,201,000 shares of its common stock at an aggregate cost of $191.9 million. During the same period in 1999, the Corporation repurchased 1,015,900 shares of its common stock at an aggregate cost of $53.3 million. The increased cash usage for share -21- repurchases was partially offset by lower cash expenditures for payments on long-term debt during the nine months ended October 1, 2000, compared to the corresponding period in 1999. At October 1, 2000, the Corporation had remaining authorization from its Board of Directors to repurchase an additional 2,249,595 shares of its common stock. On October 19, 2000, the Corporation's Board of Directors increased this authorization by three million shares. During the period from October 2, 2000, to October 29, 2000, the Corporation repurchased an additional 1,103,000 shares of its common stock at an aggregate cost of $35.2 million. Future share repurchases are anticipated. In addition to measuring its cash flow generation and usage based upon the operating, investing, and financing classifications included in the Consolidated Statement of Cash Flows, the Corporation also measures its free cash flow. Free cash flow, a measure employed by the financial community, is defined by the Corporation as cash flow from operating activities, less capital expenditures, plus proceeds from the disposal of assets (excluding proceeds from business sales). During the nine months ended October 1, 2000, the Corporation had negative free cash flow of $52.1 million compared to negative free cash flow of $75.1 million for the corresponding period in 1999. The variable rate debt to total debt ratio, after taking interest rate hedges into account, was 60% at October 1, 2000, compared to 52% at December 31, 1999. Average debt maturity was 4.7 years at October 1, 2000, compared to 6.2 years at December 31, 1999. Included in current maturities of long-term debt at October 1, 2000, are the Corporation's 6.625% notes in the amount of $208.7 million, which mature in November 2000. The Corporation intends to replace these notes with additional long-term financing. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q includes statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. By their nature, all forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons, including but not limited to: market acceptance of the new products introduced in 1999 and 2000 and scheduled for introduction in the balance of 2000; the level of sales generated from these new products relative to expectations, based on the existing investments in productive capacity and commitments of the Corporation to fund advertising and product promotions in connection with the introduction of these new products; the ability of the Corporation and its suppliers to meet scheduled timetables of new product introductions; unforeseen competitive pressure or other difficulties in maintaining mutually beneficial relationships with key distributors or penetrating new channels of distribution; adverse changes in currency exchange rates or raw material commodity prices, both in absolute terms and relative to competitors' risk profiles; delays in or unanticipated inefficiencies resulting from manufacturing and administrative reorganization actions in progress or contemplated by the strategic repositioning plan described in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999; the degree of working capital investment required to meet customer service -22- levels; economic uncertainty in Asia and Latin America; sluggish economic conditions in Europe; and economic slowing in North America. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required under this Item is contained in Item 7 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999, under the caption "Hedging Activities", and in Item 8 of that report in Notes 1 and 10 of Notes to Consolidated Financial Statements, and is incorporated by reference herein. -23- THE BLACK & DECKER CORPORATION PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Corporation is involved in various lawsuits in the ordinary course of business. The 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 is also involved in litigation and administrative proceedings involving employment matters and commercial disputes. Some of these lawsuits include claims for punitive as well as compensatory damages. The Corporation, using current product sales data and historical trends, actuarially calculates the estimate of its current exposure for product liability 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. 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 or has previously sold (on-site). For off-site claims, the Corporation makes an assessment of the cost involved based on environmental studies, prior experience at similar sites, and the experience of other named parties. The Corporation also considers the ability of other parties to share costs, the percentage of the Corporation's exposure relative to all other parties, and the effects of inflation on these estimated costs. For on-site matters associated with properties currently owned, an assessment is made as to whether an investigation and remediation would be required under applicable federal and state laws. For on-site matters associated with properties previously sold, the Corporation considers the terms of sale as well as applicable federal and state laws to determine if the Corporation has any remaining liability. If the Corporation is determined to have potential liability for properties currently owned or previously sold, an estimate is made of the total cost 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. As of October 1, 2000, the Corporation had no known probable but inestimable exposures for awards and assessments in connection with environmental matters and other litigation and administrative proceedings that could have a material effect on the Corporation. Management is of the opinion that the amounts accrued for awards or assessments in connection with the 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. -24- ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Settlements of capped forward purchase contracts resulted in the net issuance of 158,397 shares of common stock during the nine months ended October 1, 2000. The shares were issued to an investment banking firm in reliance upon the exemption from registration in Section 4(2) of the Securities Act of 1933. Reference is made to Note 9 of Notes to Consolidated Financial Statements included in Item 1 of Part I of this report for additional information on these contracts. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit No. Description 10(a) Form of Severance Benefits Agreement by and between the Corporation and approximately 11 of its key employees. 10(b) Severance Benefits Agreement, dated August 2, 2000, by and between the Corporation and Nolan D. Archibald. 10(c) Severance Benefits Agreement, dated August 2, 2000, by and between the Corporation and Charles E. Fenton. 10(d) Severance Benefits Agreement, dated August 2, 2000, by and between the Corporation and Paul A. Gustafson. 10(e) Severance Benefits Agreement, dated August 2, 2000, by and between the Corporation and Paul F. McBride. 10(f) Amendment No. 3 to The Black & Decker Supplemental Retirement Savings Plan dated as of July 20, 2000. 12 Computation of Ratios. 27 Financial Data Schedule. On July 24, 2000, the Corporation filed a Current Report on Form 8-K with the Commission. That Current Report on Form 8-K, filed pursuant to Item 5 of that Form, stated that, on July 24, 2000, the Corporation had reported its earnings for the three months ended July 2, 2000. The Corporation did not file any other reports on Form 8-K during the three-month period ended October 1, 2000. All other items were not applicable. -25- THE BLACK & DECKER CORPORATION S I G N A T U R E S Pursuant to the requirements 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 By /s/ MICHAEL D. MANGAN --------------------------------- Michael D. Mangan Senior Vice President and Chief Financial Officer Principal Accounting Officer By /s/ CHRISTINA M. MCMULLEN --------------------------------- Christina M. McMullen Vice President and Controller Date: November 3, 2000 EX-10 2 0002.txt EXHIBIT 10(A) Exhibit 10(a) -------- --, ---- - ------------------- The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 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 that 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, 2005; provided, however, that if a change in control of the Corporation shall have occurred prior to December 31, 2005, this Agreement shall continue in effect for a period of 36 months beyond the month in which the change in control of the Corporation occurred and then 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 giving you notice of termination, regardless 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 that would be reportable 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"), provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as that 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 that 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 of the Board; (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 that 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 the surviving entity outstanding immediately after the 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 the 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 failure resulting from your incapacity due to physical or mental illness or any 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) your willfully engaging in conduct that 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 that purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), the circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as those 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 office or job location immediately prior to the change in control of the Corporation, 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 that 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; and (v) Supplemental Executive Retirement Plan ("SERP"); 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 the plan and the 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 a 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) than those you enjoyed immediately prior to the change in control of the Corporation; (F) the failure by the Corporation to continue to provide to you 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 to you an automobile or allowance in lieu thereof, if an automobile or allowance in lieu thereof was provided to you at the time of the change in control of the Corporation, the taking of any action by the Corporation that would directly or indirectly materially reduce any of these 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 to you 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 that 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 in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the specific termination provision in this Agreement relied upon and that sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision 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 the 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 from the date that the Notice of Termination is given); provided that if within 15 days after Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving the 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 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 the notice is given in good faith and the party giving the notice pursues the resolution of the dispute with reasonable diligence. Notwithstanding the pendency of the dispute, the Corporation will continue to pay you your full compensation in effect when the Notice of Termination 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 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 the period, together with all amounts payable to you under any compensation plan of the Corporation during the 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 those 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 the 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 those 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, 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 2000 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 the 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 New York Stock Exchange ("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 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 the termination (including all legal fees and expenses, if any, incurred in contesting or disputing the 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 Internal Revenue Code (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") so that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and 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 other Total Payments. For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of the Excise Tax, (i) any other payments or benefits received or to be received by you in connection with a change in control of the Corporation or your termination of employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a change in control of the Corporation or any corporation affiliated (or which, as a result of the completion of a transaction causing a change in control of the Corporation, will become affiliated) with the Corporation within the meaning of Section 1504 of the Code) (together with the Contract Payments, the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you the Total Payments (in whole or in part) do not constitute parachute payments, or the 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 that could be obtained from deduction of the state and local taxes. If 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 the reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the 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 the repayment results in a reduction in Excise Tax or a federal and state and local income tax deduction) plus interest on the amount of the repayment at the rate provided in Section 1274(d) of the Code. If 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 the excess (plus any interest payable with respect to the excess) at the time that the amount of the 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 the payments cannot be finally determined on or before that day, the Corporation shall pay to you on that day an estimate, as determined in good faith by the Corporation, of the minimum amount of the payments and shall pay the remainder of the 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. If the amount of the estimated payments exceeds the amount subsequently determined to have been due, the 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 to you 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 (subject to Section 2.3 of that plan), the SERP, or any plan or agreement sponsored by the Corporation or any of its subsidiaries relating to retirement benefits. 5. Successors; Binding Agreement. (i) The Corporation will require any successor to all or substantially all of the business or assets of the Corporation (whether direct or indirect, by purchase, merger, share exchange, consolidation or otherwise) 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 the succession had not taken place. Failure of the Corporation to obtain the assumption and agreement prior to the effectiveness of the 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 the 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 or assets as described above that 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 representatives, 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) If you are employed by a subsidiary of the Corporation, wherever in this Agreement reference is made to the "Corporation," unless the context otherwise requires, the reference shall also include the subsidiary. The Corporation shall cause the subsidiary to carry out the terms of this Agreement insofar as they relate to the employment relationship between you and the subsidiary, and the Corporation shall indemnify you and save you harmless from and against all liability and damage that you may suffer as a consequence of the subsidiary's failure to perform and carry out such terms. Wherever reference is made to any benefit program of the Corporation, the reference shall include, where appropriate, the corresponding benefit program of the subsidiary if you were a participant in the 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 a notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless the waiver, modification or discharge is agreed to in writing and signed by you and an officer of the Corporation specifically designated by the Board. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the parties hereto in respect of the matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement are superseded and cancelled by this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland, without regard to its principles of conflicts of laws. 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 and in accordance with the Commercial Arbitration 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 you agree to the terms of this letter, please sign and return to the Corporation the enclosed copy, 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 ________ ____ _________________________ EX-10 3 0003.txt EXHIBIT 10(B) Exhibit 10(b) August 2, 2000 Mr. Nolan D. Archibald The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 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 that 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, 2005; provided, however, that if a change in control of the Corporation shall have occurred prior to December 31, 2005, this Agreement shall continue in effect for a period of 36 months beyond the month in which the change in control of the Corporation occurred and then 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 giving you notice of termination, regardless 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 that would be reportable 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"), provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as that 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 that 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 of the Board; (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 that 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 the surviving entity outstanding immediately after the 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 the 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 failure resulting from your incapacity due to physical or mental illness or any 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) your willfully engaging in conduct that 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 that purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), the circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as those 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, 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 miles of your office or job location immediately prior to the change in control of the Corporation, 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 that 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; and (v) Supplemental Executive Retirement Plan ("SERP"); 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 the plan and the 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 a 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) than those you enjoyed immediately prior to the change in control of the Corporation; (F) the failure by the Corporation to continue to provide to you 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 to you an automobile or allowance in lieu thereof, if an automobile or allowance in lieu thereof was provided to you at the time of the change in control of the Corporation, the taking of any action by the Corporation that would directly or indirectly materially reduce any of these 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 to you 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 that 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 in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the specific termination provision in this Agreement relied upon and that sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision 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 the 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 from the date that the Notice of Termination is given); provided that if within 15 days after Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving the 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 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 the notice is given in good faith and the party giving the notice pursues the resolution of the dispute with reasonable diligence. Notwithstanding the pendency of the dispute, the Corporation will continue to pay you your full compensation in effect when the Notice of Termination 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 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 the period, together with all amounts payable to you under any compensation plan of the Corporation during the 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 those 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 the 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 those 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, 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 2000 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 the 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 New York Stock Exchange ("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 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 the termination (including all legal fees and expenses, if any, incurred in contesting or disputing the 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 Internal Revenue Code (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") so that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and 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 other Total Payments. For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of the Excise Tax, (i) any other payments or benefits received or to be received by you in connection with a change in control of the Corporation or your termination of employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a change in control of the Corporation or any corporation affiliated (or which, as a result of the completion of a transaction causing a change in control of the Corporation, will become affiliated) with the Corporation within the meaning of Section 1504 of the Code) (together with the Contract Payments, the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you the Total Payments (in whole or in part) do not constitute parachute payments, or the 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 that could be obtained from deduction of the state and local taxes. If 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 the reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the 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 the repayment results in a reduction in Excise Tax or a federal and state and local income tax deduction) plus interest on the amount of the repayment at the rate provided in Section 1274(d) of the Code. If 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 the excess (plus any interest payable with respect to the excess) at the time that the amount of the 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 the payments cannot be finally determined on or before that day, the Corporation shall pay to you on that day an estimate, as determined in good faith by the Corporation, of the minimum amount of the payments and shall pay the remainder of the 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. If the amount of the estimated payments exceeds the amount subsequently determined to have been due, the 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 to you 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 (subject to Section 2.3 of that plan), the SERP, or any plan or agreement sponsored by the Corporation or any of its subsidiaries relating to retirement benefits. 5. Successors; Binding Agreement. (i) The Corporation will require any successor to all or substantially all of the business or assets of the Corporation (whether direct or indirect, by purchase, merger, share exchange, consolidation or otherwise) 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 the succession had not taken place. Failure of the Corporation to obtain the assumption and agreement prior to the effectiveness of the 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 the 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 or assets as described above that 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 representatives, 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) If you are employed by a subsidiary of the Corporation, wherever in this Agreement reference is made to the "Corporation," unless the context otherwise requires, the reference shall also include the subsidiary. The Corporation shall cause the subsidiary to carry out the terms of this Agreement insofar as they relate to the employment relationship between you and the subsidiary, and the Corporation shall indemnify you and save you harmless from and against all liability and damage that you may suffer as a consequence of the subsidiary's failure to perform and carry out such terms. Wherever reference is made to any benefit program of the Corporation, the reference shall include, where appropriate, the corresponding benefit program of the subsidiary if you were a participant in the 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 a notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless the waiver, modification or discharge is agreed to in writing and signed by you and an officer of the Corporation specifically designated by the Board. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the parties hereto in respect of the matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement are superseded and cancelled by this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland, without regard to its principles of conflicts of laws. 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 and in accordance with the Commercial Arbitration 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 you agree to the terms of this letter, please sign and return to the Corporation the enclosed copy, which will then constitute our agreement on this subject. Sincerely, THE BLACK & DECKER CORPORATION By: /s/ MARK H. WILLES ---------------------------------------- Mark H. Willes Chairman of the Organization Committee Agreed to as of the 2nd day of August 2000 /s/ NOLAN D. ARCHIBALD - ---------------------------- Nolan D. Archibald EX-10 4 0004.txt EXHIBIT 10(C) Exhibit 10(c) August 2, 2000 Mr. Charles E. Fenton The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 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 that 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, 2005; provided, however, that if a change in control of the Corporation shall have occurred prior to December 31, 2005, this Agreement shall continue in effect for a period of 36 months beyond the month in which the change in control of the Corporation occurred and then 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 giving you notice of termination, regardless 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 that would be reportable 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"), provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as that 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 that 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 of the Board; (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 that 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 the surviving entity outstanding immediately after the 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 the 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 failure resulting from your incapacity due to physical or mental illness or any 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) your willfully engaging in conduct that 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 that purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), the circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as those 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 office or job location immediately prior to the change in control of the Corporation, 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 that 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; and (v) Supplemental Executive Retirement Plan ("SERP"); 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 the plan and the 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 a 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) than those you enjoyed immediately prior to the change in control of the Corporation; (F) the failure by the Corporation to continue to provide to you 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 to you an automobile or allowance in lieu thereof, if an automobile or allowance in lieu thereof was provided to you at the time of the change in control of the Corporation, the taking of any action by the Corporation that would directly or indirectly materially reduce any of these 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 to you 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 that 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 in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the specific termination provision in this Agreement relied upon and that sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision 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 the 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 from the date that the Notice of Termination is given); provided that if within 15 days after Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving the 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 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 the notice is given in good faith and the party giving the notice pursues the resolution of the dispute with reasonable diligence. Notwithstanding the pendency of the dispute, the Corporation will continue to pay you your full compensation in effect when the Notice of Termination 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 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 the period, together with all amounts payable to you under any compensation plan of the Corporation during the 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 those 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 the 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 those 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, 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 2000 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 the 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 New York Stock Exchange ("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 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 the termination (including all legal fees and expenses, if any, incurred in contesting or disputing the 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 Internal Revenue Code (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") so that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and 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 other Total Payments. For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of the Excise Tax, (i) any other payments or benefits received or to be received by you in connection with a change in control of the Corporation or your termination of employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a change in control of the Corporation or any corporation affiliated (or which, as a result of the completion of a transaction causing a change in control of the Corporation, will become affiliated) with the Corporation within the meaning of Section 1504 of the Code) (together with the Contract Payments, the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you the Total Payments (in whole or in part) do not constitute parachute payments, or the 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 that could be obtained from deduction of the state and local taxes. If 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 the reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the 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 the repayment results in a reduction in Excise Tax or a federal and state and local income tax deduction) plus interest on the amount of the repayment at the rate provided in Section 1274(d) of the Code. If 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 the excess (plus any interest payable with respect to the excess) at the time that the amount of the 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 the payments cannot be finally determined on or before that day, the Corporation shall pay to you on that day an estimate, as determined in good faith by the Corporation, of the minimum amount of the payments and shall pay the remainder of the 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. If the amount of the estimated payments exceeds the amount subsequently determined to have been due, the 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 to you 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 (subject to Section 2.3 of that plan), the SERP, or any plan or agreement sponsored by the Corporation or any of its subsidiaries relating to retirement benefits. 5. Successors; Binding Agreement. (i) The Corporation will require any successor to all or substantially all of the business or assets of the Corporation (whether direct or indirect, by purchase, merger, share exchange, consolidation or otherwise) 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 the succession had not taken place. Failure of the Corporation to obtain the assumption and agreement prior to the effectiveness of the 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 the 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 or assets as described above that 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 representatives, 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) If you are employed by a subsidiary of the Corporation, wherever in this Agreement reference is made to the "Corporation," unless the context otherwise requires, the reference shall also include the subsidiary. The Corporation shall cause the subsidiary to carry out the terms of this Agreement insofar as they relate to the employment relationship between you and the subsidiary, and the Corporation shall indemnify you and save you harmless from and against all liability and damage that you may suffer as a consequence of the subsidiary's failure to perform and carry out such terms. Wherever reference is made to any benefit program of the Corporation, the reference shall include, where appropriate, the corresponding benefit program of the subsidiary if you were a participant in the 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 a notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless the waiver, modification or discharge is agreed to in writing and signed by you and an officer of the Corporation specifically designated by the Board. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the parties hereto in respect of the matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement are superseded and cancelled by this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland, without regard to its principles of conflicts of laws. 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 and in accordance with the Commercial Arbitration 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 you agree to the terms of this letter, please sign and return to the Corporation the enclosed copy, 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 2nd day of August 2000 /s/ CHARLES E. FENTON - ------------------------------------- Charles E. Fenton EX-10 5 0005.txt EXHIBIT 10(D) Exhibit 10(d) August 2, 2000 Mr. Paul A. Gustafson The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Dear Paul: 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 that 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, 2005; provided, however, that if a change in control of the Corporation shall have occurred prior to December 31, 2005, this Agreement shall continue in effect for a period of 36 months beyond the month in which the change in control of the Corporation occurred and then 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 giving you notice of termination, regardless 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 that would be reportable 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"), provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as that 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 that 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 of the Board; (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 that 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 the surviving entity outstanding immediately after the 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 the 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 failure resulting from your incapacity due to physical or mental illness or any 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) your willfully engaging in conduct that 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 that purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), the circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as those 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 office or job location immediately prior to the change in control of the Corporation, 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 that 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; and (v) Supplemental Executive Retirement Plan ("SERP"); 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 the plan and the 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 a 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) than those you enjoyed immediately prior to the change in control of the Corporation; (F) the failure by the Corporation to continue to provide to you 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 to you an automobile or allowance in lieu thereof, if an automobile or allowance in lieu thereof was provided to you at the time of the change in control of the Corporation, the taking of any action by the Corporation that would directly or indirectly materially reduce any of these 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 to you 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 that 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 in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the specific termination provision in this Agreement relied upon and that sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision 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 the 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 from the date that the Notice of Termination is given); provided that if within 15 days after Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving the 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 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 the notice is given in good faith and the party giving the notice pursues the resolution of the dispute with reasonable diligence. Notwithstanding the pendency of the dispute, the Corporation will continue to pay you your full compensation in effect when the Notice of Termination 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 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 the period, together with all amounts payable to you under any compensation plan of the Corporation during the 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 those 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 the 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 those 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, 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 2000 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 the 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 New York Stock Exchange ("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 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 the termination (including all legal fees and expenses, if any, incurred in contesting or disputing the 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 Internal Revenue Code (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") so that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and 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 other Total Payments. For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of the Excise Tax, (i) any other payments or benefits received or to be received by you in connection with a change in control of the Corporation or your termination of employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a change in control of the Corporation or any corporation affiliated (or which, as a result of the completion of a transaction causing a change in control of the Corporation, will become affiliated) with the Corporation within the meaning of Section 1504 of the Code) (together with the Contract Payments, the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you the Total Payments (in whole or in part) do not constitute parachute payments, or the 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 that could be obtained from deduction of the state and local taxes. If 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 the reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the 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 the repayment results in a reduction in Excise Tax or a federal and state and local income tax deduction) plus interest on the amount of the repayment at the rate provided in Section 1274(d) of the Code. If 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 the excess (plus any interest payable with respect to the excess) at the time that the amount of the 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 the payments cannot be finally determined on or before that day, the Corporation shall pay to you on that day an estimate, as determined in good faith by the Corporation, of the minimum amount of the payments and shall pay the remainder of the 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. If the amount of the estimated payments exceeds the amount subsequently determined to have been due, the 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 to you 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 (subject to Section 2.3 of that plan), the SERP, or any plan or agreement sponsored by the Corporation or any of its subsidiaries relating to retirement benefits. 5. Successors; Binding Agreement. (i) The Corporation will require any successor to all or substantially all of the business or assets of the Corporation (whether direct or indirect, by purchase, merger, share exchange, consolidation or otherwise) 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 the succession had not taken place. Failure of the Corporation to obtain the assumption and agreement prior to the effectiveness of the 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 the 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 or assets as described above that 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 representatives, 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) If you are employed by a subsidiary of the Corporation, wherever in this Agreement reference is made to the "Corporation," unless the context otherwise requires, the reference shall also include the subsidiary. The Corporation shall cause the subsidiary to carry out the terms of this Agreement insofar as they relate to the employment relationship between you and the subsidiary, and the Corporation shall indemnify you and save you harmless from and against all liability and damage that you may suffer as a consequence of the subsidiary's failure to perform and carry out such terms. Wherever reference is made to any benefit program of the Corporation, the reference shall include, where appropriate, the corresponding benefit program of the subsidiary if you were a participant in the 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 a notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless the waiver, modification or discharge is agreed to in writing and signed by you and an officer of the Corporation specifically designated by the Board. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the parties hereto in respect of the matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement are superseded and cancelled by this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland, without regard to its principles of conflicts of laws. 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 and in accordance with the Commercial Arbitration 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 you agree to the terms of this letter, please sign and return to the Corporation the enclosed copy, 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 15th day of August 2000 /s/ PAUL A. GUSTAFSON - ------------------------------------- Paul A. Gustafson EX-10 6 0006.txt EXHIBIT 10(E) Exhibit 10(e) August 2, 2000 Mr. Paul F. McBride The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Dear Paul: 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 that 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, 2005; provided, however, that if a change in control of the Corporation shall have occurred prior to December 31, 2005, this Agreement shall continue in effect for a period of 36 months beyond the month in which the change in control of the Corporation occurred and then 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 giving you notice of termination, regardless 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 that would be reportable 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"), provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as that 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 that 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 of the Board; (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 that 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 the surviving entity outstanding immediately after the 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 the 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 failure resulting from your incapacity due to physical or mental illness or any 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) your willfully engaging in conduct that 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 that purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Corporation of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), the circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as those 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 office or job location immediately prior to the change in control of the Corporation, 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 that 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; and (v) Supplemental Executive Retirement Plan ("SERP"); 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 the plan and the 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 a 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) than those you enjoyed immediately prior to the change in control of the Corporation; (F) the failure by the Corporation to continue to provide to you 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 to you an automobile or allowance in lieu thereof, if an automobile or allowance in lieu thereof was provided to you at the time of the change in control of the Corporation, the taking of any action by the Corporation that would directly or indirectly materially reduce any of these 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 to you 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 that 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 in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that indicates the specific termination provision in this Agreement relied upon and that sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision 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 the 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 from the date that the Notice of Termination is given); provided that if within 15 days after Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving the 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 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 the notice is given in good faith and the party giving the notice pursues the resolution of the dispute with reasonable diligence. Notwithstanding the pendency of the dispute, the Corporation will continue to pay you your full compensation in effect when the Notice of Termination 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 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 the period, together with all amounts payable to you under any compensation plan of the Corporation during the 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 those 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 the 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 those 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, 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 2000 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 the 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 New York Stock Exchange ("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 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 the termination (including all legal fees and expenses, if any, incurred in contesting or disputing the 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 Internal Revenue Code (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") so that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and 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 other Total Payments. For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of the Excise Tax, (i) any other payments or benefits received or to be received by you in connection with a change in control of the Corporation or your termination of employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, its successors, any person whose actions result in a change in control of the Corporation or any corporation affiliated (or which, as a result of the completion of a transaction causing a change in control of the Corporation, will become affiliated) with the Corporation within the meaning of Section 1504 of the Code) (together with the Contract Payments, the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you the Total Payments (in whole or in part) do not constitute parachute payments, or the 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 that could be obtained from deduction of the state and local taxes. If 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 the reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to the 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 the repayment results in a reduction in Excise Tax or a federal and state and local income tax deduction) plus interest on the amount of the repayment at the rate provided in Section 1274(d) of the Code. If 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 the excess (plus any interest payable with respect to the excess) at the time that the amount of the 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 the payments cannot be finally determined on or before that day, the Corporation shall pay to you on that day an estimate, as determined in good faith by the Corporation, of the minimum amount of the payments and shall pay the remainder of the 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. If the amount of the estimated payments exceeds the amount subsequently determined to have been due, the 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 to you 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 (subject to Section 2.3 of that plan), the SERP, or any plan or agreement sponsored by the Corporation or any of its subsidiaries relating to retirement benefits. 5. Successors; Binding Agreement. (i) The Corporation will require any successor to all or substantially all of the business or assets of the Corporation (whether direct or indirect, by purchase, merger, share exchange, consolidation or otherwise) 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 the succession had not taken place. Failure of the Corporation to obtain the assumption and agreement prior to the effectiveness of the 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 the 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 or assets as described above that 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 representatives, 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) If you are employed by a subsidiary of the Corporation, wherever in this Agreement reference is made to the "Corporation," unless the context otherwise requires, the reference shall also include the subsidiary. The Corporation shall cause the subsidiary to carry out the terms of this Agreement insofar as they relate to the employment relationship between you and the subsidiary, and the Corporation shall indemnify you and save you harmless from and against all liability and damage that you may suffer as a consequence of the subsidiary's failure to perform and carry out such terms. Wherever reference is made to any benefit program of the Corporation, the reference shall include, where appropriate, the corresponding benefit program of the subsidiary if you were a participant in the 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 a notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless the waiver, modification or discharge is agreed to in writing and signed by you and an officer of the Corporation specifically designated by the Board. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the parties hereto in respect of the matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement are superseded and cancelled by this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland, without regard to its principles of conflicts of laws. 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 and in accordance with the Commercial Arbitration 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 you agree to the terms of this letter, please sign and return to the Corporation the enclosed copy, 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 28th day of August 2000 /s/ PAUL F. MCBRIDE ------------------------------------ Paul F. McBride EX-10 7 0007.txt EXHIBIT 10(F) Exhibit 10(f) THIRD AMENDMENT TO THE BLACK & DECKER SUPPLEMENTAL RETIREMENT SAVINGS PLAN Pursuant to the powers of amendment reserved under Section 9.1 of The Black & Decker Supplemental Retirement Savings Plan (the "Plan"), The Black & Decker Corporation (the "Company"), hereby amends the Plan as follows, effective as of July 20, 2000. FIRST AND ONLY CHANGE Section 4.5 of the Plan is amended in its entirety to read as follows: 4.5 DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to such limitations as may from time to time be required by law, imposed by the Committee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be established from time to time by the Plan Manager, each Participant may communicate to the Plan Manager a direction as to how his or her Plan Account should be deemed to be invested among such categories of deemed investments as may be made available by the Committee hereunder. The Plan Manager has discretion to develop rules and regulations to administer such investment elections and transfers of investments, including establishing dollar or percentage increments of the Plan Accounts for Participants to invest, and limits on the value of Plan Accounts that Participants may invest in each deemed investment category or transfer between each deemed investment category. All amounts credited to the Participant's Account shall be deemed to be invested in accordance with the then effective deemed investment direction; and as of the effective date of any new deemed investment direction, all or a portion of the Participant's Account at that date shall be reallocated among the designated deemed investment categories in the manner specified in the new deemed investment direction unless and until a subsequent deemed investment direction shall be delivered and become effective. An election concerning deemed investment choices shall continue indefinitely as provided in the election form or other procedure specified by the Committee. If the Plan Manager receives an initial or revised deemed investment direction which it deems to be incomplete, unclear or improper, the Participant's investment direction then in effect shall remain in effect (or, in the case of a deficiency in an initial deemed investment direction, the Participant shall be deemed to have delivered no deemed investment direction) until the next Designation Date, unless the Committee provides for, and permits the application of, corrective action prior thereto. If the Plan Manager possesses (or is deemed to possess as provided above) at any time directions as to the deemed investment of less than all of a Participant's Account, the Participant shall be deemed to have directed that the undesignated portion of the Account be deemed to be invested in a money market, fixed income or similar fund made available under the Plan as determined by the Committee in its sole and absolute discretion. Each Participant hereunder, as a condition to his or her participation hereunder, agrees to indemnify and hold harmless the Plan Manager, the Committee and their agents and representatives from any losses or damages of any kind relating to the deemed investment of the Participant's Account hereunder. Each reference in this Section to a Participant shall be deemed to include, where applicable, a reference to a Beneficiary. The Plan, as amended by the foregoing change, is hereby ratified and confirmed in all respects. IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officers on this 20th day of July, 2000. WITNESS/ATTEST: THE BLACK & DECKER CORPORATION ______________________________ By: ________________________________ EX-12 8 0008.txt EXHIBIT 12 EXHIBIT 12
THE BLACK & DECKER CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Millions of Dollars Except Ratios) Three Months Ended Nine Months Ended October 1, 2000 October 1, 2000 ------------------ ----------------- EARNINGS: Earnings before income taxes $ 123.3 $ 329.3 Interest expense 37.2 108.3 Portion of rent expense representative of an interest factor 6.9 20.7 -------- -------- Adjusted earnings before taxes and fixed charges $ 167.4 $ 458.3 ======== ======== FIXED CHARGES: Interest expense $ 37.2 $ 108.3 Portion of rent expense representative of an interest factor 6.9 20.7 -------- -------- Total fixed charges $ 44.1 $ 129.0 ======== ======== RATIO OF EARNINGS TO FIXED CHARGES 3.80 3.55 ======== ========
EX-27 9 0009.txt EXHIBIT 27
5 This schedule contains financial information extracted from the Corporation's unaudited interim financial statements as of and for the nine months ended October 1, 2000, and the accompanying footnotes and is qualified in its entirety by the reference to such financial statements. 0000012355 THE BLACK & DECKER CORPORATION 1,000 9-MOS DEC-31-2000 OCT-01-2000 138,200 0 859,900 0 906,600 2,147,900 749,000 0 4,232,200 1,871,800 806,000 0 0 41,200 727,800 4,232,200 3,297,200 3,297,200 2,081,600 2,894,800 0 0 108,300 329,300 99,800 229,500 0 0 0 229,500 2.71 2.69 Represents net trade receivables. Represents net property, plant, and equipment. Includes a pre-tax gain on the sale of a business in the amount of $20,100. Includes tax expense of $7,000 resulting from a gain on the sale of a business. Includes an after-tax gain on the sale of a business in the amount of $13,100.
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