-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HAEtsBrUoPoglfdYpUIyhijZC6mSua9zk+Jg7sWgXeY3hahpxfGHRXfxVKATwRHW lM79pVbIDKnZNWMoHSGq5Q== 0000012355-97-000007.txt : 19970515 0000012355-97-000007.hdr.sgml : 19970515 ACCESSION NUMBER: 0000012355-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK & DECKER CORP CENTRAL INDEX KEY: 0000012355 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 520248090 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-03593 FILM NUMBER: 97605222 BUSINESS ADDRESS: STREET 1: 701 E JOPPA RD CITY: TOWSON STATE: MD ZIP: 21286 BUSINESS PHONE: 4107163310 MAIL ADDRESS: STREET 1: 701 EAST JOPPA ROAD STREET 2: MAIL STOP TW 290 CITY: TOWSON STATE: MD ZIP: 21286 FORMER COMPANY: FORMER CONFORMED NAME: BLACK & DECKER MANUFACTURING CO DATE OF NAME CHANGE: 19850206 10-Q 1 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 March 30, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-1553 THE BLACK & DECKER CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 52-0248090 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) - -------------------------------------------------------------------------------- 701 East Joppa Road Towson, Maryland 21286 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (410) 716-3900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X YES NO The number of shares of Common Stock outstanding as of March 30, 1997: 94,416,964 The exhibit index as required by item 601(a) of Regulation S-K is included in this report. THE BLACK & DECKER CORPORATION AND SUBSIDIARIES INDEX - FORM 10-Q March 30, 1997 Page PART I - FINANCIAL INFORMATION Consolidated Statement of Earnings (Unaudited) For the Three Months Ended March 30, 1997 and March 31, 1996................3 Consolidated Balance Sheet March 30, 1997 (Unaudited) and December 31, 1996............................4 Consolidated Statement of Cash Flows (Unaudited) For the Three Months Ended March 30, 1997 and March 31, 1996................5 Notes to Consolidated Financial Statements (Unaudited).........................6 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................9 PART II - OTHER INFORMATION...................................................15 SIGNATURES....................................................................18 CONSOLIDATED STATEMENT OF EARNINGS (Unaudited) The Black & Decker Corporation and Subsidiaries (Dollars in Millions Except Per Share Amounts)
Three Months Ended - ------------------------------------------------------------------------------------------------------------------- March 30, 1997 March 31, 1996 - ------------------------------------------------------------------------------------------------------------------- Sales $ 1,015.0 $ 1,065.0 Cost of goods sold 650.5 670.1 Selling, general, and administrative expenses 291.2 306.2 Restructuring costs - 81.6 - ------------------------------------------------------------------------------------------------------------------- Operating Income 73.3 7.1 Interest expense (net of interest income) 30.6 37.9 Other expense 2.3 3.4 - ------------------------------------------------------------------------------------------------------------------- Earnings (Loss) From Continuing Operations Before Income Taxes 40.4 (34.2) Income taxes (benefit) 14.1 (1.8) - ------------------------------------------------------------------------------------------------------------------- Earnings (Loss) From Continuing Operations 26.3 (32.4) Earnings from discontinued operations (net of income taxes of $55.6 for 1996) - 70.4 - ------------------------------------------------------------------------------------------------------------------- Net Earnings $ 26.3 $ 38.0 =================================================================================================================== - ------------------------------------------------------------------------------------------------------------------- Net Earnings Applicable to Common Shares $ 26.3 $ 35.1 =================================================================================================================== Net Earnings Per Common and Common Equivalent Share: - ------------------------------------------------------------------------------------------------------------------- Primary: Earnings (loss) from continuing operations $ .27 $ (.40) Earnings from discontinued operations - .79 - ------------------------------------------------------------------------------------------------------------------- Primary Earnings Per Share $ .27 $ .39 =================================================================================================================== Shares Used in Computing Primary Earnings Per Share (in Millions) 96.2 89.1 =================================================================================================================== Assuming Full Dilution: Earnings (loss) from continuing operations $ .27 $ (.40) Earnings from discontinued operations - .79 - ------------------------------------------------------------------------------------------------------------------- Fully Diluted Earnings Per Share $ .27 $ .39 =================================================================================================================== Shares Used in Computing Fully Diluted Earnings Per Share (in Millions) 96.2 89.5 =================================================================================================================== Dividends Per Common Share $ .12 $ .12 ===================================================================================================================
See Notes to Consolidated Financial Statements (Unaudited) CONSOLIDATED BALANCE SHEET The Black & Decker Corporation and Subsidiaries (Millions of Dollars Except Per Share Amount)
- ------------------------------------------------------------------------------------------------------------------- March 30, 1997 (Unaudited) December 31, 1996 - ------------------------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents $ 119.6 $ 141.8 Trade receivables 655.7 672.4 Inventories 842.4 747.8 Other current assets 186.4 242.2 - ------------------------------------------------------------------------------------------------------------------- Total Current Assets 1,804.1 1,804.2 - ------------------------------------------------------------------------------------------------------------------- Property, Plant, and Equipment 875.5 905.8 Goodwill 1,940.8 2,012.2 Other Assets 506.4 431.3 - ------------------------------------------------------------------------------------------------------------------- $ 5,126.8 $ 5,153.5 =================================================================================================================== Liabilities and Stockholders' Equity Short-term borrowings $ 147.4 $ 235.9 Current maturities of long-term debt 52.1 54.1 Trade accounts payable 333.5 380.7 Other accrued liabilities 800.4 835.9 - ------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 1,333.4 1,506.6 - ------------------------------------------------------------------------------------------------------------------- Long-Term Debt 1,652.0 1,415.8 Deferred Income Taxes 77.1 67.5 Postretirement Benefits 304.4 310.3 Other Long-Term Liabilities 151.5 220.9 Stockholders' Equity Common stock, par value $.50 per share (outstanding: March 30, 1997--94,416,964 shares; December 31, 1996--94,248,807 shares) 47.2 47.1 Capital in excess of par value 1,266.5 1,261.7 Retained earnings 395.2 380.2 Equity adjustment from translation (100.5) (56.6) - ------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 1,608.4 1,632.4 - ------------------------------------------------------------------------------------------------------------------- $ 5,126.8 $ 5,153.5 ===================================================================================================================
See Notes to Consolidated Financial Statements (Unaudited) CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) The Black & Decker Corporation and Subsidiaries (Millions of Dollars)
Three Months Ended - ------------------------------------------------------------------------------------------------------------------- March 30, 1997 March 31, 1996 - ------------------------------------------------------------------------------------------------------------------- Operating Activities Net earnings $ 26.3 $ 38.0 Adjustments to reconcile net earnings to cash flow from operating activities of continuing operations: Non-cash charges and credits: Restructuring charges - 81.6 Depreciation and amortization 54.7 52.9 Other (2.7) 2.1 Earnings of discontinued operations - (70.4) Changes in selected working capital items: Trade receivables 49.2 87.5 Inventories (120.3) (69.2) Trade accounts payable (36.4) (8.8) Other assets and liabilities (42.5) (115.6) Net decrease in receivables sold (59.0) (56.0) - ------------------------------------------------------------------------------------------------------------------- Cash flow from operating activities of continuing operations (130.7) (57.9) Cash flow from operating activities of discontinued operations - (10.1) - ------------------------------------------------------------------------------------------------------------------- Cash Flow From Operating Activities (130.7) (68.0) - ------------------------------------------------------------------------------------------------------------------- Investing Activities Proceeds from partial sale of discontinued operations - 415.0 Proceeds from disposal of assets 2.6 18.0 Capital expenditures (40.2) (40.5) Cash inflow from hedging activities 15.0 155.6 Cash outflow from hedging activities (14.4) (156.5) - ------------------------------------------------------------------------------------------------------------------- Cash Flow From Investing Activities (37.0) 391.6 - ------------------------------------------------------------------------------------------------------------------- Cash Flow Before Financing Activities (167.7) 323.6 Financing Activities Net decrease in short-term borrowings (56.6) (362.0) Proceeds from long-term debt (including revolving credit facility) 400.0 24.7 Payments on long-term debt (including revolving credit facility) (183.6) (5.6) Issuance of common stock 1.1 13.8 Cash dividends (11.3) (13.4) - ------------------------------------------------------------------------------------------------------------------- Cash Flow From Financing Activities 149.6 (342.5) Effect of exchange rate changes on cash (4.1) (.2) - ------------------------------------------------------------------------------------------------------------------- Decrease In Cash And Cash Equivalents (22.2) (19.1) Cash and cash equivalents at beginning of period 141.8 131.6 - ------------------------------------------------------------------------------------------------------------------- Cash And Cash Equivalents At End Of Period $ 119.6 $ 112.5 ===================================================================================================================
See Notes to Consolidated Financial Statements (Unaudited) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Black & Decker Corporation and Subsidiaries NOTE 1: BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments consisting only of normal recurring accruals considered necessary for a fair presentation of the financial position and the results of operations. Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the presentation used for 1997. Operating results for the three-month period ended March 30, 1997, 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, 1996. NOTE 2: SALE OF RECEIVABLES At March 30, 1997, under its sale of receivables program, the Corporation had sold $153.0 million of receivables compared to $212.0 million at December 31, 1996. The discount on sale of receivables is included in "Other expense." NOTE 3: INVENTORIES The components of inventory at the end of each period, in millions of dollars, consisted of the following:
March 30, 1997 December 31, 1996 - ------------------------------------------------------------------------------------------------------------------- FIFO Cost Raw materials and work-in-process $ 227.9 $ 211.1 Finished products 645.6 567.7 - ------------------------------------------------------------------------------------------------------------------- 873.5 778.8 Excess of FIFO cost over LIFO inventory value (31.1) (31.0) - ------------------------------------------------------------------------------------------------------------------- $ 842.4 $ 747.8 ===================================================================================================================
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: GOODWILL Goodwill at the end of each period, in millions of dollars, was as follows:
March 30, 1997 December 31, 1996 - ------------------------------------------------------------------------------------------------------------------- Goodwill $ 2,516.1 $ 2,571.5 Less accumulated amortization 575.3 559.3 - ------------------------------------------------------------------------------------------------------------------- $ 1,940.8 $ 2,012.2 ===================================================================================================================
NOTE 5: LONG-TERM DEBT Indebtedness of subsidiaries of the Corporation in the aggregate principal amounts of $710.1 million and $586.5 million were included in the Consolidated Balance Sheet at March 30, 1997 and December 31, 1996, respectively, under the captions short-term borrowings, current maturities of long-term debt, and long-term debt. NOTE 6: INTEREST EXPENSE (NET OF INTEREST INCOME) Interest expense (net of interest income) for each period, in millions of dollars, consisted of the following:
Three Months Ended March 30, 1997 March 31, 1996 - ------------------------------------------------------------------------------------------------------------------- Interest expense $ 33.3 $ 39.9 Interest (income) (2.7) (2.0) - ------------------------------------------------------------------------------------------------------------------- $ 30.6 $ 37.9 ===================================================================================================================
NOTE 7: DISCONTINUED OPERATIONS As more fully described in Note 2 of Notes to Consolidated Financial Statements included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, on February 16, 1996, the Corporation completed the previously announced sale of PRC Inc., the remaining business in the discontinued information technology and services (PRC) segment, for $425.0 million to Litton Industries, Inc. Earnings from discontinued operations of $70.4 million for the three months ended March 31, 1996, consist primarily of the gain on the sale of PRC Inc., net of applicable income taxes of $55.6 million. Revenues and operating income of PRC Inc. for the period from January 1, 1996 through February 15, 1996, were not significant. The terms of the sale of PRC Inc. provide for an adjustment to the sales price, expected to be finalized later in 1997, based upon the changes in the net assets of PRC Inc. through February 15, 1996. NOTE 8: RESTRUCTURING During the three months ended March 31, 1996, the Corporation commenced a restructuring of certain of its operations and recorded a restructuring charge of $81.6 million. As more fully described in Note 3 of Notes to Consolidated Financial Statements and in Management's Discussion and Analysis of Financial Condition and Results of Operations under the caption Restructuring included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, the Corporation modified portions of the initial restructuring plan later in 1996 as a result of changed business conditions and the insight of new management in certain businesses. The net effect of these modifications was to increase the total restructuring charge recognized in 1996 to $91.3 million. NOTE 9: NET EARNINGS PER COMMON SHARE Primary earnings per common and common equivalent share are computed by dividing net earnings, after deducting, for the quarter ended March 31, 1996, preferred stock dividends, by the weighted average number of common shares outstanding during each period plus the incremental shares that would have been outstanding under certain employee benefit plans and upon the assumed exercise of dilutive stock options. As more fully described in Note 15 of Notes to Consolidated Financial Statements included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, the Corporation exercised its conversion option in respect of all of the issued and outstanding shares of Series B Cumulative Convertible Preferred Stock in October 1996, and in connection therewith issued 6,350,000 shares of common stock in exchange for the existing Series B Cumulative Convertible Preferred Stock. Fully diluted earnings per share are computed by dividing net earnings, after deducting, for the quarter ended March 31, 1996, preferred stock dividends, by the weighted average number of common shares outstanding during the period plus the incremental shares that would have been outstanding under certain employee benefit plans and upon the assumed exercise of dilutive stock options. For the three months ended March 31, 1996, conversion of the preferred shares would have been anti-dilutive and, therefore, was not considered in the computation of fully diluted earnings per share. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which is required to be adopted on December 31, 1997. At that time, the Corporation will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under SFAS No. 128, the dilutive effect of stock options will be excluded from the calculation of primary earnings per share (known as "basic earnings per share" in the new standard). Under SFAS No. 128, the calculation of fully diluted earnings per share (known as "diluted earnings per share" in the new standard) uses income from continuing operations--before the effect of discontinued operations, extraordinary items, and the cumulative effect of accounting changes--as the benchmark to determine whether securities are dilutive. Under the existing standard, net earnings is used as the benchmark to determine whether securities are dilutive. The following table sets forth the Corporation's pro forma earnings per share, calculated in accordance with SFAS No. 128.
Three Months Ended March 30, 1997 March 31, 1996 - ------------------------------------------------------------------------------------------------------------------- Basic earnings per share: Earnings (loss) from continuing operations $ .28 $ (.41) Earnings from discontinued operations - .81 - ------------------------------------------------------------------------------------------------------------------- Basic earnings per share $ .28 $ .40 =================================================================================================================== Diluted earnings per share: Earnings (loss) from continuing operations $ .27 $ (.41) Earnings from discontinued operations - .81 - ------------------------------------------------------------------------------------------------------------------- Diluted earnings per share $ .27 $ .40 ===================================================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Corporation reported net earnings of $26.3 million or $.27 per share on a fully diluted basis for the three-month period ended March 30, 1997, compared to net earnings of $38.0 million or $.39 per share on a fully diluted basis for the three-month period ended March 31, 1996. Net earnings for the quarter ended March 31, 1996, included a gain of $70.4 million or $.79 per share on a fully diluted basis from the sale of PRC Inc., part of the Corporation's discontinued information technology and services segment, partially offset by a restructuring charge of $81.6 million ($67.0 million after tax) or $.75 per share on a fully diluted basis. Excluding both the gain on sale and the restructuring charge, net earnings for the quarter ended March 31, 1996, would have been $34.6 million or $.35 per share on a fully diluted basis. The decline in net earnings, excluding the gain on sale of PRC Inc. and the restructuring charge, from the first quarter of 1996 to the first quarter of 1997 was due to a number of factors. The primary factors were the sharply lower sales of the Corporation's SnakeLight(R) flexible flashlight and a higher effective tax rate, partially offset by reduced interest expense as a result of lower borrowing levels. CONTINUING OPERATIONS SALES The following chart sets forth an analysis of the consolidated changes in sales for the three-month periods ended March 30, 1997 and March 31, 1996. ANALYSIS OF CHANGES IN SALES OF CONTINUING OPERATIONS
- ------------------------------------------------------------------------------------------------------------------- For the Three Months Ended (Dollars in Millions) March 30, 1997 March 31, 1996 - ------------------------------------------------------------------------------------------------------------------- Total sales $ 1,015.0 $ 1,065.0 Unit volume (2)% 4% Price - % -% Currency (3)% -% - ------------------------------------------------------------------------------------------------------------------- Change in total sales (5)% 4% ===================================================================================================================
The Corporation operates in two business segments: Consumer and Home Improvement Products (Consumer), including consumer and professional power tools and accessories, household products, security hardware, outdoor products (composed of electric lawn and garden tools and recreational products), plumbing products, and product service; and Commercial and Industrial Products (Commercial), including fastening and assembly systems and glass container-forming and inspection equipment. The following chart sets forth an analysis of the change in sales of continuing operations for the three months ended March 30, 1997, compared to the three months ended March 31, 1996, by geographic area for each business segment. ANALYSIS OF CHANGES IN SALES OF CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED MARCH 30, 1997
- ------------------------------------------------------------------------------------------------------------------- United (Dollars in Millions) States Europe Other Total - ------------------------------------------------------------------------------------------------------------------- Consumer Total Sales $ 462.1 $ 269.6 $ 111.6 $ 843.3 Unit volume (6)% (1)% 1 % (3)% Price - % - % - % - % Currency - % (6)% - % (2)% - ------------------------------------------------------------------------------------------------------------------- (6)% (7)% 1 % (5)% - ------------------------------------------------------------------------------------------------------------------- Commercial Total Sales $ 80.4 $ 63.6 $ 27.7 $ 171.7 Unit volume 23 % (4)% (17)% 3 % Price (1)% 1 % - % - % Currency - % (7)% (8)% (4)% - ------------------------------------------------------------------------------------------------------------------- 22 % (10)% (25)% (1)% - ------------------------------------------------------------------------------------------------------------------- Consolidated Total Sales $ 542.5 $ 333.2 $ 139.3 $ 1,015.0 Unit volume (2)% (1)% (3)% (2)% Price (1)% - % - % - % Currency - % (6)% (2)% (3)% - ------------------------------------------------------------------------------------------------------------------- Change in Total Sales (3)% (7)% (5)% (5)% ===================================================================================================================
Unit volume decreased 2% for the three-month period ended March 30, 1997, from the prior year's level. The negative effects of a stronger United States dollar compared to most major foreign currencies caused a 3% decrease in the Corporation's consolidated sales from the prior year's level for the quarter ended March 30, 1997. Pricing actions had minimal effect on sales for the three-month period ended March 30, 1997, compared to the corresponding period in 1996. Unit volume in the Consumer segment for the three months ended March 30, 1997, declined by 3% compared to last year. Sales in the Corporation's Consumer businesses in the United States decreased by 6% for the three-month period ended March 30, 1997, from the 1996 level. Excluding the significant sales decline experienced by the Corporation's household products business in the first quarter of 1997, sales in the Corporation's other domestic Consumer businesses for the three months ended March 30, 1997, met or exceeded the prior year's level. Sales in the domestic power tools and accessories business for the quarter ended March 30, 1997, increased at a mid-single digit rate over the corresponding quarter in 1996. The domestic power tools and accessories business benefited from the continued strength of the DEWALT(R) professional power tools and accessories line, spurred by the recent introduction of the 18 Volt Extreme CordlessTM system, but that benefit was partially offset by weakness in sales of outdoor products and consumer power tools and accessories in the first quarter of 1997. Sales in the domestic security hardware business during the quarter ended March 30, 1997, slightly exceeded the prior year's level while sales in the domestic plumbing products business were essentially flat. While the significant sales decline experienced in the domestic household products business during the first quarter of 1997 compared to the corresponding quarter in 1996 resulted primarily from sharply lower sales of the SnakeLight flexible flashlight, sales decreases also were experienced in most other product categories with the exception of cleaning products, where sales increased on the strength of the ScumBusterTM cordless submersible tub and tile scrubber, which was introduced in the latter part of 1996. Excluding the significant negative effect of changes in foreign exchange rates, sales in the Corporation's Consumer businesses in Europe declined by 1% for the three months ended March 30, 1997, from the corresponding period in 1996. Increased sales of consumer and professional power tools and accessories and outdoor lawn and garden tools in Europe during the first quarter of 1997 as compared to the prior year's level were not sufficient to offset declines in sales of security hardware, household products, and product service during the quarter. Sales of the Corporation's Consumer businesses in Other geographic areas for the first quarter of 1997 increased by 1% over the first quarter of 1996. The net effect of changes in foreign exchange rates did not have a significant impact on the sales of those businesses during the three months ended March 30, 1997. Increased sales by Consumer businesses in certain countries, in particular Canada and Brazil, were substantially offset by sales declines by Consumer businesses in other countries, in particular Australia. Excluding the negative effect of changes in foreign exchange rates, sales in the Corporation's Commercial businesses increased by 3% during the three months ended March 30, 1997, over the corresponding period in 1996. This improvement was driven by good sales growth in the Corporation's fastening and assembly systems business while sales in the glass container-forming and inspection equipment business modestly exceeded the prior year's level. EARNINGS Operating income for the three months ended March 30, 1997, was $73.3 million compared to $7.1 million for the corresponding period in 1996. Excluding the effects of the $81.6 million restructuring charge recognized in the first quarter of 1996, operating income for the first quarter of 1997 decreased 17% from $88.7 million for the first quarter of 1996 to $73.3 million for the first quarter of 1997. Operating income as a percentage of sales, excluding the restructuring charge recognized in the first quarter of 1996, was 7.2% for the three-month period ended March 30, 1997, compared to 8.3% for the corresponding period in 1996. This decline in operating income as a percentage of sales was experienced in the Corporation's power tools and accessories, plumbing products, security hardware, and glass container-forming and inspection businesses and, most significantly, in the Corporation's household products business. Gross margin as a percentage of sales was 35.9% and 37.1% for the three-month periods ended March 30, 1997 and March 31, 1996, respectively. The decline in gross margin during the first quarter of 1997 was a result of the sales decline during the quarter, particularly with respect to the Corporation's higher margin SnakeLight product, and competitive pressures which continued to constrain pricing. Selling, general, and administrative expenses as a percentage of total sales for the three-month period ended March 30, 1997, were 28.7% compared to 28.8% for the comparable period in 1996 as the benefits of the Corporation's cost reduction initiatives offset the unfavorable effects of lower sales volumes on fixed and semi-fixed costs. Net interest expense (interest expense less interest income) for the three-month period ended March 30, 1997, was $30.6 million as compared to $37.9 million for the three-month period ended March 31, 1996. The lower level of net interest expense was primarily the result of reduced debt levels in the first quarter of 1997 as compared to the first quarter of 1996. The Corporation maintains a portfolio of interest rate hedge instruments for the purpose of managing interest rate exposure. During the quarter ended March 30, 1997, the Corporation decreased its portfolio through the scheduled maturities of interest rate caps with an aggregate notional principal amount of $100.0 million and variable to fixed rate interest rate swaps with an aggregate notional principal amount of $100.0 million. Deferred gains and losses on the early termination of interest rate swaps as of March 30, 1997, were not significant. An increase in variable-rate borrowings during the quarter ended March 30, 1997, coupled with the changes in the Corporation's interest rate hedge portfolio described above, had the effect of increasing the Corporation's variable rate debt to total debt ratio from 35% at December 31, 1996, to 52% at March 30, 1997. Other expense for the three-month periods ended March 30, 1997 and March 31, 1996, primarily includes the discount on the sale of receivables. An income tax benefit of $1.8 million was recognized on the Corporation's pre-tax loss from continuing operations of $34.2 million for the three months ended March 31, 1996. Excluding the income tax benefit of $14.6 million recognized on the restructuring charge of $81.6 million recognized in the quarter ended March 31, 1996, the Corporation's reported tax rate on its continuing operations for the first quarter of 1996 would have been 27% compared to a tax rate of 35% in the first quarter of 1997. This increase in the effective tax rate in 1997 resulted from the fact that, by the end of 1996, the Corporation had fully recognized the benefit of domestic deferred tax assets, exclusive of foreign tax credits, for financial reporting purposes. The benefit of the previously unrecognized deferred tax assets had lowered the domestic portion of tax expense for 1996 as well as for a number of prior years. DISCONTINUED OPERATIONS On February 16, 1996, the Corporation completed the sale of PRC Inc., the remaining business in the discontinued PRC segment. Proceeds of $425.0 million, less cash selling expenses of $10.0 million paid in the first quarter of 1996, were used to reduce indebtedness during the quarter ended March 31, 1996. Earnings from discontinued operation of $70.4 million ($.73 per share on a fully diluted basis) for the quarter ended March 31, 1996, primarily consist of the gain on sale of PRC Inc., net of applicable income taxes of $55.6 million. Revenues and operating income of PRC Inc. for the period from January 1, 1996, through the date of sale were not significant. Operating results, net assets, and cash flows of the discontinued PRC segment have been segregated in the accompanying Consolidated Financial Statements. FINANCIAL CONDITION Operating activities of continuing operations before the sale of receivables used cash of $71.7 million for the three months ended March 30, 1997, compared to $1.9 million of cash used for the corresponding period in 1996. This increased cash usage was principally the result of changes in working capital. Increased cash generation during 1996 resulted in the Corporation reducing its working capital at December 31, 1996, to a lower level than at the 1995 year end. The increase in working capital at March 30, 1997, from the lower base at December 31, 1996, was, as a result, higher than the increase in working capital at March 31, 1996, from the higher base at December 31, 1995. In addition, cash spending during the first quarter of 1997 in the amount of $5.7 million reduced the restructuring reserve from $37.7 million at December 31, 1996, to $32.0 million at March 30, 1997. The Corporation anticipates that the remaining restructuring reserve at March 30, 1997, will be substantially spent in 1997. Investing activities for the three months ended March 30, 1997, used cash of $37.0 million compared to $23.4 million of cash used in the corresponding period in 1996, exclusive of the $415.0 million of net proceeds from the sale of PRC Inc. received in the first quarter of 1996. Higher cash usage in the first quarter of 1997 compared to the prior year's level primarily resulted from a reduced level of asset disposals in the first quarter of 1997. Financing activities generated cash of $149.6 million for the three months ended March 30, 1997, compared to cash generated of $72.5 million in the first three months of 1996, exclusive of the $415.0 million in debt repayments which occurred in the first quarter of 1996 upon receipt of the net proceeds from the sale of PRC Inc. The increased cash generated from financing activities in the first quarter of 1997 over the corresponding quarter in 1996 was principally the result of a larger increase in borrowings to fund working capital requirements at March 30, 1997, over the 1996 year-end level versus the increase at March 31, 1996, over the 1995 year-end level, exclusive of the impact of debt repayments related to the receipt of the PRC Inc. sales proceeds. Average debt maturity was 4.5 years at both March 30, 1997 and December 31, 1996. In addition to measuring its cash flow generation and usage based upon the operating, investing, and financing classifications included in the Consolidated Statement of Cash Flows, the Corporation also measures its free cash flow. Free cash flow, a measure commonly employed by bond rating agencies and banks, is defined by the Corporation as cash available for debt reduction (including short-term borrowings), prior to the effects of cash received from divested businesses, issuances of equity, and sales of receivables. Free cash flow, a more inclusive measure of the Corporation's cash flow generation than cash flow from operating activities included in the Consolidated Statement of Cash Flows, considers items such as cash used for capital expenditures and dividends, as well as net cash inflows or outflows from hedging activities. During the three months ended March 30, 1997, the Corporation experienced negative free cash flow of $110.0 million compared to negative free cash flow of $46.2 million for the corresponding period in 1996. This $63.8 million decrease in free cash flow during the first three months of 1997 from the 1996 level was primarily the result of reduced cash flows from operating activities. FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q includes statements that constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. By their nature, all forward looking statements involve risk and uncertainties. Actual results may differ materially from those contemplated by the forward looking statements for a number of reasons, including but not limited to: market acceptance of the significant new products scheduled for introduction over the balance of the year; the level of sales generated from these new products relative to expectation, based on the existing investments in productive capacity and commitments of the Corporation to fund advertising and product promotions in connection with the introduction of these new products; the ability of the Corporation and its suppliers to achieve scheduled new product introduction timetables; unforeseen competitive pressures or other difficulty in penetrating new channels of distribution; adverse changes in currency exchange rates or raw material commodity prices, both in absolute terms and relative to competitors' risk profiles; delays in or unanticipated inefficiencies resulting from manufacturing reorganization actions in progress or contemplated; and the continuation of modest economic growth in the United States and gradual improvement of the economic environment in Europe. The Corporation's ability to realize the anticipated benefits during 1997 of the existing restructuring program also could be affected by those factors identified in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996. THE BLACK & DECKER CORPORATION PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS The Corporation is involved in various lawsuits in the ordinary course of business. The lawsuits primarily involve claims for damages arising out of the use of the Corporation's products and allegations of patent and trademark infringement. The Corporation is also involved in litigation and administrative proceedings involving employment matters and commercial disputes. Some of these lawsuits include claims for punitive as well as compensatory damages. The Corporation, using current product sales data and historical trends, actuarially calculates the estimate of its current exposure for product liability claims for amounts in excess of established deductibles and accrues for the estimated liability as described above up to the limits of the deductibles. All other claims and lawsuits are handled on a case-by-case basis. The Corporation also is involved in lawsuits and administrative proceedings with respect to claims involving the discharge of hazardous substances into the environment. Certain of these claims assert damages and liability for remedial investigations and cleanup costs with respect to sites at which the Corporation has been identified as a potentially responsible party under federal and state environmental laws and regulations (off-site). Other matters involve sites that the Corporation currently owns or has previously sold (on-site). For off-site claims, the Corporation makes an assessment of the cost involved based on environmental studies, prior experience at similar sites, and the experience of other named parties. The Corporation also considers the ability of other parties to share costs, the percentage of the Corporation's exposure relative to all other parties, and the effects of inflation on these estimated costs. For on-site matters associated with properties currently owned, an assessment is made as to whether an investigation and remediation would be required under applicable federal and state law. For on-site matters associated with properties previously sold, the Corporation considers the terms of sale as well as applicable federal and state laws to determine if the Corporation has any remaining liability. If the Corporation is determined to have potential liability for properties currently owned or previously sold, an estimate is made of the total cost of investigation and remediation and other potential costs associated with the site. The Corporation's estimate of the costs associated with legal, product liability, and environmental exposures is accrued if, in management's judgment, the likelihood of a loss is probable. These accrued liabilities are not discounted. Insurance recoveries for environmental and certain general liability claims are not recognized until realized. As of March 30, 1997, the Corporation had no known probable but inestimable exposures for awards and assessments in connection with environmental matters and other litigation and administrative proceedings that could have a material effect on the Corporation. Management is of the opinion that the amounts accrued for awards or assessments in connection with the environmental matters and other litigation and administrative proceedings to which the Corporation is a party are adequate and, accordingly, ultimate resolution of these matters will not have a material adverse effect on the Corporation. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 1997 Annual Meeting of Stockholders was held on April 22, 1997, for the election of directors and to ratify the selection of Ernst & Young LLP as independent public accountants for the Corporation for fiscal year 1997. A total of 81,663,684 of the 94,390,399 votes entitled to be cast at the meeting were present in person or by proxy. At the meeting, the stockholders: (1) Elected the following directors: Number of Shares Number of Shares AUTHORITY Directors VOTED FOR WITHHELD - -------------------------------------------------------------------------------- Nolan D. Archibald 81,195,805 467,879 Alonzo G. Decker, Jr. 81,195,761 467,923 Norman R. Augustine 81,211,579 452,105 Barbara L. Bowles 81,175,174 488,510 Malcolm Candlish 81,192,354 471,330 Anthony Luiso 81,186,690 476,994 Lawrence R. Pugh 81,201,680 462,004 Mark H. Willes 81,208,499 455,185 M. Cabell Woodward, Jr. 81,205,602 458,082 (2) Ratified the selection of Ernst & Young LLP as independent public accountants for the Corporation for fiscal year 1997 by an affirmative vote of 81,250,897; votes against ratification were 148,862; and abstentions were 263,925. No other matters were submitted to a vote of the stockholders at the meeting. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K Exhibit No. Description 10(a) The Black & Decker 1986 Stock Option Plan, as amended. 10(b) The Black & Decker 1989 Stock Option Plan, as amended. 10(c) The Black & Decker 1992 Stock Option Plan, as amended. 10(d) The Black & Decker Corporation 1995 Stock Option Plan for Non-Employee Directors, as amended. 10(e) The Black & Decker 1996 Stock Option Plan, as amended. 11 Computation of Earnings Per Share. 12 Computation of Ratios. 27 Financial Data Schedule. The Corporation did not file any reports on Form 8-K during the three-month period ended March 30, 1997. 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/ THOMAS M. SCHOEWE Thomas M. Schoewe Senior Vice President and Chief Financial Officer Principal Accounting Officer By /s/ STEPHEN F. REEVES Stephen F. Reeves Vice President and Controller Date: May 14, 1997 EX-10 2 Exhibit 10(a) THE BLACK & DECKER 1986 STOCK OPTION PLAN The proper execution of the duties and responsibilities of the executive and other key employees of The Black & Decker Corporation and its subsidiaries is a vital factor in the continued growth and success of the Corporation. Toward this end, it is necessary to attract and retain effective and capable employees to assume positions which contribute materially to the successful operation of the business of the Corporation. It will benefit the Corporation, therefore, to bind the interests of these persons more closely to its own interests by offering them an attractive opportunity to acquire a proprietary interest in the business enterprise and thereby provide them with added incentive to remain in its employ and to increase the prosperity, growth and earnings of the Corporation. This stock option plan will serve these purposes. ARTICLE 1:00 Definitions The following terms wherever used herein shall have the following meanings respectively: 1:01 The term "Corporation" shall mean The Black & Decker Corporation. 1:02 The term "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulation thereto. 1:03 The term "Incentive Stock Option" shall mean any Option granted pursuant to the Plan clearly designated as an Incentive Stock Option and which satisfies the requirements of Code Section 422(b). 1:04 The term "Plan" shall mean The Black & Decker 1986 Stock Option Plan as approved and recommended by the Board of Directors on October 17, 1985 and as adopted by the shareholders of the Corporation on January 27, 1986, as the same may be further amended from time to time. 1:05 The term "Board of Directors" shall mean the Board of Directors of the Corporation. 1:06 The term "Committee" shall mean a committee to be appointed by the Board of Directors to consist of two or more of those members of the Board of Directors who are Non-Employee Directors within the meaning of Rule 16b-3 promulgated under the Exchange Act and are outside directors within the meaning of the Section 162(m) Regulations, as each may be amended from time to time. 1:07 The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1:08 The term "Nonqualified Stock Option" shall mean an Option granted under the Plan that is not an Incentive Stock Option. 1:09 The term "Section 162(m) Regulations" shall mean the regulations adopted pursuant to Section 162(m) of the Code. 1:10 The term "Immediate Family Member" shall mean each of (i) the children, step children or grandchildren of the Initial Holder, (ii) the spouse or any parent of the Initial Holder, (iii) any trust solely for the benefit of any such family members, and (iv) any partnership or other entity in which such family members are the only partners or other equity holders. 1:11 The term "Initial Holder," with respect to an Option granted under the Plan, shall mean the executive or other key employee of the Corporation granted the Option. 1:12 The term "Option" or "Stock Option" shall mean a right granted pursuant to the Plan to purchase shares of Common Stock, and shall include the terms Incentive Stock Option and Nonqualified Stock Option. 1:13 The term "Option Agreement" shall mean the written agreement representing Options granted pursuant to the Plan as contemplated by Article 6:00 of the Plan. 1:14 The term "Option Holder" shall mean the Initial Holder so long as he or she holds an Option initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Option has been transferred in accordance with Section 6:05. ARTICLE 2:00 Effective Date of the Plan 2:01 The Plan shall become effective as of January 27, 1986. ARTICLE 3:00 Administration 3:01 The Plan shall be administered by the Committee. 3:02 The Committee shall establish, from time to time and at any time, subject to the limitations of the Plan as hereinafter set forth, such rules and regulations and amendments and supplements thereto, as it deems necessary to comply with applicable law and regulation and for the proper administration of the Plan. A majority of the members of the Committee shall constitute a quorum. The vote of a majority of a quorum shall constitute action by the Committee. 3:03 The Committee shall from time to time submit to the Board of Directors for its approval the names of those executives and key managerial personnel who, in its opinion, should receive Options, and shall recommend the numbers of shares on which Options should be granted to each such person and the nature of the Options to be granted, including without limitation whether the Options and stock appreciation rights shall be transferable in accordance with the terms and conditions provided in Section 6:12 or Section 8:05. 3:04 The Options shall be granted by the Corporation and shall become effective only after prior approval of the Board of Directors, and upon the execution of an Option Agreement between the Corporation and the Initial Holder. ARTICLE 4:00 Participation in the Plan 4:01 Participation in the Plan shall be limited to such executives and other key managerial personnel of the Corporation and its subsidiaries who are regular, full-time employees of the Corporation, or of any of its subsidiaries, and who from time to time shall be designated by the Committee and approved by the Board of Directors together with any permitted transferees in accordance with the terms and conditions of the Plan. - 2 - 4:02 No member of the Board of Directors who is not also an employee shall be eligible to participate in the Plan. No employee owning a beneficial interest in more than 5% of the outstanding stock of the Corporation shall be eligible to participate in the Plan. ARTICLE 5:00 Stock Subject to the Plan 5:01 There shall be reserved for the granting of Options under the Plan and for issuance and sale pursuant to such Options, 1,800,000 shares of the Common Stock of the Corporation. In determining the shares available at any time for granting Options, there shall be deducted from the total number of reserved shares, the number of shares with respect to which Options have been granted under the Plan which are still outstanding or have been exercised. The shares subject to Option shall be made available from the authorized and unissued Common Stock or from treasury shares of the Corporation. If for any reason shares as to which an Option has been granted cease to be subject to purchase thereunder, then such shares again shall be available for Option under the Plan. However, except as provided in Section 5:03 to prevent dilution, the aggregate number of shares subject to Options under the Plan shall not exceed 1,800,000 shares. 5:02 Proceeds of the purchase of optioned shares by any Option Holder shall be used for the general business purposes of the Corporation. 5:03 In the event of reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, acquisition of property or stock, or any change in the capital structure of the Corporation, the Committee shall make such adjustment as may be appropriate in the number and kind of shares reserved for purchase by executives or key managerial employees, in the number, kind and price of shares covered by Options granted but not then exercised, and in the number of stock appreciation rights, if any, and in the number of cash appreciation rights, if any, related to shares covered by Options granted but not then exercised. ARTICLE 6:00 Terms and Conditions of Options 6:01 Each Option granted pursuant to the Plan shall be evidenced by an Option Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. The right of an Option Holder to exercise his, her or its Option shall at all times be subject to the terms and conditions set forth in the respective Option Agreement. 6:02 The option price per share shall be equal to one hundred percent (100%) of the fair market value of a share of the Common Stock of the Corporation on the date on which the Option is granted. The fair market value shall be the closing price per share of the Common Stock of the Corporation as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange on the date on which the Option is granted, or if shares of the Common Stock of the Corporation are not sold on such date, the closing price per share of the Common Stock of the Corporation as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange for the most recent prior date on which the Common Stock of the Corporation was sold. - 3 - 6:03 Each Option, subject to the other limitations herein provided, may extend for a period of up to ten years from the date on which it is granted. The term of each Option shall be determined by the Committee at the time of grant of the Option. 6:04 Unless otherwise provided by the Board of Directors upon the recommendation of the Committee, the number of shares subject to each Option shall be divided into four installments of twenty-five percent each. The first installment shall be exercisable twelve months after the date the Option was granted, and each succeeding installment shall be exercisable twelve months after the date the immediately preceding installment became exercisable. If the Option Holder does not purchase the full number of shares which he or she at any time has become entitled to purchase, the Option Holder may purchase all or any part of those shares at any subsequent time during the term of the Option. 6:05 Options shall be non-transferable and non-assignable except that (i) Options may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Option Agreement or any other terms and conditions imposed by the Committee from time to time, Options may be transferred in accordance with the terms and conditions provided in Section 6:12 if the applicable Option Agreement or other action of the Committee expressly provides that the Options are transferable. 6:06 Upon voluntary or involuntary termination of an Initial Holder's employment, his or her Option (including any Option transferred in accordance with the terms and conditions provided in Section 6:12) and all rights thereunder, shall be terminated except to the extent previously exercised, and except as provided in Sections 6:07, 6:08 and 6:09. 6:07 In the event an Initial Holder (i) ceases to be a key employee of the Corporation due to involuntary termination, or (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or by entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability or other special circumstance, the Committee shall consider his or her case and shall, subject to the approval of the Board of Directors, take such action with respect to the related Option Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Options may be exercised and extending the time following the Initial Holder's termination of employment during which the Option Holder is entitled to purchase shares subject to such Options, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:08 If an Initial Holder dies during the term of his or her Option without the Option having been exercised in full, (i) the executor or administrator of his or her estate or the person who inherits the right to exercise the Option by bequest or inheritance in the event the Initial Holder was the Option Holder at the date of death or (ii) the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12, shall have the right within three years of the Initial Holder's death to purchase the number of shares which the deceased Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of death after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:09 If an Initial Holder's employment is terminated without having fully exercised the Option, and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries or affiliates at least 10 years and the Initial Holder's age plus years of such employment total not less than 55 years, then such Initial Holder (or the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12) shall have the right within three years of the Initial Holder's termination of employment to purchase the number of shares which the Initial Holder (or Option Holder, as - 4 - the case may be) was entitled to purchase at the date of termination, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:10 The granting of an Option to purchase shares pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries, to employ the Initial Holder for any specified period. 6:11 The aggregate fair market value (as of the date an Incentive Stock Option is granted) of stock, with respect to which Incentive Stock Options under this Plan and "incentive Stock Options" (within the meaning of Code Section 422(b)) under all other plans of the Corporation and its subsidiaries are exercisable for the first time by an Option Holder during any calendar year, shall not exceed $100,000. Incentive Stock Options shall not be transferable in accordance with the terms and conditions provided in Section 6:12. 6:12 The Committee may provide, in the original grant of a Nonqualified Stock Option or in an amendment or supplement to a previous grant, that some or all of the Nonqualified Stock Options granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Option Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Option as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Option Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Option Agreement. Any Nonqualified Stock Option transferred in accordance with the terms and conditions provided in this Section 6:12 shall continue to be subject to the same terms and conditions that were applicable to such Nonqualified Stock Option prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of an Option by an Immediate Family Member of an Option transferred in accordance with the terms and conditions provided in this Section 6:12 unless and until payment or provision for payment of any applicable withholding taxes has been made. ARTICLE 7:00 Methods of Exercise of Option 7:01 The Option Holder (or other person or persons, if any, entitled to exercise an Option hereunder) desiring to exercise an Option granted under the Plan as to all or part of the shares covered by the Option shall notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of shares to be purchased and the method of payment therefor, and make payment or provision for payment for the shares of Common Stock so purchased in accordance with this Article 7:00. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Option Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. 7:02 An Option Holder at any time may elect in writing to abandon an Option with respect to the number of shares as to which the Option shall not have been exercised. 7:03 Within 10 days after receipt by the Corporation of the notice provided in Section 7:01, payment or provision for payment shall be made as follows: - 5 - (a) the Option shall be exercised as to the number of shares specified in the notice by payment to the Corporation in United States currency of the purchase price as provided in the Option; or (b) at the election of the Option Holder, the Option may be exercised as to the number of shares specified in the notice by tendering to the Corporation shares of Common Stock of the Corporation already owned by the Option Holder which, together with any cash tendered therewith, shall equal in value the purchase price. The value of the tendered shares for this purpose shall be the fair market value (as defined in Section 6:02) of such shares on the date the notice provided in Section 7:01 is received by the Corporation, and the Option Holder shall deliver only that number of shares which, together with any cash delivered, has an aggregate value of not less than the purchase price as provided in the Option; or (c) the Option Holder shall deliver to the Corporation an exercise notice together with irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the aggregate purchase price of the shares of Common Stock as to which such exercise relates and to sell the shares of Common Stock to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Option Holder or to deliver the remaining shares of Common Stock to the Option Holder. Notwithstanding the foregoing provisions, the Committee, in processing any purported exercise of an Option granted under the Plan, may refuse to recognize the methods of exercise selected by the Option Holder (other than the methods of exercise set forth in Sections 7:03(a) and 7:03(b)) if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the Option Holder is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the method of exercise selected by the Option Holder would subject the Initial Holder or the Option Holder to a substantial risk of liability under Section 16 of the Exchange Act. Notwithstanding the foregoing provisions, no Incentive Stock Option may be exercised in accordance with the methods of exercise set forth in Section 7:03(c). 7:04 In addition to the alternative methods of exercise set forth in Section 7:03, holders of Nonqualified Stock Options shall be entitled, at or prior to the time the written notice provided for in Section 7:01 is delivered to the Corporation, to elect to have the Corporation withhold from the shares of Common Stock to be delivered upon exercise of the Nonqualified Stock Option that number of shares of Common Stock (determined based on the fair market value (as defined in Section 6:02) of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) necessary to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. Alternatively, such holder of a Nonqualified Stock Option may elect to deliver previously owned shares of Common Stock upon exercise of the Nonqualified Stock Option to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. The maximum amount that an Option Holder may elect to have withheld from the shares of Common Stock otherwise deliverable upon exercise or the maximum number of previously owned shares an Option Holder may deliver shall be based on the maximum federal, state and local taxes payable by the Option Holder. Notwithstanding the foregoing provisions, the Committee or the Board of Directors may include in the Option Agreement relating to any such Nonqualified Stock Option provisions limiting or eliminating the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock or, if no such provisions are included in the Option Agreement but in the opinion of the Committee such withholding would have an adverse tax or accounting effect to the Corporation, at or prior to exercise of the Nonqualified Stock Option the Committee may so limit or eliminate the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock. Notwithstanding the foregoing - 6 - provisions, a holder of a Nonqualified Stock Option may not elect any of the methods of satisfying his or her withholding tax obligation in respect of any exercise if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the holder of the Nonqualified Stock Option is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the election or timing of the election would subject the Initial Holder or the holder of the Nonqualified Stock Option to a substantial risk of liability under Section 16 of the Exchange Act. 7:05 An Option Holder shall have none of the rights of a stockholder until the shares covered by the Option are issued upon exercise of the Option. ARTICLE 8:00 Stock Appreciation Rights 8:01 Stock appreciation rights may be granted concurrently with the grant of Stock Options at the sole discretion of the Committee. If the Committee does grant stock appreciation rights to an Option Holder, the number of stock appreciation rights granted to the Option Holder shall equal the number of shares granted pursuant to the related Stock Option. 8:02 A stock appreciation right shall entitle an Option Holder subject to the terms and conditions of the Plan to surrender to the Corporation for cancellation all or a portion of the related Stock Option granted pursuant to the Plan, but only to the extent that such Option is then exercisable, and to be paid therefor an amount in cash or a number of shares of Common Stock having a fair market value on the date the stock appreciation right is exercised equal to the increase, if any, of the fair market value of a share of Common Stock on the date of exercise of the stock appreciation right over the value of a share of Common Stock on the date of grant of the related Stock Option. 8:03 The Committee in its sole discretion shall determine whether a stock appreciation right will be paid in cash or in shares of Common Stock. 8:04 Stock appreciation rights may only be exercised prior to the exercise, termination or cancellation of the related Stock Option. 8:05 The Committee may provide, in the original grant of a Stock Appreciation Right or in an amendment or supplement to a previous grant, that some or all of the stock appreciation rights granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the stock appreciation right agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the stock appreciation right as transferable, (ii) transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the stock appreciation right holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the stock appreciation right agreement. Any stock appreciation right transferred in accordance with the terms and conditions provided in this Section 8:11 shall continue to be subject to the same terms and conditions that were applicable to such stock appreciation right prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of a stock appreciation right by an Immediate Family Member of a stock appreciation right transferred in accordance with the terms and conditions provided in this Section 8:11 unless and until payment or provision for payment of any applicable withholding taxes has been made. - 7 - ARTICLE 9:00 Cash Appreciation Rights 9:01 Cash appreciation rights may be granted concurrently with the grant of Stock Options at the sole discretion of the Committee. If the Committee does grant cash appreciation rights to an Option Holder, the number of cash appreciation rights granted to an Option Holder shall equal the number of shares granted pursuant to the related Stock Option. 9:02 Cash appreciation rights shall entitle an Option Holder subject to the terms and conditions of the Plan to receive from the Corporation or the subsidiary employing the Option Holder, upon exercise of all or a portion of the related Stock Option granted pursuant to the Plan, or upon the surrender of all or a portion of the related Stock Option granted in exchange for the exercise of stock appreciation rights, if any, granted to the Option Holder pursuant to the Plan, a payment in cash equal to the sum of (i) the increase in income taxes, if any, incurred by the Option Holder as a result of the full or partial exercise of the related Stock Option or, if appropriate, the related stock appreciation right, and (ii) the increase in income taxes, if any, incurred by the Option Holder as a result of receipt of this cash payment. 9:03 In no event shall the cash payment for a cash appreciation right exceed the increase, if any, of the fair market value of a share of Common Stock on the date of exercise of the related Stock Option or, if appropriate, of the related stock appreciation right over the value of a share of Common Stock on the date of grant of the related Stock Option. 9:04 Except as otherwise contemplated in this Article 9:00, cash appreciation rights shall be nontransferable and nonassignable. ARTICLE 10:00 Amendments and Discontinuance of the Plan 10:01 The Board of Directors shall have the right at any time and from time to time to amend, modify or discontinue the Plan provided that, except as provided in Section 5:03, no such amendment, modification or discontinuance shall (i) revoke or alter the terms of any valid Option, stock appreciation right or cash appreciation right previously granted in accordance with the Plan, (ii) increase the number of shares to be reserved for issuance and sale pursuant to Options, (iii) change the price determined pursuant to the provisions of Section 6:02, (iv) change the class of employee to whom Options may be granted under the Plan, or (v) provide for Options exercisable more than ten years after the date granted. ARTICLE 11:00 Plan Subject to Governmental Laws and Regulations 11:01 The Plan, and the grant and the exercise of Options, stock appreciation rights and cash appreciation rights shall be subject to all applicable governmental laws and regulations. Any other provision of the Plan to the contrary notwithstanding, the Board of Directors may in its discretion make such changes in the Plan as may be required, in their opinion, to conform the Plan to such laws and regulations. - 8 - ARTICLE 12:00 Duration of the Plan 12:01 No Option shall be granted pursuant to the Plan after the close of business on January 26, 1996. - 9 - EX-10 3 Exhibit 10(b) THE BLACK & DECKER 1989 STOCK OPTION PLAN The proper execution of the duties and responsibilities of the executive and other key employees of The Black & Decker Corporation and its subsidiaries is a vital factor in the continued growth and success of the Corporation. Toward this end, it is necessary to attract and retain effective and capable employees to assume positions that contribute materially to the successful operation of the business of the Corporation. It will benefit the Corporation, therefore, to bind the interests of these persons more closely to its own interests by offering them an attractive opportunity to acquire a proprietary interest in the Corporation and thereby provide them with added incentive to remain in its employ and to increase the prosperity, growth, and earnings of the Corporation. This stock option plan will serve these purposes. ARTICLE 1:00 Definitions The following terms wherever used herein shall have the meanings set forth below. 1:01 The term "Board of Directors" shall mean the Board of Directors of the Corporation. 1:02 The term "Cash Appreciation Right" shall mean a right to receive cash pursuant to Article 10:00 of the Plan. 1:03 The term "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. 1:04 The term "Committee" shall mean a committee to be appointed by the Board of Directors to consist of two or more of those members of the Board of Directors who are Non-Employee Directors within the meaning of Rule 16b-3 promulgated under the Exchange Act and are outside directors within the meaning of the Section 162(m) Regulations, as each may be amended from time to time. 1:05 The term "Common Stock" shall mean the shares of common stock, par value $.50 per share, of the Corporation. 1:06 The term "Corporation" shall mean The Black & Decker Corporation. 1:07 The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1:08 The term "Fair Market Value of a share of Common Stock" shall mean the closing price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange, or if shares of Common Stock are not sold on such date, the closing price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange for the most recent prior date on which shares of Common Stock were sold. 1:09 The term "Immediate Family Member" shall mean each of (i) the children, step children or grandchildren of the Initial Holder, (ii) the spouse or any parent of the Initial Holder, (iii) any trust solely for the benefit of any such family members, and (iv) any partnership or other entity in which such family members are the only partners or other equity holders. 1:10 The term "Incentive Stock Option" shall mean any Option granted pursuant to the Plan that is designated as an Incentive Stock Option and which satisfies the requirements of Section 422(b) of the Code. 1:11 The term "Initial Holder," with respect to an Option or Right granted under the Plan, shall mean the executive or other key employee of the Corporation granted the Option or Right. 1:12 The term "Nonqualified Stock Option" shall mean any Option granted pursuant to the Plan that is not an Incentive Stock Option. 1:13 The term "Option" or "Stock Option" shall mean a right granted pursuant to the Plan to purchase shares of Common Stock, and shall include the terms Incentive Stock Option and Nonqualified Stock Option. 1:14 The term "Option Agreement" shall mean the written agreement representing Options granted pursuant to the Plan as contemplated by Article 6:00 of the Plan. 1:15 The term "Option Holder" shall mean the Initial Holder so long as he or she holds an Option initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Option has been transferred in accordance with Section 6:05. 1:16 The term "Plan" shall mean The Black & Decker 1989 Stock Option Plan as approved by the Board of Directors on November 17, 1988, and adopted by the stockholders of the Corporation on January 30, 1989, as the same may be amended from time to time. 1:17 The term "Rights" shall include Stock Appreciation Rights and Cash Appreciation Rights. 1:18 The term "Section 162(m) Regulations" shall mean the regulations adopted pursuant to Section 162(m) of the Code. 1:19 The term "Stock Appreciation Right" shall mean a right to receive cash or shares of Common Stock pursuant to Article 8:00 of the Plan. 1:20 The term "Stock Appreciation Right Agreement" shall mean the written agreement representing Stock Appreciation Rights granted pursuant to the Plan as contemplated by Article 8:00 of the Plan. 1:21 The term "Stock Appreciation Right Holder" shall mean the Initial Holder so long as he or she holds a Stock Appreciation Right initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Stock Appreciation Right has been transferred in accordance with Section 8:05. 1:22 The term "Stock Appreciation Right Base Price" shall mean the base price for determining the value of a Stock Appreciation Right under Section 8:02, which Stock Appreciation Right Base Price shall be established by the Committee at the time of the grant of Stock Appreciation Rights pursuant to the Plan and shall not be less than 90% of the Fair Market Value of a share of Common Stock on the date of grant. If the Committee does not establish a specific Stock Appreciation Right Base Price at the time of grant, the Stock Appreciation Right Base Price shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Stock Appreciation Right. 1:23 The term "subsidiary" or "subsidiaries" shall mean a corporation of which capital stock possessing 50% or more of the total combined voting power of all classes of its capital stock entitled to vote generally in the election of directors is owned in the aggregate by the Corporation directly or indirectly through one or more subsidiaries. - 2 - ARTICLE 2:00 Effective Date of the Plan 2:01 The Plan shall become effective upon stockholder approval, provided that such approval is received on or before November 16, 1989 and provided further that Options, Stock Appreciation Rights, or Cash Appreciation Rights may be granted pursuant to the Plan prior to stockholder approval if such Options, Stock Appreciation Rights, or Cash Appreciation Rights by their terms are contingent upon subsequent stockholder approval of the Plan. ARTICLE 3:00 Administration 3:01 The Plan shall be administered by the Committee. 3:02 The Committee may establish, from time to time and at any time, subject to the limitations of the Plan as set forth herein, such rules and regulations and amendments and supplements thereto, as it deems necessary to comply with applicable law and regulation and for the proper administration of the Plan. A majority of the members of the Committee shall constitute a quorum. The vote of a majority of a quorum shall constitute action by the Committee. 3:03 The Committee shall from time to time determine the names of those executives and other key employees who, in its opinion, should receive Options and/or Stock Appreciation Rights, and shall determine the numbers of shares on which Options should be granted or upon which Stock Appreciation Rights should be based to each such person and the nature of the Options and/or Stock Appreciation Rights to be granted, including without limitation whether the Options or Rights shall be transferable in accordance with the terms and conditions provided in Section 6:12 or Section 8:11. 3:04 Options and Stock Appreciation Rights shall be granted by the Corporation only upon the prior approval of the Committee, and upon the execution of an Option Agreement and/or Stock Appreciation Right Agreement between the Corporation and the Initial Holder. 3:05 The Committee's interpretation and construction of the provisions of the Plan and the rules and regulations adopted by the Committee shall be final. No member of the Committee or the Board of Directors shall be liable for any action taken or determination made, in respect of the Plan, in good faith. ARTICLE 4:00 Participation in the Plan 4:01 Participation in the Plan shall be limited to such executives and other key employees of the Corporation and its subsidiaries who are regular, full-time employees of the Corporation or any of its subsidiaries, and who from time to time shall be designated by the Committee together with any permitted transferees in accordance with the terms and conditions of the Plan. 4:02 No member of the Board of Directors who is not also an employee shall be eligible to participate in the Plan. No employee who owns beneficially more than 10% of the outstanding shares of Common Stock shall be eligible to participate in the Plan. - 3 - ARTICLE 5:00 Stock Subject to the Plan 5:01 There shall be reserved for the granting of Options and/or Stock Appreciation Rights pursuant to the Plan and for issuance and sale pursuant to such Options and/or Stock Appreciation Rights 3,400,000 shares of Common Stock. To determine the number of shares of Common Stock available at any time for the granting of Options and/or Stock Appreciation Rights, there shall be deducted from the total number of reserved shares of Common Stock, the number of shares of Common Stock in respect of which Options have been granted pursuant to the Plan that are still outstanding or have been exercised. The shares of Common Stock to be issued upon the exercise of Options or Stock Appreciation Rights granted pursuant to the Plan shall be made available from the authorized and unissued shares of Common Stock or from shares of Common Stock held in treasury. If for any reason shares of Common Stock as to which an Option has been granted cease to be subject to purchase thereunder, then such shares of Common Stock again shall be available for issuance pursuant to the exercise of Options and/or Stock Appreciation Rights pursuant to the Plan. Except as provided in Section 5:03, however, the aggregate number of shares of Common Stock that may be issued upon the exercise of Options and Stock Appreciation Rights pursuant to the Plan shall not exceed 3,400,000 shares and no more than 3,400,000 Stock Appreciation Rights shall be granted pursuant to the Plan. 5:02 Proceeds from the purchase of shares of Common Stock upon the exercise of Options granted pursuant to the Plan shall be used for the general business purposes of the Corporation. 5:03 In the event of reorganization, recapitalization, stock split, stock dividend, combination of shares of Common Stock, merger, consolidation, share exchange, acquisition of property or stock, or any change in the capital structure of the Corporation, the Committee shall make such adjustments as may be appropriate in the number and kind of shares reserved for purchase by executives or other key employees, in the number, kind and price of shares covered by Options and/or Stock Appreciation Rights granted pursuant to the Plan but not then exercised, in the number of Stock Appreciation Rights, if any, granted pursuant to the Plan but not then exercised, and in the number of Cash Appreciation Rights, if any, related to Options and/or Stock Appreciation Rights granted pursuant to the Plan but not then exercised. ARTICLE 6:00 Terms and Conditions of Options 6:01 Each Option granted pursuant to the Plan shall be evidenced by an Option Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. The right of an Option Holder to exercise his, her or its Option shall at all times be subject to the terms and conditions set forth in the respective Option Agreement. 6:02 The exercise price per share for Options shall be established by the Committee at the time of the grant of Options pursuant to the Plan and shall not be less than 90% of the Fair Market Value of a share of Common Stock on the date on which the Option is granted. If the Committee does not establish a specific exercise price per share at the time of grant, the exercise price per share shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Options. 6:03 Each Option, subject to the other limitations set forth in the Plan, may extend for a period of up to 10 years from the date on which it is granted. The term of each Option shall be determined by - 4 - the Committee at the time of grant of the Option, provided that if no term is established by the Committee the term of the Option shall be 10 years from the date on which it is granted. 6:04 Unless otherwise provided by the Committee, the number of shares of Common Stock subject to each Option shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Option was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If an Option Holder does not purchase the full number of shares of Common Stock that he, she or it at any time has become entitled to purchase, the Option Holder may purchase all or any part of those shares of Common Stock at any subsequent time during the term of the Option. 6:05 Options shall be nontransferable and nonassignable, except that (i) Options may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Option Agreement or any other terms and conditions imposed by the Committee from time to time, Options may be transferred in accordance with the terms and conditions provided in Section 6:12 if the applicable Option Agreement or other action of the Committee expressly provides that the Options are transferable. 6:06 Upon voluntary or involuntary termination of an Initial Holder's employment, his or her Option (including any Option transferred in accordance with the terms and conditions provided in Section 6:12) and all rights thereunder shall be terminated except to the extent previously exercised and except as provided in Sections 6:07, 6:08, and 6:09. 6:07 In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Option Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Options may be exercised and extending the time following the Initial Holder's termination of employment during which the Option Holder is entitled to purchase the shares of Common Stock subject to such Options, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:08 If an Initial Holder dies during the term of his or her Option without the Option having been exercised in full, (i) the executor or administrator of his or her estate or the person who inherits the right to exercise the Option by bequest or inheritance in the event the Initial Holder was the Option Holder at the date of death or (ii) the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12, shall have the right within three years of the Initial Holder's death to purchase the number of shares of Common Stock that the deceased Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of death, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:09 If an Initial Holder's employment is terminated without his or her Option having been exercised in full and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial Holder's age plus years of such employment total not less than 55 years, then such Initial Holder (or the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12) shall have the right within three years of the Initial Holder's termination of employment to purchase the number of shares of Common Stock that the Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of termination, after which the Option shall lapse, provided that in no event may any Option be exercised after the - 5 - expiration of the term of the Option. 6:10 The granting of an Option pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period. 6:11 In addition to the general terms and conditions set forth in this Article 6:00 in respect of Options granted pursuant to the Plan, Incentive Stock Options granted pursuant to the Plan shall be subject to the following additional terms and conditions: (a) The aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the shares of Common Stock in respect of which "incentive stock options" are exercisable for the first time by the Option Holder during any calendar year (under all such plans of the Corporation and its subsidiaries) shall not exceed $100,000; (b) The Option Agreement in respect of an Incentive Stock Option may contain any other terms and conditions specified by the Committee that are not inconsistent with the Plan, except that such terms and conditions must be consistent with the requirements for "incentive stock options" under Section 422 of the Code; and (c) Incentive Stock Options shall not be transferable in accordance with the terms and conditions provided in Section 6:12. 6:12 The Committee may provide, in the original grant of a Nonqualified Stock Option or in an amendment or supplement to a previous grant, that some or all of the Nonqualified Stock Options granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Option Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Option as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Option Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Option Agreement. Any Nonqualified Stock Option transferred in accordance with the terms and conditions provided in this Section 6:12 shall continue to be subject to the same terms and conditions that were applicable to such Nonqualified Stock Option prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of an Option by an Immediate Family Member of an Option transferred in accordance with the terms and conditions provided in this Section 6:12 unless and until payment or provision for payment of any applicable withholding taxes has been made. ARTICLE 7:00 Methods of Exercise of Options 7:01 An Option Holder (or other person or persons, if any, entitled to exercise an Option hereunder) desiring to exercise an Option granted pursuant to the Plan as to all or part of the shares of Common Stock covered by the Option shall (i) notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of shares of Common Stock to be purchased and the method of payment therefor, and (ii) make payment or provision for payment for the shares of Common Stock so purchased in accordance with this Article 7:00. Such written notice may be given by means of a facsimile transmission. - 6 - If a facsimile transmission is used, the Option Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. 7:02 Within 10 days after receipt by the Corporation of the written notice provided for in Section 7:01, payment or provision for payment shall be made as follows: (a) The Option Holder shall deliver to the Corporation at the address set forth in Section 7:01 United States currency in an amount equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (b) The Option Holder shall tender to the Corporation shares of Common Stock already owned by the Option Holder that, together with any cash tendered therewith, have an aggregate fair market value (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (c) The Option Holder shall tender less than the number of shares of Common Stock required by Section 7:02(b) together with written instructions to the Corporation to reapply continually the shares of Common Stock received upon each partial exercise of the Option until the Option shall have been exercised in full; or (d) The Option Holder shall deliver to the Corporation an exercise notice requesting the Corporation to issue to the Option Holder the full number of shares of Common Stock as to which the Option is then exercisable less the number of shares of Common Stock that have an aggregate fair market value (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (e) The Option Holder shall deliver to the Corporation an exercise notice together with irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the aggregate purchase price of the shares of Common Stock as to which such exercise relates and to sell the shares of Common Stock to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Option Holder or to deliver the remaining shares of Common Stock to the Option Holder. Notwithstanding the foregoing provisions, the Committee, in granting Options pursuant to the Plan, may limit the methods in which an Option may be exercised by any person and, in processing any purported exercise of an Option granted pursuant to the Plan, may refuse to recognize the method of exercise selected by the Option Holder (other than the method of exercise set forth in Section 7:02(a)) if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the Option Holder is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the method of exercise selected by the Option Holder would subject the Initial Holder or the Option Holder to a substantial risk of liability under Section 16 of the Exchange Act. Notwithstanding the foregoing provisions, no Incentive Stock Option may be exercised in accordance with the methods of exercise set forth in Section 7:02(d) or Section 7:02(e) unless, in the opinion of counsel to the Corporation, such exercise would not have a material adverse effect upon the incentive stock option tax treatment of any outstanding Incentive Stock Options or Incentive Stock Options that thereafter may be granted pursuant to the Plan. Notwithstanding the foregoing provisions, the methods of exercise set forth in Section 7:02(c) and Section 7:02(d) shall not be available for Options granted under the Plan on or after October 17, 1991. - 7 - 7:03 In addition to the alternative methods of exercise set forth in Section 7:02, holders of Nonqualified Stock Options shall be entitled, at or prior to the time the written notice provided for in Section 7:01 is delivered to the Corporation, to elect to have the Corporation withhold from the shares of Common Stock to be delivered upon exercise of the Nonqualified Stock Option that number of shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) necessary to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. Alternatively, such holder of a Nonqualified Stock Option may elect to deliver previously owned shares of Common Stock upon exercise of the Nonqualified Stock Option to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. The maximum amount that an Option Holder may elect to have withheld from the shares of Common Stock otherwise deliverable upon exercise or the maximum number of previously owned shares an Option Holder may deliver shall be based on the maximum federal, state and local taxes payable by the Option Holder. Notwithstanding the foregoing provisions, the Committee may include in the Option Agreement relating to any such Nonqualified Stock Option provisions limiting or eliminating the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock or, if no such provisions are included in the Option Agreement but in the opinion of the Committee such withholding would have an adverse tax or accounting effect to the Corporation, at or prior to exercise of the Nonqualified Stock Option the Committee may so limit or eliminate the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock. Notwithstanding the foregoing provisions, a holder of a Nonqualified Stock Option may not elect any of the methods of satisfying his or her withholding tax obligation in respect of any exercise if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the holder of the Nonqualified Stock Option is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the election or timing of the election would subject the Initial Holder or the holder of the Nonqualified Stock Option to a substantial risk of liability under Section 16 of the Exchange Act. 7:04 An Option Holder at any time may elect in writing to abandon an Option in respect of all or part of the number of shares of Common Stock as to which the Option shall not have been exercised. 7:05 An Option Holder shall have none of the rights of a stockholder of the Corporation until the shares of Common Stock covered by the Option are issued upon exercise of the Option. ARTICLE 8:00 Terms and Conditions of Stock Appreciation Rights 8:01 Each Stock Appreciation Right granted pursuant to the Plan shall be evidenced by a Stock Appreciation Right Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. Notwithstanding the foregoing provision, Stock Appreciation Rights granted in tandem with a related Option shall be evidenced by the Option Agreement in respect of the related Option. The right of a Stock Appreciation Right Holder to exercise his, her or its Stock Appreciation Right shall at all times be subject to the terms and conditions set forth in the respective Stock Appreciation Right Agreement. 8:02 Each Stock Appreciation Right shall entitle the holder, subject to the terms and conditions of the Plan, to receive upon exercise of the Stock Appreciation Right an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice - 8 - required by Section 9:01 less the Stock Appreciation Right Base Price. Notwithstanding the foregoing provision, each Stock Appreciation Right that is granted in tandem with a related Option shall entitle the holder, subject to the terms and conditions of the Plan, to surrender to the Corporation for cancellation all or a portion of the related Option, but only to the extent such Stock Appreciation Right and related Option then are exercisable, and to be paid therefor an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice required by Section 9:01 less the Stock Appreciation Right Base Price. 8:03 Each Stock Appreciation Right, subject to the other limitations set forth in the Plan, may extend for a period of up to 10 years from the date on which it is granted. The term of each Stock Appreciation Right shall be determined by the Committee at the time of grant of the Stock Appreciation Right, provided that if no term is established by the Committee the term of the Stock Appreciation Right shall be 10 years from the date on which it is granted. 8:04 Unless otherwise provided by the Committee, the number of Stock Appreciation Rights granted pursuant to each Stock Appreciation Right Agreement shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Stock Appreciation Right was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If a Stock Appreciation Right Holder does not exercise the Stock Appreciation Right to the extent that he, she or it at any time has become entitled to exercise, the Stock Appreciation Right Holder may exercise all or any part of the Stock Appreciation Right at any subsequent time during the term of the Stock Appreciation Right. 8:05 Stock Appreciation Rights shall be nontransferable and nonassignable, except that (i) Stock Appreciation Rights may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Stock Appreciation Right Agreement or any other terms and conditions imposed by the Committee from time to time, Stock Appreciation Rights may be transferred in accordance with the terms and conditions provided in Section 8:11 if the applicable Stock Appreciation Right Agreement or other action of the Committee expressly provides that the Stock Appreciation Rights are transferable. 8:06 Upon voluntary or involuntary termination of an Initial Holder's employment, his or her Stock Appreciation Right (including any Stock Appreciation Right transferred in accordance with the terms and conditions provided in Section 8:11) and all rights thereunder shall be terminated except to the extent previously exercised and except as provided in Sections 8:07, 8:08, and 8:09. 8:07 In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Stock Appreciation Right Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Stock Appreciation Rights may be exercised and extending the time following the Initial Holder's termination of employment during which the Stock Appreciation Right Holder is entitled to exercise the Stock Appreciation Rights, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:08 If an Initial Holder dies during the term of his or her Stock Appreciation Right without the Stock Appreciation Right having been exercised in full, (i) the executor or administrator of the Stock - 9 - Appreciation Right Holder's estate or the person who inherits the right to exercise the Stock Appreciation Right by bequest or inheritance in the event the Initial Holder was the Stock Appreciation Right Holder at the date of death or (ii) the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in Section 8:11, shall have the right within three years of the Initial Holder's death to exercise the Stock Appreciation Rights that the deceased Initial Holder (or Stock Appreciation Right Holder, as the case may be) was entitled to purchase at the date of death, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:09 If an Initial Holder's employment is terminated without his or her Stock Appreciation Right having been exercised in full and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial Holder's age plus years of such employment total not less than 55 years, then such Initial Holder (or the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in Section 8:11) shall have the right within three years of the Initial Holder's termination of employment to exercise the Stock Appreciation Rights that the Initial Holder (or Stock Appreciation Right Holder, as the case may be) was entitled to exercise at the date of termination, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:10 The granting of a Stock Appreciation Right pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, expressed or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period. 8:11 The Committee may provide, in the original grant of a Stock Appreciation Right or in an amendment or supplement to a previous grant, that some or all of the Stock Appreciation Rights granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Stock Appreciation Right Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Stock Appreciation Right as transferable, (ii) transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Stock Appreciation Right Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Stock Appreciation Right Agreement. Any Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 shall continue to be subject to the same terms and conditions that were applicable to such Stock Appreciation Right prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of a Stock Appreciation Right by an Immediate Family Member of a Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 unless and until payment or provision for payment of any applicable withholding taxes has been made. ARTICLE 9:00 Methods of Exercise of Stock Appreciation Rights 9:01 A Stock Appreciation Right Holder (or other person or persons, if any, entitled to exercise a Stock Appreciation Right hereunder) desiring to exercise a Stock Appreciation Right granted pursuant to the Plan shall notify the Corporation in writing at its principal office at 701 East Joppa Road, - 10 - Towson, Maryland 21286, to that effect, specifying the number of Stock Appreciation Rights to be exercised. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Stock Appreciation Right Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. 9:02 The Committee in its sole discretion shall determine whether a Stock Appreciation Right shall be settled upon exercise in cash or in shares of Common Stock. The Committee, in making such a determination, may from time to time adopt general guidelines or determinations as to whether Stock Appreciation Rights shall be settled in cash or in shares of Common Stock. ARTICLE 10:00 Terms and Conditions of Cash Appreciation Rights 10:01 Cash Appreciation Rights may be granted concurrently with Options or Stock Appreciation Rights granted pursuant to the Plan at the discretion of the Committee. If Cash Appreciation Rights are granted to an Initial Holder, the number of Cash Appreciation Rights granted to the Initial Holder shall equal the number of shares of Common Stock that may be purchased upon exercise of the related Option or the number of Stock Appreciation Rights granted, as the case may be. 10:02 Cash Appreciation Rights shall entitle the Initial Holder or Stock Appreciation Right Holder, as the case may be, subject to the terms and conditions of the Plan including but not limited to the limitations set forth in Section 10:03, to receive from the Corporation or the subsidiary employing the Initial Holder, upon exercise of all or part of the related Option or Stock Appreciation Right, as the case may be, or in the case of Options granted in tandem with Stock Appreciation Rights upon the surrender of all or part of the related Option granted in exchange for the exercise of Stock Appreciation Rights granted to the Initial Holder pursuant to the Plan, whether or not such exercise or surrender was by the Initial Holder or a permitted transferee, a payment in cash equal to the sum of (i) the increase in income taxes, if any, incurred by the Initial Holder or Stock Appreciation Right Holder, as the case may be, as a result of the full or partial exercise of the related Option or Stock Appreciation Right, as the case may be, and (ii) the increase in income taxes, if any, incurred by the Initial Holder or Stock Appreciation Right Holder, as the case may be, as a result of receipt of this cash payment. 10:03 In no event shall the payment in respect of a Cash Appreciation Right exceed the increase, if any, of the Fair Market Value of a share of Common Stock on the date of exercise of the related Option or Stock Appreciation Right, as the case may be, over the exercise price per share of the related Option or the Stock Appreciation Right Base Price of the related Stock Appreciation Right, as the case may be. 10:04 Except as otherwise contemplated in this Article 10:00, Cash Appreciation Rights shall be nontransferable and nonassignable. ARTICLE 11:00 Amendments and Discontinuance of the Plan 11:01 The Board of Directors shall have the right at any time and from time to time to amend, modify, or discontinue the Plan provided that, except as provided in Section 5:03, no such amendment, modification, or discontinuance of the Plan shall (i) revoke or alter the terms of any valid Option, Stock Appreciation Right, or Cash Appreciation Right previously granted pursuant to the Plan, (ii) increase the number of shares of Common Stock to be reserved for issuance and sale pursuant to Options or Stock Appreciation Rights granted pursuant to the Plan, (iii) decrease the price determined pursuant to the provisions of Section 6:02 or increase the amount of cash or shares of Common Stock that a Stock Appreciation Right Holder is - 11 - entitled to receive upon exercise of a Stock Appreciation Right, (iv) change the class of employee to whom Options or Stock Appreciation Rights may be granted pursuant to the Plan, or (v) provide for Options or Stock Appreciation Rights exercisable more than 10 years after the date granted. ARTICLE 12:00 Plan Subject to Governmental Laws and Regulations 12:01 The Plan and the grant and exercise of Options, Stock Appreciation Rights, and Cash Appreciation Rights pursuant to the Plan shall be subject to all applicable governmental laws and regulations. Notwithstanding any other provision of the Plan to the contrary, the Board of Directors may in its discretion make such changes in the Plan as may be required to conform the Plan to such laws and regulations. ARTICLE 13:00 Duration of the Plan 13:01 No Option or Stock Appreciation Right shall be granted pursuant to the Plan after the close of business on November 16, 1999. - 12 - EX-10 4 Exhibit 10(c) THE BLACK & DECKER 1992 STOCK OPTION PLAN The proper execution of the duties and responsibilities of the executive and other key employees of The Black & Decker Corporation and its subsidiaries is a vital factor in the continued growth and success of the Corporation. Toward this end, it is necessary to attract and retain effective and capable employees to assume positions that contribute materially to the successful operation of the business of the Corporation. It will benefit the Corporation, therefore, to bind the interests of these persons more closely to its own interests by offering them an attractive opportunity to acquire a proprietary interest in the Corporation and thereby provide them with added incentive to remain in its employ and to increase the prosperity, growth, and earnings of the Corporation. This stock option plan will serve these purposes. ARTICLE 1:00 Definitions The following terms wherever used herein shall have the meanings set forth below. 1:01 The term "Board of Directors" shall mean the Board of Directors of the Corporation. 1:02 The term "Cash Appreciation Right" shall mean a right to receive cash pursuant to Article 11:00 of the Plan. 1:03 The term "Change in Control" shall have the meaning provided in Section 10:02 of the Plan. 1:04 The term "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. 1:05 The term "Committee" shall mean a committee to be appointed by the Board of Directors to consist of two or more of those members of the Board of Directors who are Non-Employee Directors within the meaning of Rule 16b-3 promulgated under the Exchange Act and are outside directors within the meaning of the Section 162(m) Regulations as each may be amended from time to time. 1:06 The term "Common Stock" shall mean the shares of common stock, par value $.50 per share, of the Corporation. 1:07 The term "Corporation" shall mean The Black & Decker Corporation. 1:08 The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1:09 The term "Fair Market Value of a share of Common Stock" shall mean the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange, or if shares of Common Stock are not sold on such date, the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange for the most recent prior date on which shares of Common Stock were sold. 1:10 The term "Immediate Family Member" shall mean each of the (i) children, step children or grandchildren of the Initial Holder, (ii) the spouse or any parent of the Initial Holder, (iii) any trust solely for the benefit of any such family members, and (iv) any partnership or other entity in which such family members are the only partners or other equity holders. 1:11 The term "Incentive Stock Option" shall mean any Option granted pursuant to the Plan that is designated as an Incentive Stock Option and which satisfies the requirements of Section 422(b) of the Code. 1:12 The term "Initial Holder," with respect to an Option or Right granted under the Plan, shall mean the executive or other key employee of the Corporation granted the Option or Right. 1:13 The term "Limited Stock Appreciation Right" shall mean a limited tandem stock appreciation right that entitles the holder to receive cash upon a Change in Control pursuant to Article 10:00 of the Plan. 1:14 The term "Nonqualified Stock Option" shall mean any Option granted pursuant to the Plan that is not an Incentive Stock Option. 1:15 The term "Option" or "Stock Option" shall mean a right granted pursuant to the Plan to purchase shares of Common Stock, and shall include the terms Incentive Stock Option and Nonqualified Stock Option. 1:16 The term "Option Agreement" shall mean the written agreement representing Options granted pursuant to the Plan as contemplated by Article 6:00 of the Plan. 1:17 The term "Option Holder" shall mean the Initial Holder so long as he or she holds an Option initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Option has been transferred in accordance with the terms and conditions provided in Section 6:05. 1:18 The term "Plan" shall mean The Black & Decker 1992 Stock Option Plan as approved by the Board of Directors on February 20, 1992, and adopted by the stockholders of the Corporation at the 1992 Annual Meeting of Stockholders, as the same may be amended from time to time. 1:19 The term "Rights" shall include Stock Appreciation Rights, Limited Stock Appreciation Rights and Cash Appreciation Rights. 1:20 The term "Section 162(m) Regulations" shall mean the regulations adopted pursuant to Section 162(m) of the Code. 1:21 The term "Stock Appreciation Right" shall mean a right to receive cash or shares of Common Stock pursuant to Article 8:00 of the Plan. 1:22 The term "Stock Appreciation Right Agreement" shall mean the written agreement representing Stock Appreciation Rights granted pursuant to the Plan as contemplated by Article 8:00 of the Plan. 1:23 The term "Stock Appreciation Right Base Price" shall mean the base price for determining the value of a Stock Appreciation Right under Section 8:02, which Stock Appreciation Right Base Price shall be established by the Committee at the time of the grant of Stock Appreciation Rights pursuant to the Plan and shall not be less than 90% of the Fair Market Value of a share of Common Stock on the date of grant. If the Committee does not establish a specific Stock Appreciation Right Base Price at the time of grant, the Stock Appreciation Right Base Price shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Stock Appreciation Right. 1:24 The term "Stock Appreciation Right Holder" shall mean the Initial Holder so long as he or she holds a Stock Appreciation Right initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Stock Appreciation Right has been - 2 - transferred in accordance with the terms and conditions provided in Section 8:05. 1:25 The term "subsidiary" or "subsidiaries" shall mean a corporation of which capital stock possessing 50% or more of the total combined voting power of all classes of its capital stock entitled to vote generally in the election of directors is owned in the aggregate by the Corporation directly or indirectly through one or more subsidiaries. ARTICLE 2:00 Effective Date of the Plan 2:01 The Plan shall become effective upon stockholder approval, provided that such approval is received on or before May 31, 1992, and provided further that the Committee may grant Options or Rights pursuant to the Plan prior to stockholder approval if such Options or Rights by their terms are contingent upon subsequent stockholder approval of the Plan. ARTICLE 3:00 Administration 3:01 The Plan shall be administered by the Committee. 3:02 The Committee may establish, from time to time and at any time, subject to the limitations of the Plan as set forth herein, such rules and regulations and amendments and supplements thereto, as it deems necessary to comply with applicable law and regulation and for the proper administration of the Plan. A majority of the members of the Committee shall constitute a quorum. The vote of a majority of a quorum shall constitute action by the Committee. 3:03 The Committee shall from time to time determine the names of those executives and other key employees who, in its opinion, should receive Options or Rights, and shall determine the numbers of shares on which Options should be granted or upon which Rights should be based to each such person and the nature of the Options or Rights to be granted, including without limitation whether the Options or Rights shall be transferable in accordance with the terms and conditions provided in Section 6:12 or Section 8:11. 3:04 Options and Rights shall be granted by the Corporation only upon prior approval of the Committee, and upon the execution of an Option Agreement or Stock Appreciation Right Agreement between the Corporation and the Initial Holder. 3:05 The Committee's interpretation and construction of the provisions of the Plan and the rules and regulations adopted by the Committee shall be final. No member of the Committee or the Board of Directors shall be liable for any action taken or determination made, in respect of the Plan, in good faith. ARTICLE 4:00 Participation in the Plan 4:01 Participation in the Plan shall be limited to such executives and other key employees of the Corporation and its subsidiaries who at the date of grant of an Option or Right are regular, full-time employees of the Corporation or any of its subsidiaries and who shall be designated by the - 3 - Committee together with any permitted transferees in accordance with the terms and conditions of the Plan. 4:02 No member of the Board of Directors who is not also an employee shall be eligible to participate in the Plan. No employee who owns beneficially more than 10% of the total combined voting power of all classes of stock of the Corporation shall be eligible to participate in the Plan. ARTICLE 5:00 Stock Subject to the Plan 5:01 There shall be reserved for the granting of Options or Stock Appreciation Rights pursuant to the Plan and for issuance and sale pursuant to such Options or Stock Appreciation Rights 2,400,000 shares of Common Stock. To determine the number of shares of Common Stock available at any time for the granting of Options or Stock Appreciation Rights, there shall be deducted from the total number of reserved shares of Common Stock, the number of shares of Common Stock in respect of which Options have been granted pursuant to the Plan that are still outstanding or have been exercised. The shares of Common Stock to be issued upon the exercise of Options or Stock Appreciation Rights granted pursuant to the Plan shall be made available from the authorized and unissued shares of Common Stock. If for any reason shares of Common Stock as to which an Option has been granted cease to be subject to purchase thereunder, then such shares of Common Stock again shall be available for issuance pursuant to the exercise of Options or Stock Appreciation Rights pursuant to the Plan. Except as provided in Section 5:03, however, the aggregate number of shares of Common Stock that may be issued upon the exercise of Options and Stock Appreciation Rights pursuant to the Plan shall not exceed 2,400,000 shares and no more than 2,400,000 Stock Appreciation Rights shall be granted pursuant to the Plan. 5:02 Proceeds from the purchase of shares of Common Stock upon the exercise of Options granted pursuant to the Plan shall be used for the general business purposes of the Corporation. 5:03 Subject to the provisions of Section 10:02, in the event of reorganization, recapitalization, stock split, stock dividend, combination of shares of Common Stock, merger, consolidation, share exchange, acquisition of property or stock, or any change in the capital structure of the Corporation, the Committee shall make such adjustments as may be appropriate in the number and kind of shares reserved for purchase by executives or other key employees, in the number, kind and price of shares covered by Options and Stock Appreciation Rights granted pursuant to the Plan but not then exercised, and in the number of Rights, if any, granted pursuant to the Plan but not then exercised. ARTICLE 6:00 Terms and Conditions of Options 6:01 Each Option granted pursuant to the Plan shall be evidenced by an Option Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. The right of an Option Holder to exercise his, her or its Option shall at all times be subject to the terms and conditions set forth in the respective Option Agreement. 6:02 The exercise price per share for Options shall be established by the Committee at the time of the grant of Options pursuant to the Plan and shall not be less than 90% of the Fair Market Value of a share of Common Stock on the date on which the Option is granted. If the Committee does not - 4 - establish a specific exercise price per share at the time of grant, the exercise price per share shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Options. 6:03 Each Option, subject to the other limitations set forth in the Plan, may extend for a period of up to 10 years from the date on which it is granted. The term of each Option shall be determined by the Committee at the time of grant of the Option, provided that if no term is established by the Committee the term of the Option shall be 10 years from the date on which it is granted. 6:04 Unless otherwise provided by the Committee, the number of shares of Common Stock subject to each Option shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Option was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If an Option Holder does not purchase the full number of shares of Common Stock that he, she or it at any time has become entitled to purchase, the Option Holder may purchase all or any part of those shares of Common Stock at any subsequent time during the term of the Option. 6:05 Options shall be nontransferable and nonassignable, except that (i) Options may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Option Agreement or any other terms and conditions imposed by the Committee from time to time, Options may be transferred in accordance with the terms and conditions provided in Section 6:12 if the applicable Option Agreement or other action of the Committee expressly provides that the Options are transferable. 6:06 Upon voluntary or involuntary termination of an Initial Holder's employment, his or her Option (including any Option transferred in accordance with the terms and conditions provided in Section 6.12) and all rights thereunder shall terminate effective at the close of business on the date the Initial Holder ceases to be a regular, full-time employee of the Corporation or any of its subsidiaries, except (i) to the extent previously exercised, (ii) as provided in Sections 6:07, 6:08, and 6:09, and (iii) in the case of involuntary termination of employment, for a period of 30 days thereafter the Option Holder shall be entitled to exercise that portion of the Option which was exercisable at the close of business on the date the Initial Holder ceased to be a regular, full-time employee of the Corporation or any of its subsidiaries. 6:07 In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Option Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Options may be exercised and extending the time following the Initial Holder's termination of employment during which the Option Holder is entitled to purchase the shares of Common Stock subject to such Options, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:08 If an Initial Holder dies during the term of his or her Option without the Option having been exercised in full, (i) the executor or administrator of his or her estate or the person who inherits the right to exercise the Option by bequest or inheritance in the event the Initial Holder was the Option Holder at the date of death or (ii) the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12, shall have the right within three years of the Initial Holder's death to purchase the number of shares of Common Stock that the deceased Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of death, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. - 5 - 6:09 If an Initial Holder's employment is terminated without the Option having been exercised in full the Option and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial Holder's age plus years of such employment total not less than 55 years, then such Initial Holder (or the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12) shall have the right within three years of the Initial Holder's termination of employment to purchase the number of shares of Common Stock that the Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of termination, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:10 The granting of an Option pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period. 6:11 In addition to the general terms and conditions set forth in this Article 6:00 in respect of Options granted pursuant to the Plan, Incentive Stock Options granted pursuant to the Plan shall be subject to the following additional terms and conditions: (a) The aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the shares of Common Stock in respect of which "incentive stock options" are exercisable for the first time by the Option Holder during any calendar year (under all such plans of the Corporation and its subsidiaries) shall not exceed $100,000; (b) The Option Agreement in respect of an Incentive Stock Option may contain any other terms and conditions specified by the Committee that are not inconsistent with the Plan, except that such terms and conditions must be consistent with the requirements for "incentive stock options" under Section 422 of the Code; and (c) Incentive Stock Options shall not be transferable in accordance with the terms and conditions provided in Section 6:12. 6:12 The Committee may provide, in the original grant of a Nonqualified Stock Option or in an amendment or supplement to a previous grant, that some or all of the Nonqualified Stock Options granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Option Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Option as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Option Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Option Agreement. Any Nonqualified Stock Option transferred in accordance with the terms and conditions provided in this Section 6:12 shall continue to be subject to the same terms and conditions that were applicable to such Nonqualified Stock Option prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of an Option by an Immediate Family Member of an Option transferred in accordance with the terms and conditions provided in this Section 6:12 unless and until payment or provision for payment of any applicable withholding taxes has been made. - 6 - ARTICLE 7:00 Methods of Exercise of Options 7:01 An Option Holder (or other person or persons, if any, entitled to exercise an Option hereunder) desiring to exercise an Option granted pursuant to the Plan as to all or part of the shares of Common Stock covered by the Option shall (i) notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of shares of Common Stock to be purchased and the method of payment therefor, and (ii) make payment or provision for payment for the shares of Common Stock so purchased in accordance with this Article 7:00. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Option Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. 7:02 Payment or provision for payment shall be made as follows: (a) The Option Holder shall deliver to the Corporation at the address set forth in Section 7:01 United States currency in an amount equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (b) The Option Holder shall tender to the Corporation shares of Common Stock already owned by the Option Holder that, together with any cash tendered therewith, have an aggregate fair market value (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (c) The Option Holder shall deliver to the Corporation an exercise notice together with irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the aggregate purchase price of the shares of Common Stock as to which such exercise relates and to sell the shares of Common Stock to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Option Holder or to deliver the remaining shares of Common Stock to the Option Holder. Notwithstanding the foregoing provisions, the Committee, in granting Options pursuant to the Plan, may limit the methods in which an Option may be exercised by any person and, in processing any purported exercise of an Option granted pursuant to the Plan, may refuse to recognize the method of exercise selected by the Option Holder (other than the method of exercise set forth in Section 7:02(a)) if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the Option Holder is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the method of exercise selected by the Option Holder would subject the Initial Holder or the Option Holder to a substantial risk of liability under Section 16 of the Exchange Act. 7:03 In addition to the alternative methods of exercise set forth in Section 7:02, holders of Nonqualified Stock Options shall be entitled, at or prior to the time the written notice provided for in Section 7:01 is delivered to the Corporation, to elect to have the Corporation withhold from the shares of Common Stock to be delivered upon exercise of the Nonqualified Stock Option that number of shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) necessary to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. Alternatively, such holder of a Nonqualified Stock Option may elect to deliver previously owned shares of Common Stock upon exercise of the Nonqualified Stock Option to satisfy any withholding taxes - 7 - attributable to the exercise of the Nonqualified Stock Option. The maximum amount that an Option Holder may elect to have withheld from the shares of Common Stock otherwise deliverable upon exercise or the maximum number of previously owned shares an Option Holder may deliver shall be based on the maximum federal, state and local taxes payable by the Option Holder. Notwithstanding the foregoing provisions, the Committee may include in the Option Agreement relating to any such Nonqualified Stock Option provisions limiting or eliminating the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock or, if no such provisions are included in the Option Agreement but in the opinion of the Committee such withholding would have an adverse tax or accounting effect to the Corporation, at or prior to exercise of the Nonqualified Stock Option the Committee may so limit or eliminate the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock. Notwithstanding the foregoing provisions, a holder of a Nonqualified Stock Option may not elect any of the methods of satisfying his or her withholding tax obligation in respect of any exercise if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the holder of the Nonqualified Stock Option is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the election or timing of the election would subject the Initial Holder or the holder of the Nonqualified Stock Option to a substantial risk of liability under Section 16 of the Exchange Act. 7:04 An Option Holder at any time may elect in writing to abandon an Option in respect of all or part of the number of shares of Common Stock as to which the Option shall not have been exercised. 7:05 An Option Holder shall have none of the rights of a stockholder of the Corporation until the shares of Common Stock covered by the Option are issued upon exercise of the Option. ARTICLE 8:00 Terms and Conditions of Stock Appreciation Rights 8:01 Each Stock Appreciation Right granted pursuant to the Plan shall be evidenced by a Stock Appreciation Right Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. Notwithstanding the foregoing provision, Stock Appreciation Rights granted in tandem with a related Option shall be evidenced by the Option Agreement in respect of the related Option. The right of a Stock Appreciation Right Holder to exercise his, her or its Stock Appreciation Right shall at all times be subject to the terms and conditions set forth in the respective Stock Appreciation Right Agreement. 8:02 Each Stock Appreciation Right shall entitle the holder, subject to the terms and conditions of the Plan, to receive upon exercise of the Stock Appreciation Right an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice required by Section 9:01 less the Stock Appreciation Right Base Price. Notwithstanding the foregoing provision, each Stock Appreciation Right that is granted in tandem with a related Option shall entitle the holder, subject to the terms and conditions of the Plan, to surrender to the Corporation for cancellation all or a portion of the related Option, but only to the extent such Stock Appreciation Right and related Option then are exercisable, and to be paid therefor an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice required by Section 9:01 less the Stock Appreciation Right Base Price. - 8 - 8:03 Each Stock Appreciation Right, subject to the other limitations set forth in the Plan, may extend for a period of up to 10 years from the date on which it is granted. The term of each Stock Appreciation Right shall be determined by the Committee at the time of grant of the Stock Appreciation Right, provided that if no term is established by the Committee the term of the Stock Appreciation Right shall be 10 years from the date on which it is granted. 8:04 Unless otherwise provided by the Committee, the number of Stock Appreciation Rights granted pursuant to each Stock Appreciation Right Agreement shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Stock Appreciation Right was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If a Stock Appreciation Right Holder does not exercise the Stock Appreciation Right to the extent that he, she or it at any time has become entitled to exercise, the Stock Appreciation Right Holder may exercise all or any part of the Stock Appreciation Right at any subsequent time during the term of the Stock Appreciation Right. 8:05 Stock Appreciation Rights shall be nontransferable and nonassignable, except that (i) Stock Appreciation Rights may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Stock Appreciation Right Agreement or any other terms and conditions imposed by the Committee from time to time, Stock Appreciation Rights may be transferred in accordance with the terms and conditions provided in Section 8:11 if the applicable Stock Appreciation Right Agreement or other action of the Committee expressly provides that the Stock Appreciation Rights are transferable. 8:06 Upon voluntary or involuntary termination of an Initial Holder's employment, his or her Stock Appreciation Right (including any Stock Appreciation Right transferred in accordance with the terms and conditions provided in Section 8:11) and all rights thereunder shall terminate effective as of the close of business on the date the Initial Holder ceases to be a regular, full-time employee of the Corporation or any of its subsidiaries, except (i) to the extent previously exercised, (ii) except as provided in Sections 8:07, 8:08, and 8:09, and (iii) in the case of involuntary termination of employment, for a period of 30 days thereafter the Stock Appreciation Right Holder shall be entitled to exercise that portion of the Stock Appreciation Right which was exercisable at the close of business on the date the Initial Holder ceased to be a regular, full-time employee of the Corporation or any of its subsidiaries. 8:07 In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Stock Appreciation Right Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Stock Appreciation Rights may be exercised and extending the time following the Initial Holder's termination of employment during which the Stock Appreciation Right Holder is entitled to exercise the Stock Appreciation Rights, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:08 If an Initial Holder dies during the term of his or her Stock Appreciation Right without the Stock Appreciation Right having been exercised in full, (i) the executor or administrator of the Stock Appreciation Right Holder's estate or the person who inherits the right to exercise the Stock Appreciation Right by bequest or inheritance in the event the Initial Holder was the Stock Appreciation Right Holder at the date of death or (ii) the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in - 9 - Section 8:11, shall have the right within three years of the Initial Holder's death to exercise the Stock Appreciation Rights that the deceased Initial Holder (or the Stock Appreciation Right Holder, as the case may be) was entitled to purchase at the date of death, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:09 If an Initial Holder's employment is terminated without his or her Stock Appreciation Rights having been exercised in full and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial Holder's age plus years of such employment total not less than 55 years, then such Initial Holder (or the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in Section 8:11) shall have the right within three years of the Initial Holder's termination of employment to exercise the Stock Appreciation Rights that the Initial Holder (or Stock Appreciation Right Holder, as the case may be) was entitled to exercise at the date of termination, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:10 The granting of a Stock Appreciation Right pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, expressed or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period. 8:11 The Committee may provide, in the original grant of a Stock Appreciation Right or in an amendment or supplement to a previous grant, that some or all of the Stock Appreciation Rights granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Stock Appreciation Right Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Stock Appreciation Right as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Stock Appreciation Right Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Stock Appreciation Right Agreement. Any Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 shall continue to be subject to the same terms and conditions that were applicable to such Stock Appreciation Right prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of a Stock Appreciation Right by an Immediate Family Member of a Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 unless and until payment or provision for payment of any applicable withholding taxes has been made. ARTICLE 9:00 Methods of Exercise of Stock Appreciation Rights 9:01 A Stock Appreciation Right Holder (or other person or persons, if any, entitled to exercise a Stock Appreciation Right hereunder) desiring to exercise a Stock Appreciation Right granted pursuant to the Plan shall notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of Stock Appreciation Rights to be exercised. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Stock Appreciation Right Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. - 10 - 9:02 The Committee in its sole and absolute discretion shall determine whether a Stock Appreciation Right shall be settled upon exercise in cash or in shares of Common Stock. The Committee, in making such a determination, may from time to time adopt general guidelines or determinations as to whether Stock Appreciation Rights shall be settled in cash or in shares of Common Stock. ARTICLE 10:00 Limited Stock Appreciation Rights 10:01 Notwithstanding any other provision of the Plan, the Committee, in their sole and absolute discretion, may grant Limited Stock Appreciation Rights entitling Option Holders to receive, in connection with a Change in Control (as defined in Section 10:02), a cash payment in cancellation of all of their Options which are outstanding on the date the Change in Control occurs (whether or not such Options are then presently exercisable), which payment shall be equal to the number of shares covered by the cancelled Options multiplied by the excess over the exercise price of the Options of the higher of the (i) Fair Market Value of a share of Common Stock on the date of the Change in Control or (ii) the highest per share price paid for the shares of Common Stock in connection with the Change in Control (with the value of any noncash consideration paid in connection with the Change in Control to be determined by the Committee in its sole and absolute discretion). For purposes of this Section 10:01 as well as the other provisions of this Plan, once an Option or portion of an Option has terminated, lapsed or expired, or has been abandoned, in accordance with the provisions of the Plan, the Option (or the portion of the Option) that has terminated, lapsed or expired, or has been abandoned, shall cease to be outstanding. Limited Stock Appreciation Rights shall not be exercisable at the discretion of the Option Holder but shall automatically be exercised upon a Change in Control. 10:02 For purposes of Section 10:01 of the Plan, a "Change in Control" shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is in fact required to comply therewith, provided that, without limitation, such a Change in Control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its subsidiaries, or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (C) of this Section 10.02) whose election by the Board of Directors or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the stockholders of the Corporation approve a merger, share exchange or consolidation of the Corporation with any other corporation, other than a merger, share exchange or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger, share exchange or consolidation, or the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets. - 11 - 10:03 Limited Stock Appreciation Rights shall be nontransferable and nonassignable, except that Limited Stock Appreciation Rights shall automatically be transferred and assigned in tandem with a transfer of the related Options in accordance with Section 6:05. ARTICLE 11:00 Terms and Conditions of Cash Appreciation Rights 11:01 Cash Appreciation Rights may be granted concurrently with Options or Stock Appreciation Rights granted pursuant to the Plan in the sole and absolute discretion of the Committee. If Cash Appreciation Rights are granted to an Initial Holder, the number of Cash Appreciation Rights granted to the Initial Holder shall equal the number of shares of Common Stock that may be purchased upon exercise of the related Option or the number of Stock Appreciation Rights granted, as the case may be. 11:02 Cash Appreciation Rights shall entitle the Initial Holder or the Option Holder, as the case may be, subject to the terms and conditions of the Plan including but not limited to the limitations set forth in Section 11:03, to receive from the Corporation or the subsidiary employing the Initial Holder upon exercise of all or part of the related Option or Stock Appreciation Right, as the case may be, or in the case of Options granted in tandem with Stock Appreciation Rights upon the surrender of all or part of the related Option granted in exchange for the exercise of Stock Appreciation Rights granted to the Initial Holder pursuant to the Plan, whether or not such exercise or surrender was by the Initial Holder or a permitted transferee, a payment in cash equal to the sum of (i) the increase in income taxes, if any, incurred by the Initial Holder or the Option Holder, as the case may be, as a result of the full or partial exercise of the related Option or Stock Appreciation Right, as the case may be, and (ii) the increase in income taxes, if any, incurred by the Initial Holder or the Option Holder, as the case may be, as a result of receipt of this cash payment. 11:03 In no event shall the payment in respect of a Cash Appreciation Right exceed the increase, if any, of the Fair Market Value of a share of Common Stock on the date of exercise of the related Option or Stock Appreciation Right, as the case may be, over the exercise price per share of the related Option or the Stock Appreciation Right Base Price of the related Stock Appreciation Right, as the case may be. 11:04 Except as otherwise contemplated in this Article 11:00, Cash Appreciation Rights shall be nontransferable and nonassignable. ARTICLE 12:00 Amendments and Discontinuance of the Plan 12:01 The Board of Directors shall have the right at any time and from time to time to amend, modify, or discontinue the Plan provided that, except as provided in Section 5:03, no such amendment, modification, or discontinuance of the Plan shall (i) revoke or alter the terms of any valid Option, Stock Appreciation Right, Limited Stock Appreciation Right, or Cash Appreciation Right previously granted pursuant to the Plan, (ii) increase the number of shares of Common Stock to be reserved for issuance and sale pursuant to Options or Stock Appreciation Rights granted pursuant to the Plan, (iii) decrease the price determined pursuant to the provisions of Section 6:02 or increase the amount of cash or shares of Common Stock that a Stock Appreciation Right Holder is entitled to receive upon exercise of a Stock Appreciation Right, (iv) change the class of employee to whom Options or Stock Appreciation Rights may be granted pursuant to the Plan, or (v) provide for Options or Stock Appreciation Rights exercisable more than 10 years after the date - 12 - granted. ARTICLE 13:00 Plan Subject to Governmental Laws and Regulations 13:01 The Plan and the grant and exercise of Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, and Cash Appreciation Rights pursuant to the Plan shall be subject to all applicable governmental laws and regulations. Notwithstanding any other provision of the Plan to the contrary, the Board of Directors may in its sole and absolute discretion make such changes in the Plan as may be required to conform the Plan to such laws and regulations. ARTICLE 14:00 Duration of the Plan 14:01 No Option or Stock Appreciation Right shall be granted pursuant to the Plan after the close of business on February 19, 2002. - 13 - EX-10 5 Exhibit 10(d) THE BLACK & DECKER CORPORATION 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS Attracting and retaining qualified individuals to serve as non-employee directors is vital to the continued success of The Black & Decker Corporation. To that end and to bind the interests of those individuals to the interests of the Corporation and its stockholders, this stock option plan offers them an attractive opportunity to acquire a proprietary interest in the Corporation. ARTICLE 1:00 Definitions 1:01 The term "Board of Directors" shall mean the Board of Directors of the Corporation. 1:02 The term "Change in Control" shall have the meaning provided in Section 7:02 of the Plan. 1:03 The term "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. 1:04 The term "Common Stock" shall mean the shares of common stock, par value $.50 per share, of the Corporation. 1:05 The term "Corporation" shall mean The Black & Decker Corporation. 1:06 The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1:07 The term "Fair Market Value of a share of Common Stock" shall mean the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange, or if shares of Common Stock are not sold on such date, the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange for the most recent prior date on which shares of Common Stock were sold. 1:08 The term "Immediate Family Member" shall mean each of (i) the children, step children or grandchildren of the Initial Holder, (ii) the spouse or any parent of the Initial Holder, (iii) any trust solely for the benefit of any such family members, and (iv) any partnership or other entity in which such family members are the only partners or other equity holders. 1:09 The term "Initial Holder," with respect to an Option or Limited Stock Appreciation Right granted under the Plan, shall mean the non-employee director of the Corporation granted the Option or Limited Stock Appreciation Right. 1:10 The term "Limited Stock Appreciation Right" shall mean a limited tandem stock appreciation right that entitles the holder to receive cash upon a Change in Control pursuant to Article 7:00 of the Plan. 1:11 The term "Option" or "Stock Option" shall mean a right granted pursuant to the Plan to purchase shares of Common Stock. 1:12 The term "Option Agreement" shall mean the written agreement representing Options granted pursuant to the Plan as contemplated by Article 5:00 of the Plan. 1:13 The term "Option Holder" shall mean the Initial Holder so long as he or she holds an Option initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Option has been transferred in accordance with Section 5:10. 1:14 The term "Plan" shall mean The Black & Decker Corporation 1995 Stock Option Plan for Non-Employee Directors as approved by the Board of Directors on December 8, 1994, and adopted by the stockholders of the Corporation at the 1995 Annual Meeting of Stockholders, as the same may be amended from time to time. ARTICLE 2:00 Effective Date of the Plan 2:01 The Plan shall become effective upon stockholder approval, provided that such approval is received on or before May 31, 1995. ARTICLE 3:00 Participation in the Plan 3:01 Participation in the Plan shall be limited to individuals who are directors of the Corporation but not full-time employees of the Corporation on the date of grant of an Option together with any permitted transferees in accordance with the terms and conditions of the Plan. 3:02 No member of the Board of Directors who is a full-time employee shall be eligible to participate in the Plan. No director who owns beneficially more than 10% of the total combined voting power of all classes of stock of the Corporation shall be eligible to participate in the Plan. 3:03 Upon initial election to the Board of Directors, a director who on the date of election is not a full-time employee of the Corporation shall automatically receive an Option to purchase 2,000 shares of Common Stock. Upon each reelection, a director who on the date of reelection is not a full-time employee of the Corporation shall automatically receive an Option to purchase 1,500 shares of Common Stock. For the purpose of this Section, election or reelection at the 1995 Annual Meeting of Stockholders shall be deemed an "initial election." ARTICLE 4:00 Stock Subject to the Plan 4:01 There shall be reserved for the granting of Options pursuant to the Plan and for issuance and sale pursuant to such Options 150,000 shares of Common Stock. To determine the number of shares of Common Stock available at any time for the granting of Options, there shall be deducted from the total number of reserved shares of Common Stock the number of shares of Common Stock in respect of which Options have been granted pursuant to the Plan that are still outstanding or have been exercised. The shares of Common Stock to be issued upon the exercise of Options granted pursuant to the Plan shall be made available from the authorized and unissued shares of Common Stock. If for any reason shares of Common Stock as to which an Option has been granted cease to be subject to purchase thereunder, then such shares of Common Stock again shall be available for issuance pursuant to the Plan. Except as provided in Section 4:03, however, the aggregate number of shares of Common Stock that may be issued upon the exercise of Options pursuant to the Plan shall not exceed 150,000 shares. -2- 4:02 Proceeds from the purchase of shares of Common Stock upon the exercise of Options granted pursuant to the Plan shall be used for the general business purposes of the Corporation. 4:03 Subject to the provisions of Section 7:02, in the event of reorganization, recapitalization, stock split, stock dividend, combination of shares of Common Stock, merger, consolidation, share exchange, acquisition of property or stock, or any change in the capital structure of the Corporation, the number and kind of shares reserved for the granting of Options and the number, kind and price of shares covered by Options granted pursuant to the Plan but not then exercised shall be adjusted appropriately by resolution of the Board. ARTICLE 5:00 Terms and Conditions of Options 5:01 Each Option granted pursuant to the Plan shall be evidenced by an Option Agreement in such form as the Board of Directors from time to time may determine. 5:02 The exercise price per share for Options shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Options. 5:03 Subject to the other limitations set forth in the Plan, the term of the Option shall be 10 years from the date on which it is granted. 5:04 Unless otherwise provided by the Board of Directors, each Option shall become exercisable on the date of the first Annual Meeting of Stockholders following the date the Option was granted. If an Option Holder does not purchase the full number of shares of Common Stock that he or she at any time has become entitled to purchase, he or she may purchase all or any part of those shares of Common Stock at any subsequent time during the term of the Option. 5:05 Options shall be nontransferable and nonassignable, except that (i) Options may be transferred by testamentary instrument or by the laws of descent and distribution, (ii) Options may be transferred pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act, and (iii) Options may be transferred to an Immediate Family Member of the Initial Holder, provided that (a) the transfer by the Initial Holder is a bona fide gift without consideration, (b) the transfer is irrevocable, (c) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Board of Directors or any employee of the Corporation acting on behalf of the Board of Directors may from time to time request, and (d) the Initial Holder or the Option Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Option Agreement. Any Option transferred in accordance with the terms and conditions provided in this Section 5:05 shall continue to be subject to the same terms and conditions that were applicable to such Option prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of an Option by an Immediate Family Member of an Option transferred in accordance with the terms and conditions provided in Section 5:05(iii) unless and until payment or provision for payment of any applicable withholding taxes has been made. 5:06 If an Initial Holder ceases to be a director of the Corporation, his or her Option and all rights thereunder shall terminate effective at the close of business on the date the Initial Holder ceases to be a director of the Corporation, except (i) to the extent previously exercised, (ii) as provided in Sections 5:07 and 5:08 and (iii) for a period of 30 days after the Initial Holder ceases to be a director of the Corporation, the Option Holder shall be entitled to exercise any Option that was exercisable at the close of business on the date the Initial Holder ceased to be a director of the -3- Corporation. 5:07 If an Initial Holder dies during the term of his or her Option without the Option having been exercised in full, (i) the executor or administrator of his or her estate or the person who inherits the right to exercise the Option by bequest or inheritance in the event the Initial Holder was the Option Holder at the date of death or (ii) the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 5.05(iii), shall have the right within three years of the Initial Holder's death to purchase the number of shares of Common Stock that the deceased Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of his or her death, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 5:08 If an Initial Holder ceases to be a director of the Corporation without his or her Option having been exercised in full and (i) the Initial Holder is 65 years of age or older, or (ii) the Initial Holder has been a director of the Corporation or any of its subsidiaries for at least 5 years, then the Initial Holder (or the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 5:05) shall have the right within three years of the Initial Holder's termination as a director to purchase the number of shares of Common Stock that the Initial Holder (or the Option Holder, as the case may be) was entitled to purchase at the date of termination, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 5:09 The granting of an Option pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation to continue the Initial Holder as a director for any specified period. ARTICLE 6:00 Methods of Exercise of Options 6:01 An Option Holder (or other person or persons, if any, entitled to exercise an Option hereunder) desiring to exercise an Option granted pursuant to the Plan as to all or part of the shares of Common Stock covered by the Option shall (i) notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of shares of Common Stock to be purchased and the method of payment therefor, and (ii) make payment or provision for payment for the shares of Common Stock so purchased in accordance with this Article 6:00. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Option Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. 6:02 Payment or provision for payment shall be made as follows: (a) The Option Holder shall deliver to the Corporation at the address set forth in Section 6:01 United States currency in an amount equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (b) The Option Holder shall tender to the Corporation shares of Common Stock already owned by the Option Holder that, together with any cash tendered therewith, have an aggregate fair market value (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 6:01 is received by the Corporation) equal to the aggregate purchase price of the shares of Common Stock as to -4- which such exercise relates; or (c) The Option Holder shall deliver to the Corporation an exercise notice together with irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the aggregate purchase price of the shares of Common Stock as to which such exercise relates and to sell the shares of Common Stock to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Option Holder or to deliver the remaining shares of Common Stock to the Option Holder. Notwithstanding the foregoing provisions, the Board of Directors may limit the methods in which an Option may be exercised by any person and, in processing any purported exercise of an Option granted pursuant to the Plan, may refuse to recognize the method of exercise selected by the Option Holder (other than the method of exercise set forth in Section 6:02(a)) if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the Option Holder is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the method of exercise selected by the Option Holder would subject the Initial Holder or the Option Holder to a substantial risk of liability under Section 16 of the Exchange Act. 6:03 In addition to the alternative methods of exercise set forth in Section 6:02, the Option Holder shall be entitled, at or prior to the time the written notice provided for in Section 6:01 is delivered to the Corporation, to elect to have the Corporation withhold from the shares of Common Stock to be delivered upon exercise of the Option that number of shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 6:01 is received by the Corporation) necessary to satisfy any withholding taxes attributable to the exercise of the Option. Alternatively the holder may elect to deliver previously owned shares of Common Stock upon exercise of the Stock Option to satisfy any withholding taxes attributable to the exercise of the Stock Option. The maximum amount that an Option Holder may elect to have withheld from the shares of Common Stock otherwise deliverable upon exercise or the maximum number of previously owned shares an Option holder may deliver shall be equal to his or her federal and state withholding. Notwithstanding the foregoing provisions, the Board of Directors may include in the Option Agreement relating to any such Option provisions limiting or eliminating the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock or, if no such provisions are included in the Option Agreement but in the opinion of the Board of Directors such withholding would have an adverse tax or accounting effect to the Corporation, at or prior to exercise of the Option, the Board of Directors may so limit or eliminate the Option Holder's ability to pay withholding tax obligations with shares of Common Stock. Notwithstanding the foregoing provisions, a holder of an Option may not elect any of the methods of satisfying his or her withholding tax obligation in respect of any exercise if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the holder of the Stock Option is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the election or timing of the election would subject the Initial Holder or the holder of the Nonqualified Stock Option Holder to a substantial risk of liability under Section 16 of the Exchange Act. 6:04 An Option Holder at any time may elect in writing to abandon an Option in respect of all or part of the number of shares of Common Stock as to which the Option shall not have been exercised. 6:05 An Option Holder shall have none of the rights of a stockholder of the Corporation until the shares of Common Stock covered by the Option are issued upon exercise of the Option. -5- ARTICLE 7:00 Limited Stock Appreciation Rights 7:01 Option Holders shall have Limited Stock Appreciation Rights entitling Option Holders to receive, in connection with a Change in Control (as defined in Section 7:02), a cash payment in cancellation of all of their Options that are outstanding on the date the Change in Control occurs (whether or not such Options are then presently exercisable), which payment shall be equal to the number of shares covered by the cancelled Options multiplied by the excess over the exercise price of the Options of the higher of (i) the Fair Market Value of a share of Common Stock on the date of the Change in Control or (ii) the highest per share price paid for the shares of Common Stock in connection with the Change in Control (with the value of any noncash consideration paid in connection with the Change in Control to be determined by the Board of Directors in its sole and absolute discretion). For purposes of this Section 7:01 as well as the other provisions of this Plan, once an Option or portion of an Option has terminated, lapsed or expired, or has been abandoned, in accordance with the provisions of the Plan, the Option (or the portion of the Option) that has terminated, lapsed or expired, or has been abandoned, shall cease to be outstanding. Limited Stock Appreciation Rights shall not be exercisable at the discretion of the Option Holder but shall automatically be exercised upon a Change in Control. 7:02 For purposes of Section 7:01, a "Change in Control" shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is in fact required to comply therewith, provided that, without limitation, such a Change in Control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its subsidiaries, or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (C) of this Section 7:02) whose election by the Board of Directors or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the stockholders of the Corporation approve a merger, share exchange or consolidation of the Corporation with any other corporation, other than a merger, share exchange or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger, share exchange or consolidation, or the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets. 7:03 Limited Stock Appreciation Rights shall be nontrans-ferable and nonassignable, except that Limited Stock Appreciation Rights shall automatically be transferred and assigned in tandem with a transfer of the related Options in accordance with Section 5:05. -6- ARTICLE 8:00 Amendments and Discontinuance of the Plan 8:01 The Board of Directors shall have the right at any time and from time to time to amend, modify, or discontinue the Plan provided that, except as provided in Section 4:03, no such amendment, modification, or discontinuance of the Plan shall (i) revoke or alter the terms of any valid Option or Limited Stock Appreciation Right previously granted pursuant to the Plan, (ii) increase the number of shares of Common Stock to be reserved for issuance and sale pursuant to Options or Stock Appreciation Rights granted pursuant to the Plan, (iii) decrease the price determined pursuant to the provisions of Section 5:02 or increase the amount of cash that a holder of a Limited Stock Appreciation Right is entitled to receive upon exercise of a Limited Stock Appreciation Right, (iv) change the class of individuals to whom Options or Limited Stock Appreciation Rights may be granted pursuant to the Plan, or (v) provide for Options or Limited Stock Appreciation Rights exercisable more than 10 years after the date granted. Notwithstanding the foregoing, the provisions of the Plan that determine the amount, price or timing of benefits or the grant or exercise of Options as Limited Stock Appreciation Rights shall not be amended more than once every six months, unless the amendment would be consistent with the provisions of Rule 16b-3(c)(2)(ii) promulgated under the Exchange Act (or any successor provision thereto). ARTICLE 9:00 Plan Subject to Governmental Laws and Regulations 9:01 The Plan and the grant and exercise of Options and Limited Stock Appreciation Rights pursuant to the Plan shall be subject to all applicable governmental laws and regulations. Notwithstanding any other provision of the Plan to the contrary, the Board of Directors may in its sole and absolute discretion make such changes in the Plan as may be required to conform the Plan to such laws and regulations. ARTICLE 10:00 Duration of the Plan 10:01 No Option or Limited Stock Appreciation Right shall be granted pursuant to the Plan after the close of business on April 30, 2005. -7- EX-10 6 Exhibit 10(e) THE BLACK & DECKER 1996 STOCK OPTION PLAN The proper execution of the duties and responsibilities of the executive and other key employees of The Black & Decker Corporation and its subsidiaries is a vital factor in the continued growth and success of the Corporation. Toward this end, it is necessary to attract and retain effective and capable employees to assume positions that contribute materially to the successful operation of the business of the Corporation. It will benefit the Corporation, therefore, to bind the interests of these persons more closely to its own interests by offering them an attractive opportunity to acquire a proprietary interest in the Corporation and thereby provide them with added incentive to remain in its employ and to increase the prosperity, growth, and earnings of the Corporation. This stock option plan will serve these purposes. ARTICLE 1:00 Definitions The following terms wherever used herein shall have the meanings set forth below. 1:01 The term "Board of Directors" shall mean the Board of Directors of the Corporation. 1:02 The term "Change in Control" shall have the meaning provided in Section 10:02 of the Plan. 1:03 The term "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. 1:04 The term "Committee" shall mean a committee to be appointed by the Board of Directors to consist of two or more of those members of the Board of Directors who are Non-Employee Directors within the meaning of Rule 16b-3 promulgated under the Exchange Act and are outside directors within the meaning of the Section 162(m) Regulations, as each may be amended from time to time. 1:05 The term "Common Stock" shall mean the shares of common stock, par value $.50 per share, of the Corporation. 1:06 The term "Corporation" shall mean The Black & Decker Corporation. 1:07 The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 1:08 The term "Fair Market Value of a share of Common Stock" shall mean the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange, or if shares of Common Stock are not sold on such date, the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange for the most recent prior date on which shares of Common Stock were sold. 1:09 The term "Immediate Family Member" shall mean each of (i) the children, step children or grandchildren of the Initial Holder, (ii) the spouse or any parent of the Initial Holder, (iii) any trust solely for the benefit of any such family members, and (iv) any partnership or other entity in which such family members are the only partners or other equity holders. 1:10 The term "Incentive Stock Option" shall mean any Option granted pursuant to the Plan that is designated as an Incentive Stock Option and which satisfies the requirements of Section 422(b) of the Code. 1:11 The term "Initial Holder," with respect to an Option or Right granted under the Plan, shall mean the executive or other key employee of the Corporation granted the Option or Right. 1:12 The term "Limited Stock Appreciation Right" shall mean a limited tandem stock appreciation right that entitles the holder to receive cash upon a Change in Control pursuant to Article 10:00 of the Plan. 1:13 The term "Nonqualified Stock Option" shall mean any Option granted pursuant to the Plan that is not an Incentive Stock Option. 1:14 The term "Option" or "Stock Option" shall mean a right granted pursuant to the Plan to purchase shares of Common Stock, and shall include the terms Incentive Stock Option and Nonqualified Stock Option. 1:15 The term "Option Agreement" shall mean the written agreement representing Options granted pursuant to the Plan as contemplated by Article 6:00 of the Plan. 1:16 The term "Option Holder" shall mean the Initial Holder so long as he or she holds an Option initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Option has been transferred in accordance with Section 6:05. 1:17 The term "Plan" shall mean The Black & Decker 1996 Stock Option Plan as approved by the Board of Directors on February 14, 1996, and adopted by the stockholders of the Corporation at the 1996 Annual Meeting of Stockholders, as the same may be amended from time to time. 1:18 The term "Rights" shall include Stock Appreciation Rights and Limited Stock Appreciation Rights. 1:19 The term "Section 162(m) Regulations" shall mean the regulations adopted pursuant to Section 162(m) of the Code. 1:20 The term "Stock Appreciation Right" shall mean a right to receive cash or shares of Common Stock pursuant to Article 8:00 of the Plan. 1:21 The term "Stock Appreciation Right Agreement" shall mean the written agreement representing Stock Appreciation Rights granted pursuant to the Plan as contemplated by Article 8:00 of the Plan. 1:22 The term "Stock Appreciation Right Base Price" shall mean the base price for determining the value of a Stock Appreciation Right under Section 8:02, which Stock Appreciation Right Base Price shall be established by the Committee at the time of the grant of Stock Appreciation Rights pursuant to the Plan and shall not be less than the Fair Market Value of a share of Common Stock on the date of grant. If the Committee does not establish a specific Stock Appreciation Right Base Price at the time of grant, the Stock Appreciation Right Base Price shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Stock Appreciation Right. 1:23 The term "Stock Appreciation Right Holder" shall mean the Initial Holder so long as he or she holds a Stock Appreciation Right initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Stock Appreciation Right has been transferred in accordance with Section 8:05. 1:24 The term "subsidiary" or "subsidiaries" shall mean a corporation of which capital stock possessing 50% or more of the total combined voting power of all classes of its capital stock entitled to vote generally in the election of directors is owned in the aggregate by the Corporation directly or indirectly through one or more subsidiaries. - 2 - ARTICLE 2:00 Effective Date of the Plan 2:01 The Plan shall become effective upon stockholder approval, provided that such approval is received on or before May 31, 1996, and provided further that the Committee may grant Options or Rights pursuant to the Plan prior to stockholder approval if such Options or Rights by their terms are contingent upon subsequent stockholder approval of the Plan. ARTICLE 3:00 Administration 3:01 The Plan shall be administered by the Committee. 3:02 The Committee may establish, from time to time and at any time, subject to the limitations of the Plan as set forth herein, such rules and regulations and amendments and supplements thereto, as it deems necessary to comply with applicable law and regulation and for the proper administration of the Plan. A majority of the members of the Committee shall constitute a quorum. The vote of a majority of a quorum shall constitute action by the Committee. 3:03 The Committee shall from time to time determine the names of those executives and other key employees who, in its opinion, should receive Options or Rights, and shall determine the numbers of shares on which Options should be granted or upon which Rights should be based to each such person and the nature of the Options or Rights to be granted, including without limitation whether the Options or Rights shall be transferable in accordance with the terms and conditions provided in Section 6:12 or Section 8:11. 3:04 Options and Rights shall be granted by the Corporation only upon the prior approval of the Committee and upon the execution of an Option Agreement or Stock Appreciation Right Agreement between the Corporation and the Initial Holder. 3:05 The Committee's interpretation and construction of the provisions of the Plan and the rules and regulations adopted by the Committee shall be final. No member of the Committee or the Board of Directors shall be liable for any action taken or determination made, in respect of the Plan, in good faith. ARTICLE 4:00 Participation in the Plan 4:01 Participation in the Plan shall be limited to such executives and other key employees of the Corporation and its subsidiaries who at the date of grant of an Option or Right are regular, full-time employees of the Corporation or any of its subsidiaries and who shall be designated by the Committee together with any permitted transferees in accordance with the terms and conditions of the Plan. 4:02 No member of the Board of Directors who is not also an employee shall be eligible to participate in the Plan. No employee who owns beneficially more than 10% of the total combined voting power of all classes of stock of the Corporation shall be eligible to participate in the Plan. - 3 - 4:03 No employee may be granted, in any calendar year, Options or Stock Appreciation Rights exceeding 100,000 in the aggregate. ARTICLE 5:00 Stock Subject to the Plan 5:01 There shall be reserved for the granting of Options or Stock Appreciation Rights pursuant to the Plan and for issuance and sale pursuant to such Options or Stock Appreciation Rights 2,400,000 shares of Common Stock. To determine the number of shares of Common Stock available at any time for the granting of Options or Stock Appreciation Rights, there shall be deducted from the total number of reserved shares of Common Stock, the number of shares of Common Stock in respect of which Options have been granted pursuant to the Plan that are still outstanding or have been exercised. The shares of Common Stock to be issued upon the exercise of Options or Stock Appreciation Rights granted pursuant to the Plan shall be made available from the authorized and unissued shares of Common Stock. If for any reason shares of Common Stock as to which an Option has been granted cease to be subject to purchase thereunder, then such shares of Common Stock again shall be available for issuance pursuant to the exercise of Options or Stock Appreciation Rights pursuant to the Plan. Except as provided in Section 5:03, however, the aggregate number of shares of Common Stock that may be issued upon the exercise of Options and Stock Appreciation Rights pursuant to the Plan shall not exceed 2,400,000 shares and no more than 2,400,000 Stock Appreciation Rights shall be granted pursuant to the Plan. 5:02 Proceeds from the purchase of shares of Common Stock upon the exercise of Options granted pursuant to the Plan shall be used for the general business purposes of the Corporation. 5:03 Subject to the provisions of Section 10:02, in the event of reorganization, recapitalization, stock split, stock dividend, combination of shares of Common Stock, merger, consolidation, share exchange, acquisition of property or stock, or any change in the capital structure of the Corporation, the Committee shall make such adjustments as may be appropriate in the number and kind of shares reserved for purchase by executives or other key employees, in the number, kind and price of shares covered by Options and Stock Appreciation Rights granted pursuant to the Plan but not then exercised, and in the number of Rights, if any, granted pursuant to the Plan but not then exercised. ARTICLE 6:00 Terms and Conditions of Options 6:01 Each Option granted pursuant to the Plan shall be evidenced by an Option Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. The right of an Option Holder to exercise his, her or its Option shall at all times be subject to the terms and conditions set forth in the respective Option Agreement. 6:02 The exercise price per share for Options shall be established by the Committee at the time of the grant of Options pursuant to the Plan and shall not be less than the Fair Market Value of a share of Common Stock on the date on which the Option is granted. If the Committee does not establish a specific exercise price per share at the time of grant, the exercise price per share shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Options. 6:03 Each Option, subject to the other limitations set forth in the Plan, may extend for a period of up - 4 - to 10 years from the date on which it is granted. The term of each Option shall be determined by the Committee at the time of grant of the Option, provided that if no term is established by the Committee the term of the Option shall be 10 years from the date on which it is granted. 6:04 Unless otherwise provided by the Committee, the number of shares of Common Stock subject to each Option shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Option was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If an Option Holder does not purchase the full number of shares of Common Stock that he, she or it at any time has become entitled to purchase, the Option Holder may purchase all or any part of those shares of Common Stock at any subsequent time during the term of the Option. 6:05 Options shall be nontransferable and nonassignable, except that (i) Options may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Option Agreement or any other terms and conditions imposed by the Committee from time to time, Options may be transferred in accordance with the terms and conditions provided in Section 6:12 if the applicable Option Agreement or other action of the Committee expressly provides that the Options are transferable. 6:06 Upon voluntary or involuntary termination of an Initial Holder's employment, his or her Option (including any Option transferred in accordance with the terms and conditions provided in Section 6:12) and all rights thereunder shall terminate effective at the close of business on the date the Initial Holder ceases to be a regular, full-time employee of the Corporation or any of its subsidiaries, except (i) to the extent previously exercised, (ii) as provided in Sections 6:07, 6:08, and 6:09, and (iii) in the case of involuntary termination of employment, for a period of 30 days thereafter the Option Holder shall be entitled to exercise that portion of the Option which was exercisable at the close of business on the date the Initial Holder ceased to be a regular, full-time employee of the Corporation or any of its subsidiaries. 6:07 In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Option Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Options may be exercised and extending the time following the Initial Holder's termination of employment during which the Option Holder is entitled to purchase the shares of Common Stock subject to such Options, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:08 If an Initial Holder dies during the term of his or her Option without the Option having been exercised in full, (i) the executor or administrator of his or her estate or the person who inherits the right to exercise the Option by bequest or inheritance in the event the Initial Holder was the Option Holder at the date of death or (ii) the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12, shall have the right within three years of the Initial Holder's death to purchase the number of shares of Common Stock that the deceased Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of death, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:09 If an Initial Holder's employment is terminated without his or her Option having been exercised in full and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial Holder's - 5 - age plus years of such employment total not less than 55 years, then such Initial Holder (or the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12) shall have the right within three years of the Initial Holder's termination of employment to purchase the number of shares of Common Stock that the Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of termination, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option. 6:10 The granting of an Option pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period. 6:11 In addition to the general terms and conditions set forth in this Article 6:00 in respect of Options granted pursuant to the Plan, Incentive Stock Options granted pursuant to the Plan shall be subject to the following additional terms and conditions: (a) The aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the shares of Common Stock in respect of which "incentive stock options" are exercisable for the first time by the Option Holder during any calendar year (under all such plans of the Corporation and its subsidiaries) shall not exceed $100,000; (b) The Option Agreement in respect of an Incentive Stock Option may contain any other terms and conditions specified by the Board of Directors that are not inconsistent with the Plan, except that such terms and conditions must be consistent with the requirements for "incentive stock options" under Section 422 of the Code; and (c) Incentive Stock Options shall not be transferable in accordance with the terms and conditions provided in Section 6:12. 6:12 The Committee may provide, in the original grant of a Nonqualified Stock Option or in an amendment or supplement to a previous grant, that some or all of the Nonqualified Stock Options granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Option Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Option as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Option Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Option Agreement. Any Nonqualified Stock Option transferred in accordance with the terms and conditions provided in this Section 6:12 shall continue to be subject to the same terms and conditions that were applicable to such Nonqualified Stock Option prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of an Option by an Immediate Family Member of an Option transferred in accordance with the terms and conditions provided in this Section 6:12 unless and until payment or provision for payment of any applicable withholding taxes has been made. - 6 - ARTICLE 7:00 Methods of Exercise of Options 7:01 An Option Holder (or other person or persons, if any, entitled to exercise an Option hereunder) desiring to exercise an Option granted pursuant to the Plan as to all or part of the shares of Common Stock covered by the Option shall (i) notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of shares of Common Stock to be purchased and the method of payment therefor, and (ii) make payment or provision for payment for the shares of Common Stock so purchased in accordance with this Article 7:00. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Option Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. 7:02 Payment or provision for payment shall be made as follows: (a) The Option Holder shall deliver to the Corporation at the address set forth in Section 7:01 United States currency in an amount equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (b) The Option Holder shall tender to the Corporation shares of Common Stock already owned by the Option Holder that, together with any cash tendered therewith, have an aggregate fair market value (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (c) The Option Holder shall deliver to the Corporation an exercise notice together with irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the aggregate purchase price of the shares of Common Stock as to which such exercise relates and to sell the shares of Common Stock to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Option Holder or to deliver the remaining shares of Common Stock to the Option Holder. Notwithstanding the foregoing provisions, the Committee, in granting Options pursuant to the Plan, may limit the methods in which an Option may be exercised by any person and, in processing any purported exercise of an Option granted pursuant to the Plan, may refuse to recognize the method of exercise selected by the Option Holder (other than the method of exercise set forth in Section 7:02(a)) if, (A) in the opinion of counsel to the Corporation, (i) the Initial Holder or the Option Holder is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the method of exercise selected by the Option Holder would subject the Initial Holder or the Option Holder to a substantial risk of liability under Section 16 of the Exchange Act, or (B) in the opinion of the Committee, the method of exercise could have an adverse tax or accounting effect to the Corporation. 7:03 In addition to the alternative methods of exercise set forth in Section 7:02, holders of Nonqualified Stock Options shall be entitled, at or prior to the time the written notice provided for in Section 7:01 is delivered to the Corporation, to elect to have the Corporation withhold from the shares of Common Stock to be delivered upon exercise of the Nonqualified Stock Option that number of shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) necessary to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. Alternatively, such holder of a Nonqualified Stock Option may elect to deliver previously owned shares of - 7 - Common Stock upon exercise of the Nonqualified Stock Option to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. The maximum amount that an Option Holder may elect to have withheld from the shares of Common Stock otherwise deliverable upon exercise or the maximum number of previously owned shares an Option Holder may deliver shall be based on the maximum federal, state and local taxes payable by the Option Holder. Notwithstanding the foregoing provisions, the Committee may include in the Option Agreement relating to any such Nonqualified Stock Option provisions limiting or eliminating the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock or, if no such provisions are included in the Option Agreement but in the opinion of the Committee such withholding could have an adverse tax or accounting effect to the Corporation, at or prior to exercise of the Nonqualified Stock Option the Committee may so limit or eliminate the Option Holder's ability to pay his or her withholding tax obligation with shares of Common Stock. Notwithstanding the foregoing provisions, a holder of a Nonqualified Stock Option may not elect any of the methods of satisfying his or her withholding tax obligation in respect of any exercise if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the holder of the Nonqualified Stock Option is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the election or timing of the election would subject the Initial Holder or the holder of the Nonqualified Stock Option to a substantial risk of liability under Section 16 of the Exchange Act. 7:04 An Option Holder at any time may elect in writing to abandon an Option in respect of all or part of the number of shares of Common Stock as to which the Option shall not have been exercised. 7:05 An Option Holder shall have none of the rights of a stockholder of the Corporation until the shares of Common Stock covered by the Option are issued upon exercise of the Option. ARTICLE 8:00 Terms and Conditions of Stock Appreciation Rights 8:01 Each Stock Appreciation Right granted pursuant to the Plan shall be evidenced by a Stock Appreciation Right Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. Notwithstanding the foregoing provision, Stock Appreciation Rights granted in tandem with a related Option shall be evidenced by the Option Agreement in respect of the related Option. The right of a Stock Appreciation Right Holder to exercise his, her or its Stock Appreciation Right shall at all times be subject to the terms and conditions set forth in the respective Stock Appreciation Right Agreement. 8:02 Each Stock Appreciation Right shall entitle the holder, subject to the terms and conditions of the Plan, to receive upon exercise of the Stock Appreciation Right an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice required by Section 9:01 less the Stock Appreciation Right Base Price. Notwithstanding the foregoing provision, each Stock Appreciation Right that is granted in tandem with a related Option shall entitle the holder, subject to the terms and conditions of the Plan, to surrender to the Corporation for cancellation all or a portion of the related Option, but only to the extent such Stock Appreciation Right and related Option then are exercisable, and to be paid therefor an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice required by Section 9:01 less the Stock Appreciation Right Base Price. - 8 - 8:03 Each Stock Appreciation Right, subject to the other limitations set forth in the Plan, may extend for a period of up to 10 years from the date on which it is granted. The term of each Stock Appreciation Right shall be determined by the Committee at the time of grant of the Stock Appreciation Right, provided that if no term is established by the Committee the term of the Stock Appreciation Right shall be 10 years from the date on which it is granted. 8:04 Unless otherwise provided by the Committee, the number of Stock Appreciation Rights granted pursuant to each Stock Appreciation Right Agreement shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Stock Appreciation Right was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If a Stock Appreciation Right Holder does not exercise the Stock Appreciation Right to the extent that he, she or it at any time has become entitled to exercise, the Stock Appreciation Right Holder may exercise all or any part of the Stock Appreciation Right at any subsequent time during the term of the Stock Appreciation Right. 8:05 Stock Appreciation Rights shall be nontransferable and nonassignable, except that (i) Stock Appreciation Rights may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Stock Appreciation Right Agreement or any other terms and conditions imposed by the Committee from time to time, Stock Appreciation Rights may be transferred in accordance with the terms and conditions provided in Section 8:11 if the applicable Stock Appreciation Right Agreement or other action of the Committee expressly provides that the Stock Appreciation Rights are transferable. 8:06 Upon voluntary or involuntary termination of an Initial Holder's employment, his or her Stock Appreciation Right (including any Stock Appreciation Right transferred in accordance with the terms and conditions provided in Section 8:11) and all rights thereunder shall terminate effective as of the close of business on the date the Initial Holder ceases to be a regular, full-time employee of the Corporation or any of its subsidiaries, except (i) to the extent previously exercised, (ii) except as provided in Sections 8:07, 8:08, and 8:09, and (iii) in the case of involuntary termination of employment, for a period of 30 days thereafter the Stock Appreciation Right Holder shall be entitled to exercise that portion of the Stock Appreciation Right which was exercisable at the close of business on the date the Initial Holder ceased to be a regular, full-time employee of the Corporation or any of its subsidiaries. 8:07 In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Stock Appreciation Right Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Stock Appreciation Rights may be exercised and extending the time following the Initial Holder's termination of employment during which the Stock Appreciation Right Holder is entitled to exercise the Stock Appreciation Rights, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:08 If an Initial Holder dies during the term of his or her Stock Appreciation Right without the Stock Appreciation Right having been exercised in full, (i) the executor or administrator of his or her estate or the person who inherits the right to exercise the Stock Appreciation Right by bequest or inheritance in the event the Initial Holder was the Stock Appreciation Right Holder at the date of death or (ii) the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in Section 8:11, shall have - 9 - the right within three years of the Initial Holder's death to exercise the Stock Appreciation Rights that the Initial Holder (or Stock Appreciation Right Holder, as the case may be) was entitled to purchase at the date of death, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:09 If an Initial Holder's employment is terminated without his or her Stock Appreciation Right having been exercised in full and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial Holder's age plus years of such employment total not less than 55 years, then such Initial Holder (or the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in Section 8:11) shall have the right within three years of the Initial Holder's termination of employment to exercise the Stock Appreciation Rights that the Initial Holder (or Stock Appreciation Right Holder, as the case may be) was entitled to exercise at the date of termination, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right. 8:10 The granting of a Stock Appreciation Right pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, expressed or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period. 8:11 The Committee may provide, in the original grant of a Stock Appreciation Right or in an amendment or supplement to a previous grant, that some or all of the Stock Appreciation Rights granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Stock Appreciation Right Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Stock Appreciation Right as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Stock Appreciation Right Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Stock Appreciation Right Agreement. Any Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 shall continue to be subject to the same terms and conditions that were applicable to such Stock Appreciation Right prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of a Stock Appreciation Right by an Immediate Family Member of a Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 unless and until payment or provision for payment of any applicable withholding taxes has been made. ARTICLE 9:00 Methods of Exercise of Stock Appreciation Rights 9:01 A Stock Appreciation Right Holder (or other person or persons, if any, entitled to exercise a Stock Appreciation Right hereunder) desiring to exercise a Stock Appreciation Right granted pursuant to the Plan shall notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of Stock Appreciation Rights to be exercised. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Stock Appreciation Right Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter. - 10 - 9:02 The Committee in its sole and absolute discretion shall determine whether a Stock Appreciation Right shall be settled upon exercise in cash or in shares of Common Stock. The Committee, in making such a determination, may from time to time adopt general guidelines or determinations as to whether Stock Appreciation Rights shall be settled in cash or in shares of Common Stock. ARTICLE 10:00 Limited Stock Appreciation Rights 10:01 Notwithstanding any other provision of the Plan, the Committee, in its sole and absolute discretion, may grant Limited Stock Appreciation Rights entitling Option Holders to receive, in connection with a Change in Control (as defined in Section 10:02), a cash payment in cancellation of all of their Options which are outstanding on the date the Change in Control occurs (whether or not such Options are then presently exercisable), which payment shall be equal to the number of shares covered by the cancelled Options multiplied by the excess over the exercise price of the Options of the higher of the (i) Fair Market Value of a share of Common Stock on the date of the Change in Control or (ii) the highest per share price paid for the shares of Common Stock in connection with the Change in Control (with the value of any noncash consideration paid in connection with the Change in Control to be determined by the Committee in its sole and absolute discretion). For purposes of this Section 10:01 as well as the other provisions of this Plan, once an Option or portion of an Option has terminated, lapsed or expired, or has been abandoned, in accordance with the provisions of the Plan, the Option (or the portion of the Option) that has terminated, lapsed or expired, or has been abandoned, shall cease to be outstanding. Limited Stock Appreciation Rights shall not be exercisable at the discretion of the Option Holder but shall automatically be exercised upon a Change in Control. 10:02 For purposes of Section 10:01 of the Plan, a "Change in Control" shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is in fact required to comply therewith, provided that, without limitation, such a Change in Control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its subsidiaries, or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (C) of this Section 10.02) whose election by the Board of Directors or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the stockholders of the Corporation approve a merger, share exchange or consolidation of the Corporation with any other corporation, other than a merger, share exchange or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger, share exchange or consolidation, or the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets. - 11 - 10:03 Limited Stock Appreciation Rights shall be nontransferable and nonassignable, except that Limited Stock Appreciation Rights shall automatically be transferred and assigned in tandem with a transfer of the related Options in accordance with Section 6:05. ARTICLE 11:00 Amendments and Discontinuance of the Plan 11:01 The Board of Directors shall have the right at any time and from time to time to amend, modify, or discontinue the Plan provided that, except as provided in Section 5:03, no such amendment, modification, or discontinuance of the Plan shall (i) revoke or alter the terms of any valid Option, Stock Appreciation Right, or Limited Stock Appreciation Right previously granted pursuant to the Plan, (ii) increase the number of shares of Common Stock to be reserved for issuance and sale pursuant to Options or Stock Appreciation Rights granted pursuant to the Plan, (iii) decrease the price determined pursuant to the provisions of Section 6:02 or increase the amount of cash or shares of Common Stock that a Stock Appreciation Right Holder is entitled to receive upon exercise of a Stock Appreciation Right, (iv) change the class of employee to whom Options or Stock Appreciation Rights may be granted pursuant to the Plan, or (v) provide for Options or Stock Appreciation Rights exercisable more than 10 years after the date granted. ARTICLE 12:00 Plan Subject to Governmental Laws and Regulations 12:01 The Plan and the grant and exercise of Options, Stock Appreciation Rights, and Limited Stock Appreciation Rights pursuant to the Plan shall be subject to all applicable governmental laws and regulations. Notwithstanding any other provision of the Plan to the contrary, the Board of Directors may in its sole and absolute discretion make such changes in the Plan as may be required to conform the Plan to such laws and regulations. ARTICLE 13:00 Duration of the Plan 13:01 No Option or Stock Appreciation Right shall be granted pursuant to the Plan after the close of business on February 13, 2006. - 12 - EX-11 7 Exhibit 11(a) THE BLACK & DECKER CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Millions of Dollars Except Per Share Data)
For The Three Months Ended March 30,1997 March 31, 1996 Amount Per Share Amount Per Share Primary: Average shares outstanding 94.4 87.0 Dilutive stock options and stock issuable under employee benefit plans--based on the Treasury stock method using the average market price 1.8 2.1 ---- ---- Adjusted shares outstanding 96.2 89.1 ==== ==== Earnings (loss) from continuing operations $26.3 $(32.4) Less preferred stock dividend (Note 1) 2.9 -------- ---- Earnings (loss) from continuing operations attributable to common stock $26.3 $.27 $(35.3) $(.40) ===== ==== ======= ====== Fully Diluted: Average shares outstanding 94.4 87.0 Dilutive stock options and stock issuable under employee benefit plans--based on the Treasury stock method using the higher of the average market price or ending market price 1.8 2.5 ---- ---- Adjusted shares outstanding 96.2 89.5 Average shares assumed to be converted through convertible preferred stock (Note 1) 6.3 (Note 2) -------- --- Fully diluted average shares outstanding 96.2 95.8 ==== ==== Earnings (loss) from continuing operations $26.3 $.27 $(32.4) $(.34) ===== ==== ======= ====== Notes: 1. The convertible preferred stock was converted to common stock on October 14, 1996. 2. The assumed conversion of convertible preferred stock is anti-dilutive and, therefore, is not used in the calculation of fully diluted earnings per share included in the financial statements.
Exhibit 11(b) THE BLACK & DECKER CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Millions of Dollars Except Per Share Data)
For The Three Months Ended March 30,1997 March 31,1996 Amount Per Share Amount Per Share Primary: Average shares outstanding 94.4 87.0 Dilutive stock options and stock issuable under employee benefit plans--based on the Treasury stock method using the average market price 1.8 2.1 ---- ---- Adjusted shares outstanding 96.2 89.1 ==== ==== Net earnings $26.3 $38.0 Less preferred stock dividend (Note 1) 2.9 -------- --- Net earnings attributable to common stock $26.3 $.27 $35.1 $ .39 ===== ==== ===== ===== Fully Diluted: Average shares outstanding 94.4 87.0 Dilutive stock options and stock issuable under employee benefit plans--based on the Treasury stock method using the higher of the average market price or ending market price 1.8 2.5 ---- ---- Adjusted shares outstanding 96.2 89.5 Average shares assumed to be converted through convertible preferred stock (Note 1) 6.3 (Note 2) -------- ----- Fully diluted average shares outstanding 96.2 95.8 ==== ==== Net earnings $26.3 $.27 $38.0 $ .40 ===== ==== ===== ===== Notes: 1. The convertible preferred stock was converted to common stock on October 14, 1996. 2. The assumed conversion of convertible preferred stock is anti-dilutive and, therefore, is not used in the calculation of fully diluted earnings per share included in the financial statements.
EX-12 8 EXHIBIT 12 THE BLACK & DECKER CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Millions of Dollars Except Ratios)
Three Months Ended March 30, 1997 EARNINGS: Earnings from continuing operations before income taxes $40.4 Interest expense 33.3 Portion of rent expense representative of an interest factor 5.9 ----- Adjusted earnings from continuing operations before taxes and fixed charges $79.6 ===== FIXED CHARGES: Interest expense $33.3 Portion of rent expense representative of an interest factor 5.9 ----- Total fixed charges $39.2 ===== RATIO OF EARNINGS TO FIXED CHARGES 2.03 =====
EX-27 9
5 This schedule contains financial information extracted from the Corporation's unaudited interim financial statements as of and for the three months ended March 30, 1997, and the accompanying footnotes and is qualified in its entirety by the reference to such financial statements. 0000012355 THE BLACK & DECKER CORPORATION 1,000 3-MOS DEC-31-1997 MAR-30-1997 119,600 0 655,700 0 842,400 1,804,100 875,500 0 5,126,800 1,333,400 1,652,000 0 0 47,200 1,561,200 5,126,800 1,015,000 1,015,000 650,500 941,700 0 0 33,300 40,400 14,100 26,300 0 0 0 26,300 .27 .27 Represents net trade receivables. Represents net property, plant, and equipment.
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