Black & Decker 2011 Annual Report Download - page 77

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Following the issuance of Convertible Preferred Stock upon settlement of a holder’s Purchase Contracts, a holder of Convertible
Preferred Stock may, at its option, at any time and from time to time, convert some or all of its outstanding shares of Convertible
Preferred Stock as described below at a conversion rate of 1.3333 shares of the Company’s common stock per share of Convertible
Preferred Stock (subject to customary anti-dilution adjustments), which is equivalent to an initial conversion price of approximately
$75.00 per share of common stock. At December 31, 2011, the conversion rate on the Convertibles Notes due 2012 was 1.3388
(equivalent to a conversion price set at $74.69 per common share). If a fundamental change occurs, in certain circumstances the
conversion rate may be adjusted by a fundamental change make-whole premium.
The Company may redeem some or all of the Convertible Preferred Stock on or after December 22, 2015 at a redemption price equal
to 100% of the liquidation preference per share plus accrued and unpaid dividends to the redemption date. If the Company calls the
Convertible Preferred Stock for redemption, holders may convert their Convertible Preferred Stock at any time prior to the close of
business on the business day immediately preceding the redemption date.
Upon conversion prior to November 17, 2015, the Company may only deliver shares of common stock, together with cash in lieu of
fractional shares. Upon a conversion on or after November 17, 2015, the Company may elect to pay or deliver, as the case may be,
solely shares of common stock, together with cash in lieu of fractional shares (“physical settlement”), solely cash (“cash settlement”)
or a combination of cash and common stock (“combination settlement”). The amount of shares and/or cash that each holder of
Convertible Preferred Stock will receive is called the “settlement amount.” If the Company elects physical settlement or any shares of
Convertible Preferred Stock are converted prior to November 17, 2015, the Company will deliver to the converting holder a number of
shares of common stock (and cash in lieu of any fractional shares) equal to the number of shares of Convertible Preferred Stock to be
converted multiplied by the applicable conversion rate. If the Company elects cash settlement or combination settlement, the
settlement amount will be based on the volume weighted average price of the Company’s common stock during a 20 day observation
period.
Notes:
The $632.5 million principal amount of the Notes is due November 17, 2018. At maturity, the Company is obligated to repay the
principal in cash. The Notes bear interest at an initial rate of 4.25% per annum, initially payable quarterly in arrears on February 17,
May 17, August 17 and November 17 of each year, commencing February 17, 2011, subject to the Company’s right to defer interest
payments. The Notes are the Company’s direct, unsecured general obligations and are initially subordinated and junior in right of
payment to the Company’s existing and future senior indebtedness. The Notes initially rank equally in right of payment with all of the
Company’s other junior subordinated debt. The Notes are initially pledged as collateral to guarantee the obligations of holders of
Purchase Contracts to purchase Convertible Preferred Stock. The Notes will be released from that pledge arrangement (1) following a
successful remarketing, (2) following the substitution of cash to purchase certain treasury unit collateral, (3) following the substitution
of cash during certain periods prior to the final remarketing period or triggered remarketed period for the Notes, (4) following the
early settlement of the Purchase Contracts or (5) following certain events of bankruptcy, insolvency or reorganization. The
unamortized deferred issuance cost of the Notes was $5.9 million at December 31, 2011. The remaining unamortized balance will be
recorded to interest expense through the Notes maturity in November 2018.
Unless a trigger event (as defined below) has occurred, the Company may elect, at its option, to remarket the Notes during a period
(the “optional remarketing window”) beginning on and including August 12, 2015 until October 27, 2015. Such remarketing will
include the Notes underlying Convertible Preferred Units that have not been released from the pledge and other Notes of holders that
have elected to include those Notes in the remarketing. The Company may attempt to remarket the Notes during multiple optional
remarketing periods in the optional remarketing window so long as it gives 15 calendar days notice prior to the first day of any
optional remarketing period. Upon a successful optional remarketing of the Notes, the remarketing agent will purchase U.S. Treasury
securities as described in the prospectus supplement (the “Treasury portfolio”), and deduct such price from the proceeds of the
optional remarketing. Any remaining proceeds will be promptly remitted after the optional remarketing settlement date by the
remarketing agent for the benefit of the holders whose Notes were remarketed. The applicable ownership interests in the Treasury
portfolio will be substituted for the applicable ownership interests in remarketed pledged Notes and will be pledged to the Company to
secure the holders’ obligation under the Purchase Contracts. On the Purchase Contract settlement date, a portion of the proceeds from
the Treasury portfolio equal to the aggregate principal amount of the Notes that are components of the Convertible Preferred Units at
the time of remarketing will automatically be applied to satisfy the holders’ obligations to purchase Convertible Preferred Stock under
the Purchase Contracts. In addition, proceeds from the Treasury portfolio equal to the interest payment (assuming no reset of the
interest rate) that would have been attributable to the Notes that were components of the Convertible Preferred Units at the time of
remarketing will be paid on the Purchase Contract settlement date to the holders.
If a trigger event occurs prior to the first day in the optional remarketing window, all Purchase Contracts will mandatorily settle early
on the date that is 25 calendar days after the occurrence of the trigger event or, if such day is not a business day, the immediately
following business day (the “triggered early settlement date”). In connection with the occurrence of a trigger event, the remarketing
agent will remarket the Notes that are components of the units and any separate Notes whose holders have elected to participate in the