Black & Decker 2011 Annual Report Download - page 89

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Working capital incentive plan: In 2010, the Company initiated a bonus program under its 2009 Long Term Incentive Plan. The
program provides executives the opportunity to receive stock in the event certain working capital turn objectives are achieved by June
of 2013 and are sustained for a period of at least six months. The ultimate issuances of shares, if any, will be determined based on
achievement of objectives during the performance period.
Expense recognized for the various performance-contingent grants amounted to $9.6 million in 2011, $10.3 million in 2010, and
$3.4 million in 2009. With the exception of the market-based award, in the event performance goals are not met compensation cost is
not recognized and any previously recognized compensation cost is reversed.
A summary of the activity pertaining to the maximum number of shares that may be issued is as follows:
Share Units
Weighted
Average
Grant
Date Fair Value
Non
-vested at January 1, 2011
................................
1,293,372
$ 40.37
Granted ................................................................
.......
297,409
68.97
Vested................................................................
.........
—
—
Forfeited ................................................................
.....
(232,882)
43.27
Non
-vested at December 31, 2011
.............................
1,357,899
$ 46.14
OTHER EQUITY ARRANGEMENTS
In May 2011, the Company purchased from a financial institution over the counter 3 month “in-the-money” capped call options,
subject to adjustments for standard anti-dilution provisions, on 2,448,558 shares of its common stock for an aggregate premium of
$19.6 million, or an average of $8.00 per option. The initial term of the capped call options was one month which was subsequently
extended in an addendum to the agreement with the counterparty to a three month term. The purpose of the capped call options was to
reduce share price volatility on potential future share repurchases by establishing the prices at which the Company could elect to
repurchase 2,448,558 shares in the three month term. In accordance with ASC 815-40 the premium paid was recorded as a reduction
to Shareowners’ equity. The contracts for this series of options generally provided that the options might, at the Company’s election,
be cash settled, physically settled or net-share settled (the default settlement method). This series of options had various expiration
dates within the month of August 2011. The applicable lower strike price was $70.16 and the applicable upper strike price was $80.35.
The capped calls were terminated in July 2011. The Company elected to net share settle the transaction and received 3,052 shares
valued at $0.2 million.
Convertible Preferred Units and Equity Option
As described more fully in Note H, Long-Term Debt and Financing Arrangements, in November 2010, the Company issued
Convertible Preferred Units comprised of $632,500,000 of Notes due November 17, 2018 and Purchase Contracts. There have been no
changes to the terms of the Convertible Preferred Units. The Purchase Contracts obligate the holders to purchase, on the earlier of
(i) November 17, 2015 (the Purchase Contract Settlement date) or (ii) the triggered early settlement date, 6,325,000 shares, for $100
per share, of the Company’s 4.75% Series B Cumulative Convertible Preferred Stock (the “Convertible Preferred Stock”), resulting in
cash proceeds to the Company of up to $632.5 million.
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 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 provisions), which is equivalent to an initial conversion price of approximately $75.00 per share of
common stock. Assuming conversion of the 6,325,000 shares of Convertible Preferred Stock at the 1.3333 initial conversion rate a
total of 8.43 million shares of the Company’s common stock may be issued upon conversion. As of December 31, 2011, due to the
customary anti-dilution provisions, the conversion rate on the Convertible Preferred Stock was 1.3388 (equivalent to a conversion
price of approximately $74.69 per common share). In the event that holders elect to settle their Purchase Contracts prior to
November 17, 2015, the Company will deliver a number of shares of Convertible Preferred Stock equal to 85% of the Purchase
Contacts tendered, together with cash in lieu of fractional shares. Upon a conversion on or after November 15, 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 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
$100 liquidation preference per share plus accrued and unpaid dividends to the redemption date.