Form 10-Q
Securities and Exchange Commission
Washington, D. C. 20549
X Quarterly Report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
Commission file number 1-1043
Brunswick Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-0848180
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 N. Field Ct., Lake Forest, Illinois 60045-4811
(Address of principal executive offices) (Zip Code)
(708) 735-4700
Registrant's telephone number, including area code
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.
Yes X No
At August 4, 1995, there were 95,798,923 shares of the Company's Common Stock
($.75 par value) outstanding.
<PAGE>
<TABLE>
Part I- Financial Information
Item I-Financial Statements
Brunswick Corporation
Consolidated Results Of Operations
for the periods ended June 30
(dollars in millions, except per share data)
<CAPTION>
Quarter Six Months
ended June 30 ended June 30
1995 1994 1995 1994
(unaudited)
<S> <C> <C> <C> <C>
Net sales $ 839.2 $ 748.2 $1,613.4 $ 1,383.1
Cost of sales 594.3 522.8 1,153.1 981.4
Selling, general and administrative 147.4 137.0 289.2 268.6
Restructuring charges and management
transition expenses 40.0 - 40.0 -
Operating earnings 57.5 88.4 131.1 133.1
Interest expense (7.9) (6.9) (15.9) (13.3)
Interest income and other items, net 7.8 6.2 6.5 9.7
Earnings before income taxes 57.4 87.7 121.7 129.5
Income tax provision 20.3 32.5 44.4 47.9
Earnings from continuing operations 37.1 55.2 77.3 81.6
Loss on disposition of Technical segment (7.0) - (7.0) -
Net earnings $ 30.1 $ 55.2 $ 70.3 $ 81.6
Earnings (loss) per common share
Earnings from continuing operations $ 0.38 $ 0.58 $ 0.80 $ 0.85
Loss on disposition of Technical segment (0.07) - (0.07) -
Net earnings per common share $ 0.31 $ 0.58 $ 0.73 $ 0.85
Cash dividends declared per common share $ 0.125 $ 0.11 $ 0.250 $ 0.22
The notes are an integral part of these consolidated statements.
The 1995 earnings from continuing operations (and related per share amounts)
have been reduced by a $40 million pre-tax provision for the divestitures of
certain businesses and certain management transition expenses.
</TABLE>
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<TABLE>
Brunswick Corporation
Consolidated Balance Sheets
As of June 30, 1995 and December 31, 1994
(dollars in millions)
<CAPTION>
June 30 December 31,
Assets 1995 1994
Current assets (unaudited)
Cash and cash equivalents, at cost, which
<S> <C> <C>
approximates market $ 204.2 $ 185.2
Marketable securities 4.7 18.2
Accounts and notes receivable, less allowances
of $19.5 and $19.5 325.3 218.9
Inventories 435.2 409.0
Prepaid income taxes 206.0 175.0
Prepaid expenses 28.3 33.9
Income tax refunds receivable 4.0 17.3
Current assets 1,207.7 1,057.5
Property
Land 61.1 61.0
Buildings 374.3 367.8
Equipment 819.2 779.9
1,254.6 1,208.7
Accumulated depreciation (682.0) (643.3)
Property 572.6 565.4
Other assets
Dealer networks 129.2 140.9
Trademarks and other 148.5 136.0
Excess of cost over net assets of businesses acquired 112.3 117.8
Investments 86.3 76.1
Other assets 476.3 470.8
Assets of continuing operations 2,256.6 2,093.7
Net assets of discontinued operations - 28.6
Total assets $ 2,256.6 $ 2,122.3
Liabilities And Shareholders' Equity
Current liabilities
Short-term debt, including current maturities $ 5.7 $ 8.2
Accounts payable 157.6 157.3
Accrued expenses 506.1 455.8
Current liabilities 669.4 621.3
Long-term debt
Notes, mortgages and debentures 315.9 318.8
Deferred items
Income taxes 136.8 133.8
Postretirement and postemployment benefits 133.7 114.0
Compensation and other 27.0 23.7
Deferred items 297.5 271.5
Common shareholders' equity
Common stock; authorized: 200,000,000 shares,
$.75 par value; issued: 100,687,992 shares
at June 30, 1995 and December 31, 1994 75.5 75.5
Additional paid-in capital 263.4 261.5
Retained earnings 781.9 735.5
Treasury stock, at cost: 4,900,862 shares at June
30, 1995 and 5,236,856 shares at December 31, 1994 (90.7) (98.3)
Minimum pension liability adjustment (0.7) (0.7)
Unearned portion of restricted stock
issued for future services (2.4) (2.4)
Cumulative translation adjustments 16.4 11.8
Unamortized ESOP expense (69.6) (72.2)
Common shareholders' equity 973.8 910.7
Total liabilities and shareholders' equity $ 2,256.6 $ 2,122.3
The notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
Brunswick Corporation
Consolidated Statements Of Cash Flows
for the six months ended June 30
(dollars in millions)
<CAPTION>
1995 1994
(unaudited
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 70.3 $ 81.6
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization by continuing operations 55.1 58.6
Changes in noncash current assets and current
liabilities of continuing operations (144.3) (99.1)
Increase in deferred items 24.4 23.7
Stock issued for employee benefit plans 9.4 3.0
Other, net 8.3 0.9
Restructuring charge 40.0 -
Loss on disposal of discontinued operations 11.5 -
Decrease in net assets of discontinued operations 7.1 1.7
Net cash provided by operating activities 81.8 70.4
Cash flows from investing activities
Capital expenditures (50.3) (39.1)
Investment in marketable securities 13.6 (29.3)
Investment in unconsolidated affiliates (9.6) (0.3)
Proceeds from sales of property 3.2 3.6
Investments (10.5) -
Other, net (1.4) (2.1)
Proceeds from disposal of discontinued operations 22.0 -
Net investing activities of discontinued operations (0.5) (0.5)
Net cash used for investing activities (33.5) (67.7)
Cash flows from financing activities
Payments of long-term debt, including current maturities (2.7) (3.1)
Cash dividends paid (23.9) (21.0)
Other, net (2.7) 0.1
Net cash used for financing activities (29.3) (24.0)
Net increase (decrease) in cash and cash equivalents 19.0 (21.3)
Cash and cash equivalents at January 1 185.2 248.8
Cash and cash equivalents at June 30 $ 204.2 $ 227.5
Supplemental cash flow disclosures:
Interest paid $ 27.0 $ 12.2
Income taxes paid, net of refunds 30.6 79.8
The notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
Brunswick Corporation
Notes To Consolidated Financial Statements
June 30, 1995, December 31, 1994 and June 30, 1994
(unaudited)
Note 1 - Accounting policies
This financial data has been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain information and
disclosures, normally included in financial statements and footnotes prepared
in accordance with generally accepted accounting principles, have been
condensed or omitted. Brunswick Corporation (the "Company") believes that the
disclosures in these statements are adequate to make the information presented
not misleading.
These financial statements should be read in conjunction with, and have been
prepared in conformity with, the accounting principles reflected in the
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994. These interim
results include, in the opinion of the Company, all normal and recurring
adjustments necessary to present fairly the results of operations for the
quarter and six-month periods ended June 30, 1995 and 1994. The 1995 interim
results are not necessarily indicative of the results which may be expected for
the remainder of the year.
The financial statements segregate the results of the Company's discontinued
Technical segment. The 1995 and 1994 operating results of the Technical Group
have been charged against a reserve established at the time the decision to
discontinue the segment was announced. See Note 4 for additional discussion on
the Technical Group disposition.
Note 2 - Earnings per common share
Earnings (loss) per common share are based on the weighted average number of
common and common equivalent shares outstanding during each period. Such
average shares were 96.0 million and 95.8 million for the quarters ended June
30, 1995 and 1994, respectively, and 96.0 and 95.7 million for the six-month
periods ended June 30, 1995 and 1994, respectively.
Note 3 - Inventories
Inventories, of which approximately sixty percent were valued using the LIFO
method, consisted of the following at June 30, 1995 and December 31, 1994
(dollars in millions):
June 30 December 31
1995 1994
Finished goods $259.5 $233.4
Work in process 98.7 105.2
Raw materials 77.0 70.4
Inventories $435.2 $409.0
<PAGE>
Note 4 - Disposition of the Technical segment
On April 28, 1995, the Company completed the sale of substantially all the
assets of its Technical Group to Technical Products Group, Inc, a recently
formed company controlled by TPG Holdings in Atlanta, Georgia. Included in the
sale were Brunswick operations in Marion, Virginia: Lincoln, Nebraska; Camden,
Arkansas; and Deland, Florida. Excluded were the assets associated with the
unit's facility in Costa Mesa, California, which are fully reserved as of June
30, 1995 and for which the Company continues to seek a buyer. Also in the
second quarter of 1995, the Company recorded a provision of $11.5 million ($7.0
million after-tax) reflecting lower than anticipated selling prices for those
businesses.
Note 5 - Restructuring charges and management transition expenses
In the second quarter of 1995, the Company recorded restructuring and
management transition expenses of $40.0 million($24.4 million after-tax). The
charge consists of anticipated losses on the planned divestitures of the golf
club shaft business and Circus World Pizza operations, management transition
expenses and the costs of an early retirement and selective separation program
at the Company's corporate office.
Note 6 - Investments
On January 20, 1995, the Company and Orbital Engine Corporation Ltd. of Perth,
Australia, formed a joint venture to design, manufacture and market fuel
systems for low-emission two-stoke engines. The Company contributed $6.6
million for its 50% share of this joint venture.
<TABLE>
Note 7 - Consolidated common shareholders' equity
<CAPTION> Minimum
Additional pension Unearned Cumulative Unamortized
Common stock paid-in Retained Treasury stoc liability restrictedtranslation ESOP
(in millions) Shares Amount capital earnings Shares Amount adjustment stock adjustments Expense
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 100.7 $75.5 $261.5 $735.5 (5.2) ($98.3) ($0.7) ($2.4) $11.8 ($72.2)
Net Earnings - - - 70.3 - - - - - -
Dividends declared ($.25 per
common share) - - - (23.9) - - - - - -
Compensation plans and other - - 1.9 - 0.3 7.6 - - - -
Deferred Compensation-ESOP - - - - - - - - - 2.6
Currency translation - - - - - - - - 4.6 -
Balance, June 30, 1995 100.7 $75.5 $263.4 $781.9 (4.9) ($90.7) ($0.7) ($2.4) $16.4 ($69.6)
</TABLE>
Note 8 - Debt
Long-term debt at June 30, 1995 and December 31, 1994 consisted of the
following (dollars in millions):
June 30 December 31
1995 1994
Notes, 8.125%, due 1997 (net of discount
of $0.1.) $ 99.9 $ 99.9
Mortgage notes and other, 3% to 10%,
payable through 1999 27.1 27.3
Debentures, 7.375%, due 2023,
(net of discount of $0.9) 124.1 124.1
Guaranteed ESOP debt, 8.13%, payable through 2004 70.5 73.1
321.6 324.4
Current maturities (5.7) (5.6)
Long-term debt $315.9 $318.8
<PAGE>
Note 8 - Debt(Cont.)
As of June 30, 1995, the Company and seventeen banks had a short-term credit
agreement for $100 million and a long-term credit agreement for $300 million.
On November 7, 1994, both agreements were amended to reduce facility fees,
extend maturities and reduce spreads on borrowing options. The termination date
of the short-term agreement was extended to November 6, 1995 and the long-term
agreement was extended to December 31, 1999. With mutual agreement between the
Company and the banks, the short-term agreement may be extended.
Under terms of the amended agreements, the Company has multiple borrowing
options, including borrowings at a corporate base rate, as announced by The
First National Bank of Chicago, or a rate tied to the Eurodollar rate.
Currently, the Company must pay a facility fee of 0.10% on the short-term
agreement and 0.15% on the long-term agreement.
Under the agreements, the Company is subject to interest coverage, net worth
and leverage tests as well as a restriction on secured debt, as defined. On
the interest coverage test, the Company is required to maintain a ratio of
consolidated income before interest and taxes, as defined, to consolidated
interest expense of not less than 2.0 to 1.0 on a cumulative twelve-month
basis. The ratio, on a cumulative twelve-month basis, was 8.7 to 1.0 at June
30, 1995. The leverage ratio of consolidated total debt to capitalization, as
defined, may not exceed 0.55 to 1.00, and at June 30, 1995, this ratio was 0.25
to 1.00.
The Company is also required to maintain shareholders' equity of least $776.0
million, with the required level of shareholders' equity at December 31 of each
year being increased by 50% of net earnings for that year. The Company has
complied with this limitation and the secured debt limitation as of June 30,
1995. There were no borrowings under the agreements at June 30, 1995.
Note 9 - Litigation
The Company is subject to certain legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. In light of existing reserves, the Company's litigation and
claims, when finally resolved, will not, in the opinion of management, have a
material adverse effect on the Company's consolidated financial position and
results of operations.
The Company is involved in certain legal and administrative proceedings under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 and other federal and state legislation governing the generation and
disposition of certain hazardous wastes. These proceedings, which involve both
on and off site waste disposal, in many instances seek compensation from the
Company as a waste generator under Superfund legislation which authorizes
action regardless of fault, legality of original disposition or ownership of a
disposal site.
On February 3, 1995, the Company announced a series of agreements with Genmar
Industries, Inc., including settlement of an antitrust lawsuit brought by
Genmar against the Company. Agreements were entered to supply Genmar with
marine engines manufactured by the Company and to acquire certain investments
in another boat manufacturer from Genmar. The Company's total cash payment
relating to these agreements was $22.5 million and had no material impact on
the results of operations of the Company.
<PAGE>
Note 9 - Litigation(Cont.)
The Federal Trade Commission is conducting an investigation of whether the
formation or operations of Tracker Marine L.P. and the Company's contracts with
Tracker Marine L.P. violate the antitrust laws. The Company has received and
responded to a subpoena seeking information relating to the Company's outboard
motor sales. The Company understands that other marine companies have received
similar subpoenas from the Federal Trade Commission.
Note 10 - Income Taxes
In January 1994, the Company reached an agreement with the U.S. Internal
Revenue Service ("IRS") regarding its examination of the Company for the years
1985 and 1986. The issues of this examination dealt primarily with the
deductibility of approximately $500 million of acquired intangible assets,
which the IRS proposed to reclassify to non-deductible intangible assets. Under
the terms of the agreement, the IRS agreed to allow amortization deductions for
virtually all of the acquired intangible assets, and the Company agreed to
increase the amortizable lives of most of the acquired intangible assets.
The revised lives created a temporary difference which resulted in an initial
obligation by the Company to pay the IRS approximately $55 million during the
first quarter of 1994, representing taxes and interest, net of taxes, for the
years 1986 through 1993. This initial $55 million obligation will subsequently
be reduced by the future tax benefits of the temporary difference created by
the agreeement. Since the interest was charged to existing reserves and the
taxes paid represent temporary differences which created, and have been
recorded as deferred tax assets, this agreement had no impact on the Company's
consolidated results of operations.
Note 11 - Segment Data
The following table sets forth net sales and operating earnings of each of the
Company's industry segments for the quarter and six-month periods ended June
30, 1995 and 1994.
Quarter Ended June 30
Net Operating Net Operating
Sales Earnings(Loss) Sales Earnings
Marine $ 645.3 $ 89.7 $ 563.0 $ 79.0
Recreation 193.9 ( 7.8) 185.2 22.0
Segments 839.2 81.9 748.2 101.0
Corporate - (24.4) - (12.6)
Consolidated $ 839.2 $ 57.5 $ 748.2 $ 88.4
Six-Months Ended June 30
Sales Earnings Sales Earnings
Marine $1,221.0 $ 150.5 $1,020.5 $ 108.3
Recreation 392.4 16.2 362.6 48.5
Segments 1,613.4 166.7 1,383.1 156.8
Corporate - (35.6) - (23.7)
Consolidated $1,613.4 $131.1 $1,383.1 $ 133.1
<PAGE>
Note 11 - Segment Data(Cont.)
The operating earnings (loss) of the Recreation segment for the quarter and six
months ended June 30, 1995 include a $25.8 million charge for the anticipated
losses on the planned divestitiures of the golf club shaft business and Circus
World Pizza operations.
The Corporate operating expenses for the quarter and six months periods ended
June 30, 1995 include $14.2 million in management transition expenses and costs
associated with an early retirement and selective separation program at the
Company's corporate office.
<PAGE>
Management's Discussion and Anaysis
Cash Flow, Liquidity and Capital Resources
For the six months ended June 30, 1995, cash and cash equivalents increased
$19.0 million versus a decrease of $21.3 million in the comparable period of
1994. Net cash provided by operating activities rose to $81.8 million from the
$70.4 million for the six months ended June 30, 1994. The net cash provided by
operating activities increased, despite a decline in net earnings, as the
provisions for the restructuring charge and loss on the disposal of
discontinued operations did not effect cash in the period. These items were
partially offset by increased non-cash working capital requirements, primarily
for inventory and receivables.
Net cash used for investing activities for the first six months of 1995 was
$33.5 million compared to $67.7 million for the same period of 1994. The
decrease resulted primarily from the receipt of proceeds from the disposal of
the Company's Technical Group and the net redemption of marketable securities
with maturities of more than ninety days in 1995 compared to a net investment
in such securities in 1994, partially offset by increased capital expenditures
and investments in unconsolidated affiliates.
Net cash used for financing activities was $29.3 million for the first six
months of 1995 compared to $24.0 million in the same period of 1994. The change
resulted primarily from an increase in cash dividends paid to 25 cents per
share in 1995 versus 22 cents per share in 1994.
Working capital at June 30, 1995 was $538.3 million compared to $436.2
million at December 31, 1994. The Company's current ratio was 1.8 at June 30,
1995 and 1.7 at December 31, 1994.
Total debt at June 30, 1995 was $321.6 million and $327.0 million at December
31, 1994. The Company's debt-to-capitalization ratio was 24.8% at June 30,
1995 compared to 26.4% at December 31, 1994.
The Company maintains a $100 million short-term and a $300 million long-term
line of credit agreement with a group of banks. For an explanation of the
agreement and a discussion of the specific covenant restrictions, see page 6,
Note 6 - Debt.
Capital expenditures for the first six months of 1995 were $50.3 million
compared to $39.1 million for the comparable period of 1994. The Company
believes that operating cash flows and existing cash balances, supplemented
when necessary with short and/or long-term borrowings, will continue to provide
the financial resources necessary for capital expenditures and working capital
requirements.
<PAGE>
Management's Discussion and Analysis
Results of Operations
Second Quarter and the First Six Months of 1995 vs. 1994
Net Sales
Consolidated net sales for the second quarter of 1995 increased 12% to $839.2
million from $748.2 million in the second quarter of 1994. For the six months
ended June 30, 1995, net sales rose to $1,613.4 million, or 17%, from the
comparable period of 1994. The Marine and Recreation segments contributed to
the improvements in both reporting periods.
The Marine segment net sales for the second quarter of 1995 increased 15% to
$645.3 million compared to $563.0 million in the 1994 period. The improvement
resulted from a 24% increase in international sales and a 12% increase in
domestic sales. For the six months ended June 30, 1995, net sales rose 17% to
$1,613.4 million from the $1,383.1 million in the comparable period of 1994.
International sales rose 25% while domestic sales improved 18% in the six month
period. The increases in both reporting periods were led by strong demand for
boats in Europe while demand for marine engines showed a moderate increase.
The Recreation segment's second quarter net sales increased 5%, to $193.9
million, from $185.2 million for the same period of 1994. For the six months
ended June 30, 1995, net sales increased to $392.4 million, or 8%, from the
$362.6 million for the same period of 1994. The second quarter net sales
improvement resulted primarily from strong East Asian demand for the Brunswick
Division's bowling capital equipment and increased international demand for the
products of the Zebco Division. For the six months, the Zebco Division's sales
increased both domestically and internationally, while the Brunswick Division
experienced stronger domestic demand for consumer products and billiards, and
the international bowling capital equipment sales increase mentioned above. The
BRC Division's sales increased approximately 4%, primarily due to price
increases.
Operating Earnings
For the second quarter, 1995 operating earnings declined to $57.5 million from
$88.4 million in 1994. For the six months ended June 30, 1995, operating
earnings were $131.1 million compared to $133.1 million for the same period of
1994. The declines in both reporting periods resulted from a $40.0 million
provision for restructuring charges and management transition expenses. Absent
these charges, operating earnings for the second quarter would have been $97.5
million, or 10% higher than the prior year, and for the six months operating
earnings would have been $171.1 million, or 29% higher than 1994.
The Marine segment reported operating earnings of $89.7 million for the second
quarter of 1995 compared to $79.0 million for the same period of 1994. For the
six months ended June 30, 1995, operating earnings were $150.5 million versus
$108.3 million for the comparable period of 1994. The previously discussed
domestic and international sales increases accounted for the improvement,
offset in part by increased manufacturing and product research and development
expenses.
<PAGE>
Operating Earnings(Cont.)
The Recreation segment reported an operating loss of $7.8 million for the
second quarter of 1995, which includes a $25.8 million restructuring charge for
the planned divestitures of the golf shaft business and Circus World Pizza
operations. Absent the restructuring charges, operating earnings were $18.0
million for the second quarter of 1995 versus $22.0 million in 1994. The
decline resulted primarily from delays in shipping the Brunswick Division's new
Frameworx scoring system. Shipments of Frameworx began in the third quarter of
1995. For the six months ended June 30, 1995, operating earnings were $16.2
million compared to $48.5 million in the 1994 period. Excluding the
restructuring charge, operating earnings were $42.0 million for 1995. Operating
earnings declined, despite the sales increases discussed previously, because of
the Brunswick Division's higher operating expenses associated with the
introduction of a new product line of capital equipment and lower margins on
sales of German-manufactured pinsetters due to currency fluctuations.
Corporate expenses for the second quarter of 1995 rose to $24.4 milliom from
the $12.6 million in the second quarter of 1994. For the six months ended June
30, 1995, corporate expenses were $35.6 million compared to $23.7 million in
the comparable period of 1994. Both 1995 reporting periods include a provision
of $14.2 million for management transition expenses and the costs of an early
retirement and selective separation program at the Company's corporate office.
Excluding the provision, second quarter corporate expenses were $10.2 million
versus $12.6 million for the same period of 1994. For the six months ended June
30, 1995, corporate expenses, excluding the provision, were $21.4 million
compared to $23.7 million for 1994.
Interest Expense and Other Items, Net
Interest expense for the second quarter of 1995 increased to $7.9 million from
$6.9 million the same period of 1994. For the six months ended June 30, 1995,
interest expense rose to $15.9 million from the $13.3 million reported for the
1994 period. The increase for both reporting periods resulted primarily from
increased interest rate swap expenses. Interest income and other items, net for
the second quarter of 1995 was $7.8 million versus $6.2 million for the
comparable period of 1994. The increase was primarily due to increased earnings
of unconsolidated affiliates. For the six months ended June 30, 1995, interest
income and other items, net declined to $6.5 million from $9.7 million for the
same period of 1994. The decline was primarily due to increased foreign
currency losses in the first quarter of 1995.
Income Taxes
The effective tax rate from continuing operations for the first six months of
1995 was 36.5% compared to 37% for the same period of 1994. The effective tax
rate for both periods exceeds the statutory rate due to the impact of
non-deductible permanent differences and the effect of higher foreign tax
rates. The effective tax rate from continuing operations for the second quarter
of 1995 was 35% compared to 37% for the same period of 1994. The 1995 second
quarter rate reflects the adjustment to an effective tax rate of 36.5% at June
30, 1995 from the 37.5% effective tax rate used for the three months ended
March 31, 1995.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10. Employment agreement dated April 1, 1995 by and between
the Company and Peter N. Larson.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the three
months ended June 30, 1995.
Signatures
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.
BRUNSWICK CORPORATION
August 10, 1995 By /s/ Thomas K. Erwin
Thomas K. Erwin, Controller*
*Mr. Erwin is signing this report both as a duly authorized officer and as the
chief accounting officer.
<PAGE>
Exhibit Index
No. Title
10. Employment agreement dated April 1, 1995 by and between the
Company and Peter N. Larson.
<PAGE>
Employment Agreement
This Agreement, made and entered into as of April 1, 1995 (the "Effective
Date"), by and between BRUNSWICK CORPORATION, a Delaware corporation (the
"Company"), and Peter N. Larson (the "Executive");
Witnesseth That:
Whereas, the parties hereto desire to enter into this Agreement pertaining
to the employment of the Executive by the Company beginning on the Effective
Date;
Now, therefore, in consideration of the mutual covenants set forth below,
it is hereby covenanted and agreed by the Executive and the Company as follows:
1. Performance of Services. The Executive's employment with the Company
shall be subject to the following:
(a) Subject to the terms of this Agreement, the Company hereby agrees to
employ the Executive as its President and Chief Executive Officer during
the Agreement Term (as defined below), and the Executive hereby agrees to
remain in the employ of the Company during the Agreement Term. On the
Effective Date, the Executive will be elected as a member of the Board of
Directors of the Company (the "Board"), as a member of the class of
directors scheduled to stand for election in 1997. Not later than October
1, 1995, the Executive shall be elected to the position of Chairman of the
Board and, for the duration of the Agreement Term, while the Executive is
employed by the Company, he shall continue to serve as Chairman of the
Board.
(b) During the Agreement Term, while the Executive is employed by the Company,
the Executive shall devote his best efforts and full business time
exclusively to the business affairs of the Company and the Affiliates (as
defined below) and shall perform his duties faithfully and efficiently,
subject to the direction of the Board. The Executive, however, may engage
in charitable, civic or other similar pursuits and, subject to Board
approval, may become a director of other corporations, to the extent that
such activities do not interfere with his devoting his best efforts to his
duties to the Company. For purposes of the preceding sentence, Board
approval is deemed to be granted to the Executive to serve on the board of
directors of Compaq Computer Corp.
(c) For purposes of this Agreement, the term "Affiliate" means (i) any
corporation, partnership, joint venture or other entity during any period
in which it owns, directly or indirectly, at least fifty percent of the
voting power of all classes of stock of the Company (or successor to the
Company) entitled to vote; and (ii) any corporation, partnership, joint
<PAGE>
venture or other entity during any period in which at least a thirty
percent voting or profits interest is owned, directly or indirectly, by
the Company, by any entity that is a successor to the Company, or by
any entity that is an Affiliate by reason of clause (i) next above.
(d) The "Agreement Term" shall be the period beginning on the Effective Date
and ending on the third anniversary of the Effective Date. The Agreement
Term shall be automatically extended for an additional three-year period
(until the sixth anniversary of the Effective Date), unless either party
gives written notice to the other party, at least six months prior to the
third anniversary of the Effective Date, of a decision not to extend the
term. Beginning as of the sixth anniversary of the Effective Date, the
Agreement Term shall be automatically extended for an additional one-year
period on each anniversary of the Effective Date unless either party gives
six month prior written notice to the other party of a decision not to
extend the term.
2. Compensation. In consideration of the services rendered by the
Executive to the Company, in consideration of the Executive's agreement to
remain in the employ of the Company during the Agreement Term, and subject
to the terms of this Agreement, the Company shall compensate the Executive
during the Agreement Term, while the Executive is employed by the Company,
as follows:
(a) One-Time Payment. To compensate the Executive for the forfeiture of
compensation and other employment benefits resulting from his resignation
from his prior employer, the Company shall provide to the Executive the
following one-time payments:
(i) The Executive shall receive an award of 149,079 shares of common
stock of the Company ("Company Stock"). Shares awarded under this
paragraph (i) shall be fully vested on the Effective Date.
(ii) The Executive shall receive a non-qualified stock option award to
purchase of 500,000 shares of Company Stock, subject to terms
comparable to those included in stock options awarded under the
Brunswick Corporation 1991 Stock Plan (the "1991 Plan") to other
officers of the Company; provided that the purchase price shall
equal $20.125, the fair market value of the stock as of the
Effective Date, the option exercise period shall expire ten years
after grant (or such earlier time following termination of
employment as provided in stock options awarded to officers under
the 1991 Plan), and the option shall be exercisable in accordance
with the following schedule:
<PAGE>
The option shall
become exercisable with
If the Executive is respect to the following
employed through number of shares on
the Following date: and after thar date:
1st anniversary of
the Effective Date 60,000
2nd anniversary of
the Effective Date 60,000
3d anniversary of
the Effective Date 80,000
The first date on which the
Stock Price attains $25.00 or,
if earlier, the first day of the
fiscal year of the Company
following the fiscal year in
which net earnings exceed
$2.00 per share 90,000
The first date on which the
Stock Price attains $30.00 or,
if earlier, the first day of the
fiscal year of the Company
following the fiscal year in
which net earnings exceed
$2.35 per share 90,000
The first date on which the
Stock Price attains $35.00 or,
if earlier, the first day of the
fiscal year of the Company
following the fiscal year in
which net earnings exceed
$2.70 per share 120,000
The Compensation Committee of the Board, in consultation with the
Executive, shall adjust the net earnings per share requirement and
the Stock Price requirement applicable to Company Stock under this
paragraph 2(a)(ii) as appropriate from time to time to reflect
material acquisitions, mergers, consolidations, recapitalizations,
reclassifications, stock dividends, stock splits, combinations of
shares, other capital adjustments and other unusual and
extraordinary events. If the Executive's employment by the Company
<PAGE>
continues through the three-year anniversary of the Effective Date, then any
portion of the option described in this paragraph 2(a)(ii) not previously
exercisable shall become exercisable on such three-year anniversary. For
purposes of this paragraph 2(a)(ii), the "Stock Price" for any date shall be
the closing market composite price for the Company Stock (as reported for the
New York Stock Exchange - Composite Transactions). The stock option award
described in this paragraph 2(a)(ii) shall be subject to terms substantially
comparable to the terms set forth in the stock option agreement included in
Supplement A, which is attached to and forms a part of this Agreement. To the
extent that the express terms of this Agreement are inconsistent with the terms
of the 1991 Plan or awards granted thereunder, the terms of this paragraph (ii)
and other applicable terms of this Agreement shall govern the awards made under
this paragraph.
(iii) If the stock options awarded under this paragraph 2(a) are awarded
under the 1991 Plan (or any successor plan providing for
administration by a committee of the Board), or if any other awards
are made pursuant to this Agreement under the 1991 Plan (or any such
successor plan), then any action with respect to such awards that is
required of the Board may instead by taken by the committee
administering the applicable plan.
(b) Salary and Review. The Executive's annual base salary rate shall
initially be $800,000, and thereafter shall not be reduced below the
annual rate of $800,000. The salary shall be payable monthly or more
frequently in accordance with Company practice and shall be subject to all
normal deductions and withholdings. The Executive's performance shall be
reviewed annually by the Board, taking into account such financial and
non-financial factors as the Board determines to be pertinent, with the
results of such review to be discussed with the Executive. Approximately
six months through each annual performance review cycle, the Board shall
review the Executive's performance on an interim basis, with the interim
review focusing primarily on non-financial factors, and the results of
such interim review to be discussed with the Executive. The Executive's
salary rate shall be reviewed at the time of each annual performance
review, and shall be established by the Board.
(c) Bonus. The Executive shall participate in an annual bonus program. The
bonus program shall provide for a maximum bonus amount of 200% of the
Executive's annual salary. The performance goals shall be established
<PAGE>
by the Board in consultation with the Executive. Half of the value for each
bonus award will be distributed in fully-vested shares of Company Stock, with
the remainder distributed in cash. The value of Company Stock distributed as
a bonus in accordance with this paragraph (c) shall be determined as of the
last business day prior to the date on which the amount of the bonus is
determined by the Board. For the fiscal year ending December 31, 1995, the
Executive shall be entitled to a payment under the annual bonus program of not
less than $400,000 in cash, and an additional award of Company Stock, with
such stock having a value of $400,000, determined as of the last business day
prior to the date on which the amount of the bonus is determined by the Board.
(d) Long-Term Incentive Share Award. The Executive shall be entitled to
Long-Term Incentive Share Awards of Company Stock, subject to the
following:
(i) For the fiscal year ending December 31, 1995, the Executive shall
receive a Long-Term Incentive Share Award of Company Stock based on
Company performance for that year, provided that the market value
of such award, determined as of the last business day prior to the
date on which the amount of the award is determined by the Board,
shall be not less than $600,000. The Company performance that must
be achieved for an award in excess of $600,000 for the fiscal year
ending December 31, 1995 shall be established by the Board in
consultation with the Executive. The Executive's rights to the
shares awarded under this paragraph (i) shall be distributed in
accordance with the deferral provisions of paragraph 2(n). To the
extent that the express terms of this Agreement are inconsistent
with the terms of the 1991 Plan or awards granted thereunder, the
terms of this paragraph (i) and other applicable terms of this
Agreement shall govern the awards made under this paragraph.
Except as otherwise provided in paragraph 5:
(A) The Executive shall forfeit the shares awarded under this
paragraph (i) as of his Date of Termination, if such Date of
Termination occurs prior to the third anniversary of the Effective
Date under circumstances other than those described in paragraph
3(a) (relating to the death of the Executive), paragraph 3(b)
(relating to the Executive's disability), paragraph 3(e) (relating
to termination by the Executive for Good Reason), paragraph 3(f)
(relating to termination following a Change in Control), or
paragraph 3(g) (relating to termination by the Company for reasons
other than Cause).
<PAGE>
(B) The Executive shall become vested on his Date of Termination if
such Date of Termination occurs prior to the third anniversary of
the Effective Date under circumstances described in paragraph 3(a)
(relating to the death of the Executive), paragraph 3(b) (relating
to the Executive's disability), paragraph 3(e) (relating to
termination by the Executive for Good Reason), paragraph 3(f)
(relating to termination following a Change in Control), or
paragraph 3(g) (relating to termination by the Company for reasons
other than Cause).
(C) The Executive shall become vested on the third anniversary of the
Effective Date if the Executive remains employed by the Company
through such third anniversary.
The Executive shall be entitled to dividends with respect to shares
of Company Stock awarded under this paragraph (i), to the extent
that the dividends are payable with respect to dates prior to
termination of employment, regardless of the reason for such
termination.
(ii) For periods after December 31, 1995, the Long-Term Incentive Share
Awards shall be based on Company performance during three-year
performance periods, with the first performance period beginning
January 1, 1996 and ending December 31, 1998, and each subsequent
performance period beginning immediately after the end of the
preceding performance period.
(iii) The maximum value of the award for any three-year performance
period shall be 100% of the Executive's salary for the performance
period, with the minimum value of the award for the period not less
than 75% of the Executive's salary for the performance period if the
target goals established by the Board for the performance period are
achieved. The performance goals that must be achieved in connection
with the three-year performance periods shall be established by the
Board in consultation with the Executive. For purposes of this
paragraph (iii), the Executive's salary for a performance period
shall be three times his annual salary rate at the beginning of the
three-year performance period, without regard to any changes in
salary rate during the performance period. The value of Company
Stock distributed as a Long-Term Incentive Share Award shall be
determined as of the last business day prior to the date on which
the amount of the award is determined by the Board at the end of
the performance period.
<PAGE>
(iv) Shares awarded for any three-year performance period (as described
in paragraph 2(d)(ii)) shall be transferred as soon as practicable
after the end of the performance period, and shall be fully vested
upon transfer.
(e) Stock Options. For each fiscal year of the Company, beginning with the
fiscal year ending December 31, 1995, the Executive shall be entitled to a
grant of a non-qualified stock option. The option granted for each year
shall have a grant-date value (determined using the Black-Scholes
methodology, but excluding any discount for deferred vesting, or other
contingencies) of $750,000 (determined as of the date of grant); provided
that for the year ending December 31, 1995, the value of such option award
shall be $750,000 (determined as of the date of grant). Each option shall
be subject to terms comparable to those included in stock options awarded
under the 1991 Plan (or any successor or substitute plan) to other
officers of the Company; provided that the option shall permit purchase of
shares of Company Stock at a price equal to the fair market value of such
stock as of the date of grant, the exercise period shall expire ten years
after grant, or such earlier time following termination of employment as
provided in stock options awarded to officers under the 1991 Plan, or
successor to the 1991 Plan, and the option shall be exercisable in
accordance with the following schedule:
The option shall
become exercisable with
If the Executive is respect to the following
employed through number of shares on
the following date: and after that date:
1st anniversary
of grant date 30% of grant
2nd anniversary
of grant date 30% of grant
3d anniversary
of grant date 40% of grant
Stock options to be awarded for any year under this paragraph (e) shall be
granted after the end of the year, at the time stock options are granted
to other officers of the Company, but in no event more than 60 days after
the end of the year. If the Executive's employment with the Company is
terminated after the third anniversary of the Effective Date, all options
<PAGE>
which were awarded to the Executive pursuant to this paragraph (e) prior to the
third anniversary of the Effective Date, other than options for which
performance criteria have not been satisfied, shall become (or remain)
exercisable until the earlier of (i) the expiration date of the option or (ii)
five years following termination of the Executive's employment. If the
Executive's employment with the Company is terminated after the sixth
anniversary of the Effective Date, all options which were awarded to the
Executive pursuant to this paragraph (e) after the third anniversary of the
Effective Date and prior to the sixth anniversary of the Effective Date, other
than options for which performance criteria have not been satisfied, shall
become (or remain) exercisable until the earlier of (i) the expiration date of
the option or (ii) five years following termination of the Executive's
employment. To the extent that the express terms of this Agreement are
inconsistent with the terms of the 1991 Plan or awards granted thereunder, the
terms of this paragraph (e) and other applicable terms of this Agreement shall
govern the awards made under this paragraph.
(f) Life Insurance. The Company shall provide aggregate life insurance death
benefit coverage to the Executive of at least 3- times the Executive's
base salary rate, reduced by the face value of any life insurance policy
rolled out to the Executive under the Company's Split Dollar Life
Insurance Plan. At any time after the Effective Date, the Executive may
reduce the amount of coverage required to be provided under this paragraph
(f), in which case the Executive will be entitled to receive the net
amount of any life insurance premium reduction provided to the Company as
a result of such reduction in coverage, with such amount to be paid by the
Company to the Executive in cash from time to time.
(g) Supplemental Pension. The Executive shall be entitled to receive benefits
under the Brunswick Supplemental Pension Plan (the "Supplemental Plan")
or, in the discretion of the Company, under another non-qualified plan
maintained by the Company, in an amount which, when added to the benefits
otherwise payable to or on behalf of the Executive under the Supplemental
Plan and the Brunswick Pension Plan for Salaried Employees, will provide
the Executive with the benefits that would have been payable to or on
behalf of the Executive under the Supplemental Plan and the Brunswick
Pension Plan for Salaried Employees if he had, in addition to his actual
Years of Service, completed an additional 15 Years of Service with the
Company. The monthly benefit payable under this paragraph (g) in the form
of a single life annuity for the life of the Executive commencing at his
<PAGE>
age 65 shall be reduced (but not below zero) by the following:
(i) the monthly amount of the total Social Security benefit payable to
the Executive as a single life annuity for the life of the Executive
commencing at his age 65; and
(ii) $15,369.10, which is the monthly amount of the benefit payable to
the Executive under the Retirement Plan of Johnson & Johnson and
Affiliated Companies and the Excess Benefit Plan of Johnson &
Johnson and Affiliated Companies (collectively, the "Predecessor
Employer Plan"), based on its being paid in the form of a single
life annuity for the life of the Executive commencing at his age
65).
If the pension benefits are payable to the Executive pursuant to this
paragraph (g) are paid in a form other than a single life annuity for the
life of the Executive commencing at his age 65, then such benefits shall
be actuarially equivalent to the value of the benefit determined in
accordance with the foregoing provisions of this paragraph (g), with the
actuarial equivalency determined using the actuarial assumptions in effect
under the Brunswick Pension Plan for Salaried Employees as of the date of
commencement of such benefit payments.
(h) Retiree Medical Benefits. The Executive shall be entitled to retiree
medical benefit coverage to the same extent as other executives leaving
the employ of the Company at the time of the Executive's Date of
Termination, determined as though the Executive had then satisfied any
applicable service requirements for such coverage. However, to the extent
that, as of the Executive's Date of Termination, the amount of required
employee contributions under the retiree medical benefit plan is based on
an employee's service with the Company, the Executive shall be deemed to
have service with the Company equal to his actual service with the Company
plus 15 years.
(i) Security Protection. The Company shall make an automobile and chauffeur
available to the Executive and his family on a reasonable basis for
business and personal use.
(j) Vacation. The Executive shall be entitled to paid vacations in accordance
with the applicable policy of the Company as in effect from time to time,
but in no event shall the Executive be entitled to less than four weeks
paid vacation per year.
(k) Benefits. The Executive shall be a participant in any and all plans
maintained by the Company from time to time to provide benefits for its
<PAGE>
senior executives, or for its salaried employees generally, including, without
limitation, any pension, profit sharing, employee stock ownership or retirement
plan, any life, accident, medical, hospital or similar group insurance program,
and any plans or arrangements providing tax planning or financial planning.
However, the Company shall not be required to provide a benefit under this
paragraph (k) if such benefit would duplicate (or otherwise be of the same type
as) a benefit specifically required to be provided under another provision of
this Agreement.
(l) Perquisites. The Executive shall be entitled to all perquisites generally
provided by the Company to its senior executives. However, the Company
shall not be required to provide perquisites under this paragraph (l) if
such perquisites would duplicate (or otherwise be of the same type as) a
perquisite specifically required to be provided under another provision of
this Agreement.
(m) Expenses. The Executive shall be reimbursed for all reasonable expenses
incurred in performing his obligations under this Agreement. The
Executive shall be reimbursed for all reasonable relocation expenses
(including, without limitation, temporary living expenses) in connection
with his relocation to the Chicago area, in accordance with the Company's
relocation policy applicable to officers.
(n) Deferral. The Executive shall be entitled, by agreement with the Company
under terms established by the Board and acceptable to the Executive, to
defer receipt of any part of the salary, cash bonus, or other cash
incentive compensation payments, and to defer the receipt of any part of
the Company Stock otherwise due to him from the Company subject to the
following:
(i) Electively deferred cash payments under this paragraph (n) shall be
credited to a deferred compensation account (the Executive's
"Account") maintained by the Company in his name. The opening
balance of such Account on the date of this Agreement shall be the
amount credited by the Company in accordance with this paragraph
(n). The portion of the Executive's Account that is not invested in
accordance with paragraph 2(n)(ii) shall be credited as of the last
day of each calendar month with interest for that month at the prime
rate in effect at The First National Bank of Chicago on the first
day of the month or, if greater, the Company's short-term borrowing
rate.
<PAGE>
(ii) The Company, after consultation with the Executive, may invest
amounts credited to his Account in securities and other assets as the
Company may determine. The Company and its agents shall not incur
any liability by reason of purchasing, or failing to purchase, any
security or other asset in good faith. The Executive's Account shall
be charged or credited as of the last day of each fiscal year of the
Company, and at such other times as the balance in the Account shall
be determined, to reflect (A) dividends, interest or other earnings
on any such investments, reduced by the cost of funds (for the period
of deferral) for the amount of any taxes incurred by the Company with
respect thereto; (B) any gains or losses (whether or not realized) on
such investment; (C) the cost of funds (for the period of deferral)
for the amount of any taxes incurred with respect to net gains
realized on any such investments, taking into account any applicable
capital loss carryovers and carrybacks, provided that in computing
such taxes, capital gains and losses on assets of the Company other
than such investments shall be disregarded; and (D) any direct
expenses incurred by the Company in such fiscal year or other
applicable period which would not have been incurred but for the
investment of amounts pursuant to the provisions of this paragraph
(ii).
(iii) The Executive shall be entitled to any dividends payable with respect
to shares of Company Stock during the period in which receipt of
those shares is electively deferred by the Executive. Such dividends
shall be treated as being reinvested in additional shares of Company
Stock (based on the value of the stock at the time of the dividend),
which shares shall be delivered to the Executive at the same time as
delivery of other shares electively deferred by the Executive.
(iv) By providing reasonable advance notice to the Company, the Executive
may elect to receive interest and dividends earned with respect
deferred cash and stock distributions as such interest and dividends
are earned.
(v) The Brunswick Corporation Supplemental Pension Plan (the
"Supplemental Plan") provides that certain amounts deferred under a
"Deferred Compensation Agreement" shall be taken into account for
purposes of determining a Participant's plan benefits. For purposes
of the Supplemental Plan, salary and bonus amounts that are
electively deferred by the Executive in accordance with this pargraph
<PAGE>
(n) shall be treated as deferred under a Deferred Compensation
Agreement, and shall be taken into account under the Supplemental
Plan to the extent provided in that plan.
(vi) The Company will distribute the shares of Company Stock described
below in this paragraph (vi) as soon as practicable (but not more
than ten business days) after the Executive's Date of Termination.
Subject to paragraph 2(n)(iv), during the period of deferral, any
dividends will be deemed reinvested in accordance with paragraph
2(n)(iii) above. The deferral under this paragraph (vi) shall apply
to:
(A) The one-time stock award described in paragraph 2(a)(i), with the
period of deferral to begin as of the Effective Date.
(B) The Long-Term Incentive Stock Award for the 1995 fiscal year, as
described in paragraph 2(d)(i), with the period of deferral to begin
as of January 1, 1996.
(C) The portion of the bonus for the 1995 fiscal year payable in
Company Stock, as described in paragraph 2(c), with the period of
deferral to begin as of the date on which stock bonuses are
distributable to other officers for the 1995 year or, if no such
awards are distributable, as of February 15, 1996.
(o) Attorney fees. The Company shall reimburse the Executive for the
reasonable attorney fees incurred in connection with the negotiation of
this Agreement.
3. Termination. The Executive's employment with the Company may be
terminated by the Company or the Executive only under the circumstances
described in paragraphs 3(a) through 3(g):
(a) Death. The Executive's employment hereunder will terminate upon his
death.
(b) Disability. If the Executive is Disabled, the Company may terminate the
Executive's employment with the Company. For purposes of the Agreement,
the Executive shall be deemed to be "Disabled" if he has a physical or
mental disability that renders him incapable, after reasonable
accommodation, of performing his duties under this Agreement.
<PAGE>
(c) Cause. The Company may terminate the Executive's employment hereunder at
any time for Cause. For purposes of this Agreement, the term "Cause"
shall mean the Executive's gross misconduct or willful and material breach
of this Agreement.
(d) Termination by Executive. The Executive may terminate his employment
hereunder as of the end of the Agreement Term. The delivery of a notice
by the Executive to the Company in accordance with paragraph 1(d)
indicating that the Executive will not extend the Agreement Term shall be
treated as the delivery of Notice of Termination by the Executive, with
the Executive's employment treated as being terminated immediately
following the end of the Agreement Term under this paragraph (d) (except
to the extent that the notice indicates that the failure to renew is for
Good Reason, and the circumstances conform to the requirements of
paragraph 3(e)).
(e) Termination by Executive for Good Reason. The Executive may resign for
Good Reason (as defined in this paragraph (e)). For purposes of this
Agreement, "Good Reason" shall mean, without the Executive's express
written consent, the occurrence of any of the following circumstances
unless, in the case of paragraphs (i), (iii), (iv), (v), (vi) or (vii)
below, such circumstances are fully corrected within a reasonable period
(not to exceed 10 business days) following delivery of the Notice of
Termination given in respect thereof:
(i) The assignment to the Executive of any duties materially
inconsistent with the Executive's position as President, Chief
Executive Officer and Chairman of the Board, or a substantial
adverse alteration in the nature of the Executive's
responsibilities from those in effect on the Effective Date.
(ii) Relocation of the Executive's office to a location that is greater
than fifty miles from the Executive's office as of the Effective
Date.
(iii) A reduction in the Executive's annual base salary or bonus
opportunities as of the Effective Date, except for across-the-board
uniform bonus reductions affecting all senior executives of the
Company, or a reduction in any benefit required to be provided to
the Executive under this Agreement to a level below the level
required under this Agreement.
(iv) The failure of the Company, without the Executive's consent, to pay
to the Executive any portion of the Executive's compensation due
under this Agreement, within 10 business days of the date such
such payment is due.
<PAGE>
(v) The failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement.
(vi) Any purported termination of the Executive's employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (h) below (and for purposes of this
Agreement, no such purported termination shall be effective).
(vii) A reasonable determination by the Executive that, as a result of a
change in circumstances regarding his duties, he is unable to
exercise the authorities, powers, functions or duties attached to
his position and contemplated by paragraph 1(a).
(viii) The failure of the Executive to be elected Chairman of the Board by
October 1, 1995; provided, however, that if, prior to October 1,
1995, the Company provides Notice of Termination to the Executive
that the Executive's employment is being terminated for Cause, or
because of his being Disabled, and the circumstances conform to the
requirements of paragraph 3(c) or paragraph 3(b), respectively, or
if the Executive's death occurs before October 1, 1995, the failure
to elect the Executive as Chairman of the Board shall not
constitute an event described in this paragraph 3(e).
Except as otherwise expressly provided in this paragraph 3(e) or paragraph
3(f), nothing in this Agreement shall be construed to authorize or permit
the resignation of the Executive during the Agreement Term.
(f) Termination following Change in Control. The Executive may elect to
terminate his employment with the Company during the first six months
following a Change in Control for any reason.
(g) Termination by Company. The Company may terminate the Executive's
employment hereunder at any time for any reason, and the Company shall not
be required to specify a reason for the termination unless termination
occurs under paragraph 3(a), 3(b), or 3(c). Termination of the
Executive's employment by the Company shall be deemed to have occurred
under this paragraph 3(g) only if it is not for reasons described in
paragraph 3(a), 3(b) or 3(c). The delivery of a notice by the Company to
the Executive in accordance with paragraph 1(d) indicating that the
<PAGE>
the Company will not extend the Agreement Term shall be treated as the delivery
of Notice of Termination by the Company, with the Executive's employment
treated as being terminated immediately following the end of the Agreement Term
under this paragraph (g) (except to the extent that the notice indicates that
the failure to renew is for Cause, or because of the Executive's death or the
Executive's being Disabled, and the circumstances conform to the requirements
of paragraph 3(c), paragraph 3(a) or paragraph 3(b), respectively).
(h) Notice of Termination. Any termination of the Executive's employment by
the Company or the Executive must be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" means a dated notice which indicates the specific
termination provision in this Agreement relied on and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provision so
indicated (except to the extent that such facts and circumstances are not
required under paragraph 3(d), 3(f), or 3(g)).
(i) Date of Termination. "Date of Termination" means the last day the
Executive is employed by the Company, provided that the Executive's
employment is terminated in accordance with the foregoing provisions of
this paragraph 3.
(4) Rights Upon Termination. The Executive's right to payment and benefits
under this Agreement for periods after his Date of Termination shall be
determined in accordance with the following provisions of this paragraph 4:
(a) Death or Disability. If the Executive's Date of Termination occurs under
circumstances described in paragraph 3(a) (relating to the Executive's
death) or paragraph 3(b) (relating to the Executive's being Disabled),
then, except as otherwise provided in paragraph 2(d), paragraph 4(e) or
otherwise agreed in writing between the Executive and the Company, the
Executive shall be entitled to:
(i) Any unpaid salary for days worked prior to the Date of Termination,
and payment for unused vacation (determined in accordance with the
policies of the Company as in effect from time to time for Company
officers) earned prior to the Date of Termination.
(ii) A pro-rata payment with respect to the bonus described in paragraph
2(c) for the performance period in which the Date of Termination
occurs. In determining the amount of the bonus payable under
<PAGE>
this paragraph (ii), the performance through the end of the
performance period shall be extrapolated based on the performance
through the Date of Termination.
(iii) A pro-rata distribution of the Long-Term Incentive Share Award
shares described in paragraph 2(d) with respect to the performance
period in which the Date of Termination occurs. In determining the
amount of the Long-Term Incentive Share Award payable under this
paragraph (iii), the performance through the end of the performance
period shall be extrapolated based on the performance through the
Date of Termination.
(iv) Lapse of non-performance exercise restrictions with respect to stock
options. For purposes of this Agreement, exercise restrictions with
respect to options shall be considered to be "non-performance" if it
is substantially certain, at the Date of Termination, that the
restrictions would have lapsed if the Executive had continued in the
employ of the Company for two years after that date.
(v) The performance-related exercise restrictions with respect to stock
options shall lapse to the extent that the Board, in its discretion,
determines that the lapse is appropriate. The determination by the
Board shall be based on such factors as the Board determines to be
appropriate, including the progress toward the performance goals
that have been achieved as of the Date of Termination.
(vi) The portion of any stock option awarded to the Executive that is
exercisable immediately prior to the Date of Termination, as well as
the portion of any stock option that becomes exercisable by reason
of this paragraph (a), shall remain exercisable for five years after
the Date of Termination, but in no event later than the date fixed
for expiration of the option (determined without regard to
Executive's termination of employment).
(b) Termination by Company without Cause. If the Executive's Date of
Termination occurs under circumstances described in paragraph 3(g)
(relating to termination by the Company without Cause), if the Executive
resigns for Good Reason, or if the Executive resigns in accordance under
circumstances described in paragraph 3(f) (relating to termination
following a Change in Control), then, subject to paragraph 2(d), paragraph
4(e), and except as otherwise agreed in writing between the Executive and
the Company, the Executive shall be entitled to benefits in accordance
with paragraphs (i) through (viii) below, determined as though he had
<PAGE>
continued to be employed by the Company for the period continuing
through the second anniversary of the Date of Termination:
(i) The Executive shall be entitled to the salary amount
described in paragraph 2(b), as in effect on his
Date of Termination, determined as though he had
continued to be employed by the Company for the period
continuing through the second anniversary of the Date of
Termination.
(ii) The Executive shall be entitled to the bonus payments
described in paragraph 2(c), determined as though he had
continued to be employed by the Company for the period
continuing through the second anniversary of the Date of
Termination; provided that the Executive will be entitled
to a pro-rata payment for the performance period that
includes the two-year anniversary of the Date of Termination.
In determining the amount of the bonus payable under this
paragraph (ii), the performance through the end of the
performance period shall be extrapolated based on the
performance through the Date of Termination.
(iii) The Executive shall be entitled to the Long-Term
Incentive Share Award described in paragraph 2(d)
based on the actual performance for the applicable
period(s), determined as though he had continued to
be employed by the Company for the period continuing
through the second anniversary of the Date of
Termination; provided that the Executive will be
entitled to a pro-rata payment for the performance
period that includes the two-year anniversary of the
Date of Termination. In determining the amount of
the Long-Term Incentive Share Award payable under
this paragraph (iii), the performance through the end
of the performance period shall be extrapolated based
on the performance through the Date of Termination.
(iv) The Executive shall be entitled to the life insurance
coverage described in paragraph 2(f), determined as
though he had continued to be employed by the Company
for the period continuing through the second
anniversary of the Date of Termination.
(v) The non-performance exercise restrictions with
respect to stock options shall lapse as of the Date
of Termination. The performance-related exercise
restrictions with respect to stock options shall
lapse to the extent that the Board, in its
<PAGE>
discretion, determines that the lapse is appropriate; provided that
such determination by the Board shall be based on such factors as
the Board determines to be appropriate, including the progress
toward the performance goals that have been achieved as of the Date
of Termination.
(vi) The portion of any stock option awarded to the Executive that is
exercisable immediately prior to the Date of Termination, as well
as the portion of any stock option that becomes exercisable by
reason of this paragraph (b), shall remain exercisable for five
years after the Date of Termination, but in no event later than the
date fixed for expiration of the option (determined without regard
to Executive's termination of employment).
(vii) The pension benefits described in paragraph 2(g) shall be vested as
of the Date of Termination, provided that the Executive shall not
accrue additional pension benefits for periods after the Date of
Termination, and the retiree medical benefit described in the final
sentence of paragraph 2(h) (relating to employee contributions)
shall be determined as though the Executive had continued in the
employ of the Company for the period continuing through the second
anniversary of the Date of Termination.
(viii) The Executive shall be entitled to any additional benefits that
would have been provided to him pursuant to paragraph 2(k),
determined as though he had continued to be employed by the Company
for the period continuing through the second anniversary of the
Date of Termination; provided that this paragraph (viii) shall not
apply to stock options, security protection, vacation, perquisites,
expense reimbursement, or any benefits that are subject to the
foregoing provisions of paragraphs 4(b)(i) through 4(b)(vii).
Payments and benefits due under this paragraph 4(b) shall be subject to
the following:
(I) Subject to the following provisions of this paragraph 4(b)(I),
benefits to be provided under the foregoing provisions of this
paragraph 4(b) shall be provided at the time they would have been
provided if the Executive continued to be employed by the Company;
provided, however, that the amounts payable in accordance with
paragraphs 4(b)(i), (ii) and (iii) shall be distributed to the
Executive, within 10 business days following the Date of
<PAGE>
Termination, in a lump sum payment, with no actuarial or present
value reduction for accelerated payment.
(II) To the extent that benefits distributable under this paragraph 4(b)
would be distributable in Company Stock, or the amount of such
benefit would be based on the value of Company stock, the Company
may satisfy its obligation under this paragraph 4(b) by providing a
cash payment equal to the value of the benefit. Except as
otherwise provided in this paragraph (II), to the extent that the
Company determines that the Executive cannot participate in any
benefit plan because he is not actively performing services for the
Company, the Company may satisfy its obligation under this
paragraph 4(b) by distributing cash to the Executive equal to the
cost that would be incurred by the Executive to replace the
benefit.
(c) Indemnification. For a period of six years after his Date of Termination,
the Executive shall be entitled to coverage under any directors and
officers liability insurance policy, indemnification by-law and
indemnification agreement maintained or offered by the Company or any
successor to the Company during that period to directors and officers.
This paragraph (c) shall not apply if the Executive's Date of Termination
occurs during the Agreement Term under circumstances described in
paragraph 3(c) (relating to the Executive's termination for Cause).
(d) Other Obligations. In addition to the foregoing payments and benefits,
the Executive shall be entitled to any other payments or benefits due to
be provided to the Executive pursuant to any employee compensation or
benefit plans or arrangements, to the extent such payments and benefits
are earned as of the Date of Termination. Except as otherwise
specifically provided in this paragraph 4, the Company shall have no
obligation to make any other payments or provide any other benefits under
the Agreement for periods after the Executive's Date of Termination.
(e) No Participation in Severance Plans. Except as may be otherwise
specifically provided in an amendment of this paragraph (e) adopted in
accordance with paragraph 11, payments under this paragraph 4 shall be in
lieu of any compensation or benefits that may be otherwise payable to or
on behalf of the Executive pursuant to the terms of any severance pay
arrangement of the Company or any Affiliate or any other, similar
arrangement of the Company or any Affiliate providing benefits upon
involuntary termination of employment.
<PAGE>
5. Change in Control Rules. The following shall apply with respect to a
change in control of the Company:
(a) The terms of stock options, restricted stock, and other stock-based
compensation awarded to the Executive under this Agreement shall include
change in control protections (described below). For purposes of this
paragraph (a), "change in control protections" means the protections
relating to a change in control (as defined in the 1991 Plan, or a
successor plan) that are provided for comparable awards to officers under
the 1991 Plan (or successor plan) at the time such awards are made
pursuant to this Agreement (or, if no comparable awards are then made
under the plan, at the next previous time such awards are made under the
plan).
(b) Upon the request of the Executive made at any time after there has been a
Change in Control of the Company, the Company shall do any one or more of
the following as requested:
(i) Pay to the Executive any cash and stock deferred in accordance with
paragraph 2(n) of this Agreement.
(ii) Pay to the Executive (or his beneficiary after his death, if the
Executive so provides by a writing filed with the Secretary of the
Company and the beneficiary so requests), the actuarial equivalence
of the Executive's accrued benefit under the Company's supplemental
pension plan. Actuarial equivalence shall be determined on the
basis of the rates, tables, and factors then in effect for purposes
of determining the actuarial equivalence of optional forms of
payment under the Brunswick Pension Plan for Salaried Employees, or
any successor plans (the "Pension Plans"); provided, however, that
the interest rate or rates which would be used as of the date of
Change in Control of the Company by the Pension Benefit Guaranty
Corporation (the "PBGC") for purposes of determining the present
value of the Executive's benefits under the Pension Plans if the
Pension Plans had terminated on the date of Change in Control with
insufficient assets to provide benefits guaranteed by the PBGC on
that date shall be substituted for the interest assumptions used
under the Pension Plans.
(c) "Change in Control" means a change in the beneficial ownership of the
Company's voting stock or a change in the composition of the Board which
occurs as follows: (A) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than
<PAGE>
a trustee or other fiduciary of securities held under an employee benefit plan
of the Company or its subsidiaries, is or becomes beneficial owner, directly or
indirectly, of stock of the Company representing 30% or more of the total
voting power of the Company's then outstanding stock, (B) a tender offer (for
which a filing has been made with the SEC which purports to comply with the
requirements of Section 14(d) of the Securities Exchange Act of 1934 and the
corresponding SEC rules) is made for the stock of the Company, which has not
been negotiated and approved by the Board, then the first to occur of (i) any
time during the offer when the person (using the definition in (A) above)
making the offer owns or has accepted for payment stock of the Company with 25%
or more of the total voting power of the Company's stock or (ii) three business
days before the offer is to terminate unless the offer is withdrawn first if
the person making the offer could own, by the terms of the offer plus any
shares owned by that person, shares with 50% or more of the total voting power
of the Company's shares when the offer terminates; or (C) individuals who were
the Board's nominees for election as directors of the Company immediately prior
to a meeting of the stockholders of the Company involving a contest for the
election of directors shall not constitutes a majority of the Board following
the election.
6. Noncompetition. For the period beginning on the Effective Date and
ending two years after the Executive's Date of Termination (regardless of the
reason for the termination of employment), (a) the Executive shall not directly
or indirectly be employed or retained by, or render any services for, or be
financially interested in any manner, in any person, firm or corporation
engaged in any business which is then materially competitive in any way with
any business in which the Company or any of its Affiliates was engaged
(including any program of development or research) during the Executive's
employment, (b) the Executive shall not divert or attempt to divert any
business from the Company or any Affiliate, and (c) the Executive shall not
disturb or attempt to disturb any business or employment relationships of the
Company or any Affiliate.
7. Confidential Information. The Executive agrees that:
(a) Except as may be required by the lawful order of a court or agency of
competent jurisdiction, or except to the extent that the Executive has
express written authorization from the Company, he agrees to keep secret
and confidential all Confidential Information (as defined below), and not
disclose the same, either directly or indirectly, to any other person,
firm, or business entity, or to use it in any way. The Executive agrees
that, to the extent that any court or agency seeks to have the Executive
disclose Confidential Information, he shall promptly inform the Company,
<PAGE>
and he shall take such reasonable steps to prevent disclosure of Confidential
Information until the Company (or, if applicable, the Affiliate) has been
informed of such requested disclosure, and the Company has an opportunity to
respond to such court or agency. To the extent that the Executive obtains
information on behalf of the Company or an Affiliate that may be subject to
attorney-client privilege as to the Company's or an Affiliate's attorneys, the
Executive shall take reasonable steps to maintain the confidentiality of such
information and to preserve such privilege.
(b) For purposes of this Agreement, the term "Confidential Information" means
all non-public information concerning the Company and any Affiliate that
was acquired by or disclosed to the Executive during the course of his
employment with the Company, or during discussions between the Executive
and the Company or any Affiliate following his termination of employment
arising out of his employment or this Agreement, including, without
limitation:
(i) all "trade secrets" as that term is used in the Illinois Trade
Secrets Act (or, if that Act is repealed, the Uniform Trade Secrets
Act upon which the Illinois Trade Secrets Act is based) of the
Company or any Affiliate;
(ii) any non-public information regarding the Company's or the
Affiliates' directors, officers, employees, customers, equipment,
processes, costs, operations and methods, whether past, current or
planned, as well as knowledge and data relating to business plans,
marketing and sales information originated, owned, controlled or
possessed by the Company or an Affiliate; and
(iii) information regarding litigation and threatened litigation
involving or affecting the Company or an Affiliate.
(c) This paragraph 7 shall not be construed to unreasonably restrict the
Executive's ability to disclose confidential information in an arbitration
proceeding or a court proceeding in connection with the assertion of, or
defense against any claim of breach of this Agreement in accordance with
paragraph 9 or paragraph 19. If there is a dispute between the Company
and the Executive as to whether information may be disclosed in accordance
with this paragraph (c), the matter shall be submitted to the arbitrators
or the court (whichever is applicable) for decision.
<PAGE>
8. Defense of Claims. The Executive agrees that, for the period beginning
on the Effective Date, and continuing for a reasonable period after the
Executive's Date of Termination, the Executive will cooperate with the Company
and the Affiliates in defense of any claims that may be made against the
Company or an Affiliate, and will cooperate with the Company and the Affiliates
in the prosecution of any claims that may be made by the Company or an
Affiliate, to the extent that such claims may relate to services performed by
the Executive for the Company or the Affiliates. The Executive agrees to
promptly inform the Company if he becomes aware of any lawsuits involving such
claims that may be filed against the Company or any Affiliate. The Company
agrees to reimburse the Executive for all of the Executive's reasonable
out-of-pocket expenses associated with such cooperation, including travel
expenses. For periods after the Executive's Date of Termination, the Company
agrees to provide reasonable compensation to the Executive for such
cooperation. The Executive also agrees to promptly inform the Company if he is
asked to assist in any investigation of the Company or an Affiliate (or their
actions) that may relate to services performed by the Executive for the Company
or an Affiliate, regardless of whether a lawsuit has then been filed against
the Company or an Affiliate with respect to such investigation.
9. Equitable Remedies. The Executive acknowledges that the Company would
be irreparably injured by a violation of paragraph 6 or 7, and he agrees that
the Company, in addition to any other remedies available to it for such breach
or threatened breach, shall be entitled to a preliminary injunction, temporary
restraining order, or other equivalent relief, restraining the Executive from
any actual or threatened breach of paragraph 6 or 7.
10. Nonalienation. The interests of the Executive under this Agreement are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Executive or the Executive's beneficiary.
11. Amendment. This Agreement may be amended or cancelled only by mutual
agreement of the parties in writing without the consent of any other person.
So long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
12. Applicable Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois, without regard to the
conflict of law provisions of any state.
13. Severability. The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any other
<PAGE>
provision of this Agreement, and this Agreement will be construed as if such
invalid or unenforceable provision were omitted (but only to the extent that
such provision cannot be appropriately reformed or modified).
14. Waiver of Breach. No waiver by any party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provisions and conditions at the same or any
prior or subsequent time. The failure of any party hereto to take any action
by reason of such breach will not deprive such party of the right to take
action at any time while such breach continues.
15. Successors. This Agreement shall be binding upon, and inure to the
benefit of, the Company and its successors and assigns and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business.
16. Notices. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid, or
sent by facsimile or prepaid overnight courier to the parties at the addresses
set forth below (or such other addresses as shall be specified by the parties
by like notice). Such notices, demands, claims and other communications shall
be deemed given:
(a) in the case of delivery by overnight service with guaranteed next day
delivery, the next day or the day designated for delivery;
(b) in the case of certified or registered U.S. mail, five days after deposit
in the U.S. mail; or
(c) in the case of facsimile, the date upon which the transmitting party
received confirmation of receipt by facsimile, telephone or otherwise;
provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that
are to be delivered by the U.S. mail or by overnight service are to be
delivered to the addresses set forth below:
<PAGE>
to the Company:
Brunswick Corporation
1 N. Field Court
Lake Forest, IL 60045-4811
or to the Executive:
Peter N. Larson
23 Hodge Road
Princeton, NJ 08540
All notices to the Company shall be directed to the attention of Secretary of
the Company, with a copy to the Chairman of the Compensation Committee of the
Board. Each party, by written notice furnished to the other party, may modify
the applicable delivery address, except that notice of change of address shall
be effective only upon receipt.
17. Survival of Agreement. Except as otherwise expressly provided in this
Agreement, the rights and obligations of the parties to this Agreement shall
survive the termination of the Executive's employment with the Company and all
Affiliates.
18. Entire Agreement. Except as otherwise noted herein, this Agreement
constitutes the entire agreement between the parties concerning the subject
matter hereof and supersedes all prior and contemporaneous agreements, if any,
between the parties relating to the subject matter hereof.
19. Resolution of Disputes. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in the City of Chicago in accordance with the laws of the State of
Illinois by three arbitrators, one of whom shall be appointed by the Company,
one by the Executive, and the third by the other two. If the other two
arbitrators cannot agree on the appointment of a third arbitrator, or if either
party fails to appoint an arbitrator, then such arbitrator shall be appointed
by the Chief Judge of the United States Court of Appeals for the Seventh
Circuit. The arbitration shall be conducted in accordance with the rules of
the American Arbitration Association, except with respect to the selection of
arbitrators which shall be a provided in this paragraph 19. Judgement upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event that it shall be necessary or desirable for
the Executive to retain legal counsel or incur other costs and expenses in
connection with the enforcement of any or all of his rights under this
Agreement, he shall be entitled to recover from the Company reasonable
attorney's fees and costs and expenses incurred by him in connection with the
enforcement of those rights. Payments shall be made to the Executive by the
<PAGE>
Company at the time these attorney's fees and costs and expenses are incurred
by the Executive. If, however, the arbitrators should later determine that
under the circumstances it was unjust for the Company to have made any of these
payments or attorney's fees and costs and expenses to the Executive, he shall
repay them to the Company in accordance with the order of the arbitrators. Any
award of the arbitrators shall include interest at a rate or rates considered
just under the circumstances by the arbitrators. This paragraph 19 shall not
be construed to limit the Company's right to obtain relief under paragraph 9
with respect to any matter or controversy subject to paragraph 9, and, pending
a final determination by the arbitrator with respect to any such matter or
controversy, the Company shall be entitled to obtain any such relief by direct
application to a court of law, without being required to first arbitrate such
matter or controversy.
In Witness Thereof, the Executive has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
and its corporate seal to be hereunto affixed, all as of the Effective Date.
/s/ Peter N. Larson
Peter N. Larson
Date: April 1, 1995
Brunswick Corporation
By /s/ Jack F. Reichert
Chairman of the Board
Date: April 1, 1995
Attest:
/s/ D. M. Yaconetti
(Seal)
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