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 September 28, 2008
or
o 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 of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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||
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701
East Joppa Road
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|||
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Towson,
Maryland
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21286
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||
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(Address
of principal executive offices)
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(Zip
Code)
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||
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(410)
716-3900
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|||
|
(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 o NO
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer x
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Accelerated
filer o
|
Non-accelerated
filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o
YES x NO
The
number of shares of Common Stock outstanding as of October 24, 2008:
60,093,046
INDEX
– FORM 10-Q
September
28, 2008
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Page
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PART
I – FINANCIAL INFORMATION
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||
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Item
1. Financial Statements
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3
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4
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5
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6
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7
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21
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34
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34
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PART
II – OTHER INFORMATION
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35
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35
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36
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37
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SIGNATURES
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38
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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
|
|||||||||||||||
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September
28,
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September
30,
|
September
28,
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September
30,
|
|||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Sales
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$ | 1,570.8 | $ | 1,633.6 | $ | 4,708.3 | $ | 4,910.7 | ||||||||
|
Cost
of goods sold
|
1,061.9 | 1,077.7 | 3,144.7 | 3,206.3 | ||||||||||||
|
Selling,
general, and administrative
expenses
|
373.4 | 391.4 | 1,167.5 | 1,183.7 | ||||||||||||
|
Restructuring
and exit costs
|
15.6 | — | 33.9 | — | ||||||||||||
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Operating
Income
|
119.9 | 164.5 | 362.2 | 520.7 | ||||||||||||
|
Interest
expense (net of interest
income)
|
13.4 | 19.9 | 44.7 | 61.4 | ||||||||||||
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Other
(income) expense
|
(3.0 | ) | .9 | (2.6 | ) | 2.2 | ||||||||||
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Earnings
Before Income Taxes
|
109.5 | 143.7 | 320.1 | 457.1 | ||||||||||||
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Income
taxes
|
23.7 | 39.1 | 70.2 | 126.4 | ||||||||||||
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Net
Earnings
|
$ | 85.8 | $ | 104.6 | $ | 249.9 | $ | 330.7 | ||||||||
|
Net
Earnings Per Common Share –
Basic
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$ | 1.45 | $ | 1.63 | $ | 4.17 | $ | 5.09 | ||||||||
|
Shares
Used in Computing Basic
Earnings
Per Share (in Millions)
|
59.2 | 64.2 | 59.9 | 65.0 | ||||||||||||
|
Net
Earnings Per Common Share –
Assuming
Dilution
|
$ | 1.42 | $ | 1.59 | $ | 4.09 | $ | 4.95 | ||||||||
|
Shares
Used in Computing Diluted
Earnings
Per Share (in Millions)
|
60.4 | 65.8 | 61.2 | 66.8 | ||||||||||||
|
Dividends
Per Common Share
|
$ | .42 | $ | .42 | $ | 1.26 | $ | 1.26 | ||||||||
See
Notes to Consolidated Financial Statements (Unaudited).
CONSOLIDATED BALANCE SHEET (Unaudited)
The Black
& Decker Corporation and Subsidiaries
(Dollars
in Millions Except Per Share Amount)
|
September
28,
2008
|
December
31,
2007
|
|||||||
|
Assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 340.3 | $ | 254.7 | ||||
|
Trade
receivables
|
1,220.8 | 1,109.4 | ||||||
|
Inventories
|
1,103.7 | 1,145.8 | ||||||
|
Other
current assets
|
377.5 | 329.6 | ||||||
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Total
Current Assets
|
3,042.3 | 2,839.5 | ||||||
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Property,
Plant, and Equipment
|
553.3 | 596.2 | ||||||
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Goodwill
|
1,222.2 | 1,212.9 | ||||||
|
Other
Assets
|
749.2 | 762.3 | ||||||
| $ | 5,567.0 | $ | 5,410.9 | |||||
|
Liabilities
and Stockholders’ Equity
|
||||||||
|
Short-term
borrowings
|
$ | 220.6 | $ | 329.7 | ||||
|
Current
maturities of long-term debt
|
.2 | .2 | ||||||
|
Trade
accounts payable
|
592.8 | 504.6 | ||||||
|
Other
current liabilities
|
1,032.9 | 1,046.3 | ||||||
|
Total
Current Liabilities
|
1,846.5 | 1,880.8 | ||||||
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Long-Term
Debt
|
1,405.3 | 1,179.1 | ||||||
|
Postretirement
Benefits
|
304.2 | 311.3 | ||||||
|
Other
Long-Term Liabilities
|
532.6 | 581.0 | ||||||
|
Stockholders’
Equity
|
||||||||
|
Common
stock, par value $.50 per share
|
30.1 | 31.5 | ||||||
|
Capital
in excess of par value
|
5.8 | 27.0 | ||||||
|
Retained
earnings
|
1,523.5 | 1,498.5 | ||||||
|
Accumulated
other comprehensive income (loss)
|
(81.0 | ) | (98.3 | ) | ||||
|
Total
Stockholders’ Equity
|
1,478.4 | 1,458.7 | ||||||
| $ | 5,567.0 | $ | 5,410.9 | |||||
See
Notes to Consolidated Financial Statements (Unaudited).
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
The Black
& Decker Corporation and Subsidiaries
(Dollars
in Millions Except Per Share Data)
|
Outstanding
Common
Shares
|
Par
Value
|
Capital
in
Excess
of
Par
Value
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Total
Stockholders’
Equity
|
|||||||||||||||||||
|
Balance
at December 31, 2006
|
66,734,843 | $ | 33.4 | $ | — | $ | 1,473.0 | $ | (342.8 | ) | $ | 1,163.6 | ||||||||||||
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Comprehensive
income (loss):
|
||||||||||||||||||||||||
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Net
earnings
|
— | — | — | 330.7 | — | 330.7 | ||||||||||||||||||
|
Net
loss on derivative
instruments
(net of tax)
|
— | — | — | — | (27.0 | ) | (27.0 | ) | ||||||||||||||||
|
Foreign
currency translation
adjustments,
less effect of
hedging
activities (net of tax)
|
— | — | — | — | 38.1 | 38.1 | ||||||||||||||||||
|
Amortization
of actuarial losses
and
prior service cost (net of tax)
|
— | — | — | — | 19.3 | 19.3 | ||||||||||||||||||
|
Comprehensive
income
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— | — | — | 330.7 | 30.4 | 361.1 | ||||||||||||||||||
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Cumulative
effect of adopting
FASB
Interpretation No. 48
|
— | — | — | (7.3 | ) | — | (7.3 | ) | ||||||||||||||||
|
Cash
dividends ($1.26 per share)
|
— | — | — | (82.1 | ) | — | (82.1 | ) | ||||||||||||||||
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Common
stock issued under
stock-based
plans (net of
forfeitures)
|
1,276,751 | .6 | 81.9 | — | — | 82.5 | ||||||||||||||||||
|
Purchase
and retirement of
common
stock
|
(5,475,803 | ) | (2.7 | ) | (81.9 | ) | (376.7 | ) | — | (461.3 | ) | |||||||||||||
|
Balance
at September 30, 2007
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62,535,791 | $ | 31.3 | $ | — | $ | 1,337.6 | $ | (312.4 | ) | $ | 1,056.5 | ||||||||||||
|
Outstanding
Common
Shares
|
Par
Value
|
Capital
in
Excess
of
Par
Value
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Total
Stockholders’
Equity
|
|||||||||||||||||||
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Balance
at December 31, 2007
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62,923,723 | $ | 31.5 | $ | 27.0 | $ | 1,498.5 | $ | (98.3 | ) | $ | 1,458.7 | ||||||||||||
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Comprehensive
income (loss):
|
||||||||||||||||||||||||
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Net
earnings
|
— | — | — | 249.9 | — | 249.9 | ||||||||||||||||||
|
Net
gain on derivative
instruments
(net of tax)
|
— | — | — | — | 40.8 | 40.8 | ||||||||||||||||||
|
Foreign
currency translation
adjustments,
less effect of
hedging
activities (net of tax)
|
— | — | — | — | (34.2 | ) | (34.2 | ) | ||||||||||||||||
|
Amortization
of actuarial losses
and
prior service cost (net of tax)
|
— | — | — | — | 10.7 | 10.7 | ||||||||||||||||||
|
Comprehensive
income
|
— | — | — | 249.9 | 17.3 | 267.2 | ||||||||||||||||||
|
Cash
dividends ($1.26 per share)
|
— | — | — | (76.5 | ) | — | (76.5 | ) | ||||||||||||||||
|
Common
stock issued under
stock-based
plans (net of
forfeitures)
|
305,122 | .2 | 31.1 | — | — | 31.3 | ||||||||||||||||||
|
Purchase
and retirement of
common
stock
|
(3,136,382 | ) | (1.6 | ) | (52.3 | ) | (148.4 | ) | — | (202.3 | ) | |||||||||||||
|
Balance
at September 28, 2008
|
60,092,463 | $ | 30.1 | $ | 5.8 | $ | 1,523.5 | $ | (81.0 | ) | $ | 1,478.4 | ||||||||||||
See
Notes to Consolidated Financial Statements (Unaudited).
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
The Black
& Decker Corporation and Subsidiaries
|
(Dollars
in Millions)
|
||||||||
|
Nine
Months Ended
|
||||||||
|
September
28,
2008
|
September
30,
2007
|
|||||||
|
Operating
Activities
|
||||||||
|
Net
earnings
|
$ | 249.9 | $ | 330.7 | ||||
|
Adjustments
to reconcile net earnings to cash flow from
operating
activities:
|
||||||||
|
Non-cash
charges and credits:
|
||||||||
|
Depreciation
and amortization
|
104.7 | 109.3 | ||||||
|
Stock-based
compensation
|
20.9 | 20.5 | ||||||
|
Amortization
of actuarial losses and
prior
service cost
|
10.7 | 19.3 | ||||||
|
Restructuring
and exit costs
|
33.9 | — | ||||||
|
Other
|
.2 | (.6 | ) | |||||
|
Changes
in selected working capital items:
|
||||||||
|
Trade
receivables
|
(112.1 | ) | (70.9 | ) | ||||
|
Inventories
|
37.6 | (167.3 | ) | |||||
|
Trade
accounts payable
|
87.7 | 190.0 | ||||||
|
Other
current liabilities
|
(64.7 | ) | 29.0 | |||||
|
Restructuring
spending
|
(15.4 | ) | (.8 | ) | ||||
|
Other
assets and liabilities
|
(37.9 | ) | 25.6 | |||||
|
Cash
Flow From Operating Activities
|
315.5 | 484.8 | ||||||
|
Investing
Activities
|
||||||||
|
Capital
expenditures
|
(77.6 | ) | (75.4 | ) | ||||
|
Proceeds
from disposal of assets
|
20.2 | 4.0 | ||||||
|
Purchase
of business, net of cash acquired
|
(23.8 | ) | — | |||||
|
Cash
inflow from hedging activities
|
40.3 | — | ||||||
|
Cash
outflow from hedging activities
|
(29.7 | ) | (47.4 | ) | ||||
|
Other
investing activities
|
— | (1.0 | ) | |||||
|
Cash
Flow From Investing Activities
|
(70.6 | ) | (119.8 | ) | ||||
|
Financing
Activities
|
||||||||
|
Net
(decrease) increase in short-term borrowings
|
(108.7 | ) | 250.3 | |||||
|
Proceeds
from issuance of long-term debt (net of debt
issue
costs of $.3)
|
224.7 | — | ||||||
|
Payments
on long-term debt
|
(.1 | ) | (150.2 | ) | ||||
|
Purchase
of common stock
|
(202.3 | ) | (461.3 | ) | ||||
|
Issuance
of common stock
|
8.8 | 62.0 | ||||||
|
Cash
dividends
|
(76.5 | ) | (82.1 | ) | ||||
|
Cash
Flow From Financing Activities
|
(154.1 | ) | (381.3 | ) | ||||
|
Effect
of exchange rate changes on cash
|
(5.2 | ) | 5.1 | |||||
|
Increase
(Decrease) In Cash And Cash Equivalents
|
85.6 | (11.2 | ) | |||||
|
Cash
and cash equivalents at beginning of period
|
254.7 | 233.3 | ||||||
|
Cash
And Cash Equivalents At End Of Period
|
$ | 340.3 | $ | 222.1 | ||||
See
Notes to Consolidated Financial Statements (Unaudited).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Black
& Decker Corporation and Subsidiaries
Note
1: Accounting Policies
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of The Black &
Decker Corporation (collectively with its subsidiaries, the Corporation) have
been prepared in accordance with the instructions to Form 10-Q and do not
include all the information and notes required by accounting principles
generally accepted in the United States 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 September 28, 2008, 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, 2007.
Comprehensive
Income
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 September 28, 2008, and September 30, 2007, the
Corporation has presented comprehensive income in the accompanying Consolidated
Statement of Stockholders’ Equity. Comprehensive income for the three months
ended September 28, 2008, and September 30, 2007, was $51.6 million
and $99.5 million, respectively.
Adoption
of New Accounting Standard
In
September 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
157, Fair Value
Measurements. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value measurements.
This statement clarifies how to measure fair value as permitted under other
accounting pronouncements, but does not require any new fair value measurements.
In February 2008, the FASB adopted a one-year deferral of SFAS No. 157 for
non-financial assets and liabilities, except for those that are recognized or
disclosed at fair value in the financial statements on at least an annual
basis.
The
Corporation adopted SFAS No. 157 effective January 1, 2008, for measuring
financial assets and financial liabilities. That adoption did not have a
material impact on the Corporation’s earnings or financial position. The
Corporation will be required to adopt the measurement and disclosure
requirements of SFAS No. 157 for non-financial assets and liabilities as of
January 1, 2009. The Corporation is currently evaluating the impact of its
adoption of SFAS No. 157 for non-financial assets and liabilities and has not
determined the effect on its earnings or financial position. The impact of the
adoption of SFAS No. 157 is more fully disclosed in Note 6.
Recent Accounting
Pronouncements
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities. SFAS No. 161 requires enhanced
disclosures about an entity’s derivative and hedging activities, including (i)
how and why an entity uses derivative instruments, (ii) how derivative
instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, and (iii) how derivative instruments
and the related hedged items affect an entity’s results of operations, financial
performance, and cash flows. This statement is effective for the Corporation on
January 1, 2009. Since SFAS No. 161 requires enhanced disclosures, without a
change to existing standards relative to measurement and recognition, the
Corporation’s adoption of SFAS No. 161 will not have any effect on its earnings
or financial position.
Note
2: Acquisition
Effective
September 9, 2008, the Corporation acquired Spiralock Corporation (Spiralock)
for a cash purchase price of $23.8 million. The final purchase price is subject
to customary adjustments based upon changes in the net assets of Spiralock as of
the closing date. The addition of Spiralock to the Corporation’s Fastening and
Assembly Systems segment allows the Corporation to offer customers a broader
range of products.
The
acquisition of Spiralock has been accounted for in accordance with SFAS No. 141,
Business Combinations,
and accordingly the financial position and results of operations have been
included in the Corporation’s Consolidated Balance Sheet and Statement of
Earnings since the date of acquisition. The acquisition of Spiralock did not
have a significant effect on the Corporation’s results of operations for the
three- and nine-month periods ended September 28, 2008. The Corporation has not
yet obtained all information required to complete the purchase price allocation
related to Spiralock. The Corporation anticipates that the allocation will be
completed in 2008. The preliminary allocation of the purchase price resulted in
the recognition of $12.8 million of goodwill primarily related to the
anticipated future earnings and cash flows of Spiralock. The transaction also
generated $10.2 million of finite-lived intangible assets that will be amortized
over 15 years. These intangible assets are reflected in other assets in the
Consolidated Balance Sheet. The Corporation does not believe that the goodwill
and intangible assets recognized will be deductible for income tax
purposes.
Note
3: Inventories
The
classification of inventories at the end of each period, in millions of dollars,
was as follows:
|
September
28,
2008
|
December
31,
2007
|
|||||||
|
FIFO
cost
|
||||||||
|
Raw
materials and work-in-process
|
$ | 287.6 | $ | 275.4 | ||||
|
Finished
products
|
838.4 | 885.2 | ||||||
| 1,126.0 | 1,160.6 | |||||||
|
Adjustment
to arrive at LIFO inventory value
|
(22.3 | ) | (14.8 | ) | ||||
| $ | 1,103.7 | $ | 1,145.8 | |||||
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: Short-Term Borrowings, Current Maturities of Long-Term Debt, and Long-Term
Debt
The terms
of the Corporation’s $1.0 billion commercial paper program and its supporting
$1.0 billion senior unsecured revolving credit facility are more fully disclosed
in Note 7 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, 2007. The Corporation’s average borrowings
outstanding under its commercial paper program, its unsecured revolving credit
facility, and other short-term borrowing arrangements were $697.9 million
and $266.8 million for the nine-month periods ended September 28, 2008 and
September 30, 2007, respectively. The amount available for borrowing under the
Corporation’s unsecured revolving credit facility was $780.3 million at
September 28, 2008.
During
2008, the Corporation entered into loan agreements in the aggregate amount of
$225.0 million, with $125.0 million and $100.0 million maturing in April 2011
and December 2012, respectively. The terms of the loan agreements permit
repayment prior to maturity. Borrowings under the loan agreements are at
variable rates. The average borrowing rate under the loan agreements is LIBOR
plus 1.14%.
During
2008, the Corporation entered into $100.0 million notional amount of
fixed-to-variable interest rate swaps. At September 28, 2008, the Corporation’s
portfolio of interest rate swap instruments consisted of $425.0 million of
fixed-to-variable interest rate swaps with a weighted-average fixed rate receipt
of 4.98%. The basis of the variable rate paid is LIBOR.
Indebtedness
of subsidiaries of the Corporation in the aggregate principal amounts of $151.1
million and $155.9 million were included in the Consolidated Balance Sheet
at September 28, 2008 and December 31, 2007, respectively, in
short-term borrowings, current maturities of long-term debt, and long-term
debt.
Note
5: Stockholders’ Equity
During
the nine months ended September 28, 2008, the Corporation repurchased 3,136,382
shares of its common stock at a total cost of $202.3 million. To reflect that
repurchase in its Consolidated Balance Sheet, the Corporation: (i) first,
reduced its common stock by $1.6 million, representing the aggregate par value
of the shares repurchased; (ii) next, reduced capital in excess of par value by
$52.3 million (representing the available balance of capital in excess of par
value in each quarter of purchase); and (iii) last, charged the residual of
$148.4 million to retained earnings.
During
the nine months ended September 30, 2007, the Corporation repurchased 5,475,803
shares of its common stock at a total cost of $461.3 million. To reflect that
repurchase in its Consolidated Balance Sheet, the Corporation: (i) first,
reduced its common stock by $2.7 million, representing the aggregate par value
of the shares repurchased; (ii) next, reduced capital in excess of par value by
$81.9 million — an amount which brought capital in excess of par value to zero
as of September 30, 2007; and (iii) last, charged the residual of $376.7 million
to retained earnings.
Note
6: Fair Value Measurements
As
disclosed in Note 1, the Corporation adopted SFAS No. 157 effective January 1,
2008, with respect to the fair value measurement and disclosure of financial
assets and liabilities. As disclosed in Note 1, the effective date of SFAS No.
157 with respect to the fair value measurement and disclosure of non-financial
assets and liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis, is January 1, 2009. SFAS
No. 157 defines fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants at the measurement date. SFAS No. 157
establishes a three-level fair value hierarchy that prioritizes the inputs used
to measure fair value. This hierarchy requires entities to maximize the use of
observable inputs and minimize the use of unobservable inputs. The three levels
of inputs used to measure fair value are as follows:
|
|
Level 1 —
Quoted prices in active markets for identical assets or
liabilities.
|
|
|
Level 2 —
Observable inputs other than quoted prices included in Level 1, such
as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be
corroborated by observable market
data.
|
|
|
Level 3 —
Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities. This
includes certain pricing models, discounted cash flow methodologies and
similar techniques that use significant unobservable
inputs.
|
Assets
and liabilities measured at fair value on a recurring basis are summarized below
(in millions of dollars):
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
September
28,
2008
(Total)
|
||||||||||
|
Assets:
|
||||||||||||
|
Investments
|
$ | 36.2 | $ | 45.3 | $ | 81.5 | ||||||
|
Derivatives
|
.3 | 135.1 | 135.4 | |||||||||
|
Liabilities:
|
||||||||||||
|
Derivatives
|
2.8 | 95.2 | 98.0 | |||||||||
Investments
and derivative contracts are valued using quoted market prices for
identical or similar assets and liabilities. Investments classified as Level 1
include those whose fair value is based on identical assets in an active market.
Investments classified as Level 2 include those whose fair value is based
upon identical assets in markets that are less active. The fair value for
derivative contracts are based upon current quoted market prices and are
classified as Level 1 or Level 2 based on the nature of the underlying market in
which these derivatives are traded.
Note
7: 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)
|
September
28,
2008
|
September
30,
2007
|
September
28,
2008
|
September
30,
2007
|
||||||||||||
|
Numerator:
|
||||||||||||||||
|
Net
earnings
|
$ | 85.8 | $ | 104.6 | $ | 249.9 | $ | 330.7 | ||||||||
|
Denominator:
|
||||||||||||||||
|
Denominator
for basic
earnings
per share –
weighted-average
shares
|
59.2 | 64.2 | 59.9 | 65.0 | ||||||||||||
|
Employee
stock options and
other
stock-based awards
|
1.2 | 1.6 | 1.3 | 1.8 | ||||||||||||
|
Denominator
for diluted earnings
per
share – adjusted
weighted-average
shares
and assumed
conversions
|
60.4 | 65.8 | 61.2 | 66.8 | ||||||||||||
|
Basic
earnings per share
|
$ | 1.45 | $ | 1.63 | $ | 4.17 | $ | 5.09 | ||||||||
|
Diluted
earnings per share
|
$ | 1.42 | $ | 1.59 | $ | 4.09 | $ | 4.95 | ||||||||
As of
September 28, 2008, options to purchase approximately 2.5 million
shares of common stock, with a weighted-average exercise price of $83.28 per
share, were outstanding, but were not included in the computation of diluted
earnings per share because the effect would be anti-dilutive.
Note
8: Business Segments
The
following table provides selected financial data for the Corporation’s
reportable business segments (in millions of dollars):
|
Reportable
Business Segments
|
||||||||||||||||||||||||||||
|
Three
Months Ended September 28, 2008
|
Power
Tools & Accessories
|
Hardware
& Home Improvement
|
Fastening
&
Assembly Systems
|
Total
|
Currency
Translation Adjustments
|
Corporate,
Adjustment, &
Eliminations
|
Consolidated
|
|||||||||||||||||||||
|
Sales
to unaffiliated customers
|
$ | 1,115.9 | $ | 232.4 | $ | 173.0 | $ | 1,521.3 | $ | 49.5 | $ | – | $ | 1,570.8 | ||||||||||||||
|
Segment
profit (loss) (for Consoli-
dated,
operating income before
restructuring
and exit costs)
|
84.1 | 26.4 | 26.8 | 137.3 | 8.5 | (10.3 | ) | 135.5 | ||||||||||||||||||||
|
Depreciation
and amortization
|
21.6 | 4.8 | 5.2 | 31.6 | 1.1 | .1 | 32.8 | |||||||||||||||||||||
|
Capital
expenditures
|
13.5 | 3.8 | 3.9 | 21.2 | .6 | 2.0 | 23.8 | |||||||||||||||||||||
|
Three
Months Ended September 30, 2007
|
||||||||||||||||||||||||||||
|
Sales
to unaffiliated customers
|
$ | 1,189.9 | $ | 267.9 | $ | 176.6 | $ | 1,634.4 | $ | (.8 | ) | $ | – | $ | 1,633.6 | |||||||||||||
|
Segment
profit (loss) (for Consoli-
dated,
operating income)
|
122.7 | 33.1 | 27.6 | 183.4 | (.1 | ) | (18.8 | ) | 164.5 | |||||||||||||||||||
|
Depreciation
and amortization
|
24.7 | 4.6 | 5.1 | 34.4 | .1 | .5 | 35.0 | |||||||||||||||||||||
|
Capital
expenditures
|
19.7 | 4.4 | 5.0 | 29.1 | – | (.3 | ) | 28.8 | ||||||||||||||||||||
|
Nine
Months Ended September 28, 2008
|
||||||||||||||||||||||||||||
|
Sales
to unaffiliated customers
|
$ | 3,324.1 | $ | 686.1 | $ | 542.9 | $ | 4,553.1 | $ | 155.2 | $ | – | $ | 4,708.3 | ||||||||||||||
|
Segment
profit (loss) (for Consoli-
dated,
operating income before
restructuring
and exit costs)
|
262.4 | 64.8 | 85.1 | 412.3 | 28.2 | (44.4 | ) | 396.1 | ||||||||||||||||||||
|
Depreciation
and amortization
|
69.0 | 15.6 | 16.2 | 100.8 | 3.1 | .8 | 104.7 | |||||||||||||||||||||
|
Capital
expenditures
|
45.3 | 13.8 | 13.2 | 72.3 | 1.9 | 3.4 | 77.6 | |||||||||||||||||||||
|
Nine
Months Ended September 30, 2007
|
||||||||||||||||||||||||||||
|
Sales
to unaffiliated customers
|
$ | 3,641.2 | $ | 770.8 | $ | 538.2 | $ | 4,950.2 | $ | (39.5 | ) | $ | – | $ | 4,910.7 | |||||||||||||
|
Segment
profit (loss) (for Consoli-
dated,
operating income)
|
427.7 | 92.0 | 85.1 | 604.8 | (5.6 | ) | (78.5 | ) | 520.7 | |||||||||||||||||||
|
Depreciation
and amortization
|
74.7 | 17.8 | 15.7 | 108.2 | (.7 | ) | 1.8 | 109.3 | ||||||||||||||||||||
|
Capital
expenditures
|
47.6 | 15.1 | 12.3 | 75.0 | (.4 | ) | .8 | 75.4 | ||||||||||||||||||||
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 industrial power
tools and accessories, lawn and garden products, and electric cleaning,
automotive, lighting, and household products, 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; and for the sale of plumbing products to customers
outside the United States and Canada. 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). The Hardware and Home Improvement segment 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
profitability measure employed by the Corporation and its chief operating
decision maker for making decisions about allocating resources to segments and
assessing segment performance is segment profit (for the Corporation on a
consolidated basis, operating income before restructuring and exit costs). In
general, segments follow the same accounting policies as those described in Note
1 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, 2007, except with respect to foreign currency translation
and except as further indicated below. The financial statements of a segment’s
operating units located outside of the United States, except those units
operating in highly inflationary economies, are generally measured using the
local currency as the functional currency. For these units located outside of
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 restated to
reflect the current year’s budgeted rates of exchange. The amounts included in
the preceding table under the captions “Reportable Business Segments” and
“Corporate, Adjustments, & Eliminations” are reflected at the Corporation’s
budgeted rates of exchange for 2008. The amounts included in the preceding table
under the caption “Currency Translation Adjustments” represent the difference
between consolidated amounts determined using those budgeted rates of exchange
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,
adjustments to eliminate intercompany profit in inventory, and income tax
expense. In addition, segment profit excludes restructuring and exit costs. In
determining segment profit, expenses relating to pension and other
postretirement benefits are based solely upon estimated service costs. Corporate
expenses, as well as certain centrally managed expenses, including expenses
related to share-based compensation, are allocated to each reportable 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 goods sold 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
non-recurring nature in 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 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
|
|||||||||||||||
|
September
28,
2008
|
September
30,
2007
|
September
28,
2008
|
September
30,
2007
|
|||||||||||||
|
Segment
profit for total reportable business segments
|
$ | 137.3 | $ | 183.4 | $ | 412.3 | $ | 604.8 | ||||||||
|
Items
excluded from segment profit:
|
||||||||||||||||
|
Adjustment
of budgeted foreign exchange rates
to actual rates
|
8.5 | (.1 | ) | 28.2 | (5.6 | ) | ||||||||||
|
Depreciation
of Corporate property
|
(.1 | ) | (.2 | ) | (.8 | ) | (.7 | ) | ||||||||
|
Adjustment
to businesses’ postretirement benefit
expenses booked in consolidation
|
(.9 | ) | (5.0 | ) | (2.8 | ) | (14.8 | ) | ||||||||
|
Other
adjustments booked in consolidation directly
related to reportable business segments
|
(.5 | ) | 4.6 | (3.8 | ) | 1.0 | ||||||||||
|
Amounts
allocated to businesses in arriving at segment
profit in excess of (less than) Corporate center
operating expenses, eliminations, and other amounts
identified
above
|
(8.8 | ) | (18.2 | ) | (37.0 | ) | (64.0 | ) | ||||||||
|
Operating
income before restructuring and exit costs
|
135.5 | 164.5 | 396.1 | 520.7 | ||||||||||||
|
Restructuring
and exit costs
|
15.6 | – | 33.9 | – | ||||||||||||
|
Operating
income
|
119.9 | 164.5 | 362.2 | 520.7 | ||||||||||||
|
Interest
expense, net of interest income
|
13.4 | 19.9 | 44.7 | 61.4 | ||||||||||||
|
Other
(income) expense
|
(3.0 | ) | .9 | (2.6 | ) | 2.2 | ||||||||||
|
Earnings
before income taxes
|
$ | 109.5 | $ | 143.7 | $ | 320.1 | $ | 457.1 | ||||||||
Note
9: Postretirement Benefits
The
Corporation’s pension and other postretirement benefit plans are more fully
disclosed in Notes 1 and 12 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, 2007. The following tables present the components of the
Corporation’s net periodic cost related to its defined benefit pension plans for
the three and nine months ended September 28, 2008 and September 30, 2007 (in
millions of dollars):
|
Pension
Benefits Plans
|
Pension
Benefits Plans
|
|||||||||||||||
|
In
the United States
|
Outside
of the United States
|
|||||||||||||||
|
Three
Months Ended
|
Three
Months Ended
|
|||||||||||||||
|
September
28,
2008
|
September
30,
2007
|
September
28,
2008
|
September
30,
2007
|
|||||||||||||
|
Service
cost
|
$ | 5.6 | $ | 6.5 | $ | 3.1 | $ | 3.7 | ||||||||
|
Interest
cost
|
15.9 | 15.6 | 10.6 | 9.9 | ||||||||||||
|
Expected
return on plan assets
|
(19.5 | ) | (18.8 | ) | (10.4 | ) | (9.9 | ) | ||||||||
|
Amortization
of prior service cost
|
.6 | .5 | .4 | .4 | ||||||||||||
|
Amortization
of net actuarial loss
|
4.0 | 6.5 | 1.2 | 3.3 | ||||||||||||
|
Net
periodic cost
|
$ | 6.6 | $ | 10.3 | $ | 4.9 | $ | 7.4 | ||||||||
|
Pension
Benefits Plans
|
Pension
Benefits Plans
|
|||||||||||||||
|
In
the United States
|
Outside
of the United States
|
|||||||||||||||
|
Nine
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
28,
2008
|
September
30,
2007
|
September
28,
2008
|
September
30,
2007
|
|||||||||||||
|
Service
cost
|
$ | 16.9 | $ | 19.5 | $ | 9.4 | $ | 10.9 | ||||||||
|
Interest
cost
|
47.8 | 46.8 | 32.1 | 29.3 | ||||||||||||
|
Expected
return on plan assets
|
(58.4 | ) | (56.6 | ) | (31.6 | ) | (29.1 | ) | ||||||||
|
Amortization
of prior service cost
|
1.6 | 1.6 | 1.1 | 1.2 | ||||||||||||
|
Amortization
of net actuarial loss
|
11.9 | 19.7 | 3.7 | 9.6 | ||||||||||||
|
Net
periodic cost
|
$ | 19.8 | $ | 31.0 | $ | 14.7 | $ | 21.9 | ||||||||
The
Corporation’s defined postretirement benefits consist of several unfunded health
care plans that provide certain postretirement medical, dental, and life
insurance benefits for certain United States retirees and employees. The
postretirement medical benefits are contributory and include certain
cost-sharing features, such as deductibles and co-payments. The net periodic
cost related to these defined postretirement benefit plans were $.7 million and
$1.9 million for the three and nine months ended September 28, 2008, and $.5
million and $1.3 million for the three and nine months ended September 30, 2007,
respectively.
As more
fully disclosed in Note 1 of Notes to Consolidated Financial Statements included
in Item 8 of the Corporation’s Annual Report on 10-K for the year ended December
31, 2007, in September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106 and 132(R). The funded status recognition and
certain disclosure provisions of FAS 158 were effective as of December 31,
2006. The additional requirement of SFAS No. 158, which requires that the funded
status be measured as of an entity’s year-end balance sheet date rather than as
of an earlier date as previously permitted, is effective for the Corporation as
of December 31, 2008. The Corporation, which previously used a measurement date
of September 30 for the majority of its defined benefit pension plans, will
utilize a December 31 measurement date effective December 31, 2008. The
Corporation expects that the adoption of the year-end measurement date
requirement of SFAS No. 158 as of December 31, 2008, will result in a charge to
retained earnings of $8.2 million, an increase in deferred tax assets of $2.2
million, an increase in pension assets of $.2 million, an increase in pension
liabilities of $7.1 million, and an increase in accumulated other comprehensive
income of $3.5 million.
Note
10: Stock-Based Compensation
The
number of shares/units granted under the Corporation’s stock option and
restricted stock plans during the nine months ended September 28, 2008, together
with the weighted exercise price and the related weighted-average grant-date
fair values, were as follows:
|
Underlying
Shares
|
Exercise
Price
|
Grant-
Date
Fair
Value
|
||||||||||
|
Options
Granted
|
547,020 | $ | 67.15 | $ | 17.86 | |||||||
|
Restricted
Stock Granted
|
176,700 | $ | 68.04 | |||||||||
|
Restricted
Stock Units Granted
|
169,625 | $ | 65.20 | |||||||||
The
options granted are exercisable in equal annual installments over a period of
four years. Under the restricted stock plans, restrictions generally expire four
years from the date of grant.
As more
fully disclosed in Note 1 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, 2007, the fair value of stock options is determined using
the Black-Scholes option valuation model, which incorporates assumptions
surrounding volatility, dividend yield, the risk-free interest rate, expected
life, and the exercise price as compared to the stock price on the grant date.
The following table summarizes the significant weighted-average assumptions used
to determine the grant-date fair value of options granted during the nine-month
period ended September 28, 2008:
|
Volatility
|
30.7 | % | ||
|
Dividend
yield
|
2.50 | % | ||
|
Risk-free
interest rate
|
3.30 | % | ||
|
Expected
life in years
|
6.0 |
Note
11: Interest Expense (Net of Interest Income)
Interest
expense (net of interest income) for each period, in millions of dollars, was as
follows:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
28,
2008
|
September
30,
2007
|
September
28,
2008
|
September
30,
2007
|
|||||||||||||
|
Interest
expense
|
$ | 25.3 | $ | 24.6 | $ | 74.8 | $ | 74.1 | ||||||||
|
Interest
(income)
|
(11.9 | ) | (4.7 | ) | (30.1 | ) | (12.7 | ) | ||||||||
| $ | 13.4 | $ | 19.9 | $ | 44.7 | $ | 61.4 | |||||||||
Note
12: Income Taxes
The
Corporation’s effective tax rate was 21.6% and 27.2% for the three-month periods
ended September 28, 2008, and September 30, 2007, respectively, and 21.9% and
27.7% for the first nine months of 2008 and 2007, respectively. The
Corporation’s effective tax rate for the three- and nine-month periods ended
September 28, 2008, was less than the effective tax rates recognized in the
corresponding periods of 2007, due primarily to the following factors: (i)
favorability associated with finalization of closing agreements, in the third
quarter of 2008, of the settlement of income tax litigation between the
Corporation and the U.S. government agreed in late 2007 and more fully described
in Note 11 of Notes to Consolidated Financial Statements included in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007;
and (ii) the favorable settlement of certain tax audits in 2008. In addition,
the tax benefit of $9.1 million recognized on the $33.9 million pre-tax
restructuring charge during the nine months ended September 28, 2008,
contributed to a lower effective income tax rate in that period, as compared to
the corresponding period in 2007.
The
amount of unrecognized tax benefits, including the amount of related interest,
and the amount, if recognized, that would not affect the annual effective tax
rate at the end of each period, in millions of dollars, was as
follows:
|
September
28,
2008
|
December
31,
2007
|
|||||||
|
Unrecognized
tax benefits (including interest of
$38.7
in 2008 and $81.3 in 2007)
|
$ | 314.7 | $ | 398.7 | ||||
|
Amount,
if recognized, that would not affect the
annual
effective tax rate
|
50.1 | 83.5 | ||||||
At
September 28, 2008, the Corporation classified $39.9 million of its liabilities
for unrecognized tax benefits within other current liabilities.
As more
fully disclosed in Note 11 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, 2007, the Corporation is subject to periodic examinations by
taxing authorities in many countries and, currently, is undergoing periodic
examinations of its tax returns in the United States (both federal and state),
Canada, Germany and the United Kingdom. The final outcome of the future tax
consequences of these examinations and legal proceedings, as well as the outcome
of competent authority proceedings, changes in regulatory tax laws, or
interpretation of those tax laws, changes in income tax rates, or expiration of
statutes of limitation, could impact the Corporation’s financial statements. The
Corporation is subject to the effects of these matters occurring in various
jurisdictions. Accordingly, the Corporation has tax reserves recorded for which
it is reasonably possible that the amount of the unrecognized tax benefit will
increase or decrease within the next twelve months. Any such increase or
decrease could have a material effect on the financial results for any
particular fiscal quarter or year. However, based on the uncertainties
associated with litigation and the status of examinations, including the
protocols of finalizing audits by the relevant tax authorities, which could
include formal legal proceedings, it is not possible to estimate the impact of
any such change.
Note
13: Restructuring Actions
A summary
of restructuring activity during the nine-month period ended September 28, 2008,
is set forth below (in millions of dollars):
|
Severance
Benefits
|
Write-Down
to
Fair
Value Less Costs to Sell of Certain Long-
Lived
Assets
|
Other
Charges
|
Total
|
|||||||||||||
|
Restructuring
reserve at December 31, 2007
|
$ | 16.7 | $ | – | $ | .6 | $ | 17.3 | ||||||||
|
Reserves
established in 2008
|
29.0 | 3.7 | 1.2 | 33.9 | ||||||||||||
|
Utilization
of reserves:
|
||||||||||||||||
|
Cash
|
(15.0 | ) | – | (.4 | ) | (15.4 | ) | |||||||||
|
Non-cash
|
– | (3.7 | ) | – | (3.7 | ) | ||||||||||
|
Foreign
currency translation
|
(1.0 | ) | – | – | (1.0 | ) | ||||||||||
|
Restructuring
reserve at September 28, 2008
|
$ | 29.7 | $ | – | $ | 1.4 | $ | 31.1 | ||||||||
The
Corporation’s restructuring actions that were initiated prior to 2008 are more
fully disclosed in Note 18 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, 2007.
During
the three months ended September 28, 2008, the Corporation recorded a
restructuring charge of $15.6 million, reflecting actions to reduce its selling,
general, and administrative expenses and manufacturing cost base. The principal
components of this restructuring charge related to the elimination of selling,
general, and administrative positions as well as direct and indirect
manufacturing positions. As a result, a severance benefits accrual of $14.4
million was included in the restructuring charge, of which $11.3 million related
to the Power Tools and Accessories segment and $3.1 million related to the
Hardware and Home Improvement segment. In total, this restructuring action will
result in the elimination of approximately 350 positions; however, the
Corporation will increase headcount in other locations by approximately 150
positions. The actions to reduce the Corporation’s manufacturing cost base in
its Hardware and Home Improvement segment include the transfer of production
from a facility in Mexico to a facility in China. The restructuring charge also
reflected $1.2 million related to the early termination of a lease agreement by
the Power Tools and Accessories segment necessitated by restructuring
actions.
During
the three months ended March 30, 2008, the Corporation recorded a restructuring
charge of $18.3 million, reflecting actions to reduce its selling, general, and
administrative expenses and manufacturing cost base. The principal components of
this restructuring charge related to the elimination of selling, general, and
administrative positions as well as direct and indirect manufacturing positions.
As a result, a severance benefits accrual of $14.6 million was included in the
restructuring charge, of which $10.9 million related to the Power Tools and
Accessories segment, $3.0 million related to the Fastening and Assembly Systems
segment, and $.7 million related to the Hardware and Home Improvement segment.
The severance benefits accrual relates to the elimination of approximately 700
positions, including approximately 450 manufacturing-related positions. The
restructuring charge also included a $3.7 million write-down to fair value of
certain long-lived assets for the Power Tools and Accessories segment ($3.0
million) and Hardware and Home Improvement segment ($.7 million), which were
either held for sale or idled in preparation for disposal. As part of these
restructuring actions, the Power Tools and Accessories segment closed its
manufacturing facility in Decatur, Arkansas, and transferred production to
another facility. As of September 28, 2008, the carrying value of long-lived
assets held for sale was not significant.
Of the
remaining $31.1million restructuring accrual at September 28, 2008, $25.5
million relates to the Power Tools and Accessories segment, $4.2 million relates
to the Hardware and Home Improvement segment and $1.4 million relates to the
Fastening and Assembly Systems segment. The Corporation anticipates that the
remaining actions contemplated under that $31.1 million accrual will be
completed during 2008 and 2009.
Note
14: Litigation and Contingent Liabilities
As more
fully disclosed in Note 21 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, 2007, the Corporation is involved in various
lawsuits in the ordinary course of business. These lawsuits primarily involve
claims for damages arising out of the use of the Corporation’s products,
allegations of patent and trademark infringement, and litigation and
administrative proceedings relating to employment matters, commercial disputes,
and income tax matters. In addition, the Corporation is party to litigation and
administrative proceedings with respect to claims involving the discharge of
hazardous substances into the environment.
The
Environmental Protection Agency (EPA) and the Santa Ana Regional Water Quality
Control Board have each initiated administrative proceedings against the
Corporation and certain of the Corporation’s current or former affiliates
alleging that the Corporation and numerous other defendants are responsible to
investigate and remediate alleged groundwater contamination in and adjacent to a
160-acre property located in Rialto, California. The cities of Colton and
Rialto, as well as Goodrich Corporation, also initiated lawsuits against the
Corporation and certain of the Corporation’s former or current affiliates in the
Federal District Court for California, Central District, alleging similar claims
that the Corporation is liable under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA), the Resource Conservation and
Recovery Act, and state law for the discharge or release of hazardous substances
into the environment and the contamination caused by those alleged releases.
These cases were voluntarily dismissed without prejudice in June 2008. The City
of Colton also has a companion case in California state court, which is
currently stayed for all purposes. Certain defendants in that case have
cross-claims against other defendants and have asserted claims against the State
of California. The administrative proceedings and the lawsuits generally allege
that West Coast Loading Corporation (WCLC), a defunct company that operated in
Rialto between 1952 and 1957, and an as yet undefined number of other defendants
are responsible for the release of perchlorate and solvents into the groundwater
basin, and that the Corporation and certain of the Corporation’s current or
former affiliates are liable as a “successor” of WCLC. The Corporation believes
that neither the facts nor the law support an allegation that the Corporation is
responsible for the contamination and is vigorously contesting these
claims.
The EPA
has provided an affiliate of the Corporation a “Notice of Potential Liability”
related to environmental contamination found at the Centredale Manor Restoration
Project Superfund site, located in North Providence, Rhode Island. The EPA has
discovered dioxin, polychlorinated biphenyls, and pesticide contamination at
this site. The EPA alleged that an affiliate of the Corporation is liable for
site cleanup costs under CERCLA as a successor to the liability of
Metro-Atlantic, Inc., a former operator at the site, and demanded reimbursement
of the EPA’s costs related to this site. The EPA, which considers the
Corporation to be the primary potentially responsible party (PRP) at the site,
is expected to release a draft Feasibility Study Report, which will identify and
evaluate remedial alternatives for the site, in 2009. The estimated remediation
costs related to this site (including the EPA’s past costs as well as costs of
additional investigation, remediation, and related costs, less escrowed funds
contributed by PRPs who have reached settlement agreements with the EPA), which
the Corporation considers to be probable and can be reasonably estimable, range
from approximately $48.7 million to approximately $100 million, with no amount
within that range representing a more likely outcome. At September 28, 2008, the
Corporation maintains a reserve for this environmental remediation matter of
$48.7
million,
reflecting the probability that the Corporation will be identified as the
principal financially viable PRP upon issuance of the EPA draft Feasibility
Study Report in 2009. The Corporation has not yet determined the extent to
which it will contest the EPA’s claims with respect to this site. Further, to
the extent that the Corporation agrees to perform or finance remedial activities
at this site, it will seek participation or contribution from additional PRPs
and insurance carriers. As the specific nature of the environmental remediation
activities that may be mandated by the EPA at this site have not yet been
determined, the ultimate remedial costs associated with the site may vary from
the amount accrued by the Corporation at September 28, 2008.
As of
September 28, 2008, the Corporation’s aggregate probable exposure with respect
to environmental liabilities, for which accruals have been established in the
consolidated financial statements, was $105.0 million. These accruals are
reflected in other current liabilities and other long-term liabilities in the
Consolidated Balance Sheet.
Total
future costs for environmental remediation activities will depend upon, among
other things, the identification of any additional sites, the determination of
the extent of contamination at each site, the timing and nature of required
remedial actions, the technology available, the nature and terms of cost sharing
arrangements with other PRPs, the existing legal requirements and nature and
extent of future environmental laws, and the determination of the Corporation’s
liability at each site. The recognition of additional losses, if and when they
may occur, cannot be reasonably predicted.
In the
opinion of management, amounts accrued for exposures relating to product
liability claims, environmental matters, income tax matters, and other legal
proceedings are adequate and, accordingly, the ultimate resolution of these
matters is not expected to have a material adverse effect on the Corporation’s
consolidated financial statements. As of September 28, 2008, the Corporation had
no known probable but inestimable exposures relating to product liability
claims, environmental matters, income tax matters, or other legal proceedings
that are expected to have a material adverse effect on the Corporation. There
can be no assurance, however, that unanticipated events will not require the
Corporation to increase the amount it has accrued for any matter or accrue for a
matter that has not been previously accrued because it was not considered
probable. While it is possible that the increase or establishment of an accrual
could have a material adverse effect on the financial results for any particular
fiscal quarter or year, in the opinion of management there exists no known
potential exposure that would have a material adverse effect on the financial
condition or on the financial results of the Corporation beyond any such fiscal
quarter or year.
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
The
Corporation is a global manufacturer and marketer of power tools and
accessories, hardware and home improvement products, and technology-based
fastening systems. As more fully described in Note 8 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 — with these business segments comprising
approximately 73%, 15%, and 12%, respectively, of the Corporation’s sales for
the nine-month period ended September 28, 2008.
The
Corporation markets its products and services in over 100 countries. During
2007, approximately 60%, 24%, and 16% of its sales were made to customers in the
United States, in Europe (including the United Kingdom and Middle East), and in
other geographic regions, respectively. The Power Tools and Accessories and
Hardware and Home Improvement segments are subject to general economic
conditions in the countries in which they operate as well as the strength of the
retail economies. The Fastening and Assembly Systems segment is also subject to
general economic conditions in the countries in which it operates as well as to
automotive and industrial demand.
An
overview of certain aspects of the Corporation’s performance during the three-
and nine-month periods ended September 28, 2008, follows:
|
·
|
Total
consolidated sales for the three- and nine-month periods ended September
28, 2008, decreased by 4%, from the corresponding 2007 periods to $1.6
billion and $4.7 billion, respectively. Those reductions were the result
of a 6% and 7% decline in unit volume for the three- and nine-month
periods ended September 28, 2008, respectively, and a 1% unfavorable
impact from pricing actions. Those decreases were partially offset by a 3%
and 4% favorable impact from foreign currency attributable to the effects
of a weaker U.S. dollar for the three- and nine-month periods ended
September 28, 2008, respectively. Those unit volume declines were
primarily driven by lower sales in the United States and Western Europe.
The Corporation expects that continued weakness in key sectors of the U.S.
economy, including lower residential housing starts, together with slowing
conditions in Western Europe and the global effects of the recent economic
upheaval, will contribute to a high-single-digit rate of sales decline,
excluding the effects of foreign currency translation, in 2008, as
compared to 2007.
|
|
·
|
Operating
income as a percentage of sales for the three- and nine-month periods
ended September 28, 2008, decreased by approximately 250 basis points and
290 basis points, respectively, from the corresponding periods in 2007. Of
the 250 basis point decline for the three-month period ended September 28,
2008, a reduction in gross margin contributed approximately 160 basis
points and the $15.6 million pre-tax restructuring charge contributed
approximately 100 basis points, partially offset by approximately 10 basis
points of improvement associated with a decrease in selling, general, and
administrative expenses. Of the 290 basis point decline for the nine-month
period ended September 28, 2008, approximately 150 basis points was
attributable to a reduction in gross margin, approximately 70 basis points
was attributable to an increase in selling, general, and administrative
expenses, and approximately 70 basis points was attributable to a $33.9
million pre-tax
|
restructuring
charge. Gross margin as a percentage of sales declined in the three and nine
months ended September 28, 2008, as compared to the corresponding periods in
2007, as a result of the negative effects of rising commodity/component costs
(together with the change in China’s value added tax and appreciation of the
Chinese renminbi that, in the aggregate, increased cost of goods sold by
approximately $30 million and $120 million for the three- and nine-month
periods, respectively), negative effects of pricing actions, de-leveraging of
fixed costs, and unfavorable mix. Those negative effects on gross margin were
partially offset by the favorable effects of productivity and restructuring
initiatives, lower customer consideration and promotional spending, and foreign
currency transaction gains. Selling, general, and administrative expenses as a
percentage of sales decreased in the three-month period ended September 28,
2008, as compared to the corresponding 2007 period, due principally to
the favorable effects of cost control and restructuring initiatives.
Selling, general, and administrative expenses as a percentage of sales increased
in the nine-month period ended September 28, 2008, as compared to the
corresponding 2007 period, due principally to the de-leveraging of expenses over
a lower sales base in the United States and Europe that more than offset the
favorable effects of cost control and restructuring initiatives.
|
·
|
The
Corporation expects that operating income as a percentage of sales for
2008 will be unfavorably impacted by the effects of rising
commodity/component costs (together with the change in China’s value added
tax and appreciation of the Chinese renminbi) which, in the
aggregate, are expected to approximate $145 million of incremental
inflation, and an increase in selling, general, and administrative
expenses as a percentage of sales associated with the de-leveraging of
expenses over a lower sales base. However, the Corporation believes that
those unfavorable effects will be partially offset by the favorable
impacts of productivity and restructuring
initiatives.
|
|
·
|
Interest
expense (net of interest income) decreased by $6.5 million and $16.7
million for the three- and nine-month periods ended September 28, 2008,
from the corresponding 2007 periods principally as a result of lower
interest rates, including the impact on the Corporation’s foreign currency
hedging activities. The recent global credit crisis has caused a
significant increase in interest rates since mid-September 2008 and the
Corporation expects that the effect of higher interest rates will continue
throughout the remainder of 2008.
|
|
·
|
The
Corporation’s effective tax rates of 21.6% and 21.9% for the three-and
nine-month periods ended September 28, 2008, respectively, were less than
the 27.2% and 27.7% effective tax rates recognized in the corresponding
periods of 2007, primarily due to the following factors: (i) favorability
associated with finalization of closing agreements, in the third quarter
of 2008, of the settlement of income tax litigation between the
Corporation and the U.S. government agreed in late 2007 and more fully
described in Note 11 of Notes to Consolidated Financial Statements
included in the Annual Report on Form 10-K for the year ended December 31,
2007; and (ii) the favorable settlement of certain tax audits in 2008. In
addition, the tax benefit of $9.1 million recognized on the $33.9 million
pre-tax restructuring charge during the nine months ended September 28,
2008, contributed to a lower effective income tax rate in that period, as
compared to the corresponding period in
2007.
|
|
·
|
Net
earnings were $85.8 million, or $1.42 per share on a diluted basis, for
the three-month period ended September 28, 2008, as compared to net
earnings of $104.6 million, or $1.59 per share on a diluted basis, for the
corresponding period in 2007. For the nine months ended September 28,
2008, net earnings were $249.9 million, or $4.09 per share on a diluted
basis, as
|
compared
to $330.7 million, or $4.95 per share on a diluted basis, for the corresponding
period in 2007.
|
·
|
Under
an ongoing share repurchase program, the Corporation repurchased
approximately 3.1 million shares of its common stock during the first nine
months of 2008 at a cost of $201.1 million. As a result of the
Corporation’s share repurchase program, shares used in computing diluted
earnings per share for both the three- and nine-month periods ended
September 28, 2008, declined by 8%, as compared to the corresponding 2007
periods.
|
The
preceding information is an overview of certain information for the three- and
nine-month periods ended September 28, 2008, and should be read in conjunction
with Management’s Discussion and Analysis of Financial Condition and Results of
Operations in its entirety.
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.
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 September 28, 2008 and September 30,
2007:
Analysis
of Changes in Sales
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
(Dollars
in Millions)
|
September
28, 2008
|
September
30, 2007
|
September
28, 2008
|
September
30, 2007
|
||||||||||||
|
Total
sales
|
$ | 1,570.8 | $ | 1,633.6 | $ | 4,708.3 | $ | 4,910.7 | ||||||||
|
Unit
volume
|
(6 | ) % | (1 | ) % | (7 | ) % | (1 | ) % | ||||||||
|
Price
|
(1 | ) % | — | % | (1 | ) % | 1 | % | ||||||||
|
Currency
|
3 | % | 2 | % | 4 | % | 2 | % | ||||||||
|
Change
in total sales
|
(4 | ) % | 1 | % | (4 | ) % | 2 | % | ||||||||
Total
consolidated sales for the three- and nine-month periods ended September 28,
2008, decreased by 4% from the corresponding 2007 levels. Unit volume declined
6% and 7% for the three- and nine-month periods ended September 28, 2008,
respectively. Those unit volume declines were primarily driven by lower sales in
the United States, due to general economic conditions in the U.S., including
lower housing starts, and in Western Europe due to weakening economic
conditions. Pricing actions had a 1% unfavorable impact on sales for both the
three- and nine-month periods ended September 28, 2008, respectively. The
effects of a weaker U.S. dollar, as compared to most other currencies,
particularly the euro, Canadian dollar, Brazilian real, and Japanese yen,
resulted in a 3% and 4% increase in consolidated sales over the prior year’s
levels for the three- and nine-month periods ended September 28, 2008,
respectively.
Earnings
A summary
of the Corporation’s consolidated gross margin, selling, general, and
administrative expenses, restructuring and exit costs, and operating income—all
expressed as a percentage of sales follows:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
(Percentage
of sales)
|
September
28,
2008
|
September
30,
2007
|
September
28,
2008
|
September
30,
2007
|
||||||||||||
|
Gross
margin
|
32.4 | % | 34.0 | % | 33.2 | % | 34.7 | % | ||||||||
|
Selling,
general, and administra-
tive expenses
|
23.8 | % | 23.9 | % | 24.8 | % | 24.1 | % | ||||||||
|
Restructuring
and exit costs
|
1.0 | % | — | % | .7 | % | — | % | ||||||||
|
Operating
income
|
7.6 | % | 10.1 | % | 7.7 | % | 10.6 | % | ||||||||
The
Corporation reported consolidated operating income of $119.9 million, or 7.6% of
sales, for the three months ended September 28, 2008, as compared to operating
income of $164.5 million, or 10.1% of sales, for the corresponding period in
2007. Operating income for the nine months ended September 28, 2008, was $362.2
million, or 7.7% of sales, as compared to operating income of $520.7 million, or
10.6% of sales, for the corresponding period in 2007.
Consolidated
gross margin as a percentage of sales declined by 160 basis points and 150 basis
points from the 2007 levels to 32.4% and 33.2% for the three- and nine-month
periods ended September 28, 2008, respectively. That decrease in gross margin
was driven by the negative effects of rising commodity/component costs –
together with the change in China’s value added tax and appreciation of the
Chinese renminbi – which, in the aggregate, increased cost of goods sold over
the prior year’s levels by approximately $30 million and $120 million for the
three and nine months ended September 28, 2008, respectively. In addition, the
comparison of gross margin as a percentage of sales for the three and nine
months ended September 28, 2008, to the 2007 levels was unfavorably impacted by
the negative effects of pricing actions, de-leveraging of fixed costs, and
unfavorable mix. Those negative factors were partially offset by the favorable
effects of productivity and restructuring initiatives, lower customer
consideration and promotional spending, and foreign currency transaction
gains.
Consolidated
selling, general, and administrative expenses as a percentage of sales decreased
by 10 basis points from the 2007 level to 23.8% for the three months ended
September 28, 2008, and increased by 70 basis points over the 2007 level to
24.8% for the nine months ended September 28, 2008. Selling, general,
and administrative expenses declined by $18.0 million and $16.2 million from the
prior year’s levels to $373.4 million and $1,167.5 million for the three- and
nine-month periods ended September 28, 2008, respectively, as the favorable
effects of cost control and restructuring initiatives, coupled with the effect
of lower sales on certain volume-sensitive expenses, such as transportation and
distribution, offset the unfavorable effects of foreign currency
translation.
During
the three and nine months ended September 28, 2008, the Corporation recognized
restructuring and exit costs of $15.6 million and $33.9 million, respectively,
related to actions in its Power Tools and Accessories and Hardware and Home
Improvement segments and, for the nine-month period, Fastening and Assembly
Systems segment. As more fully described in Note 13 of Notes to Consolidated
Financial Statements, these restructuring charges primarily reflect actions to
reduce the Corporation’s selling, general, and administrative expenses and to
improve its manufacturing cost base.
Consolidated
net interest expense (interest expense less interest income) for the three
months ended September 28, 2008, and September 30, 2007, was $13.4 million
and $19.9 million, respectively. Net interest expense for the nine months
ended September 28, 2008, and September 30, 2007, was $44.7 million and $61.4
million, respectively. The decrease in net interest expense, as compared to the
prior year's levels, for both the three- and nine-month periods ended September
28, 2008, was principally the result of lower interest rates, including the
impact on the Corporation’s foreign currency hedging activities.
Other
(income) expense was $(3.0) million and $.9 million for the three months ended
September 28, 2008, and September 30, 2007, respectively. Other (income) expense
for the nine months ended September 28, 2008, and September 30, 2007, was $(2.6)
million and $2.2 million, respectively. Other (income) expense for the three-
and nine-month periods ended September 28, 2008, benefited from a gain on the
sale of a non-operating asset.
Consolidated
income tax expense of $23.7 million and $70.2 million was recognized on the
Corporation’s earnings before income taxes of $109.5 million and $320.1 million
for the three- and nine-month periods ended September 28, 2008,
respectively. The
Corporation’s effective tax rate was 21.6% and 21.9% for the three and nine
months ended September 28, 2008, respectively. The decline in those effective
tax rates from the 27.2% and 27.7% effective tax rates recognized for the three
and nine months ended September 30, 2007, respectively, was primarily due to the
following factors: (i) favorability associated with finalization of closing
agreements, in the third quarter of 2008, of the settlement of income tax
litigation between the Corporation and the U.S. government agreed in late 2007
and more fully described in Note 11 of Notes to Consolidated Financial
Statements included in the Annual Report on Form 10-K for the year ended
December 31, 2007; and (ii) the favorable settlement of certain tax audits in
2008. In addition, the tax benefit of $9.1 million recognized on the $33.9
million pre-tax restructuring charge during the nine months ended September 28,
2008, contributed to a lower effective income tax rate in that period, as
compared to the corresponding period in 2007.
The
Corporation reported net earnings of $85.8 million, or $1.42 per share on a
diluted basis, for the three-month period ended September 28, 2008, as compared
to net earnings of $104.6 million, or $1.59 per share on a diluted basis,
for the corresponding period in 2007. The Corporation reported net earnings of
$249.9 million, or $4.09 per share on a diluted basis, for the nine-month period
ended September 28, 2008, as compared to net earnings of $330.7 million, or
$4.95 per share on a diluted basis, for the corresponding period in 2007. Net
earnings for the three- and nine-month periods ended September 28, 2008,
included the effects of an after-tax restructuring charge of $12.6 million
($15.6 million before taxes) and $24.8 million ($33.9 million before taxes),
respectively. In addition to the matters previously noted, diluted earnings per
share for the three- and nine-month periods ended September 28, 2008, benefited
from lower weighted average shares outstanding. Shares used in computing diluted
earnings per share for the three- and nine-month
periods,
ended September 28, 2008, declined by approximately 8%, as compared to the
corresponding 2007 periods, as a result of the Corporation’s share repurchase
program.
BUSINESS
SEGMENTS
As more
fully described in Note 8 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 segment profit for the Power Tools and Accessories segment, determined
on the basis described in Note 8 of Notes to Consolidated Financial Statements,
were as follows (dollars in millions):
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
28, 2008
|
September
30, 2007
|
September
28, 2008
|
September
30, 2007
|
|||||||||||||
|
Sales
to unaffiliated customers
|
$ | 1,115.9 | $ | 1,189.9 | $ | 3,324.1 | $ | 3,641.2 | ||||||||
|
Segment
profit
|
84.1 | 122.7 | 262.4 | 427.7 | ||||||||||||
Sales to
unaffiliated customers in the Power Tools and Accessories segment during the
third quarter of 2008 decreased by 6% from the corresponding period in
2007.
During
the third quarter of 2008, sales in North America decreased at a
high-single-digit rate from the prior year’s level primarily as a result of
continued weak demand in the United States as a result of depressed housing and
decelerating commercial construction. Sales for the industrial power tools and
accessories business in the United States decreased at a high-single-digit rate
as a result of lower demand across all channels and most key product categories,
but that decline was mitigated by sales associated with listing gains at a major
retailer. Sales for the consumer power tools and accessories business
in the United States decreased at a double-digit rate from the 2007 level as a
result of declines caused by lost listings in the pressure-washer category, weak
demand, and the effects of a transition from the Firestorm® to the Porter-Cable®
brand of power tools and accessories at a large customer. The negative effects
of the Firestorm transition were partially offset by initial shipments of the
Porter-Cable line in the third quarter of 2008. In Canada, sales increased at a
double-digit rate in both the industrial and consumer power tools and
accessories businesses, driven by promotional activity.
Sales in
Europe decreased at a double-digit rate during the third quarter of 2008 from
the prior year’s level primarily as a result of deteriorating economic
conditions in Western Europe, which were only partially offset by continued
growth in the Middle East and Eastern Europe. The weakness experienced in
Western Europe was across virtually all countries but was particularly acute in
the United Kingdom and Iberia. During the third quarter of 2008, sales decreased
at a double-digit rate in both the industrial and consumer power tools and
accessories businesses in Europe.
Sales in
other geographic areas increased at a double-digit rate during the third quarter
of 2008 over the prior year’s level. That increase primarily resulted from a
double-digit rate of increase in Latin America. Sales in the Asia/Pacific region
approximated the prior year's level as sales growth in Asia was offset by
weaknesses in Australia and New Zealand.
Segment
profit as a percentage of sales for the Power Tools and Accessories segment
declined from 10.3% for the third quarter of 2007 to 7.5% for the third quarter
of 2008. Gross margin as a percentage of sales for the 2008 period decreased
from the corresponding period in 2007 due to the unfavorable effects of
commodity/component cost inflation (together with the change in China’s value
added tax and appreciation of the Chinese renminbi), pricing actions, mix, and
fixed cost leverage. Selling, general, and administrative expenses as a
percentage of sales were lower for the 2008 period, as compared to the
corresponding period in 2007, principally due to the effects of cost reduction
initiatives, including restructuring actions.
Sales to
unaffiliated customers in the Power Tools and Accessories segment during the
nine months ended September 28, 2008, decreased by 9% from the corresponding
period in 2007.
During
the nine months ended September 28, 2008, sales in North America decreased at a
double-digit rate from the level experienced in the corresponding period in
2007. Sales of the Corporation’s industrial power tools and accessories business
in the United States decreased at a double-digit rate, with declines experienced
across all key product categories and channels. Sales of the consumer power
tools and accessories business in the United States decreased by approximately
24% from the 2007 level. Over half of that decline was caused by lost listings
in the pressure-washer category and the effects of a transition from the
Firestorm to the Porter-Cable brand of power tools and accessories at a large
customer. In Canada, sales increased at a mid-single-digit rate primarily as a
result of higher sales of the industrial power tools and accessories business
due, in part, to promotional activities and listing gains.
Sales in
Europe decreased at a high-single-digit rate during the nine months ended
September 28, 2008, from the level experienced in the corresponding 2007 period
as a result of lower sales in Western Europe, which were only partially offset
by higher sales in Eastern Europe and the Middle East. Sales of both the
Corporation’s industrial and consumer power tools and accessories businesses in
Europe decreased at a high-single-digit rate.
Sales in
other geographic areas increased at a double-digit rate during the nine months
ended September 28, 2008, over the level experienced in the corresponding period
in 2007. That increase resulted from a double-digit rate of increase in Latin
America and a low-single-digit rate of increase in the Asia/Pacific
region.
Segment
profit as a percentage of sales for the Power Tools and Accessories segment was
7.9% for the nine-month period ended September 28, 2008, as compared to 11.7%
for the corresponding period in 2007. Gross margin as a percentage of sales for
the 2008 period decreased from the corresponding period in 2007 as the
unfavorable effects of commodity/component cost inflation (together with the
change in China’s value added tax and appreciation of the Chinese
renminbi), pricing actions, fixed cost leverage, unfavorable mix and higher
provisions for warranty were only partially offset by the favorable effects of
productivity initiatives and foreign currency transaction gains. Selling,
general, and administrative expenses as a percentage of sales was higher for the
2008 period, as compared to the corresponding period in 2007, due to
de-leveraging of those expenses over lower sales volumes.
Hardware
and Home Improvement
Segment
sales and segment profit for the Hardware and Home Improvement segment,
determined on the basis described in Note 8 of Notes to Consolidated Financial
Statements, were as follows (in millions of dollars):
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
28, 2008
|
September
30, 2007
|
September
28, 2008
|
September
30, 2007
|
|||||||||||||
|
Sales
to unaffiliated customers
|
$ | 232.4 | $ | 267.9 | $ | 686.1 | $ | 770.8 | ||||||||
|
Segment
profit
|
26.4 | 33.1 | 64.8 | 92.0 | ||||||||||||
Sales to
unaffiliated customers in the Hardware and Home Improvement segment decreased by
13% during the three-month period ended September 28, 2008, from the
corresponding period in 2007. Sales of security hardware products decreased at a
double-digit rate during the third quarter of 2008, from the corresponding
period in 2007, due to lower U.S. sales in the new construction channel in 2008
as well as to the effect of sales associated with the introduction of
the SmartSeries product line in 2007. Sales of plumbing products during the
three-month period ended September 28, 2008, approximated the prior year’s level
as sales in the new construction channel declined at a double-digit rate but
that decline was substantially offset by a slight increase in sales in the
larger retail channel, as retailers increased inventories, in part, to support
recent listings of the segment’s plumbing products.
Segment
profit as a percentage of sales for the Hardware and Home Improvement segment
decreased from 12.3% for the three months ended September 30, 2007, to 11.3% for
the three months ended September 28, 2008. That decrease was primarily
attributable to an increase in selling, general, and administrative expenses as
a percentage of sales, principally due to the de-leveraging of those expenses
over lower sales. Gross margin as a percentage of sales increased during the
three-month period ended September 28, 2008, as compared to the corresponding
period in 2007, as the favorable effects of restructuring and productivity
initiatives, together with pricing actions, more than offset the unfavorable
effects of commodity inflation and cost absorption.
Sales to
unaffiliated customers in the Hardware and Home Improvement segment decreased by
11% during the nine-month period ended September 28, 2008, from the
corresponding period in 2007. Sales of security hardware products decreased at a
double-digit rate during the first nine months of 2008, from the corresponding
period in 2007, due to lower U.S. sales in both the new construction and retail
channels. Sales of plumbing products decreased at a mid-single-digit rate during
the nine-month period ended September 28, 2008, as compared to the corresponding
period in 2007, due to lower U.S. sales in both the new construction and retail
channels.
Segment
profit as a percentage of sales for the Hardware and Home Improvement segment
decreased from 11.9% for the nine months ended September 30, 2007, to 9.4% for
the nine months ended September 28, 2008. That decrease was primarily
attributable to an increase in selling, general, and administrative expenses as
a percentage of sales, principally due to the de-leveraging of those expenses
over lower sales. Gross margin as a percentage of sales decreased slightly
during the nine-month period ended September 28, 2008, as compared to
the
corresponding
period in 2007, due to the unfavorable effects of commodity inflation and cost
absorption, which were partially offset by the favorable effects of
restructuring and productivity initiatives.
Fastening
and Assembly Systems
Segment
sales and segment profit for the Fastening and Assembly Systems segment,
determined on the basis described in Note 8 of Notes to Consolidated Financial
Statements, were as follows (in millions of dollars):
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
28, 2008
|
September
30, 2007
|
September
28, 2008
|
September
30, 2007
|
|||||||||||||
|
Sales
to unaffiliated customers
|
$ | 173.0 | $ | 176.6 | $ | 542.9 | $ | 538.2 | ||||||||
|
Segment
profit
|
26.8 | 27.6 | 85.1 | 85.1 | ||||||||||||
Sales to
unaffiliated customers in the Fastening and Assembly Systems segment decreased
by 2% for the three-month period ended September 28, 2008, and increased by 1%
for the nine-month period ended September 28, 2008, as compared to the
corresponding periods in 2007. Sales of the North American automotive business
decreased at a double-digit rate during both the third quarter and the first
nine months of 2008 from the corresponding periods in 2007, reflecting the
weakness in the U.S. automotive sector. Sales of the North American industrial
business decreased at a low-single-digit rate during the third quarter of 2008
and increased at a low-single-digit rate during the first nine months of 2008,
as compared to the corresponding periods in 2007. Sales in Europe during the
third quarter of 2008 approximated the prior year’s level as a low-single-digit
rate of growth in the automotive business was offset by a low-single-digit rate
of decline in the industrial business. Sales in Europe during the nine months
ended September 28, 2008, increased at a mid-single-digit rate over the prior
year’s level as a mid-single-digit rate of growth in the automotive business was
tempered by sales in the industrial business that approximated the 2007 level.
Sales in Asia during both the third quarter and the first nine months of 2008
increased at double-digit rates over the corresponding periods in
2007.
Segment
profit as a percentage of sales for the Fastening and Assembly Systems segment
decreased from 15.6% in the third quarter of 2007 to 15.5% in the third quarter
of 2008 as the effects of the de-leveraging of selling, general and
administrative expenses over lower sales volumes more than offset a modest
increase in gross margin as a percentage of sales. Segment profit as a
percentage of sales for the Fastening and Assembly Systems segment decreased
from 15.8% in the first nine months of 2007 to 15.7% in the corresponding 2008
period as the unfavorable effect of a modest decrease in gross margin was
partially offset by the favorable effect of the leverage of selling, general,
and administrative expenses over higher sales volumes.
As more
fully described in Note 2 of Notes to Consolidated Financial Statements, the
Fastening and Assembly Systems segment acquired Spiralock, a provider of
engineered threaded fastening solutions, on September 9, 2008. That acquisition
did not have a material effect on segment sales or segment profit for the three-
and nine-month periods ended September 28, 2008. Sales of Spiralock for the year
ended December 31, 2007, were approximately $15 million.
Other
Segment-Related Matters
As
indicated in the first table of Note 8 of Notes to Consolidated Financial
Statements, segment profit (expense) associated with Corporate, Adjustments, and
Eliminations was $(10.3) million and $(44.4) million for the three- and
nine-month periods ended September 28, 2008, respectively, as compared to
$(18.8) million and $(78.5) million, respectively, for the corresponding periods
in 2007. The decrease in Corporate expenses during the three months ended
September 28, 2008, was primarily due to the effects of lower pension expense,
lower expenses associated with intercompany eliminations, and lower legal and
environmental expenses which were partially offset by (expense) income directly
related to reportable business segments booked in consolidation as described
below. On a year-to-date basis, the decrease in Corporate expenses was primarily
due to the effects of lower pension expense, a foreign currency loss by a
Corporate subsidiary in 2007 which did not recur in 2008, and lower legal and
environmental expenses which were partially offset by (expense) income directly
related to reportable business segments booked in consolidation as described
below.
Expense
recognized by the Corporation, on a consolidated basis, relating to its pension
and other postretirement benefit plans decreased by $6.0 million and $17.8
million for the three- and nine-month periods ended September 28, 2008,
respectively, as compared to the 2007 levels. The Corporate adjustment to
businesses’ postretirement benefit expense booked in consolidation, as
identified in the final table included in Note 8 of Notes to Consolidated
Financial Statements was $.9 million and $2.8 million for the three- and
nine-month periods ended September 28, 2008, respectively, as compared to $5.0
million and $14.8 million, respectively, for the corresponding periods in 2007.
Those decreases in the Corporate adjustment in 2008, as compared to the 2007
periods, resulted from the lower level of pension and other postretirement
benefit expense (excluding the service costs allocated to the reportable
business segments). As more fully described in Note 8 of Notes to Consolidated
Financial Statements, in determining segment profit, expenses relating to
pension and other postretirement benefits are based solely upon estimated
service costs. The Corporation anticipates that its pension and other
postretirement benefit costs in 2008 will decrease by approximately $24 million
from the 2007 level.
(Expenses)
income directly related to reportable business segments booked in consolidation
and, thus, excluded from segment profit for the reportable business segments
were $(.5) million and $(3.8) million for the three- and nine-month periods
ended September 28, 2008, respectively, as compared to $4.6 million and $1.0
million, respectively, for the corresponding periods in 2007. The
segment-related (expense) income excluded from segment profit in both the three-
and nine-month periods ended September 28, 2008, and September 30, 2007,
primarily related to the Power Tools and Accessories segment.
RESTRUCTURING
ACTIVITY
The
Corporation is committed to continuous productivity improvements and continues
to evaluate opportunities to reduce fixed costs, simplify or improve processes,
and eliminate excess capacity. The Corporation’s restructuring activities are
more fully discussed in both Item 7 under the caption “Restructuring and
Integration Actions” and Item 8 in Note 18 of Notes to Consolidated Financial
Statements of the Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2007, and in Note 13 of Notes to Consolidated Financial
Statements.
The
Corporation realized restructuring benefits of approximately $7 million and $14
million during the three- and nine-month periods ended September 28, 2008, net
of restructuring-related expenses. Of those restructuring savings, approximately
75% were realized through a reduction of selling, general, and administrative
expenses, with the remainder benefiting gross margin.
The
Corporation expects that pre-tax savings associated with the fourth quarter 2007
and 2008 restructuring actions will benefit its 2008 and 2009 results by
approximately $20 million and $30 million, respectively, net of
restructuring-related expenses. The Corporation expects that, of those
incremental pre-tax savings, approximately 75% will benefit selling, general,
and administrative expenses and the remaining 25% will benefit cost of goods
sold.
Ultimate
savings realized from restructuring actions may be mitigated by such factors as
economic weakness and competitive pressures, as well as decisions to increase
costs in areas, such as promotion or research and development, above levels that
were otherwise assumed.
INTEREST
RATE SENSITIVITY
The
following table provides information as of September 28, 2008, about the
Corporation’s short-term borrowings, long-term debt, and interest rate hedge
portfolio. This table should be read in conjunction with the information
contained in Management’s Discussion and Analysis of Financial Condition and
Results of Operations under the heading “Interest Rate Sensitivity” included in
Item 7 of the Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2007.
Principal
Payments and Interest Rate Detail by Contractual Maturity Dates
|
(U.S.
Dollars in Millions)
|
3
Mos.
Ending
Dec.
31,
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
Total
|
Fair
Value
(Assets)/
Liabilities
|
||||||||||||||||||||||||
|
LIABILITIES
|
||||||||||||||||||||||||||||||||
|
Short-term
borrowings
|
||||||||||||||||||||||||||||||||
|
Variable
rate (U.S. dollars and
other
currencies) (a)
|
$ | 220.6 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 220.6 | $ | 220.6 | ||||||||||||||||
|
Average
interest rate
|
4.33 | % | 4.33 | % | ||||||||||||||||||||||||||||
|
Long-term
debt
|
||||||||||||||||||||||||||||||||
|
Variable
rate (U.S. dollars)
|
$ | — | $ | — | $ | — | $ | 125.0 | $ | 100.0 | $ | — | $ | 225.0 | $ | 225.0 | ||||||||||||||||
|
Average
interest rate
|
3.63 | % | 3.64 | % | 3.63 | % | ||||||||||||||||||||||||||
|
Fixed
rate (U.S. dollars)
|
$ | .1 | $ | .1 | $ | — | $ | 400.0 | $ | — | $ | 750.0 | $ | 1,150.2 | $ | 1,061.0 | ||||||||||||||||
|
Average
interest rate
|
7.00 | % | 7.00 | % | 7.13 | % | 5.61 | % | 6.14 | % | ||||||||||||||||||||||
|
INTEREST
RATE DERIVATIVES
|
||||||||||||||||||||||||||||||||
|
Fixed
to Variable Rate Interest
|
||||||||||||||||||||||||||||||||
|
Rate
Swaps (U.S. dollars)
|
$ | — | $ | — | $ | — | $ | 150.0 | $ | — | $ | 275.0 | $ | 425.0 | $ | (17.7 | ) | |||||||||||||||
|
Average
pay rate (b)
|
||||||||||||||||||||||||||||||||
|
Average
receive rate
|
5.34 | % | 4.78 | % | 4.98 | % | ||||||||||||||||||||||||||
|
(a)
|
Short-term
borrowings of $220.6 million include $219.7 million and $.9 million that
are denominated in U.S. dollars and other currencies,
respectively.
|
|
(b)
|
The average pay rate for swaps in
the notional principal amount of $175.0 million is based upon 3-month
forward LIBOR (with swaps in the notional principal amounts of $150.0
million maturing in 2011 and $25.0 million maturing thereafter). The
average pay rate for the remaining swaps is based upon 6-month forward
LIBOR.
|
FINANCIAL
CONDITION
Operating
activities provided cash of $315.5 million for the nine months ended September
28, 2008, as compared to $484.8 million of cash provided in the corresponding
period in 2007. The lower level of cash provided from operating activities in
the first nine months of 2008, as compared
to the
2007 period, reflected: (i) lower earnings, (ii) higher usage of cash associated
with other assets and liabilities, including the impact of the Corporation’s
foreign currency hedging activities and (iii) higher working capital
requirements. The higher working capital requirements in the first nine months
of 2008, as compared to the corresponding 2007 period, were primarily due to
lower cash provided by accounts payable (associated with both production levels
and timing), cash used rather than provided by other current liabilities (due,
in part, to a tax payment in the 2008 period associated with the settlement of
U.S. tax litigation), and higher cash used by an increase in trade receivables
(associated with both days sales outstanding and timing of sales). Those items
were partially offset by the favorable operating cash flow effect associated
with inventories (due to the lower level of inventories in the 2008
period).
As part
of its capital management, the Corporation reviews certain working capital
metrics. For example, the Corporation evaluates its trade receivables and
inventory levels through the computation of days sales outstanding and inventory
turnover ratio, respectively. The number of days sales outstanding increased
modestly at September 28, 2008, over the level at September 30, 2007. Average
inventory turns at September 28, 2008, remained consistent with inventory turns
at September 30, 2007.
Investing
activities for the nine months ended September 28, 2008, used cash of
$70.6 million, as compared to $119.8 million of cash used during the
corresponding period in 2007. That decrease primarily resulted from a $58.0
million net increase in cash flows associated with certain hedging activities
and a $16.2 million increase in proceeds from the disposal of assets principally
related to the sale of a non-operating asset. Those favorable items were
partially offset by the use of cash of $23.8 million associated with purchase of
Spiralock. Capital expenditures increased $2.2 million during the first nine
months of 2008, as compared to the 2007 period. The Corporation anticipates that
its capital spending in 2008 will approximate $105 million.
Financing
activities for the nine months ended September 28, 2008, used cash of $154.1
million, as compared to $381.3 million of cash used during the
corresponding period in 2007. During the first nine months of 2008, the
Corporation purchased 3,136,382 shares of its common stock at an aggregate cost
of $202.3 million. During the corresponding period in 2007, the Corporation
repurchased 5,475,803 shares of its common stock at an aggregate cost of $461.3
million. As of September 28, 2008, the Corporation had remaining authorization
from its Board of Directors to repurchase an additional 3,777,145 shares of its common stock.
During the nine months ended September 28, 2008, the Corporation entered into
term loan agreements totaling $225.0 million which resulted in proceeds from
long-term debt of $224.7 million (net of issuance costs of $.3 million). During
the nine months ended September 30, 2007, the Corporation repaid $150.0 million
associated with 6.55% notes due July 1, 2007. Cash provided on the issuance of
common stock decreased $53.2 million for the nine months ended September 28,
2008, as compared to the corresponding 2007 period, due to a lower level of
stock option exercises. Cash used in financing activities in the first nine
months of 2008 was also affected by the Corporation’s quarterly dividend
payments, which declined by $5.6 million, as compared to the corresponding 2007
period, due to the lower number of shares outstanding in the first nine months
of 2008. The $108.7 million net decrease in short-term borrowings during the
first nine months of 2008, as compared to the $250.3 million net increase in
short-term borrowings in the comparable 2007 period, was the result of the
previously described cash flow activity.
The
variable-rate debt to total debt ratio, after taking interest rate hedges into
account, was 55% and
44% at
September 28, 2008 and December 31, 2007, respectively. Average debt
maturity was 5.7 years at September 28, 2008, as compared to 6.2 years at
December 31, 2007. Average long-term debt maturity was 6.6 years at
September 28, 2008, as compared to 8.0 years at December 31, 2007.
The
Corporation will continue to have cash requirements to support seasonal working
capital needs and capital expenditures, to pay interest, and to service debt. In
order to meet its cash requirements, the Corporation intends to use its existing
cash, cash equivalents, and internally generated funds, to borrow under its
existing unsecured revolving credit facilities or other short-term borrowing
facilities, and to consider additional term financing. The Corporation believes
that cash provided from these sources will be adequate to meet its cash
requirements over the next twelve months.
FORWARD-LOOKING
STATEMENTS
The
Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a
safe harbor for forward-looking statements made by or on behalf of the
Corporation. The Corporation and its representatives may, from time to time,
make written or verbal forward-looking statements, including statements
contained in the Corporation’s filings with the Securities and Exchange
Commission and in its reports to stockholders. Generally, the inclusion of the
words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” and
similar expressions identify 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. All statements
addressing operating performance, events, or developments that the Corporation
expects or anticipates will occur in the future, including statements relating
to sales growth, earnings or earnings per share growth, and market share, as
well as statements expressing optimism or pessimism about future operating
results, are forward-looking statements within the meaning of the Reform Act.
The forward-looking statements are and will be based upon management’s
then-current views and assumptions regarding future events and operating
performance, and are applicable only as of the dates of such statements. The
Corporation undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
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 those factors
identified in Item 1A of Part II of this report and in Item 1A of Part I of the
Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2007.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
Information
required under this Item is contained in Note 4 of Notes to the Consolidated
Financial Statements, in Item 2 of Part I of this report under the caption
“Interest Rate Sensitivity”, and under the caption “Hedging Activities”,
included in Item 7, and in Notes 1 and 9 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, 2007, and is incorporated by reference
herein.
Item 4. Controls and Procedures
(a) Under
the supervision and with the participation of the Corporation’s management,
including the Corporation’s Chief Executive Officer and Chief Financial Officer,
the Corporation carried out an evaluation of the effectiveness of the design and
operation of the Corporation’s disclosure controls and procedures as of
September 28, 2008, pursuant to Exchange Act Rule 13a-15. Based upon that
evaluation, the Corporation’s Chief Executive Officer and Chief Financial
Officer have concluded that the Corporation’s disclosure controls and procedures
are effective.
(b) There
have been no changes in the Corporation’s internal control over financial
reporting during the quarterly period ended September 28, 2008, that have
materially affected, or are reasonably likely to materially affect, the
Corporation’s internal control over financial reporting.
THE
BLACK & DECKER CORPORATION
PART
II – OTHER INFORMATION
Item 1. Legal Proceedings
As more
fully described in the Annual Report on Form 10-K for the year ended
December 31, 2007, and in Note 14, the Corporation is involved in various
lawsuits in the ordinary course of business. These lawsuits primarily involve
claims for damages arising out of the use of the Corporation’s products,
allegations of patent and trademark infringement, and litigation and
administrative proceedings relating to employment matters, tax matters and
commercial disputes. In addition, the Corporation is party to litigation and
administrative proceedings with respect to claims involving the discharge of
hazardous substances into the environment.
Item 1A. Risk Factors
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed under the caption "Risk Factors" included in Part
I, Item 1A. of our Annual Report on Form 10-K for the year ended December
31, 2007, as well as the risk factors noted below. These risk factors could
materially affect our business, financial condition, or results of
operations.
|
·
|
The global credit crisis may
adversely impact the availability and cost of credit. The recent
turmoil in the credit markets has resulted in higher borrowing costs and,
for some companies, has limited access to credit, particularly through the
commercial paper markets. Although we believe commercial paper
markets will remain available to us and the lenders participating in our
revolving credit facility, which serves as a backstop to our commercial
paper borrowings, will be able to provide financing in accordance with
their contractual obligations, the current economic environment may
adversely impact our ability to access funds on reasonable terms in a
timely manner. Continued disruption in the credit markets also may
negatively affect the ability of our customers and suppliers to conduct
business on a normal basis.
|
|
·
|
We have pension plans that are
exposed to adverse changes in the market values of equity securities,
fixed income securities, and other investments. Our funded pension
plans cover substantially all of our employees in the United States
and Canada (if hired before 2007) and the United Kingdom (if hired
before 2005). Our funding of pension obligations and our pension benefit
costs are dependent on the assumptions used in calculating such amounts,
as compared to the actual experience of the plan. A decrease in the market
value of equity securities, fixed income securities, and other investments
could result in an increase to those obligations and costs and could
adversely affect our results of operations and our cash
flow.
|
The risks
described in the preceding paragraphs and in our Annual Report on Form 10-K are
not exhaustive. Additional risks and uncertainties not presently known to us or
that we currently believe to be immaterial also may adversely impact our
business. Should any risk or uncertainties develop into actual events, these
developments could have material adverse effects on our business, financial
condition, or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
(c)
Issuer Purchases of Equity Securities
|
Period (a)
|
Total
Number
of
Shares
Purchased
(b)
|
Average
Price
Paid
Per
Share
|
Total
Number of
Shares
Purchased
as
Part of Publicly
Announced
Plans
|
Maximum
Number
of
Shares that May
Yet
be Purchased
Under
the Plans (c)
|
||||||||||||
|
June
30, 2008 through
July
27, 2008
|
151,977 | $ | 58.56 | 151,963 | 3,777,145 | |||||||||||
|
July
28, 2008 through
August
24, 2008
|
— | — | — | 3,777,145 | ||||||||||||
|
August
25, 2008 through
September 28,
2008
|
— | — | — | 3,777,145 | ||||||||||||
|
Total
|
151,977 | $ | 58.56 | 151,963 | 3,777,145 | |||||||||||
|
(a)
|
The
periods represent the Corporation’s monthly fiscal
calendar.
|
|
(b)
|
Includes
14 shares acquired from associates to satisfy withholding tax requirements
upon the vesting of restricted
stock.
|
|
(c)
|
The
maximum number of shares that may yet be purchased under the plans
represent the remaining shares that are available pursuant to the
Corporation’s publicly announced repurchase plans. The maximum number of
shares that may yet be purchased under the plans noted above included
4,000,000 shares authorized by the Board of Directors on October 17, 2007,
and 2,000,000 shares authorized by the Board of Directors on February 14,
2008. There is no expiration date or current intent to terminate the
repurchase plans.
|
|
Exhibit
No.
|
Description
|
|
|
3
|
Bylaws
of the Corporation, as amended, included in the Corporation’s Current
Report on Form 8-K filed with the Commission on October 20, 2008, are
incorporated herein by reference.
|
|
|
10.1
|
|
The
Black & Decker Supplemental Retirement Savings Plan, as amended and
restated, included in the Corporation’s Current Report on Form 8-K filed
with the Commission on October 20, 2008, is incorporated herein by
reference.
|
|
10.2
|
The
Black & Decker Corporation Deferred Compensation Plan for Non-Employee
Directors, as amended and restated, included in the Corporation’s Current
Report on Form 8-K filed with the Commission on October 20, 2008, is
incorporated herein by reference.
|
|
|
10.3
|
The
Black & Decker Executive Annual Incentive Plan, as amended and
restated.
|
|
|
10.4
|
The
Black & Decker Management Annual Incentive Plan, as amended and
restated.
|
|
|
10.5
|
The
Black & Decker Supplemental Pension Plan, as amended and
restated.
|
|
|
10.6
|
The
Black & Decker Supplemental Executive Retirement Plan, as amended and
restated.
|
|
|
10.7
|
The
Black & Decker Executive Salary Continuance Plan, as amended and
restated.
|
|
|
10.8
|
Severance
Benefits Agreement, dated February 14, 2008, by and between the
Corporation and Stephen F. Reeves.
|
|
|
31.1
|
Chief
Executive Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
31.2
|
Chief
Financial Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.1
|
Chief
Executive Officer’s Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.2
|
Chief
Financial Officer’s Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
All other items were not applicable
|
|
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/ STEPHEN
F. REEVES
|
|||
|
Stephen
F. Reeves
|
||||
|
Senior
Vice President and Chief
|
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Principal
Accounting Officer
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By
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/s/
CHRISTINA M. MCMULLEN
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Christina
M. McMullen
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Vice
President and Controller
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Date: November
6, 2008
-38-
Exhibit 10.3
THE BLACK & DECKER
EXECUTIVE ANNUAL INCENTIVE PLAN
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1.
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Purpose
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The
purpose of The Black & Decker Corporation Executive Annual Incentive Plan is
to make a part of the annual compensation of the Corporation’s officers
dependent on the Corporation’s performance and to provide rewards for
performance as a competitive incentive to their efforts on the Corporation’s
behalf, and thus to enhance and reinforce the Corporation’s ability to achieve
its business goals. It is the intention of the Board of Directors of the
Corporation in adopting the Plan that amounts paid to Participants under the
Plan be “qualified performance-based compensation” within the meaning of Section
162(m) of the Code and the Section 162(m) Regulations.
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2.
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Definitions
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Whenever
used for purposes of the Plan, the following terms have the meanings defined
below, and when the defined meaning is intended, the term is
capitalized:
(a) “Award”
means a grant to a Participant of incentive compensation under the
Plan.
(b) “CEO”
means the Chief Executive Officer of the Corporation.
(c) “Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
(d) “Committee”
means the Compensation Committee of the Board of Directors of the
Corporation. All members of the Committee shall be members of the
Board of Directors of the Corporation who are not eligible to participate in the
Plan and who are (i) disinterested persons as defined in Rule 16b-3 adopted
pursuant to the Securities Exchange Act of 1934, (ii) outside directors as
defined in the Section 162(m) Regulations, and (iii) independent directors as
defined in the New York Stock Exchange’s corporate governance rules and the
Corporation’s Corporate Governance Policies and Procedures
Statement.
(e) “Corporation”
means The Black & Decker Corporation.
(f) “Maximum
Participant Award” means, with respect to a particular Participant, the maximum
Award payable to such Participant as determined in accordance with Section 5(d)
of the Plan.
(g) “Participant”
means an employee who is an officer of the Corporation who has been designated
to participate in the Plan.
(h) “Performance
Period” means the fiscal year in respect of which an Award is to be paid under
the Plan.
(i) “Plan”
means The Black & Decker Executive Annual Incentive Plan, as amended from
time to time.
(j) “Section
162(m) Regulations” mean the regulations adopted pursuant to Section 162(m) of
the Code, as amended from time to time.
(k) “Subsidiary”
means any domestic or foreign corporation, at least 50% of the outstanding
voting stock or voting power of which is beneficially owned, directly or
indirectly, by the Corporation.
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3.
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Administration
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(a) The
Committee shall determine who shall be a Participant, the applicable performance
goals for each Performance Period and the amount of any Awards paid under the
Plan, shall construe, interpret (subject to Section 3(d) of the Plan) and
administer the Plan, and shall adopt such rules and regulations and take such
other action as it deems appropriate. All decisions by the Committee shall be
final, conclusive and binding on the Corporation and each Participant, former
Participant, beneficiary and every other interested person. The Committee may
condition participation in the Plan by an employee upon the employee agreeing to
certain terms and conditions of employment (including, without limitation,
noncompete, confidentiality or similar provisions). Prior to the payment of any
Awards under the Plan the Committee shall certify, in accordance with the
Section 162(m) Regulations, that the performance goals in respect of the
applicable Performance Period have been satisfied. The Committee will report
annually to the Board of Directors of the Corporation all action taken under the
Plan, including Awards paid.
(b) Within
90 days of the beginning of each Performance Period (or, if earlier, before 25%
of the period of service to which the performance goals relate has elapsed), the
Committee shall establish or approve performance goals for the Performance
Period. The performance goals established by the Committee shall be stated in
terms of an objective formula or standard and shall be based on one of, or a
combination of, the following factors: the market price of the Corporation’s
Common Stock at the close of business on the last business day of the
Performance Period, increases in the market price of the Corporation’s Common
Stock during the Performance Period, the earnings for the Performance Period
(either before taxes, before interest and taxes, before depreciation,
amortization, interest and taxes, or after all of the foregoing), the earnings
per share for the Performance Period, or, as to the Corporation or any
subsidiary, group, division, or operating unit thereof, the return on equity or
net assets for the Performance Period, the gross margin or cost of goods sold
for the Performance Period, or the cash flow from operations or free cash flow
for the Performance Period.
(c) The
Committee shall administer the Plan in a manner consistent with the terms and
conditions of the Section 162(m) Regulations to enable Awards paid under
the
-2-
Plan to
be “qualified performance-based compensation” within the meaning of Section
162(m) of the Code and the Section 162(m) Regulations.
(d) It
is intended that the Plan comply with Section 409A of the Code and the
regulations or guidance issued thereunder and it shall be interpreted
accordingly.
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4.
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Participation
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(a) Participation
in the Plan shall be limited to selected officers of the Corporation who the
Committee has determined have a significant influence on the Corporation’s
annual corporate performance. The selection of Participants shall be made by the
Committee within 90 days of the beginning of a Performance Period (or, if
earlier, before 25% of the period of service to which the performance goals
relate has elapsed) and communicated to the Participants as soon thereafter as
practicable.
(b) At
any time during a Performance Period the Committee may designate new
Participants or remove officers from participation, in its sole discretion. An
officer’s participation in the Plan in any prior year or years shall not give
the officer the right to be a Participant in any subsequent year.
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5.
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Awards
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(a) At
the end of each Performance Period, the CEO shall submit a written report to the
Committee describing the performance of the Corporation (or, if applicable, a
business unit) relative to those performance goals previously established by the
Committee for the Performance Period.
(b) Awards
shall be made annually in accordance with the respective performance against the
performance goals established by the Committee for the respective Performance
Period.
(c) The
decision to pay or not to pay an Award and the amount of the Award to be paid
shall be made by the Committee based on the performance goals established in
respect of the applicable Performance Period and in accordance with the Section
162(m) Regulations. Under no circumstances may the Committee make an Award to a
Participant that exceeds the applicable Maximum Participant Award for the
respective Performance Period. The Committee in its sole discretion may reduce
the amount of any Award paid to a Participant below the amount of the Award that
otherwise would be payable to the Participant upon application of the
performance goals for the applicable Performance Period or may decide not to pay
an Award when performance goals for the applicable Performance Periods have been
satisfied, but under no circumstances may the Committee increase the amount of
any Award that otherwise would be payable to the Participant upon application of
the performance goals for the applicable Performance Period.
(d) With
respect to each Participant, the Maximum Participant Award for a Performance
Period shall not exceed $4 million.
-3-
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6.
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Payment
of Awards
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(a) Awards
shall be paid as soon as practicable after the end of a Performance Period (but
in no event later than March 15 of the calendar year immediately following the
end of the Performance Period) and after the Committee has certified that the
applicable performance goals have been satisfied.
(b) Awards
shall be paid in cash and shall be paid in the currency in which each
Participant’s base salary is paid.
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7.
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Termination
of Employment
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If before
an Award is actually paid to a Participant with respect to a Performance Period
the Participant ceases to be a regular, full-time employee of the Corporation or
any of its Subsidiaries for a reason other than retirement with a right to an
immediate retirement benefit, the Participant’s eligibility under the Plan shall
terminate and no Award will be made. If a Participant’s employment terminates at
a time when the Participant has a right to receive an immediate retirement
benefit from the Corporation or any of its Subsidiaries, the Committee may make
such Award as it deems appropriate under the circumstances; provided, however,
that (i) the Award shall be payable at the time specified in Section 6(a) and
only if the Committee certifies that the applicable performance goals have been
satisfied; and (ii) the Award shall not exceed the Award the Participant would
have been entitled to receive upon application of the performance goals for the
applicable Performance Period if the Participant had been employed for the
entire Performance Period times a fraction the numerator of which shall equal
the number of days the Participant was employed by the Corporation and its
Subsidiaries during the Performance Period and the denominator of which shall
equal the number of days in the Performance Period.
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8.
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Claim
to Awards and Employment Rights
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No
officer or other person shall have any claim or right to be granted an Award
under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any person any right to be retained in the employ of the
Corporation or a Subsidiary or affecting the right of the Corporation and its
Subsidiaries to terminate the employment of any person at any time, for any
reason and with or without notice.
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9.
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Tax
Withholding
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The
Corporation or a Subsidiary, as appropriate, shall have the right to deduct from
all Award payments for any Federal, State or local taxes or other similar
payments required by law to be withheld with respect to such
payments.
-4-
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10.
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Expenses
of Plan
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The
expenses of administering the Plan shall be borne by the Corporation and its
Subsidiaries.
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11.
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Amendment
and Termination
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The Board
of Directors may, in its discretion, terminate, amend or modify this Plan at any
time and from time to time. The Plan may be amended at any time,
including retroactively, to conform the Plan to the provisions and requirements
of Section 409A of the Code and the Section 162(m) Regulations, and no such
amendment shall be considered prejudicial to any interest of any participant
thereunder.
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12.
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Effective
Date of the Plan
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The
original effective date of the Plan was January 1, 1996. This
amendment and restatement of the Plan is adopted on, and effective as of,
October 16, 2008.
-5-
Exhibit
10.4
THE BLACK & DECKER MANAGEMENT ANNUAL
INCENTIVE PLAN
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1.
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Purpose
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The
purpose of The Black & Decker Corporation Management Annual Incentive Plan
is to make a part of the annual compensation of certain key management employees
dependent on individual, unit and Corporation performance and to provide rewards
for performance as a competitive incentive to their efforts on the Corporation’s
behalf, and thus to enhance and reinforce the Corporation’s ability to achieve
its business goals.
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2.
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Definitions
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Whenever
used for purposes of the Plan, the following terms have the meanings defined
below, and when the defined meaning is intended, the term is
capitalized:
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(a)
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“Award”
means a grant to a Participant of incentive compensation under the
Plan.
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(b)
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“CEO”
means the Chief Executive Officer of the
Corporation.
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(c)
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“Committee”
means the Compensation Committee of the Board of Directors of the
Corporation.
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(d)
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“Corporation”
means The Black & Decker
Corporation.
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(e)
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“Elected
Officer” means an employee of the Corporation who has been elected as an
officer by the Board of Directors of the
Corporation.
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(f)
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“Participant”
means an employee of the Corporation or one of its Subsidiaries who has
been designated to participate in this
Plan.
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(g)
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“Performance
Period” means the fiscal year in respect of which an Award is to be paid
under the Plan.
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(h)
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“Plan”
means The Black & Decker Management Annual Incentive Plan, as amended
from time to time.
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(i)
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“Subsidiary”
means any domestic or foreign corporation, at least 50% of the outstanding
voting stock or voting power of which is beneficially owned, directly or
indirectly, by the Corporation.
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3.
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Administration
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(a)
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The
Committee shall construe, interpret (subject to Section 3(c) of the Plan)
and administer the Plan, and shall adopt such rules and regulations and
take such other action as it deems appropriate. All decisions by the
Committee shall be final, conclusive and binding on the Corporation and
each Participant, former Participant, beneficiary and every other
interested person. The CEO or the Committee may condition participation in
the Plan by an employee upon the employee agreeing to certain terms and
conditions of employment (including, without limitation, noncompete,
confidentiality or similar provisions). The Committee will report annually
to the Board of Directors of the Corporation all action taken under the
Plan, including Awards paid.
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(b)
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Within
90 days of the beginning of each Performance Period, the CEO or, in the
case of an Elected Officer, the Committee shall establish performance
goals for each
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Participant. The
performance goals shall be communicated to the Participants as soon
thereafter as practicable.
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(c)
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It
is intended that the Plan comply with Section 409A of the Internal Revenue
Code of 1986, as amended from time to time (the “Code”), and the
regulations or guidance issued thereunder and it shall be interpreted
accordingly.
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4.
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Participation
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(a)
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Participation
in the Plan shall be limited to selected management employees who the CEO
or the Committee has determined have a significant influence on the
Corporation’s annual corporate performance. The selection of Participants
shall be approved by the CEO or, in the case of Elected Officers, the
Committee within 90 days of the beginning of a Performance Period and
communicated to the Participants as soon thereafter as
practicable.
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(b)
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No
management employee shall be a Participant in the Plan during any year in
which he or she is a participant in any other annual incentive plan of the
Corporation or any of its Subsidiaries, including but not limited to The
Black & Decker Executive Annual Incentive
Plan.
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(c)
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At
any time during a Performance Period, the CEO or, in the case of Elected
Officers, the Committee may designate new Participants or remove employees
from participation. An employee’s participation in the Plan in any prior
year or years shall not give the employee the right to be a Participant in
any subsequent year.
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5.
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Awards
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(a)
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Awards
shall be made annually after consideration of the respective performance
against the performance goals established by the CEO or the Committee for
the respective Performance Period.
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(b)
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To
be eligible for an Award in respect of a given Performance Period, a
minimum of six months’ participation in the Plan is required for the
Performance Period. The decision to pay or not to pay an Award and the
amount of the Award to be paid shall be made by the CEO or, in the case of
an Elected Officer, the Committee. The CEO or, in the case of an Elected
Officer, the Committee may decide to pay an Award when performance
objectives have not been satisfied and elect not to pay an Award when
performance objectives have been
satisfied.
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6.
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Payment of
Awards
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(a)
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Awards
shall be paid as soon as practicable after the end of a Performance Period
(but in no event later than March 15 of the calendar year immediately
following the end of the Performance
Period).
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(b)
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Awards
shall be paid in cash and shall be paid in the currency in which each
Participant’s base salary is paid.
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7.
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Termination of
Employment
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If before
an Award is actually paid to a Participant with respect to a Performance Period
the Participant ceases to be a regular full-time employee of the Corporation or
any of its Subsidiaries for a reason other than retirement with a right to an
immediate retirement benefit, the Participant’s eligibility under the Plan shall
terminate and no Award will be made, except
- -2-
that the
CEO or, in the case of Elected Officers, the Committee may consider whether to
make an Award to such Participant. If such an Award is made, the CEO
or, in the case of Elected Officers, the Committee shall determine the amount of
the Award. If a Participant’s employment terminates at a time when the
Participant has a right to receive an immediate retirement benefit from the
Corporation or any of its Subsidiaries, the CEO, or in the case of Elected
Officers, the Committee may make such Award as it deems appropriate under the
circumstances.
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8.
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Claim to Awards and Employment
Rights
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No
employee or other person shall have any claim or right to be granted an Award
under the Plan. Only the Committee and the CEO shall have the authority to
commit the Corporation to make an Award under the Plan, and any such commitment
shall be binding on the Corporation only if in writing signed by the CEO or
another duly authorized officer of the Corporation. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Corporation or a Subsidiary or affecting the right
of the Corporation and its Subsidiaries to terminate the employment of any
employee at any time, for any reason and with or without notice.
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9.
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Tax
Withholding
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The
Corporation or a Subsidiary, as appropriate, shall have the right to deduct from
all Award payments for any Federal, State or local taxes or other similar
payments required by law to be withheld with respect to such
payments.
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10.
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Expenses of
Plan
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The
expenses of administering the Plan shall be borne by the Corporation and its
Subsidiaries.
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11.
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Amendment and
Termination
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The Board
of Directors may, in its discretion, terminate, amend or modify this Plan at any
time and from time to time. The Plan may be amended at any time,
including retroactively, to conform the Plan to the provisions and requirements
of Section 409A of the Code, and no such amendment shall be considered
prejudicial to any interest of any Participant thereunder.
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12.
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Effective Date of the
Plan
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The
original effective date of this Plan was January 1, 1996. This
amendment and restatement of the Plan is adopted on, and shall be effective as
of, October 16, 2008.
-3-
Exhibit
10.5
THE
BLACK & DECKER
SUPPLEMENTAL
PENSION PLAN
Amended
and Restated Effective as of
January
1, 2008
THE
BLACK & DECKER
SUPPLEMENTAL
PENSION PLAN
TABLE OF
CONTENTS
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SECTION 1 - Purpose and
Effect
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1
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SECTION 2 -
Definitions
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1
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SECTION 3 -
Eligibility
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3
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SECTION 4 - Calculation of
Supplemental Pension
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3
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SECTION 5 - Payment of
Supplemental Pension
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4
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SECTION 6 - Death Benefits
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4
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SECTION 7 - Beneficiary
Designation
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5
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SECTION 8 - Tax
Withholdings
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5
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SECTION 9 - Payments in the Event of
Incapacity
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6
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SECTION 10 - Forfeitures
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6
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SECTION 11 - Company’s Obligations Unfunded and
Unsecured
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7
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SECTION 12 - Alienation or
Encumbrance
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8
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SECTION 13 - Administration of
Plan
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8
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SECTION 14 - No Guarantee of
Employment
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9
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SECTION 15 - Choice of Law
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9
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SECTION 16 - Claims
Procedure
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9
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SECTION 17 - Amendments and
Termination
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10
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-i-
THE
BLACK & DECKER
SUPPLEMENTAL
PENSION PLAN
SECTION
1 – Purpose and Effect
This Plan
was originally established by Black & Decker (U.S.) Inc., effective as of
October 1, 1989, to provide certain employees of the Black & Decker
Companies with benefits that would otherwise be provided under a Defined Benefit
Plan but for reductions or restrictions to such benefits required by federal
law. Specifically, this Plan provides Participants with a Supplemental Pension
to compensate for the loss of benefits that otherwise would have been payable
under a Defined Benefit Plan were it not for the Limitations. This
Plan is to be unfunded and is maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees.
This
document amends and fully restates this Plan effective as of January 1,
2008. The terms of this amended and restated document shall apply to
Participants who incur a Separation from Service on or after January 1,
2008. The benefits under this Plan with respect to any Participant
whose Separation from Service occurred prior to January 1, 2008 shall be
determined under the terms of this Plan as in effect on the date of such
Participant’s Separation from Service without regard to amendments made to this
Plan thereafter.
SECTION
2 - Definitions
As used
in this Plan, the following terms shall have the meanings
indicated:
“Accrued
Pension” means the benefit the Participant has accrued and vested under a
Defined Benefit Plan, expressed as a single-life annuity payable for the
Participant’s life beginning at the Participant’s normal retirement date or, if
later, his or her actual retirement date, under the Defined Benefit
Plan.
“Actuarial
Equivalent” means a benefit of equivalent value on a specific date, computed on
the basis of the actuarial assumptions used to determine benefit equivalencies
under the applicable Defined Benefit Plan and using such other reasonable
actuarial assumptions and methods that may be adopted by the Pension Committee
from time to time, in its sole discretion, for this
purpose. Notwithstanding the foregoing, in the event a Participant
has elected to receive the accelerated method of payment (five annual
installments or lump sum payment) of the present value of his or her
Supplemental Pension under this Plan, the amount of the lump sum payment or
installment payments (including the Supplemental Spouse’s Death Benefit) shall
be calculated using an interest rate equal to four and one-half percent (4.5%)
and the 1994 Group Annuity Reserving Table (determined on a unisex basis and
projected to 2002, all as described in IRS Revenue Ruling 2001-62)
and assuming that the Participant will earn no wages subject to the Social
Security Act nor further accrue any other retirement benefits after his or her
Benefit Determination Date and that his or her retirement benefits under the
Social Security Act and all other retirement benefits will begin at the earliest
date they are available
after the Participant’s
Benefit
Determination Date and using such other reasonable actuarial assumptions and
methods that may be adopted by the Pension Committee from time to time, in its
sole discretion, for this purpose.
“Benefit
Determination Date” means the first day of the calendar month immediately
following the later of the Participant’s 55th
birthday or the date of his or her Separation from Service.
“Beneficiary”
means the beneficiary designated in accordance with Section 7 to receive any
benefit provided under this Plan in the event of a Participant’s
death.
“Black
& Decker Company” means The Black & Decker Corporation or any of its
affiliates and subsidiaries.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Company”
means Black & Decker (U.S.) Inc.
“Defined
Benefit Plan” means a defined benefit plan within the meaning of Section 3(35)
of ERISA that is sponsored by a Black & Decker Company and is intended to
qualify under Section 401(a) of the Code.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
“Limitations”
means the maximum limitation on benefits under Section 415 of the Code and
reductions in pensionable earnings due to Section 401(a)(17) of the Code and the
deferral of compensation under The Black & Decker Supplemental Retirement
Savings Plan or other similar plan.
“Participant”
means any employee of a Black & Decker Company eligible to participate in
this Plan in accordance with Section 3.
“Payment
Date” means the Participant’s Benefit Determination Date or, in the
case of a Participant who qualifies as a “specified employee” within the meaning
of Section 409A(a)(2)(B)(i) of the Code and related guidance and regulations,
the first day of the calendar month immediately following the later of the
Participant’s Benefit Determination Date or the date that is six months and one
day after his or her Separation from Service. A Participant will be a
“specified employee” only if, as of the date of the Participant’s Separation
from Service, the Participant is identified as a “specified employee” on a
separate document created by the Pension Management Committee of The Black &
Decker Corporation that is applicable to this Plan and all nonqualified deferred
compensation plans of any Black & Decker Company, which document (as
modified from time to time) is hereby incorporated herein by this reference and
made a part of this Plan. Notwithstanding anything to the contrary,
if the Pension Committee reasonably determines that the making of any payment to
a Participant under this Plan will violate federal
-2-
securities
laws or other applicable law, the Pension Committee may delay a Participant’s
Payment Date until the earliest date at which the Pension Committee determines
that the making of that payment will not violate those laws.
“Pension
Committee” means The Black & Decker (U.S.) Inc. Pension
Committee.
“Plan”
means this document entitled “The Black & Decker Supplemental Pension Plan”
as amended from time to time.
“Separation
from Service” means a separation from service within the meaning of Section
409A(a)(2)(A)(i) of the Code and related guidance and regulations.
“Supplemental
Pension” means the supplemental pension benefit determined in accordance with
Section 4.
“Supplemental
Spouse’s Death Benefit” means the pre-retirement death benefit payable to a
Participant’s surviving spouse as more particularly described in Section
6(b).
SECTION
3 - Eligibility
Except as
otherwise provided under this Section 3 or by Section 10 of this Plan, any
employee of a Black & Decker Company who is determined by the Pension
Committee to be a member of a select group of management or highly compensated
employees of a Black & Decker Company and whose benefit under any Defined
Benefit Plan is reduced because of the Limitations shall be a Participant in
this Plan eligible to receive a Supplemental Pension. If a
Participant’s benefit under more than one Defined Benefit Plan is reduced
because of the Limitations, the Participant shall be eligible to receive a
separate Supplemental Pension relating to each such Defined Benefit Plan, and
the provisions of this Plan shall be applied separately with respect to each
such Supplemental Pension.
SECTION
4 - Calculation of Supplemental Pension
A
Participant’s Supplemental Pension relating to any Defined Benefit Plan shall be
the Actuarial Equivalent of a benefit that would begin on the Participant’s
Benefit Determination Date that is equal to the excess of:
(a) The
Participant’s Accrued Pension, calculated without regard to the Limitations;
over
(b) The
Participant’s actual Accrued Pension.
Notwithstanding
the foregoing, the Supplemental Pension shall be reduced by the Actuarial
Equivalent of the amount of any benefit payable by a Black & Decker Company,
or by a plan sponsored by a Black & Decker Company, which is similarly
intended to offset the impact of any of the Limitations.
-3-
SECTION
5 - Payment of Supplemental Pension
(a) Except
as provided in Section 5(b), a Participant’s Supplemental Pension shall be paid
in the form of a monthly 10-year guaranteed single life annuity for the
Participant’s life, commencing on the Participant’s Payment Date, and providing
that, in the event the Participant should die before receiving at least 120 of
those monthly payments, the balance of those 120 monthly payments will continue
to be paid monthly to the Participant’s Beneficiary until the Participant and
his or her Beneficiary together shall have received a total of 120 monthly
payments.
(b) Any
Participant who was eligible for and, on or before December 31, 2006, properly
elected the accelerated payment of the Supplemental Pension shall receive his or
her Supplemental Pension under Paragraphs (1) or (2) of this Section
5(b).
(1) If
the Participant’s Payment Date occurs before his or her 65th birthday, the
present value of the Participant’s Supplemental Pension (including any benefits
payable to the spouse or other Beneficiary) shall be paid to him or her in five
(5) equal annual installments that are the Actuarial Equivalent of the
Participant’s Supplemental Pension (including any benefits payable to the spouse
or other Beneficiary), which installments shall be payable on the Participant’s
Payment Date and the succeeding four anniversaries of the Participant’s Payment
Date, with those installment payments being calculated taking into account
interest from the Benefit Determination Date to the date of the last installment
payment at the rate of four and one-half percent (4.5%).
(2) If
the Participant’s Payment Date occurs on or after the Participant’s 65th
birthday, the present value of the Participant’s Supplemental Pension (including
any benefits payable to the spouse or other Beneficiary) shall be paid to him or
her in a lump sum payment that is the Actuarial Equivalent of the Participant’s
Supplemental Pension (including any benefits payable to the spouse or other
Beneficiary).
SECTION
6 - Death Benefits
(a) Except
as provided in Section 6(c), if a Participant dies on or after the Participant’s
Payment Date, the only death benefit payable to his or her Beneficiary from this
Plan shall be the death benefit, if any, payable to the Beneficiary under
Section 5(a), commencing on the date one month after the date of the last
monthly payment paid to the Participant before his or her death. No
death benefit shall be payable to the Participant’s Beneficiary under this
Section 6(a) if the Participant elected the 5-year installments or lump sum
accelerated method of payment under Section 5(d). If a Participant’s
Beneficiary predeceases the Participant, the death benefit provided under this
Section 6(a) shall be paid to the contingent Beneficiary designated by the
Participant, or if none is designated, to the Participant’s estate.
(b) If
a Participant dies before
the Participant’s Payment Date, the only death
benefit that shall be provided from this Plan is the Supplemental Spouse’s Death
Benefit. Except as
-4-
provided
in Section 5(d), the Supplemental Spouse’s Death Benefit shall be a benefit
payable to the Participant’s surviving spouse at the same time and in the same
form as the surviving spouse is paid the spouse’s death benefit under the
related Defined Benefit Plan. The amount of the Supplemental Spouse’s
Death Benefit shall be determined in the same manner as the spouse’s death
benefit under the related Defined Benefit Plan is determined, except on the
basis of the Participant’s Supplemental Pension under this Plan rather than the
Participant’s Accrued Pension under the Defined Benefit Plan. The
Participant’s spouse who is entitled to receive the payment(s) under this
Section 6(b) shall be the person, if any, of the opposite sex to whom the
participant is legally married at the Participant’s death.
(c) In
the event a Participant has validly elected the accelerated method of payment
under Section 5(b) and dies before his or her Separation from Service, the
Participant’s spouse, if any, shall receive the Actuarial Equivalent present
value of the Supplemental Spouse’s Death Benefit under Section 6(b), payable in
five (5) annual installment payments if the Participant died before reaching age
65, or in a lump sum payment if the Participant died on or after his or her 65th
birthday, with the payment(s) beginning or to be made on the first day of the
third full calendar month following the Participant’s date of death. If the
Participant has validly elected the accelerated method of payment under Section
5(b) and dies before his or her Separation from Service and has no surviving
spouse, then no benefit shall be payable to anyone under this Plan with respect
to the Participant. If the Participant has validly elected the
accelerated method of payment under Section 5(b) and dies after his or her
Separation from Service but before receiving the lump sum payment or all of the
5-year installment payments as elected under this Section 5(d), then that lump
sum payment or the remaining installment payments shall be paid to the
Participant’s Beneficiary at the time those payments would have been paid to the
Participant. The Participant’s spouse who is entitled to receive the
payment(s) under this Section 6(c) shall be the person, if any, of the opposite
sex to whom the participant is legally married at the Participant’s
death.
SECTION
7 - Beneficiary Designation
A
Participant may designate a Beneficiary and contingent Beneficiary to receive
the death benefit provided under Section 6. A Participant’s Beneficiary
designation must be in writing, on a form signed by the Participant and
acceptable to the Pension Committee, and shall be effective upon receipt by the
Pension Committee before the Participant’s death. A Participant may change his
or her Beneficiary designation at any time and the last designation received by
the Pension Committee shall control. If the Participant fails to validly
designate a Beneficiary under this Plan or if his designated Beneficiary fails
to survive him or her, any death benefit provided under Section 6 shall be paid
to the contingent Beneficiary designated by the Participant, or if none is
designated, to the Participant’s estate.
SECTION
8 - Tax Withholdings
The
Company shall have the right to deduct from each payment to be made hereunder
any withholding or other taxes required by law.
-5-
SECTION
9 - Payments in the Event of Incapacity
In the
event that the Pension Committee shall find that the Participant or other person
entitled to a benefit is unable to care for his or her affairs because of
illness or accident or is a minor or has died, the Company may pay any benefit
payment due him or her to his or her spouse, a child, a parent or other blood
relative, or to a person with whom he or she resides, unless claim shall have
been made therefor by a duly appointed legal representative, and any such
payment so made shall be a complete discharge of the liabilities of the Company
therefor.
SECTION
10 - Forfeitures
(a) Anything
to the contrary notwithstanding, all of the rights and benefits under this Plan
of a Participant, his or her surviving spouse and his or her Beneficiary, shall
be forfeited under the following circumstances:
(1) if
the Participant’s employment with the Black & Decker Companies is terminated
by reason of fraud, misappropriation or intentional material damage to the
property or business of a Black & Decker Company; commission of a felony; or
the continuance of a willful and repeated failure by the Participant to perform
his or her duties after written notice to the Participant specifying such
failure; or
(2) if,
during the period of 24 months beginning on the date of his or her termination
of employment with the Black & Decker Companies, without the prior written
consent of the applicable Black & Decker Company, the Participant enters
into competition with any of the Black & Decker Companies or discloses or
uses confidential information of any of the Black & Decker
Companies.
(b) If
a Participant receives payment of his or her benefits under this Plan in a lump
sum or installments in accordance with Section 5(b) and during the period of 24
months beginning on the date of his or her termination of employment with the
Black & Decker Companies, without the Company’s written consent, enters into
competition with any of the Black & Decker Companies or discloses or uses
confidential information, the Participant shall forfeit his or her right to
those installment payments or that lump sum payment and shall immediately repay
to the Company the full amount of that lump sum payment or the installment
payments that he or she received in accordance with Section 5(b).
(c) For
the purposes of this Plan, a Participant shall be deemed to have entered into
competition with one of the Black & Decker Companies if the Participant,
directly or indirectly, solicits as a customer any company that is or was a
customer of a Black & Decker Company during the Participant’s employment, or
that is or was a potential customer of a Black & Decker Company with which a
Black & Decker Company has made business contacts during the Participant’s
employment; provided, however, that the Participant shall not be deemed to be in
competition with Black & Decker by soliciting a company as a customer of any
business that is not in
direct or indirect competition with any of the types of businesses conducted by
a Black & Decker Company within any of the same territories as the Black
& Decker Companies conduct
-6-
SECTION
11 - Company’s Obligations Unfunded and Unsecured
Except as otherwise
required by applicable law, the Company’s obligations under this Plan are not
required to be funded or secured in any manner; no assets need be placed in
trust or in escrow or otherwise physically or legally segregated for the benefit
of any Participant; and the eventual payment of the benefits described in this
Plan to a Participant or the Participant’s spouse or Beneficiary is not required
to be secured to the Participant or them by the issuance of any negotiable
instrument or other evidence of the Company’s indebtedness. Neither a
Participant nor the Participant’s spouse or Beneficiary, or any other person who
could or might possibly receive benefit payments that were due to the
Participant or the Participant’s spouse or Beneficiary, is entitled to any
property interest, legal or equitable, in any specific asset of the Company,
and, to the extent that any person acquires any right to receive payments under
the provisions of this Plan, that right is intended to be no greater than or to
have any preference or priority over the rights of any other unsecured general
creditor of the Company. However, the Company reserves the right, in its sole
discretion, to accumulate assets to offset its eventual liabilities under this
Plan and physically or legally to segregate assets for the benefit of any
Participant or Participant’s spouse or Beneficiary (whether by escrow, by trust,
by the purchase of an annuity contract or by any other method of
funding selected by the Company) without liability for any adverse tax
consequences resulting to that Participant or that Participant’s spouse or
Beneficiary from the Company’s action. Any such segregation of assets
may be made with respect to the Company’s obligations under this Plan for
benefits attributable to an individual Participant, a selected group of
Participants or all Participants, as the Company may determine from time to
time, in its absolute discretion. Benefits under this Plan shall be
payable by the Company from the Company’s general assets and no other company
shall have any responsibility
-7-
or liability under this
Plan. The Company’s liabilities under this Plan shall, however, be
discharged to the extent of any payment received by the Participant (or the
Participant’s surviving spouse or Beneficiary) from any other company made for
that purpose and on the Company’s behalf or for its benefit.
SECTION
12 - Alienation or Encumbrance
No
payments, benefits or rights under this Plan shall be subject in any manner to
anticipation, sale, transfer, assignment, mortgage, pledge, encumbrance, charge
or alienation by a Participant, the Participant’s spouse or Beneficiary or any
other person who could or might possibly receive benefit payments that were due
to the Participant or the Participant’s spouse or Beneficiary, but were not
paid. If the Company determines that any person entitled to payments
under this Plan has become insolvent, bankrupt, or has attempted to anticipate,
sell, transfer, assign, mortgage, pledge, encumber, charge or otherwise in any
manner alienate any amount payable to that person under this Plan or that there
is any danger of any levy, attachment, or other court process or encumbrance on
the part of any creditor of that person, against any benefit or other amounts
payable to that person, the Company may, in its sole discretion and to the
extent permitted by law, at any time, withhold any or all such payments or
benefits and apply the same for the benefit of that person, in such manner and
in such proportion as the Company may deem proper.
SECTION
13 - Administration of Plan
(a) This
Plan shall be interpreted, administered, and operated by the Pension Committee,
which shall have complete authority, in its sole and absolute discretion, to
determine who is eligible for benefits hereunder, to interpret this Plan, to
prescribe, amend and rescind rules and regulations relating to it, and to make
all other determinations necessary or advisable for the administration of this
Plan. The Pension Committee’s interpretations of this Plan and actions in
respect of this Plan shall be binding and conclusive on all persons for all
purposes. It is intended that this Plan comply with Section 409A of
the Code and any regulations or guidance issued thereunder and
shall be interpreted accordingly. Notwithstanding the amendment provisions
of Section 17, this Plan may be amended by the Board of Directors of the Company
at any time, retroactively, if found necessary, in the opinion of the Board of
Directors, to conform this Plan to the provisions and requirements of Section
409A of the Code. No such amendment shall be
considered prejudicial to any interest of a Participant, the Participant’s
spouse, or Beneficiary hereunder. Any provision of this Plan not in conformance
with Code Section 409A shall be void.
(b) Neither
the Pension Committee nor any person acting on its behalf shall be liable to any
person for any action taken or omitted in connection with the interpretation and
administration of this Plan unless attributable to gross negligence or willful
misconduct. In addition to such other rights of indemnification as they may have
as directors, officers or employees of the Company, each member of the Pension
Committee shall be indemnified by the Company against the reasonable expenses,
including attorneys’ fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which he or she may be a party by reason of any action taken or
omitted
-8-
under or
in connection with this Plan, and against all amounts paid in settlement
thereof, provided such settlement is approved by independent legal counsel
selected by the Company, or paid by him or her in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such member is
liable for gross negligence or willful misconduct in his or her duties; provided
that within 60 days after the institution of such action, suit or proceeding the
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
(c) If
a Participant is also a member of the Pension Committee, the Participant may not
vote or act upon matters relating specifically to his or her participation in
this Plan.
SECTION
14 - No Guarantee of Employment
This Plan
shall not be construed as conferring any legal rights upon any Participant for
continuation of employment, nor shall it interfere with the rights of the
Company to discharge a Participant and to treat him or her without regard to the
effect which such treatment might have upon him or her under this
Plan.
SECTION
15 - Choice of Law
This
Plan, and the respective rights and duties of the parties hereunder, shall in
all respects be governed by and construed in accordance with the laws of the
State of Maryland, except to the extent that those laws shall have been
preempted by the laws of the United States.
SECTION
16 - Claims Procedure
Any claim
by a Participant, a Participant’s spouse or Beneficiary that benefits under this
Plan have not been paid in accordance with the terms and conditions of this Plan
shall be made in writing and delivered to the Pension Committee at the Company’s
principal office in the State of Maryland. The Pension Committee shall notify
the claimant if any additional information is needed to process the claim. All
claims shall be approved or denied by the Pension Committee within 90 days of
receipt of the claim by the Pension Committee. If the claim is denied, the
Pension Committee shall furnish the claimant with a written notice
containing:
(a) an
explanation of the reason for the denial,
(b) a
specific reference to the applicable provisions of this Plan,
(c) a
description of any additional material or information necessary for the claimant
to pursue the claim, and
(d) a
statement of the claimant’s right to bring a civil action under Section 502(a)
of ERISA.
-9-
Within 90
days of receipt of the notice described above, the claimant shall, if he or she
desires further review, file a written request for reconsideration with the
Pension Committee. A request for reconsideration must include an explanation of
the grounds for the request and the facts supporting the claim. So long as the
claimant’s request for review is pending, including such 90-day period, the
claimant or his or her duly authorized representative may review pertinent
documents and may submit issues and comments in writing to the Pension
Committee.
A final
and binding decision shall be made by the Pension Committee within 60 days of
the filing of the request for reconsideration; provided, however, that the
Pension Committee, in its discretion, may extend this period up to an additional
60 days.
The
decision by the Pension Committee shall be conveyed to the claimant in writing
and shall include specific reasons for the decision, with specific references to
the applicable provisions of this Plan on which the decision is based and a
statement of the claimant’s right to bring a civil action under Section 502(a)
of ERISA.
SECTION
17 - Amendments and Termination
The Board
of Directors of the Company reserves the right, in its sole and absolute
discretion: (a) to amend this Plan, in whole or in part, at any time and from
time to time, and (b) to terminate this Plan at any time; provided, however,
that no such amendment or termination shall have the effect of accelerating or
permitting the acceleration of any payment under this Plan, except to the extent
that such acceleration would be permitted under Section 409A of the Code, and,
except as otherwise provided in Section 5(b), no such amendment or termination
shall reduce the Supplemental Pension or the Supplemental Spouse’s Death Benefit
determined as of the date on which the amendment is adopted or this Plan is
terminated, as the case may be.
Amendment
and Restatement adopted October 16, 2008
-10-
Exhibit
10.6
THE
BLACK & DECKER
SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
Amended
and Restated Effective as of
January
1, 2008
THE
BLACK & DECKER
SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
TABLE OF
CONTENTS
|
SECTION 1 - DEFINITIONS
|
1
|
|
|
SECTION 2 - ELIGIBILITY
|
7
|
|
|
SECTION 3 - RETIREMENT
BENEFIT
|
7
|
|
|
(a) Benefit
Percentage
|
7
|
|
|
(b) Reduction
for Early Determination
|
8
|
|
|
(c) Reduction
for Less than 10 Years of Service
|
8
|
|
|
(d) Benefit
Examples
|
8
|
|
|
SECTION 4 - BENEFIT OFFSETS
|
8
|
|
|
SECTION 5 - DEATH BENEFITS
|
9
|
|
|
(a) Eligibility
for Death Benefit
|
9
|
|
|
(b) Spouse’s
Death
|
9
|
|
|
(c) Death
Benefit under Accelerated Payment Method
|
9
|
|
|
SECTION 6 - VESTING
|
10
|
|
|
(a) General
|
10
|
|
|
(b) Forfeiture
for Cause
|
10
|
|
|
(c) Clawback
|
10
|
|
|
(d) Competition
and Disclosure of Confidential Information
|
10
|
|
|
(e) Committee’s
Discretion
|
11
|
|
|
SECTION 7 - ADDITIONAL PROVISIONS CONCERNING
BENEFITS
|
11
|
|
|
(a) Obligation
to Inform
|
11
|
|
|
(b) Currency
and Exchange Rates
|
11
|
|
|
(c) Election
of Accelerated Payment Method
|
12
|
|
|
SECTION 8 - CORPORATION’S OBLIGATIONS ARE UNFUNDED
AND UNSECURED
|
12
|
|
|
SECTION 9 - ALIENATION OR
ENCUMBRANCE
|
13
|
|
|
SECTION 10 - OTHER BENEFITS
|
13
|
|
|
SECTION 11 - NO GUARANTEE OF
EMPLOYMENT
|
14
|
|
|
SECTION 12 - COOPERATION OF
PARTIES
|
14
|
|
|
SECTION 13 - BENEFIT CLAIMS
|
14
|
|
|
(a) Claims
Procedure
|
14
|
|
|
(b) Arbitration
|
15
|
|
|
(c) Attorneys’
Fees
|
15
|
|
|
SECTION 14 - INCAPACITY
|
15
|
|
|
SECTION 15 - ADMINISTRATION
|
16
|
|
|
(a) Committee’s
Responsibilities
|
16
|
-i-
|
(b) Plan
Interpretation
|
16
|
|
|
(c) Committee’s
Liability and Indemnification
|
17
|
|
|
(d) Self-Dealing
|
17
|
|
|
SECTION 16 - AMENDMENTS AND
TERMINATION
|
17
|
|
|
SECTION 17 - SEVERABILITY
|
18
|
|
|
SECTION 18 - CONSTRUCTION
|
18
|
|
|
SECTION 19 - CHOICE OF LAW
|
18
|
|
|
SECTION 20 - PARTIES TO BE
BOUND
|
18
|
-ii-
THE
BLACK & DECKER
SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
This Plan
provides certain supplemental retirement benefits for selected executive
employees of The Black & Decker Corporation and its subsidiaries and
affiliates. This Plan is intended to provide supplemental retirement
benefits primarily for a select group of management or highly paid executive
employees. This document amends and fully restates The Black &
Decker Supplemental Executive Retirement Plan effective as of January 1,
2008. The terms of this amended and restated document shall apply to
Participants whose Separation from Service occurs on or after January 1,
2008. The benefits under this Plan with respect to any Participant
whose Separation from Service occurred prior to January 1, 2008 shall be
determined under the terms of this Plan in effect on the date of such
Participant’s Separation from Service without regard to amendments made to this
Plan thereafter.
SECTION
1 - Definitions
Each of
the following terms in this Plan has the meaning indicated, unless a different
meaning is plainly implied by the context:
“Accelerated
Payment Method” means one of the methods
of payment described in Section 7(c).
“Actuarial
Equivalent” means a benefit having the same actuarial value, based on the
actuarial assumptions used in calculating benefits under The Black & Decker
Pension Plan, and such other reasonable actuarial assumptions and methods that
may be adopted by the Committee from time to time, in its sole discretion, for
use in determining benefits under this Plan. Notwithstanding the foregoing, in
the event a Participant has elected to receive an Accelerated Payment Method,
the amount of the lump sum payment or installment payments (including the
spouse’s benefit) shall be calculated (A) using (i) an interest rate equal to
four and one-half percent (4.5%) and (ii) the 1994 Group Annuity Reserving Table
(determined on a unisex basis and projected to 2002, all as described in IRS Revenue Ruling 2001-62);
(B) assuming that (i) the Participant will earn no wages subject to the Social
Security Act, (ii) the Participant will not further accrue any Other Retirement
Benefits after his or her Benefit Determination Date, (iii) the Participant’s
retirement benefits under the Social Security Act and all Other Retirement
Benefits will begin at the earliest date they are available after the
Participant’s Benefit Determination Date, and (iv) the Participant, if married,
will elect the form of payment for the Other Retirement Benefits that provides
his or her spouse the largest benefit following the Participant’s death; and (C)
using such other reasonable actuarial assumptions and methods that may be
adopted by the Committee from time to time, in its sole discretion, for this
purpose.
“Benefit
Determination Date” means the later of the first day of the calendar
month coincident with or next following the Participant’s Termination Date or
the Participant’s Early Retirement Date. Notwithstanding the
foregoing, if a Participant’s Separation from Service occurs due to Disability
prior to the Participant’s Normal Retirement Date, the Participant’s Benefit
Determination Date shall mean the Participant’s Normal Retirement
Date.
“Black &
Decker” means the Corporation and all of its direct and indirect
subsidiaries and its affiliates.
“Board” means the Corporation’s Board of Directors.
“Change in
Control of the Corporation” means a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), whether or not the Corporation is in fact required
to comply therewith, provided that, without limitation, such a change in control
shall be deemed to have occurred if (A) any “person” (as 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 35% 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 or entity, 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.
“Code”
means the Internal Revenue Code of 1986, as amended from time to time,
and any successor to that statute.
“Committee”
means the
Compensation Committee of the Board.
“Corporation” means The Black & Decker Corporation, a Maryland
corporation.
“Credited
Service” means all Benefit Service Credit as defined in and credited to
the Participant under The Black & Decker Pension Plan (or that would have
been credited for any period of employment by Black & Decker, if the
Participant had been eligible to participate in
-2-
that
plan), plus the Participant’s Salary Continuance Period. Except as
credited under The Black & Decker Pension Plan or unless otherwise
determined by the Committee in its sole discretion, Credited Service under this
Plan shall not include any period of employment with any company during any
period when that company was not a subsidiary or affiliate of the Corporation.
Credited Service also includes all periods of Disability beginning while the
Participant is employed by Black & Decker and continuing as long as the
Disability continues up until the Participant’s Normal Retirement
Date.
“Disability”
means an illness or injury that would cause the
Employee to be disabled under the terms of The Black & Decker Disability
Plan.
“Early Retirement
Date” means the
first day of the calendar month coincident with or next following the date upon
which the Participant has both attained age 55 and five years of Credited
Service; provided, however, that, in the case of a Protected Participant, the
Early Retirement Date shall be the first day of the calendar month coincident
with or next following the Protected Participant’s 55th birthday regardless of
his or her Credited Service.
“Effective
Date” means January 1, 2008, the effective date of this amended and
restated Plan. This Plan was originally effective as of January 1,
1984.
“Employee”
means any person rendering personal services to Black & Decker as an
employee.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
“Final Average
Pay” means the average monthly amount of the Participant’s Pay for the
three years (whether or not consecutive) in which the Participant’s Pay was the
highest out of each of the seven-year periods that end on the following dates,
whichever seven-year period produces the highest average monthly
amount:
|
|
(A)
|
the
Participant’s Termination Date;
|
|
|
(B)
|
if
the Participant’s Termination Date is not December 31st
of any given year, the December 31st
immediately preceding the Participant’s Termination
Date;
|
|
|
(C)
|
the
last day of the Participant’s Salary Continuance Period, if
applicable;
|
|
|
(D)
|
if
the last day of the Participant’s Salary Continuance Period is not
December 31st
of any given year, the December 31st
immediately preceding the last day of the Participant’s Salary Continuance
Period, if applicable;
|
|
|
(E)
|
in
the case of a Protected Participant only, the date of the applicable
Change in Control of the Corporation;
and
|
-3-
|
|
(F)
|
in
the case of a Protected Participant only, if the date of the applicable
Change in Control of the Corporation is not December 31st
of any given year, the December 31st
immediately preceding the date of the applicable Change in Control of the
Corporation.
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“Normal
Retirement Date” means the first day of the calendar month coincident
with or next following: (A) the date upon which the Participant attains age 60
and 5 years of Credited Service or, (B) in the case of a Protected Participant,
the Participant’s 60th birthday, regardless of his or her Credited
Service.
“Other Retirement
Benefits” means the amount (actuarially adjusted, as described below) of
all retirement, disability income and death benefits, or the like, whether
tax-qualified or non-qualified, that the Participant (or, in the case of
surviving spouse’s benefit under Section 5, the Participant’s surviving spouse)
is entitled to receive in the applicable month under all plans or arrangements
provided, maintained or funded by any of the Participant’s employers (whether or
not affiliated with Black & Decker), including all Social Security Benefits,
but excluding: (A) any portion of those benefits (other than Social Security
Benefits) that is attributable to the Participant’s contributions, including
salary or other compensation reduction contributions; (B) any death benefits
under a life insurance contract; (C) any defined contribution plan, unless that
plan is intended to provide the primary source of retirement income (in addition
to Social Security Benefits) funded by any employer for the employees at any
location covered by that plan; (D) any payments to the Participant made pursuant
to an individual written agreement with Black & Decker and as a result of a
change in the ownership or effective control of the Corporation or a change in
the ownership of a substantial portion of the Corporation’s assets, including,
without limitation, a Change in Control of the Corporation; (E) any amounts paid
under an individual written agreement with Black & Decker that expressly
provides that those amounts are in addition to the benefits under this Plan; and
(F) any amount that constitutes Pay. Notwithstanding anything to the contrary,
the amount of the Participant’s or spouse’s Other Retirement Benefits in any
month shall be increased or decreased so that the amount of those Other
Retirement Benefits that offset the monthly benefit payable under this Plan is
the Actuarial Equivalent of the Other Retirement Benefits that the Participant
or spouse would otherwise have received that month but for the Participant’s or
spouse’s election with respect to those Other Retirement Benefits either to (A)
accelerate payment to a date that precedes or to defer the payment beyond the
earliest date those payments would otherwise have been made, or (B) receive
those Other Retirement Benefits in any form of payment other than the form of
payment that would have provided the largest monthly benefit to the Participant
or spouse, unless, and only to the extent that, the elected form of payment
provides death benefits to the Participant’s spouse.
“Participant”
means any Employee who qualifies for participation in this Plan, as more
particularly described in Section 2.
“Pay” means
(A) the actual compensation paid during the relevant period by Black &
Decker to the Participant for services as an Employee, including base salary,
bonuses, and annual incentive awards, (B) any amounts contributed to any
employee benefit plan pursuant to a salary or other compensation reduction
agreement with the Participant, and including, for the year of
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deferral,
amounts deferred by the Participant under any nonqualified deferred
compensation plan (such as The Black & Decker Supplemental Retirement
Savings Plan), (C) salary continuation payments during sick leave and other
authorized leaves of absence (other than long-term disability benefits) and (D)
the Participant’s Salary Continuance Payments credited as Pay ratably over the
Participant’s Salary Continuance Period. The term “Pay” does not
include any (A) amounts paid pursuant to any long-range performance compensation
plan, including The Black & Decker Performance Equity Plan, The Black &
Decker Long-Term Incentive Plan, and The Black & Decker 2008 Executive
Long-Term Incentive/Retention Plan, and The Black & Decker Long-Term
Management Compensation Plan; (B) any non-cash remuneration, imputed income,
perquisites and other cash or non-cash fringe benefits, such as (but not limited
to) reimbursements or allowances for expenses (such as automobile, moving or
relocation, country club, financial or tax counseling, tax preparation, overseas
housing, educational and similar expense allowances), (C) stock bonuses, income
attributable to discount stock purchases, stock options, restricted stock,
restricted stock units, dividends, dividend equivalents or stock appreciation
rights, (D) any other income attributable to the vesting of restricted property
or benefits under any plan or arrangement, and (E) unless specifically included
as Pay in the immediately preceding sentence, contributions to or benefits under
any employee pension or welfare benefit plan or payments received by a
Participant under any non-qualified deferred compensation plan (such as The
Black & Decker Supplemental Retirement Savings Plan). For any period during
which the Participant is entitled to Credited Service by reason of a Disability,
the Participant’s Pay is deemed to continue during that Disability period at a
monthly rate equal to 1/12th of (i) the Participant’s base salary (before any
salary reduction for contributions to any employee benefit plan pursuant to a
salary reduction agreement with the Participant) at the Participant’s annual
salary rate in effect at the date that the Disability began, plus (ii) all items
(other than base salary and such salary reduction contributions) included in the
Participant’s actual Pay during the 12-month period ending on the date that the
Disability began.
“Payment
Date” means the latest of the Participant’s Benefit Determination Date,
the date that is six (6) months and one (1) day after the Participant’s
Separation from Service or, if the Participant has elected to defer his or her
Payment Date pursuant to Section 7(c), the Payment Date so elected by the
Participant; except that (A) the death benefits payable to a Participant’s
spouse shall be paid at the date specified in Section 5; and (B) in the case of
a Participant whose Separation from Service occurs due to Disability prior to
such Participant’s Normal Retirement Date, the Participant’s Payment Date shall
be the Participant’s Normal Retirement Date. Notwithstanding anything
to the contrary, if the Committee reasonably determines that the making of any
payment to a Participant under this Plan will violate federal securities laws or
other applicable law, the Committee may delay a Participant’s Payment Date until
the earliest date at which the Committee determines that the making of that
payment will not violate those laws.
“Plan”
means “The Black & Decker Supplemental Executive Retirement Plan,” as it may
be amended from time to time. This document completely amends and restates The
Black & Decker Supplemental Executive Retirement Plan originally effective
on January 1, 1984, and last amended and restated effective as of January 1,
2005.
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“Protected
Participant” means a Participant who is an Employee when a Change in
Control of the Corporation occurs.
“Salary
Continuance Payments” means (A) in the case of a Participant who is a
participant in the Salary Continuance Plan, the maximum “Salary Continuance”
payments, if any, that the Participant could be entitled to receive under the
Salary Continuance Plan; (B) all payments, if any, that are in lieu of future
compensation items that would otherwise constitute “Pay” under the terms of this
Plan and that the Participant may be entitled to receive under the terms of any
individual written agreement with Black & Decker, as a result of the
termination of his or her employment with Black & Decker (whether by action
of Black & Decker or the Participant); and (C) in the case of a Protected
Participant, all payments, if any, that are in lieu of future compensation items
that would otherwise constitute “Pay” under the terms of this Plan and that the
Protected Participant may be entitled to receive under the terms of any
individual agreement between the Participant and Black & Decker as a result
of the termination of the Participant’s employment with Black & Decker
(whether by action of Black & Decker or the Participant) coincident with or
following a change in the ownership or effective control of the Corporation or a
change in the ownership of a substantial portion of the Corporation’s
assets. In all cases, a Participant’s entitlement to Salary
Continuance Payments and the amount thereof shall be determined at the time
specified in the Salary Continuance Plan or other applicable agreement, before
any offset for severance pay, vacation pay, salary continuance, notice pay, a
termination indemnity or the like or compensation received from a subsequent
employer, without regard to whether those payments are made in one lump sum
payment or periodically and without regard to the amount of severance or salary
continuance that is actually paid to the Participant
thereafter. Notwithstanding the foregoing, Salary Continuance
Payments shall not include, for purposes of this Plan only, any compensation
items used to calculate the amount of the Salary Continuance Payment under a
Participant’s individual written agreement that would not otherwise constitute
“Pay” under the terms of this Plan. For example, if the amount of the
Salary Continuance Payments payable under the Participant’s individual agreement
is based on the Participant’s annual base salary, annual incentive award, and
long-term incentive award, the portion of the Salary Continuance Payment based
on the Participant’s long-term incentive award shall be disregarded when
calculating the amount of the Salary Continuance Payments under this
Plan.
“Salary
Continuance Period” means (A) the maximum period with respect to which
the Participant’s Salary Continuance Payments are to be measured under the terms
of the Salary Continuance Plan or applicable individual written agreement, (B)
three (3) years in the case of Salary Continuance Payments payable under that
certain employment agreement between the Corporation and Nolan D. Archibald, as
amended from time to time, or (C) three (3) years in the case of Salary
Continuance Payments payable under the terms of any individual agreement between
the Participant and Black & Decker as a result of the termination of the
Participant’s employment with Black & Decker (whether by action of Black
& Decker or the Participant) coincident with or following a change in the
ownership or effective control of the Corporation or a change in the ownership
of a substantial portion of the Corporation’s assets. In any case,
the Salary Continuance Period is determined at the effective date of the
Participant’s termination of employment with Black & Decker, without regard
to the actual period over which those payments may be made and without regard to
whether those payments are made in one lump sum
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payment
or periodically. Notwithstanding anything to the contrary, a
Participant’s Salary Continuance Period will be taken into account under this
Plan only if the Participant is entitled to Salary Continuance Payments at the
effective date of the Participant’s termination of employment with Black &
Decker.
“Salary
Continuance Plan” means The Black & Decker Executive Salary
Continuance Plan, effective May 1, 1995, as amended from time to time, or any
salary continuance plan that is a successor to, or replacement for, that
plan.
“Separation from
Service” means a separation from service within the meaning of Section
409A(a)(2)(A)(i) of the Code and related guidance and regulations.
“Social Security
Benefit” means the retirement, disability income or death benefits under
any plan or arrangement that is sponsored, mandated or administered by any
government and that provides or would provide retirement or disability income to
the Participant and to which any of the Participant’s employers or former
employers (whether or not affiliated with Black & Decker) has made
contributions on the Participant’s behalf.
“Termination
Date” means the date on which the Participant’s Credited Service with
Black & Decker terminates.
SECTION
2 - Eligibility
Any
management or highly paid executive employee may be selected for participation
in this Plan by the Committee or any other committee of the Board designated by
the Board for such purpose and will automatically become a Participant on the
date designated by that committee. Any Employee who was still employed by Black
& Decker and was a Participant in this Plan immediately prior to the
Effective Date shall continue as a Participant under this Plan without further
action by the Board or any such committee.
SECTION
3 - Retirement Benefit
(a) Benefit
Percentage. Any Participant whose Termination Date occurs at
or after the Participant’s Early Retirement Date or, in the case of a Protected
Participant, whose Termination Date occurs at any time, whether before or after
his or her Early Retirement Date, is entitled to receive under this Plan a
monthly benefit for life beginning on the Participant’s Payment Date that is the
Actuarial Equivalent of the monthly benefit that would begin on the first day of
the calendar month after the Participant’s Benefit Determination Date and would
continue for the Participant’s expected life. The amount of the monthly benefit
(before the reductions in Sections 3(b) and 3(c)) is to be equal
to:
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(A)
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50%
of Final Average Pay, in the case of a Participant (other than a Protected
Participant) who has less than fifteen (15) years of Credited Service;
or
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(B)
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60%
of Final Average Pay, in the case of a Participant (other than a Protected
Participant) who has at least fifteen (15) years of Credited Service;
or
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(C)
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60%
of Final Average Pay, in the case of a Protected Participant (regardless
of Credited Service).
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(b) Reduction for
Early Determination. Notwithstanding anything to the contrary,
the monthly benefit, as determined under Section 3(a), shall be reduced by
one-twelfth (1/12th) of two (2) percentage points of Final Average Pay for each
full calendar month by which the Participant’s Benefit Determination Date
precedes the Participant’s Normal Retirement Date.
(c) Reduction for
Less than 10 Years of Service. Notwithstanding anything to the
contrary in this Plan, if a Participant (other than a Protected Participant) has
less than ten (10) years of Credited Service at the Participant’s Benefit
Determination Date, the monthly benefit determined under Section 3(a), as
reduced by any reduction required under Section 3(b) and before any offsets
under Section 4, is to be multiplied by a fraction, the numerator of which
equals the Participant’s years of Credited Service (including fractional years)
and the denominator of which equals ten (10) years. This Section 3(c)
shall not apply in the case of a Protected Participant.
(d) Benefit
Examples. Examples of the monthly benefit (stated as a
percentage of Final Average Pay), as determined under this Section 3, are set
forth in Schedule I attached to this Plan.
SECTION 4 -
Benefit Offsets
Notwithstanding
anything to the contrary, the amount of the Participant’s benefit each month, as
determined under Section 3 as reduced by any reduction required under Sections
3(b) and 3(c) or the amount of the Participant’s surviving spouse’s monthly
benefit under Section 5 is to be further reduced by the Other Retirement
Benefits payable to the Participant or spouse during that month. In
the event that the Other Retirement Benefits for any month exceed the monthly
benefit payment for that month under this Plan, such excess shall be carried
over and added to the Other Retirement Benefits for subsequent months, until
such excess is exhausted. The offsets to the Participant’s or
spouse’s benefits under this Section 4 are not to be increased to reflect any
increase in Other Retirement Benefits attributable to increases in the
cost-of-living after the Other Retirement Benefits commence and no benefit is
payable to the Participant or spouse in any month when those Other Retirement
Benefits (including carry-overs from prior months) exceed the monthly benefit
amount determined under Section 3, as reduced under Sections 3(b) and 3(c), or
in the spouse’s case, the benefit determined under Section
5. Notwithstanding anything to the contrary, if the Participant
returns to Credited Service after his or her Payment Date, then the
Participant’s benefits under this Plan shall be recomputed at the Participant’s
subsequent Separation from Service and shall be reduced by the Actuarial
Equivalent of any benefits previously paid under this Plan to the Participant
and/or his or her spouse and shall again become payable in accordance with
Section 3. The Committee will decide, in its sole discretion, the manner in
which these offsets are to be applied.
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SECTION
5 - Death Benefits
No
benefits under this Plan are payable after the Participant’s death except as
otherwise provided in this Section 5.
(a) Eligibility for
Death Benefit. In the case of a Participant (other than a
Protected Participant) who dies before attaining the Early Retirement Date, no
benefits under this Plan are payable after the Participant’s
death. In the case of a Participant (other than a Protected
Participant) who dies after attaining the Early Retirement Date, except as
otherwise provided in Section 5(c), the Participant’s surviving spouse, if any,
is entitled to receive the spouse’s death benefit described in Section
5(b). In the case of any Protected Participant who dies at any time,
except as otherwise provided in Section 5(c), the Protected Participant’s
surviving spouse, if any, is entitled to receive the spouse’s death benefit
described in Section 5(b). The Participant’s spouse who is entitled
to receive the payment(s) under this Section 5 shall be the person, if any, of
the opposite sex to whom the Participant is legally married at the Participant’s
Payment Date or the Participant’s death, which ever happens first.
(b) Spouse’s Death
Benefit. The spouse’s death benefit under this Section 5(b)
shall be a monthly payment for the spouse’s life beginning on the first day of
the calendar month coincident with or immediately following the date of the
Participant’s death (or, in the case of a Protected Participant only, the date
that would have been the Protected Participant’s 55th
birthday, if later than his or her date of death). The amount of the
spouse’s monthly payment shall be equal to (i) one-half (50%) of the monthly
benefit (determined under Section 3, but before the offsets under Section 4)
that the Participant was receiving or would have been entitled to receive as of
the date of the Participant’s death minus (ii) the offsets under Section
4.
(c) Death Benefit
under Accelerated Payment Method. In the event a
Participant had validly elected the Accelerated Payment Method and dies before
his or her Separation from Service, the Participant’s spouse, if any, shall
receive the Actuarial Equivalent of the spouse’s death benefit under Section
5(b), payable in five (5) annual installment payments, if the Participant died
before reaching age 65, or in a lump sum payment, if the Participant died on or
after his or her 65th
birthday, with the payment(s) beginning on the date the spouse’s death benefit
would have commenced under Section 5(b). If the Participant dies
before his or her Separation from Service and has no surviving spouse, then no
benefit shall be payable to anyone under this Plan with respect to the
Participant. If the Participant dies after his or her Separation from
Service but before receiving the lump sum payment or all of the five (5) annual
installment payments as elected under Section 7(c), then that lump sum payment
or the remaining installment payments shall be paid to the Participant’s spouse
or, if the Participant has no surviving spouse, to the Participant’s estate, at
the time those payments would have been paid to the Participant. The
Participant’s spouse who is entitled to receive the payment(s) under this
Section 5(c) shall be the person,
if any, of the opposite sex to whom the participant is legally married at the
Participant’s death.
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SECTION
6 - Vesting
(a) General. Except
in the case of a Protected Participant, if the Participant’s Termination Date
occurs before the Participant attains the Early Retirement Date, the
Participant’s (and the surviving spouse’s) right to benefits under this Plan
shall be completely forfeited. In the case of a Protected Participant
or his or her surviving spouse, all of the Protected Participant’s right to
benefits under this Plan (except the surviving spouse’s right to receive death
benefits under Section 5) shall be completely forfeited if the Protected
Participant dies before his or her Benefit Determination Date. Except in the
case of a Protected Participant and his or her surviving spouse, if this Plan is
terminated by the Corporation on or after the Participant attains the Early
Retirement Date but before the Participant’s Benefit Determination Date, the
Participant shall be entitled to receive the benefits under this Plan commencing
at the Participant’s Payment Date in the amount the Participant would have
received under this Plan based on the Participant’s Credited Service and Final
Average Pay determined at this Plan’s termination date, and the Participant’s
surviving spouse shall be entitled to receive the corresponding death benefit
pursuant to Section 5. If this Plan is terminated or amended after a Change in
Control of the Corporation, each Protected Participant who has not consented in
writing to that termination or amendment shall be entitled to receive the
benefits, commencing at his or her Payment Date, that is not less than the
benefits the Protected Participant would have received if the termination or
amendment of this Plan had not occurred and the Protected Participant’s
surviving spouse shall be entitled to receive the corresponding death benefit
pursuant to Section 5.
(b) Forfeiture for
Cause. Notwithstanding anything to the contrary, in the case
of a Participant other than a Protected Participant, all of the Participant’s
(and surviving spouse’s) rights and benefits under this Plan shall be
forfeited:
(i) if
the Participant’s employment with
Black & Decker is terminated by reason of fraud, misappropriation or
intentional material damage to the property or business of Black & Decker;
commission of a felony; or the continuance of a willful and repeated failure by
the Participant to perform his or her duties after written notice to the
Participant specifying such failure; or
(ii) if,
during the period of 24 months beginning on his or her Termination Date, the
Participant, without the Corporation’s written consent, enters into competition
with Black & Decker or uses or discloses confidential
information.
(c) Clawback. If,
during the period of 24 months beginning on his or her Termination Date, the
Participant, without the Corporation’s written consent, enters into competition
with Black & Decker or uses or discloses confidential information, the
Participant shall immediately repay to the Corporation the full amount of any
payments he or she received under this Plan.
(d) Competition and
Disclosure of Confidential Information. For purposes of this
Section 6, the Participant shall be deemed to be in competition with Black &
Decker if the Participant, directly or indirectly, solicits as a customer any
company that is or was a customer of
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Black
& Decker during the Participant’s employment, or that is or was a potential
customer of Black & Decker with which Black & Decker has made business
contacts during the Participant’s employment; provided, however, that the
Participant shall not be deemed to be in competition with Black & Decker by
soliciting a company as a customer of any business that is not in direct or
indirect competition with any of the types of businesses conducted by Black
& Decker within any of the same territories as Black & Decker conducts
such businesses. In addition, a Participant will be deemed to be in
competition with Black & Decker if the Participant directly or indirectly
becomes an owner, officer, director, operator, sole proprietor, partner, joint
venturer, contractor or consultant, or participates in or is connected with the
ownership, operation, management or control of any company in direct or indirect
competition with any of the types of businesses conducted by Black & Decker
within any of the same territories as Black & Decker conducts such
businesses; provided, however, that the ownership for investment of less than 5
percent (5%) of the outstanding stock of any of the classes of stock issued by a
publicly held company shall not be deemed competition with Black & Decker
for purposes of this Section 6. The Participant shall be deemed to have
disclosed “confidential information” if the Participant uses or fails to
preserve as confidential, communicates, or discloses to any person, orally, in
writing or by publication, any information, regardless of when, where or how
acquired relating to or concerning the affairs of Black & Decker to the
actual or potential detriment of Black & Decker; provided, however, that the
foregoing obligations shall not apply to information that is or becomes public
through no fault of the Participant.
(e) Committee’s
Discretion. The Committee shall have the absolute right to
determine in its sole discretion (i) whether or not a Participant’s employment
was terminated as a result of an act described in Section 6(d), and (ii) whether
or not a Participant has entered into competition with Black & Decker or has
disclosed confidential information so as to cause a forfeiture of the
Participant’s benefits hereunder, and the obligation of the Participant to repay
any amounts previously received under this Plan in accordance with Section
6(b).
SECTION
7 - Additional Provisions Concerning Benefits
(a) Obligation to
Inform. The payments under this Plan are conditioned on the
agreement of the Participant and the Participant’s spouse (i) to inform the
Committee of all retirement, disability, Social Security, death benefit and
other benefit payments received or receivable by them that may reduce the
Corporation’s obligations to pay benefits under this Plan and (ii) to provide
all information about those payments that the Committee may reasonably request
from time to time in order to administer this Plan.
(b) Currency and
Exchange Rates. The benefit payments under this Plan will be
calculated in U.S. dollars using the appropriate currency exchange rate selected
by the Committee in its sole discretion at the Participant’s Payment
Date. The benefits under this Plan will be paid to the Participant
and the Participant’s spouse in any currency designated by the Participant on or
before the Participant’s Payment Date (or, if the Participant dies before
benefits commence, the currency designated by the spouse), based on the
appropriate currency exchange rate (selected by the Committee in its sole
discretion) in effect at the Participant’s Payment Date. Once benefit
payments under this Plan have begun, the currency selected by the Participant
(or the Participant’s spouse) and the applicable exchange rate may not be
changed except to the
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extent
that the Committee, in its sole discretion, may approve a change in order to
prevent extreme financial hardship to the Participant or the Participant’s
spouse.
(c) Election of
Accelerated Payment Method. Any Participant who was eligible
for and, on or before December 31, 2006, validly elected the Accelerated Payment
Method shall receive his or her benefits under this Plan under the Accelerated
Payment Method described in paragraphs (i) and (ii) of this Section
7(c). Any Participant who made the Accelerated Payment Method
election on or after February 9, 2006, could, as a part of that election,
irrevocably elect to defer his or her Payment Date to any date that is at least
six (6) months and one day after the Participant’s Separation from Service but
not more than eighteen (18) months after his or her Separation from
Service. Under all circumstances, any Accelerated Payment Method
election is irrevocable and shall apply to any benefits that become payable to
the Participant and his or her spouse under this Plan.
(i) If
the Participant’s Payment Date occurs before his or her 65th
birthday, the present value of the Participant’s benefits under this Plan
(including the spouse’s benefit) shall be paid to him or her in five (5) equal
annual installments that are the Actuarial Equivalent of the Participant’s
benefits under this Plan as of the Benefit Determination Date (including any
benefits for the Participant’s spouse and after being reduced by the Actuarial
Equivalent of all applicable benefit reductions and offsets), which installments
shall be payable on the Participant’s Payment Date and the next four successive
anniversaries of the Participant’s Payment Date, with those installment payments
being calculated taking into account interest from the Benefit Determination
Date to the date of the last installment payment at the rate of four and
one-half percent (4.5%).
(ii) If
the Participant’s Payment Date occurs on or after the Participant’s 65th
birthday, the present value of the Participant’s benefits under this Plan
(including the spouse’s benefit) shall be paid to him or her at the Payment Date
in a lump sum payment that is the Actuarial Equivalent of the Participant’s
benefits under this Plan as of the Benefit Determination Date (including any
benefits for the Participant’s spouse and after being reduced by the Actuarial
Equivalent of all applicable benefit reductions and offsets).
SECTION
8 - Corporation’s Obligations are Unfunded and Unsecured
Except as
otherwise required by applicable law, the Corporation’s obligations under this
Plan are not required to be funded or secured in any manner; no assets need be
placed in trust or in escrow or otherwise physically or legally segregated for
the benefit of any Participant; and the eventual payment of the benefits
described in this Plan to a Participant or the Participant’s spouse or estate is
not required to be secured to the Participant or his or her spouse by the
issuance of any negotiable instrument or other evidence of the Corporation’s
indebtedness. Neither a Participant nor the Participant’s spouse is
entitled to any property interest, legal or equitable, in any specific asset of
the Corporation, and, to the extent that any person acquires any right to
receive payments under the provisions of this Plan, that right is intended to be
no greater than or to have any preference or priority over the rights of any
other unsecured general creditor of the Corporation. However, the Corporation
reserves the right, in its sole discretion, to
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accumulate
assets to offset its eventual liabilities under this Plan and physically or
legally to segregate assets for the benefit of any Participant or Participant’s
spouse (whether by escrow, by trust, by the purchase of an annuity contract or
by any other method of funding selected by the Corporation) without liability
for any adverse tax consequences resulting to that Participant or that
Participant’s spouse from the Corporation’s action, except as otherwise provided
in this Section with respect to a Protected Participant and his or her
spouse. Any such segregation of assets may be made with respect to
the Corporation’s obligations under this Plan for benefits attributable to an
individual Participant, a selected group of Participants or all Participants, as
the Corporation may determine from time to time, in its absolute
discretion. Notwithstanding anything to the contrary, in the case of
a Protected Participant (or his or her spouse), if the Corporation or any of its
affiliates or subsidiaries takes or has taken any action (without the written
consent of the Protected Participant or, if the Protected Participant is
deceased, his or her spouse) that causes the Protected Participant or the
Protected Participant’s spouse to incur income or other taxes with respect to
any benefit under this Plan before the date that benefit is payable to the
Protected Participant (or his or her spouse), the Corporation shall, within 60
days after a demand therefor is made by the Protected Participant or his or her
spouse, reimburse the Protected Participant (or his or her spouse) for the full
amount of those income or other taxes as well as for the full amount of the
income or other taxes the Protected Participant (or his or her
spouse) will incur with respect to such reimbursement or any subsequent
reimbursement hereunder. Benefits under this Plan shall be payable by the
Corporation from the Corporation’s general assets and no other company shall
have any responsibility or liability under this Plan. The
Corporation’s liabilities under this Plan shall, however, be discharged to the
extent of any payment received by the Participant (or the Participant’s
surviving spouse) from any other company made for that purpose and on the
Corporation’s behalf or for its benefit.
SECTION
9 - Alienation or Encumbrance
No
payments, benefits or rights under this Plan shall be subject in any manner to
anticipation, sale, transfer, assignment, mortgage, pledge, encumbrance, charge
or alienation by a Participant, the Participant’s spouse or any other person who
could or might possibly receive benefit payments that were due to the
Participant or the Participant’s spouse, but were not paid. If the
Corporation determines that any person entitled to payments under this Plan has
become insolvent, bankrupt, or has attempted to anticipate, sell, transfer,
assign, mortgage, pledge, encumber, charge or otherwise in any manner alienate
any amount payable to that person under this Plan or that there is any danger of
any levy, attachment, or other court process or encumbrance on the part of any
creditor of that person, against any benefit or other amounts payable to that
person, the Corporation may, in its sole discretion and to the extent permitted
by law, at any time, withhold any or all such payments or benefits and apply the
same for the benefit of that person, in such manner and in such proportion as
the Corporation may deem proper.
SECTION
10 - Other Benefits
The
provisions of this Plan relate only to the specific benefits described in this
Plan and are not intended to affect any other benefits to which a Participant
may be entitled as a retiree or former employee of Black &
Decker. Except as provided below in this Section 10, nothing
contained in this Plan shall in any manner modify, impair or affect the existing
rights or interests
-13-
of a
Participant under any other benefit plan provided by Black & Decker, and the
rights and interests of a Participant to any benefits or as a participant or
beneficiary in or under any or all such plans shall continue in full force and
effect unimpaired, subject nonetheless to the eligibility requirements and other
terms of each such plan. This Section shall not be interpreted as modifying in
any way the effect that the Participant’s termination of employment and
retirement has upon the Participant’s rights under such other plans. The
benefits provided under this Plan are not to be applied as an offset against any
other retirement or deferred compensation benefits or payments that are
otherwise to be provided by Black & Decker to the Participant or the
Participant’s beneficiaries; and those benefits or payments are to be calculated
first, ignoring this Plan’s existence. In no event shall any benefits
payable under this Plan be treated as salary or other compensation to a
Participant for the purpose of computing benefits to which the Participant may
be entitled under any other benefit plan of Black & Decker.
SECTION
11 - No Guarantee of Employment
This Plan
shall not be construed as conferring any legal rights upon any Participant for
continuation of employment, nor shall it interfere with the rights of Black
& Decker to discharge a Participant and to treat the Participant without
regard to the effect which such treatment might have upon the Participant under
this Plan.
SECTION
12 - Cooperation of Parties
Each
Participant (and surviving spouse) shall perform any and all reasonable acts and
execute any and all reasonable documents and papers that are necessary or
desirable for carrying out this Plan or any of its provisions.
SECTION
13 - Benefit Claims
(a) Claims
Procedure. Any claim by a Participant, a Participant’s spouse
or any person claiming on behalf of the Participant or the Participant’s spouse
that benefits under this Plan have not been paid in accordance with the terms
and conditions of this Plan shall be made in writing and delivered to the
Committee at the Corporation’s principal office in the State of
Maryland. The Committee shall notify the claimant if any additional
information is needed to process the claim. All claims shall be
approved or denied by the Committee within 90 days of receipt of the claim by
the Committee. If the claim is denied, the Committee shall furnish
the claimant with a written notice containing:
(i) an
explanation of the reason for the denial;
(ii) a
specific reference to the applicable provisions of this Plan;
(iii) a
description of any additional material or information necessary for the claimant
to pursue the claim;
(iv) an
explanation of this Plan’s claim review procedure described in this Section 13;
and
-14-
(v)
a statement of the claimant’s right to arbitration under Section 13(c) following
denial of his or her claim.
Within 90
days of receipt of the notice described above, the claimant shall, if further
review is desired, file a written request for reconsideration with the
Committee. A request for reconsideration must include an explanation
of the grounds for the request and
the facts supporting the claim. So long as the claimant’s request for
review is pending, including such 90-day period, the claimant or the claimant’s
duly authorized representative may review pertinent documents and may submit
issues and comments in writing to the Committee.
A final
decision shall be made by the Committee within 60 days of the filing of the
request for reconsideration; provided, however, that the Committee, in its
discretion, may extend this period up to an additional 60 days.
The
decision by the Committee shall be conveyed to the claimant in writing and shall
include specific reasons for the decision, with specific references to the
applicable provisions of this Plan on which the decision is
based.
(b) Arbitration. Any
dispute or controversy arising in connection with a benefit claim under this
Plan, after the claims procedure in Section 13(a) has been exhausted, shall be
settled exclusively and finally by arbitration to be conducted in Towson,
Maryland before a neutral arbitrator with expertise in employment law, including
ERISA, in accordance only with the Employee Benefit Plan Claims Arbitration
Rules then in effect of the American Arbitration Association. The
scope of review of the arbitration conducted hereunder shall be limited to
whether Black & Decker, the Board or the Committee was arbitrary and
capricious in the exercise of its or their discretion pursuant to the terms of
this Plan. The arbitrator appointed hereunder shall have no authority
or power to grant any remedy or relief not otherwise contained in this Plan and
may grant relief contained in this Plan only if the arbitrator determines that
the interpretation or administration of this Plan was in fact arbitrary and
capricious. The arbitrator appointed hereunder shall have no
authority to add to, detract from, or modify any term or condition of this
Plan. The arbitrator shall have no authority to grant any relief or
remedy other than as called for by the terms of this Plan even if such relief or
remedy is otherwise available at law or in equity but for the terms and
conditions of this Plan. Judgment may be entered on the arbitrator’s
award in a court of competent jurisdiction in the venue of the
arbitration.
(c) Attorneys’
Fees. The Corporation shall pay to a Protected Participant or
a Protected Participant’s surviving spouse all legal fees and expenses incurred
by the Protected Participant or the Protected Participant’s surviving spouse in
making a claim for benefits or otherwise in seeking to obtain or enforce any
right or benefit provided by this Plan.
SECTION
14 - Incapacity
If a
Participant or the Participant’s spouse has become legally incompetent, then the
legal guardian, or other legal representative of such Participant’s or spouse’s
estate, shall be entitled to act for and represent such incompetent Participant
or spouse in all matters and to the same extent
-15-
as the
Participant or spouse could have done but for such incompetency, including but
not limited to the receipt of benefits under this Plan.
SECTION
15 - Administration
(a) Committee’s
Responsibilities. This Plan shall be administered by the
Committee, which shall be responsible for all matters affecting the
administration of this Plan and, in addition to those responsibilities specified
elsewhere in this Plan, shall have the following duties and responsibilities in
connection with the administration of this Plan:
(i) To
prepare and enforce such rules, regulations and procedures as shall be proper
for the efficient administration of this Plan, such rules, regulations and
procedures to apply uniformly to all Participants;
(ii) To
determine all questions arising in the administration, interpretation and
application of this Plan, including questions of the status and rights of
Participants and any other persons hereunder;
(iii) To
decide any dispute arising hereunder;
(iv) To
correct defects, supply omissions, and reconcile inconsistencies to the extent
necessary to effectuate this Plan;
(v) To
compute the amount of benefits that shall be payable to any Participant or
spouse in accordance with the provisions of this Plan and to determine the
person or persons to whom such benefits shall be paid;
(vi) To
select the currency conversion or exchange rates to be applied in determining a
Participant’s or spouse’s benefits under this Plan, where foreign currencies are
involved;
(vii) To
authorize all payments that shall be made pursuant to the provisions of this
Plan;
(viii) To
make recommendations to the Corporation’s Board of Directors with respect to
proposed amendments to this Plan;
(ix)
To file all reports with government agencies, employees, and other parties as
may be required by law, whether such reports are initially the obligation
of the Corporation or this Plan; and
(x)
To have all such other powers as may be necessary to discharge its duties
hereunder.
(b) Plan
Interpretation. The Committee shall have the authority to
interpret this Plan in its sole and absolute discretion. The
Committee’s interpretation of this Plan and actions
in
-16-
respect
of this Plan shall be binding and conclusive on all persons for all purposes,
subject only to review by an arbitrator in accordance with the provisions and
standards set forth in Section 13(b). It is intended that this Plan
comply with Section 409A of the Code and any regulations or guidance issued
thereunder and shall be
interpreted accordingly. Notwithstanding the amendment provisions of
Section 16, this Plan may be amended by the Board at any time, retroactively if
required, if found necessary, in the opinion of the Board, to conform this Plan
to the provisions and requirements of Section 409A of the Code. No such
amendment shall be considered prejudicial to any interest of a Participant or
his or her spouse. Any provision of this Plan not in conformance with Section
409A of the Code shall be void.
(c) Committee’s
Liability and Indemnification. Neither the Committee nor any
person acting on its behalf shall be liable to any person for any action taken
or omitted in connection with the interpretation and administration of this Plan
unless attributable to gross negligence or willful misconduct. In addition to
such other rights of indemnification they may have as directors, officers or
employees of the Corporation, each member of the Committee shall be indemnified
by the Corporation against the reasonable expenses, including attorneys’ fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, to which such
member may be a party by reason of any action taken or omitted under or in
connection with this Plan, and against all amounts paid in settlement thereof,
provided such settlement is approved by independent legal counsel selected by
the Corporation, or paid by such member in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such member is liable
for gross negligence or willful misconduct in such member’s duties; provided
that within 60 days after the institution of such action, suit or proceeding the
member shall in writing offer the Corporation the opportunity, at its own
expense, to handle and defend the same.
(d) Self-Dealing. If
a Participant is also a member of the Committee, the Participant may not vote or
act upon matters relating specifically to such member’s participation in this
Plan.
SECTION
16 - Amendments and Termination
The Board
reserves the right at any time and from time to time to the extent permissible
under law, to amend or terminate this Plan, prospectively or retroactively, in
whole or in part; provided, however, that no such amendment or termination shall
(A) have the effect of accelerating or permitting the acceleration of any
payment under this Plan, except to the extent that such acceleration would be
permitted under Section 409A of the Code, or (B) without the Participant’s
written agreement, reduce or impair (i) the benefits or rights of any
Participant (or spouse) whose Benefit Determination Date occurred before the
date the amendment is adopted or this Plan is terminated, (ii) the vested
benefits and rights of any Participant who is then employed by Black &
Decker or (iii) the right of any Protected Participant and/or his or her
surviving spouse to receive benefits under this Plan determined as if that Plan
termination or amendment had not occurred. Any amendment or
termination shall be adopted by resolution of the Board.
-17-
SECTION
17 - Severability
If any
provision of this Plan shall be held void or unenforceable, the remaining
provisions of this Plan shall remain in full force and effect; provided,
however, that in interpreting this Plan, such void or unenforceable provision
shall be replaced with an effective and legally permissible provision, the
effect of which shall be identical to, or as close as reasonably possible to,
the effect of the original provision.
SECTION
18 - Construction
Any use
of the singular shall include the plural, and vice versa, as may be appropriate.
Titles, captions or paragraph headings contained in this Plan are for purposes
of convenience and reference only, and shall not operate to define or modify the
text to which they relate.
SECTION
19 - Choice of Law
This
Plan, and the respective rights and duties of the Corporation and all persons
thereunder, shall in all respect be governed by and construed under the laws of
the State of Maryland, except to the extent, if any, that those laws may have
been pre-empted by federal law. This Plan is intended to be a
“pension plan” within the meaning of Section 3(2)(A) of ERISA, which is exempt
from Parts 2, 3
and 4 of ERISA by virtue of Sections 201(2), 301(a)(3) and 401(a)(1) thereof,
respectively, and is not designed to meet
the requirements of Section 401(a) of the Code.
SECTION
20 - Parties to be Bound
The
provisions of this Plan shall be binding upon, and shall inure to the benefit of
the Corporation, its successors and assigns, and each Participant and the
Participant’s spouse and estate.
Originally
adopted January 30, 1984
Amendment
and Restatement adopted February 18, 1993
Amendment
and Restatement adopted July 20, 1995
Amendment
and Restatement adopted February 14, 1996
Amendment
and Restatement adopted October 15, 1998
Amendment
and Restatement adopted February 11, 1999
Amendment
and Restatement adopted April 27, 2004
Amendment
and Restatement adopted October 14, 2005
Amendment
and Restatement adopted February 9, 2006
Amendment
and Restatement adopted October 16, 2008
-18-
THE
BLACK & DECKER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SCHEDULE
I - EXAMPLES OF MONTHLY BENEFIT AMOUNTS*
STATED
AS A PERCENTAGE OF FINAL AVERAGE PAY
PARTICIPANTS
(OTHER THAN PROTECTED PARTICIPANTS)
|
YEARS
OF CREDITED SERVICE
|
BENEFIT
DETERMINATION DATE**
|
|||||
|
AGE
55
|
AGE
56
|
AGE
57
|
AGE
58
|
AGE
59
|
AGE
60 OR MORE
|
|
|
Less
than 5
|
0%
|
0%
|
0%
|
0%
|
0%
|
0%
|
|
5
|
20%
|
21%
|
22%
|
23%
|
24%
|
25%
|
|
6
|
24%
|
25.2%
|
26.4%
|
27.6%
|
28.8%
|
30%
|
|
7
|
28%
|
29.4%
|
30.8%
|
32.2%
|
33.6%
|
35%
|
|
8
|
32%
|
33.6%
|
35.2%
|
36.8%
|
38.4%
|
40%
|
|
9
|
36%
|
37.8%
|
39.6%
|
41.4%
|
43.2%
|
45%
|
|
10
|
40%
|
42%
|
44%
|
46%
|
48%
|
50%
|
|
11
|
40%
|
42%
|
44%
|
46%
|
48%
|
50%
|
|
12
|
40%
|
42%
|
44%
|
46%
|
48%
|
50%
|
|
13
|
40%
|
42%
|
44%
|
46%
|
48%
|
50%
|
|
14
|
40%
|
42%
|
44%
|
46%
|
48%
|
50%
|
|
15
or more
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
PROTECTED
PARTICIPANTS
|
YEARS
OF CREDITED SERVICE
|
BENEFIT
DETERMINATION DATE**
|
|||||
|
AGE
55
|
AGE
56
|
AGE
57
|
AGE
58
|
AGE
59
|
AGE
60 OR MORE
|
|
|
1
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
2
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
3
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
4
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
5
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
6
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
7
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
8
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
9
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
10
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
11
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
12
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
13
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
14
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
|
15
or more
|
50%
|
52%
|
54%
|
56%
|
58%
|
60%
|
*Calculated
before application of benefit offsets under Section 4, but after application of
the early retirement reduction (for all Participants) and the reduction for less
than 10 years of Credited Service (for Participants other than Protected
Participants), in Sections 3(b) and 3(c), respectively.
-19-
Exhibit
10.7
THE
BLACK & DECKER
EXECUTIVE
SALARY CONTINUANCE PLAN
The
purpose of The Black & Decker Executive Salary Continuance Plan is to
provide the continuation of salary and certain employee benefits for covered
executives during a transition period following separation of the executive’s
service with the Black & Decker Companies.
SECTION
I. DEFINITIONS.
The
following terms shall have the meanings set forth below:
1.1. “Black & Decker” means The
Black & Decker Corporation, a Maryland corporation, and its successors.
“Black & Decker Companies”
means Black & Decker and all of its subsidiaries and affiliates. “Black & Decker Company” means
Black & Decker or any of its subsidiaries and affiliates.
1.2. “Cause” means: (a) an
Employee’s willful and continued failure to substantially perform his duties
after written notice to the Employee specifying such failure, or (b) fraud,
misappropriation or willfully engaging in conduct that is demonstrably and
materially injurious to the property or business of a Black & Decker
Company, monetarily or otherwise, or (c) the commission of a
felony.
1.3. “Code” means the
Internal Revenue Code of 1986, as amended.
1.4. “Continuance Period”
means the period authorized in writing by the Chief Executive Officer but in no
event longer than a period beginning with the Employee’s Severance Date and
ending on the last day of the twenty-fourth month following the date of the
Employee’s Severance Date.
1.5. “Employee” means an
elected officer of Black & Decker (other than an Assistant Treasurer or
Assistant Secretary) or any other employee of a Black & Decker Company whose
participation in the Plan has been authorized in writing by the Chief Executive
Officer of Black & Decker.
1.6. “ERISA” means the
Employee Retirement Security Act of 1974, as it may be amended from time to
time.
1.7. “Manager of the Plan”
means the Senior Vice President-Human Resources and Corporate Initiatives of
Black & Decker.
1.8. “Plan” means The Black
& Decker Executive Salary Continuance Plan, as set forth herein, as it may
be amended from time to time.
1.9. “Plan Administrator”
means The Black & Decker Corporation Pension Management
Committee.
1.10. “Salary Continuance”
means payments made to an Employee pursuant to Section 2.1 below.
1.11. “Severance” means the
“separation from service” (as defined at Code §409A and the regulations
thereunder) of an Employee with the Black & Decker Companies by a Black
& Decker Company for any reason other than for Cause. An Employee shall not
be considered to have incurred a Severance if his separation from service is by
reason of: (a) termination by the Employee for any reason, including but not
limited to any change in job or job duties, compensation, benefits (including
participation in the Plan) or workplace for any reason, (b) the Employee’s
death, (c) a physical or mental condition that causes the Employee to be unable
substantially to perform his duties, including without limitation any condition
that entitles the Employee to benefits under any sick pay or disability income
policy or program of a Black & Decker Company, (d) the Employee’s retirement
as permitted by applicable law, or (e) termination by the Employee before the
Severance Date scheduled by the Black & Decker Company that employs the
Employee.
1.12. “Severance Date” means
the effective date of an Employee’s Severance.
SECTION
2. BENEFITS.
2.1. Each
Employee who incurs a Severance shall be entitled to continue to receive his
base salary (as of the date of Severance) at normal payroll periods during the
Continuance Period, or until he obtains another position (including a position
with a Black & Decker Company), or until his death, whichever comes first;
provided, however, that if the salary payments exceed an amount that when
annualized exceeds the Code §401(a)(17) dollar limit for the year of the
Employee’s Severance Date, the excess amount of the payments for the first six
months following the Employee’s Severance Date shall be accumulated and paid to
the Employee in a single-sum payment on the date that is six months and one day
following the Employee’s Severance Date. If the Employee obtains another
position during the Continuance Period, the amount of Salary Continuance paid to
the Employee shall be reduced by the amount of gross compensation paid or
payable to the Employee or credited to his account or for his benefit in
connection with the other position.
2.2. No
Employee shall be eligible to receive Salary Continuance or any other benefits
under the Plan unless he first executes a valid and legally binding release in
writing, in a form and manner prescribed by the Manager of the Plan, releasing
the Black & Decker Companies and their employees, officers and directors
from claims and liabilities of any kind relating to the Employee’s
employment.
2.3. If
a Black & Decker Company is or should become obligated by law or by contract
to pay an Employee severance pay, salary continuance, notice pay, a termination
indemnity, or the like, or if a Black & Decker Company is or should become
obligated by law or by contract to provide advance notice of separation
(“Notice”) to an Employee, then, unless specifically provided otherwise in any
such law or contract, any Salary Continuance otherwise payable under the Plan to
the Employee shall be reduced by the amount of any such severance pay, salary
continuance, notice pay, termination indemnity, or the like, and by the amount
of any compensation received with respect to any Notice period (including any
Notice period that may
-2-
be
required under the Worker Adjustment and Retraining Notification Act) during
which the Employee is not required to work. If an Employee applies for and
receives unemployment compensation payments for any period of time for which
Salary Continuance is made, any Salary Continuance remaining to be made shall be
reduced by the amount of the unemployment compensation payments.
2.4. Each
Employee who incurs a Severance shall also be entitled to continue to receive
the employee benefits described below during the Continuance Period, or until he
obtains another position (including a position with a Black & Decker
Company), or until his death, whichever comes first; provided the Employee
continues to pay the required employee contribution for the coverage. Provided
the Employee was eligible for and received these employee benefits before the
Severance Date, and provided that the Black & Decker Company which employed
the Employee continues to provide such benefits to similarly situated employees,
and subject to such amendments and changes in such benefit plans, programs,
practices and policies as may be made from time to time, the benefits that will
be continued are: medical, dental, executive life insurance, tax preparation
expense reimbursement, automobile allowance, executive physical examination and
country club memberships. Notwithstanding the foregoing, the amount
of any of these reimbursements or benefits that is available in any taxable year
of an Employee shall not affect the amount of reimbursements or benefits
available in a different taxable year, and any reimbursement payment shall be
made no later than the end of the year following the year the expense is
incurred. If the Employee obtains another position prior to the end
of the Continuance Period, and if the position does not offer each of these
benefits, then the benefits that are not offered by the other position will be
continued during the Continuance Period until the benefits are offered by the
other position or until the Employee’s death, whichever occurs first, strictly
on a benefit-by-benefit basis. A benefit will not be continued after the
Employee obtains another position if that benefit is available in the other
position, even if the benefit offered by the other position is inferior to the
benefit offered before the Severance Date, or requires larger employee
contributions for the coverage.
2.5. All
other benefits, including vacation pay and short term and long term disability,
shall be discontinued on the Severance Date. Unless provided in an agreement
between the Employee and a Black & Decker Company, the Employee’s employment
shall be deemed to have terminated on his or her Severance Date for purposes of
any pension, profit-sharing, deferred compensation, stock option, restricted
stock, stock bonus or stock purchase plans, whether tax-favored or otherwise,
that is sponsored or administered by a Black & Decker Company and in which
the Employee participated prior to the Severance Date.
SECTION
3. CLAIMS, OPERATION
AND INTERPRETATION.
3.1. The
Plan shall be interpreted, administered, and operated by the Manager of the Plan
and the Plan Administrator, each of whom shall have complete authority, in his
or their sole discretion, to interpret the Plan, to prescribe, amend, interpret
and rescind rules and regulations relating to the Plan, and to make all of the
determinations necessary or advisable for the administration of the Plan. It is
intended that the Plan comply with Code § 409A of the Code and the regulations
and guidance issued thereunder, and it shall be interpreted
accordingly.
-3-
3.2. All
questions of any character whatsoever arising in connection with the
interpretation of the Plan or its administration or operation shall be submitted
to and settled and determined in an equitable and fair manner in accordance with
the procedure for claims and appeals described in Section 3.4. Subject to the
provisions of Section 7.4, any such settlement and determination shall be final
and conclusive, and shall bind and may be relied upon by the Black & Decker
Companies, each of the Employees, and all other parties in
interest.
3.3. The
Plan Administrator and the Manager of the Plan may delegate any of their duties
hereunder to such person or persons as they may designate from time to
time.
3.4. An
Employee shall file a written claim with the Manager of the Plan in order to
receive Salary Continuance or any other benefits under the Plan. The Manager of
the Plan shall, within 60 days after receipt of the written claim, send a
written notification to the Employee as to its disposition. In the event the
claim is wholly or partially denied, the written notification shall (a) state
the specific reason or reasons for the denial, (b) make specific reference to
pertinent Plan provisions on which the denial is based, (c) provide a
description of any additional material or information necessary for the Employee
to perfect the claim and an explanation of why such material or information is
necessary, and (d) set forth the procedure by which the Employee may appeal the
denial of his claim. In the event an Employee wishes to appeal the denial of his
claim, he may request a review of the denial by making application in writing to
the Plan Administrator within 60 days after receipt of the denial. The Employee
(or his duly authorized legal representative) may, upon written request to the
Plan Administrator, review any documents pertinent to his claim, and submit in
writing issues and comments in support of his position. Within 60 days after
receipt of a written appeal (unless the Plan Administrator determines that
special circumstances, such as the need to hold a hearing, require an extension
of time, but in no event more than 120 days after such receipt) the Plan
Administrator shall notify the Employee of the final decision. The final
decision shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision is
based. In the event the Employee wishes to appeal from the Plan Administrator’s
decision, the Employee may submit the claim to final and binding arbitration, in
accordance with Section 7.4, by giving written notice to the Plan Administrator
within 60 days after receipt of the Plan Administrator’s decision. No
arbitration for benefits under the Plan may be commenced unless and until the
Employee has submitted a written claim for benefits, has been notified that the
claim has been denied, has filed a written request for review of the denied
claim, and has been notified in writing that the denial of the claim has been
affirmed, all in accordance with the claims procedure described
above.
SECTION
4. PLAN MODIFICATION
OR TERMINATION.
4.1. The
Plan may be modified or amended by Black & Decker, by action of the Board of
Directors, at any time with or without notice. Without limiting the foregoing,
the Plan may be modified or amended to increase, decrease or eliminate Salary
Continuance and benefits payable to any Employee who incurs a Severance after
such modification or amendment.
4.2. It
is the intention of Black & Decker to continue the Plan and to pay Salary
Continuance to all Employees who have incurred a Severance. However, Black &
Decker, by action of the Board of Directors, may for any reason terminate the
Plan, or the Chief Executive
-4-
Officer
of Black & Decker may withhold its application as to some or all Employees,
at any time or from time to time, in each case with or without
notice.
4.3. Any
modification, amendment, termination, withholding, extension or other action
shall only apply to Employees who incur a Severance after such action. No such
action shall reduce or eliminate the Salary Continuance of any Employee whose
Severance Date occurs on or before such action is
taken. Notwithstanding the foregoing, the Plan may be amended at any
time, including retroactively, to conform the Plan to the provisions of Code §
409A of the Code and the regulations and guidance thereunder. No such
amendment shall be considered prejudicial to any interest of any Employee
hereunder.
SECTION
5. GOVERNMENT LAWS AND
REGULATIONS.
5.1. The
Plan, as a “severance pay arrangement” within the meaning of Section 3(2)(B)(i)
of ERISA, is intended to be excepted from the definitions of “employee pension
benefit plan” and “pension plan” in Section 3(2) of ERISA, and is intended to
meet the descriptive requirements of a plan constituting a “severance pay plan”
within the meaning of regulations published by the Secretary of Labor at Title
29, Code of Federal Regulations, Section 2510.3-2(b), and shall be interpreted
accordingly.
5.2. The
Plan and the rights of Employees to Salary Continuance and benefits under the
Plan shall be subject to all applicable governmental laws and regulations.
Notwithstanding any other provision of the Plan to the contrary, the Manager of
the Plan and the Plan Administrator may in his or their discretion make such
changes in the Plan as may be required to conform the Plan to all applicable
governmental laws and regulations.
SECTION
6. EMPLOYEE
CONDUCT.
6.1. Notwithstanding
anything to the contrary, all of an Employee’s rights to Salary Continuance and
to benefits under the Plan will be forfeited if the Employee discloses
confidential information of a Black & Decker Company or if the Employee,
without the written consent of the Manager of the Plan, enters into competition
with a Black & Decker Company.
6.2. For
purposes of this Section 6, the Employee shall be deemed to be in competition
with a Black & Decker Company if the Employee, directly or indirectly,
solicits as a customer any company that is or was a customer of a Black &
Decker Company during the Employee’s employment, or that is or was a potential
customer of a Black & Decker Company with which a Black & Decker Company
has made or will make business contacts during the Employee’s employment;
provided, however, that solicitation of a company as a customer of any business
that is not in direct or indirect competition with any of the types of business
conducted by a Black & Decker Company within any of the same territories as
the Black & Decker Company shall not be prohibited hereby. In addition, an
Employee shall be deemed to be in competition with a Black & Decker Company
if the Employee directly or indirectly becomes an owner, officer, director,
operator, sole proprietor, partner, joint venturer, contractor or consultant, or
participates in or is connected with the ownership, operation, management or
control of any company in direct or indirect competition with any of the types
of businesses conducted by a Black & Decker Company within any of the same
territories as a Black & Decker Company;
-5-
provided,
however, that the ownership for investment of less than 5% of the outstanding
stock of any of the classes of stock issued by a publicly held company shall not
be prohibited hereby.
6.3. For
the purposes of this Section 6, the Employee shall be deemed to have disclosed
“confidential information” if the Employee fails to preserve as confidential and
uses, communicates, or discloses to any person, to the actual or potential
detriment of a Black & Decker Company, orally, in writing or by publication,
any information, regardless of when, where or how acquired, relating to or
concerning the affairs of a Black & Decker Company; provided, however, that
the foregoing obligations shall not apply to information that is or becomes
public through no fault of the Employee.
6.4. The
Plan Administrator shall have the absolute right to determine in its sole
discretion (a) whether or not an Employee’s employment was terminated for Cause,
and (b) whether or not an Employee has entered into competition with a Black
& Decker Company or has disclosed confidential information so as to cause a
forfeiture of the Employee’s rights and benefits hereunder.
SECTION
7. GENERAL
PROVISIONS.
7.1. Nothing
in the Plan shall be deemed to give any Employee the right to be retained in the
employ of any Black & Decker Company or to interfere with the right of any
Black & Decker Company to discharge an Employee at any time and for any
lawful reason, with or without notice or cause. In addition, nothing in the Plan
shall restrict an Employee’s right to terminate his employment at any
time.
7.2. Except
as otherwise provided herein or by law, no right or interest of an Employee
under the Plan shall be assignable or transferable, in whole or in part, either
directly or by operation of law or otherwise, including without limitation by
execution, levy, garnishment, attachment, pledge, or any other manner; no
attempted assignment or transfer thereof shall be effective; and no right or
interest of an Employee under the Plan shall be liable for, or subject to, any
obligation or liability of an Employee. When a payment is due under the Plan to
an Employee and the Employee is unable to care for his affairs, payment may be
made directly to his legal guardian or personal representative.
7.3. Black
& Decker may, at any time and from time to time, without any Employee’s
consent, assign its interest in the Plan with respect to one or more Employees
to a Black & Decker Company, which shall assume all of Black & Decker’s
obligations hereunder with respect to such Employees and, upon such assignment,
the assignee shall be substituted for Black & Decker for all purposes under
the Plan with respect to such Employees. Any such assignment and assumption
shall constitute a novation and the assignee(s) shall be substituted
automatically for Black & Decker with respect to such Employees. Any such
assignee shall have the same rights as the assignor to further assign the
Plan.
7.4. Any
dispute or controversy arising out of or relating to the Plan (or to payor
benefits that may be provided under the Plan), as well as any dispute or
controversy arising out of or relating to the termination of an Employee’s
employment, including any claims based on federal, state or local laws
(including employment discrimination or wrongful dismissal laws),
-6-
shall be
settled exclusively by final and binding arbitration, conducted in Towson,
Maryland before a neutral arbitrator with expertise in employment law, including
ERISA, in accordance with the Employee Benefit Plan Claims Arbitration Rules of
the American Arbitration Association. In reaching a decision, the arbitrator
shall interpret, apply and be bound by the Plan and by applicable law. The
arbitrator shall apply the same standard of review in disputes relating to the
Plan or to Plan benefits as a court of competent jurisdiction would apply under
ERISA. The arbitrator shall have no authority to add to, detract from, or modify
the Plan or any law in any respect. The arbitrator may grant any remedy or
relief that may be necessary to make the injured party whole, provided that in
no event may the arbitrator grant any remedy or relief that a court of competent
jurisdiction could not grant, nor any relief greater than that sought by the
injured party. Judgment may be entered on the arbitrator’s award in any court of
competent jurisdiction.
7.5. The
Plan is unfunded. Except as provided in Section 7.3, the liability for Salary
Continuance and other benefits under the Plan are solely the responsibility of
Black & Decker. Salary Continuance shall be payable from Black &
Decker’s general assets, and no other company shall have any responsibility or
liability under the Plan. However, Black & Decker’s liabilities under the
Plan shall be discharged to the extent of any payment or benefit received by the
Employee from any other company made for that purpose and on Black &
Decker’s behalf or for its benefit.
7.6. If
any provision of the Plan shall be held void or unenforceable, the remainder of
the Plan shall remain in full force and effect, and the Plan shall be construed
as if such void or unenforceable provision were omitted; provided that in
interpreting this Plan the arbitrator shall replace such void or unenforceable
provision with an effective and legally permissible provision, the effect of
which shall be identical to, or as close as reasonably possible to, the effect
of the original provision.
7.7. As
used in this Plan, any reference to the masculine, feminine, or neuter gender
shall include all genders, the plural shall include the singular, and the
singular shall include the plural.
Amendment
and Restatement adopted October 16, 2008
-7-
Exhibit 10.8
February
14, 2008
Stephen
F. Reeves
c/o The
Black & Decker Corporation
701 East
Joppa Road
Towson,
Maryland 21286
Dear
Steve:
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 you, 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
(this “Agreement”) in the event of a “Change in Control of the Corporation”
(as defined in Section 2) 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, 2013; provided, however,
that if a Change in Control of the Corporation shall have occurred prior to
December 31, 2013, 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, at which time this Agreement shall
terminate. Notwithstanding the foregoing, and provided no Change in
Control of the Corporation shall have occurred, this Agreement shall
automatically terminate upon the earlier to occur of (a) your termination of
employment with the Corporation, or (b) the Corporation’s giving you notice of
termination of this Agreement, regardless of the effective date of such
termination.
2. Change in
Control. No benefits shall be payable under this Agreement
unless there shall have been a Change in Control of the
Corporation. For purposes of this Agreement, a “Change in Control of
the Corporation” shall mean a change in control of a nature that would
be
Stephen
F. Reeves
February
14, 2008
Page
2
required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), whether or not the Corporation is in fact required to comply
therewith, provided that, without limitation, such a change in control shall be
deemed to have occurred if (A) any “person” (as 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 35% 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 or entity, 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. Vesting of Stock
Options. Upon a Change in Control of the Corporation, you
shall fully vest in all outstanding stock options granted to you under the
Corporation’s stock option plans. Each stock option shall continue to
be exercisable for the term of that stock option. In accordance with the terms
of the Corporation’s restricted stock plans, all shares of restricted stock held
by you shall become fully vested and no longer subject to forfeiture upon the
occurrence of a Change in Control of the Corporation.
4. Termination Following Change
in Control of the Corporation. If a Change in Control of the
Corporation shall have occurred, you shall be entitled to the benefits provided
in Section 5.2 upon the subsequent termination of your employment during the
term of this Agreement unless the termination is (A) because of your death
or Disability (as defined in Section 4.1), (B) by the Corporation for Cause (as
defined in Section 4.2), or (C) by you other than for Good Reason (as defined in
Section 4.3).
Stephen
F. Reeves
February
14, 2008
Page
3
4.1 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 a Notice of Termination (as
defined in Section 4.4) is given to you, shall not have returned to the
full-time performance of your duties, your employment may be terminated for
“Disability.”
4.2 Cause. Termination
by the Corporation of your employment for “Cause” shall mean termination upon
(a) the willful and continued failure by you to substantially perform your
duties with the Corporation (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance by you of a Notice of Termination for Good Reason)
after a written demand for substantial performance is delivered to you by
the Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (b) the
willful engaging by you in conduct that is demonstrably and materially injurious
to the Corporation, monetarily or otherwise. For purposes of
this Section 4.2, 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
Section 4.2 and specifying the particulars thereof in detail.
4.3 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 the
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination 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
of this Agreement or any subsequently established higher annual base salary,
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
Stephen
F. Reeves
February
14, 2008
Page
4
required
travel on the Corporation’s business to an extent substantially consistent with
your business travel obligations immediately prior to the Change in Control
of the Corporation;
(d) the
failure by the Corporation, without your consent, to pay to you any portion of
your compensation to which you are entitled when such compensation is
due;
(e) the
failure by the Corporation to continue in effect 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 (“EAIP”),
Annual Incentive Plan (“AIP”) or other comparable annual compensation plan, (ii)
stock option and restricted stock plans, and (iii) 2008 Executive Long-Term
Incentive/Retention Plan or other comparable medium- or long-term compensation
plan, or any substitute plan or plans adopted prior to the Change in Control of
the Corporation; unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to 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 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 in effect any material benefit available
to you immediately prior to the Change in Control of the Corporation, including
without limitation (i) the failure to provide to you benefits substantially
similar to those enjoyed by you under any of the Corporation’s retirement,
savings, 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, (ii) the failure to continue to provide to you any
material perquisite provided to you at the time of the Change in Control of the
Corporation, (iii) 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, or (iii) 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 benefit or perquisite enjoyed by you 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 7.1; or
Stephen
F. Reeves
February
14, 2008
Page
5
(h) any
purported termination of your employment that is not effected pursuant to a
Notice of Termination satisfying the requirements of Section 4.4 (and, if
applicable, the requirements of Section 4.2), which purported termination
shall not be effective for purposes of this Agreement.
Your
rights to terminate your employment pursuant to this Section 4.3 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 under this Section
4.3.
4.4 Notice of
Termination. Any purported termination of your employment by
the Corporation for Cause or Disability or by you for Good Reason shall be
communicated by written Notice of Termination to the other party in
accordance with Section 8. 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 so
indicated.
4.5 Date of
Termination. Subject to the following sentence, “Date of
Termination” shall mean (a) if your employment is terminated by your death, the
date of your death; (b) 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 (c)
if your employment is terminated for any reason other than death or Disability,
the date specified in the Notice of Termination. For purposes of
clause (c) in the immediately preceding sentence, the date specified in the
Notice of Termination shall not be less than 30 days from the date the Notice of
Termination is given, except in the case of a termination pursuant to Section
4.3 such date shall not be less than 15 nor more than 60 days from the date that
the Notice of Termination is given. If the party receiving the Notice
of Termination notifies the other party within 15 days of receiving the Notice
of Termination or, if later, prior to the Date of Termination (as determined
without regard to this sentence) 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). 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 Section 4.5. Amounts paid under this
Section 4.5 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.
Stephen
F. Reeves
February
14, 2008
Page
6
5. Compensation Upon
Termination. Upon termination of your employment following a
Change in Control of the Corporation, you shall be entitled to the following
benefits:
5.1 Termination for Cause or
Without Good Reason or upon Disability or Death. If your
employment shall be terminated by your death, by the Corporation for Cause or
Disability, or by you without Good Reason, the Corporation shall pay you your
full base salary through the Date of Termination at the rate in effect at the
time of your death or Notice of Termination is given, as the case may be, 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.
5.2 Termination Without Cause or
Disability or for Good Reason. If your employment by the
Corporation shall be terminated (A) by the Corporation other than for Cause or
Disability 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 (the “Severance Payment”) in an amount equal to three times
the sum of your (1) annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of Termination,
(2) Maximum Participant Award (as defined below); plus (3) the LTP
Amount (as defined below).
“Maximum
Participant Award” means the maximum award that could be payable to you under
the terms of the EAIP (if you were a participant in the EAIP immediately prior
to the occurrence of the circumstances giving rise to the Notice of
Termination), the AIP (if you were a participant in the AIP immediately prior to
the occurrence of the circumstances giving rise to the Notice of Termination),
or other comparable or substitute annual compensation plan for the year in which
the Date of Termination occurs, determined as if you remained a participant
until the end of the year and all performance goals for that year that would
entitle you to a maximum payment were met or exceeded. “LTP Amount”
means an amount equal to 60% of your annual base salary in effect immediately
prior to the occurrence of the circumstance giving rise to the Notice of
Termination, as such amount is adjusted (i) upward proportionately to the extent
the closing sale price per share of the Corporation’s common stock as finally
reported by the New York Stock Exchange on the trading date immediately prior to
the Date of Termination (the “Stock Price Measure”) exceeds the average daily
closing sale price of the Corporation’s common stock as finally reported by the
New York Stock Exchange during the first quarter of 2008 (the “Stock
Stephen
F. Reeves
February
14, 2008
Page
7
Base
Amount”) or (ii) downward proportionately to the extent the Stock Price Measure
is less than the Stock Base Amount.
(c) 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 under this Agreement).
(d) The
Severance Payment plus interest shall be made on the date that is six months and one day
following your “separation from service” as defined in Section 409A of the Code
and the regulations promulgated thereunder. The Severance Payment
shall bear interest at an annualized rate of 4.5% from and after your
“separation from service” until paid pursuant to this Section
5.2(d).
5.3 Additional
Benefits. If your employment shall be terminated (a) by the
Corporation other than for Cause or Disability 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 Section 5.3 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.
5.4 Mitigation. You
shall not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise. The Corporation
shall not be entitled to set off against the amount of any payment or benefit
provided for in this Agreement any amounts owed to the Corporation by you, any
compensation earned by you as the result of employment by another employer, or
any retirement benefits to which you may be entitled under the Corporation’s
retirement or savings plans.
5.5 Other Compensation and
Benefit Plans. In addition to all other amounts payable to you
under this Section 5, you shall be entitled to receive all compensation,
retirement benefits and any other benefits payable to you under any plan or
arrangement sponsored by the Corporation or any of its subsidiaries in
accordance with the terms of such plans or arrangements, and, except as
otherwise provided in this Agreement, the amounts payable under this Agreement
shall not in any way affect, diminish, or impair any compensation or benefits
payable to you under such plans or arrangements.
6. Gross-Up
Payment.
6.1 Calculation of Gross-Up
Payment. If the Severance Payment or any other portion of the
Total Payments (as defined below) will be subject to the tax imposed by Section
Stephen
F. Reeves
February
14, 2008
Page
8
4999 of
the Code (the “Excise Tax”), the Corporation shall pay to you at the time
specified in Section 6.2 an additional amount (the “Gross-Up Payment”) such that
the net amount retained by you, after deduction of any Excise Tax on the
Severance Payment and such other Total Payments and any federal and state
and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to
the Severance Payment and such other Total Payments. For purposes of
determining whether any of the payments will be subject to the Excise Tax and
the amount of such Excise Tax, (i) any other payments or benefits received or to
be received by you in connection with a Change in Control of the Corporation or
your termination of employment (whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation, its
successors, any person whose actions result in a Change in Control of the
Corporation or any corporation affiliated (or which, as a result of the
completion of a transaction causing a Change in Control of the Corporation, will
become affiliated) with the Corporation within the meaning of Section 1504 of
the Code) (together with the Severance Payment, 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 and acceptable to you (“Tax
Counsel”) the Total Payments (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning
of Section 280G(b)(4)(B) of the Code either to the extent such reasonable
compensation is in excess of the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the
amount of the Total Payments that shall be treated as subject to the Excise Tax
shall be equal to the lesser of (A) the total amount of the Total Payments
or (B) the amount of excess parachute payments within the meaning of Section
280G(b)(1) (after applying clause (i), above), and (iii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by Tax
Counsel in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of your residence on the Date of Termination,
net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. If the Excise
Tax is subsequently determined to be less than the amount taken into account
under this Section 6.1 at the time of payment of the Gross-Up Payment, you shall
repay to the Corporation at the time that the amount of such reduction in the
Excise Tax is finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results in
a reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(d) of the Code. If the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of payment of the
Gross-Up Payment (including by reason of any payment resulting from the
existence or amount of which cannot be determined at the time of the payment of
the Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties, and professional fees
Stephen
F. Reeves
February
14, 2008
Page
9
incurred
by you with respect to such excess, including all such taxes with respect to
such additional amount) at the time that the amount of such excess is finally
determined.
6.2 Payment of Gross-Up
Payments. The payments provided for in Section 6.1 shall be
made on the date that is six months and one day following your “separation of
service” as defined in Section 409A of the Code and the regulations promulgated
thereunder.
7. Successors; Binding
Agreement.
7.1 Successors. 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 terminate your employment for Good
Reason following a Change in Control of the Corporation. 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.
7.2 Binding
Agreement. This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. Any amount payable to you
under this Agreement at the time of your death, 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.
7.3 Employment by a
Subsidiary. 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.
8. 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. All notices to the Corporation shall
be sent to the Corporation at 701 East Joppa Road, Towson,
Maryland 21286 and directed to the attention of the Board with a copy
to the Secretary of the Corporation and to you at your address listed on the
Corporation’s payroll, or to such other
Stephen
F. Reeves
February
14, 2008
Page
10
address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
9. 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 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 Sections 5 and 6 shall
survive the expiration of the term of this Agreement, provided that the Date of
Termination occurred prior to such expiration.
10. 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.
11. 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.
12. Arbitration. Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in the State of Maryland, in accordance
with the 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.
13. Section
Headings. The Section headings contained in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning or interpretation of this Agreement or any of its terms and
conditions. All references to Sections in this Agreement are to
Sections of this Agreement.
Stephen
F. Reeves
February
14, 2008
Page
11
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
Agreed to
as of the 14th day of
February, 2008
/S/ STEPHEN F.
REEVES
Stephen
F. Reeves
Exhibit
31.1
THE
BLACK & DECKER CORPORATION
C
E R T I F I C A T I O N S
I, Nolan
D. Archibald, certify that:
1. I have
reviewed this quarterly report on Form 10-Q of The Black & Decker
Corporation;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/ NOLAN D.
ARCHIBALD
Nolan D.
Archibald
Chairman,
President, and Chief Executive Officer
November
6, 2008
Exhibit
31.2
THE
BLACK & DECKER CORPORATION
C
E R T I F I C A T I O N S
I,
Stephen F. Reeves, certify that:
1. I have
reviewed this quarterly report on Form 10-Q of The Black & Decker
Corporation;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/ STEPHEN F.
REEVES
Stephen
F. Reeves
Senior
Vice President and Chief Financial Officer
November
6, 2008
Exhibit
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of The Black & Decker Corporation (the
“Corporation”) on Form 10-Q for the period ended September 28, 2008, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”),
I, Nolan D. Archibald, Chief Executive Officer of the Corporation, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
Act of 2002, to my knowledge, that:
(1) The
Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Corporation.
/s/ NOLAN D.
ARCHIBALD
Nolan D.
Archibald
Chief
Executive Officer
November
6, 2008
Exhibit
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of The Black & Decker Corporation (the
“Corporation”) on Form 10-Q for the period ended September 28, 2008, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”),
I, Stephen F. Reeves, Chief Financial Officer of the Corporation, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
Act of 2002, to my knowledge, that:
(1) The
Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Corporation.
/s/ STEPHEN F.
REEVES
Stephen
F. Reeves
Chief
Financial Officer
November
6, 2008