<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 1-1043
BRUNSWICK CORPORATION
(EXACT NAME OF REGISTRANT IN ITS CHARTER)
36-0848180
DELAWARE (I.R.S. EMPLOYER IDENTIFICATION NO.)
(STATE OF INCORPORATION)
60045-4811
1 N. FIELD CT. (ZIP CODE)
LAKE FOREST, ILLINOIS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 735-4700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock ($.75 par value) New York, Chicago, Pacific,
and London Stock Exchanges
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 the past 90 days. Yes No
[X][_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
As of March 17, 1997, the aggregate market value of the voting stock of the
registrant held by non-affiliates was $2,808,737,719. Such number excludes
stock beneficially owned by officers and directors. This does not constitute
an admission that they are affiliates.
The number of shares of Common Stock ($.75 par value) of the registrant
outstanding as of March 17, 1997, was 98,944,275.
DOCUMENTS INCORPORATED BY REFERENCE
PART III OF THIS REPORT ON FORM 10-K INCORPORATES BY REFERENCE CERTAIN
INFORMATION FROM THE COMPANY'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL
MEETING SCHEDULED TO BE HELD ON APRIL 23, 1997.
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<PAGE>
PART I
ITEM 1. BUSINESS
Brunswick Corporation (the "Company") is a multinational, branded consumer
products company serving the outdoor and indoor active recreation markets. Its
major brands include Zebco(R), Quantum(R), Browning(R) and Lew's(R) fishing
reels and reel/rod combinations; MotorGuide(R) and Thruster(R) trolling
motors; Swivl-Eze(R) marine accessories; American Camper(R) and Remington(R)
camping gear; Roadmaster(R) and Ride Hard(TM) bicycles; Roadmaster(R) wagons;
Flexible Flyer(R) sleds; Brunswick Recreation Centers(R) and Brunswick(R)
bowling capital equipment and consumer products; Brunswick(R) billiards
tables; Sea Ray(R), Bayliner(R) and Maxum(R) pleasure boats; Boston Whaler(R),
Trophy(R) and Robalo(R) offshore fishing boats; Quicksilver(R) marine parts
and accessories; Mercury(R), Mariner(R) and Force(R) outboard engines and
MerCruiser(R) sterndrives and inboard engines.
Since mid-1995, the Company has been implementing a strategic plan to build
its active recreation business by:
. Expanding its leading brand franchises through the introduction of
innovative products and the application of data-based and other marketing
efforts;
. Acquiring active recreation consumer products companies with:
--leading brands,
--growth potential, and
--synergies with the Company's product lineup, such as a high level of
customer cross participation;
. Divesting under-performing businesses; and
. Improving margins through effective cost management and enhanced
operating efficiencies.
The Company operates in two business segments: Recreation and Marine.
Recreation
The Recreation segment consists of the Brunswick Outdoor Recreation Group
("BORG") and the Brunswick Indoor Recreation Group ("BIRG").
BORG markets and manufactures fishing and camping equipment, bicycles,
wagons and sleds. The Company believes that it holds the leading domestic
market share of fishing reels and reel/rod combinations. BORG also
manufactures and sells fishing pedestals, ski tows, pylons and electric
trolling motors for fishermen and for use by boat manufacturers including
Marine segment operations.
The Company acquired its camping business from Roadmaster Industries, Inc.
in March 1996 for approximately $119 million. Camping products include
sleeping bags, tents, backpacks, canvas bags, foul weather gear, waders,
propane lanterns and stoves, cookware and utensils. The Roadmaster bicycle,
wagon and sled business was acquired in September 1996 for approximately $190
million.
In January 1997 the Company acquired Igloo Holdings, Inc. for approximately
$143 million. Igloo is the domestic market leader in ice chests, beverage
coolers and thermoelectric cooler/warmer products.
BIRG is the leading manufacturer of bowling products including bowling balls
and capital equipment such as bowling lanes, automatic pinsetters, ball
returns, computerized scoring equipment and seating and locker units.
BIRG operates 123 recreation centers worldwide, and its joint ventures
operate 32 recreation centers. Recreation centers offer bowling and, depending
on size and location, the following activities and services: billiards, video
games, children's playrooms, restaurants and cocktail lounges. The Company
also operates four family entertainment centers, which in addition to the
above activities, also offer more extensive recreation alternatives such as
basketball courts, in-line skating rinks and interactive video games. Most of
the centers offer Cosmic Bowling(R), a glow in the dark bowling experience
that transforms bowling into a new and different form of recreation. Most of
the recreation centers are owned.
<PAGE>
BIRG has a 50 percent interest in Nippon Brunswick K. K., which sells
bowling equipment and operates bowling centers in Japan. The Group has other
joint ventures (i) to build, own and operate bowling centers and family
entertainment centers, which include bowling, billiards and many other games,
in Brazil, China, Korea and Thailand; and (ii) to sell bowling equipment in
China and Thailand.
The Company's products are distributed through mass merchants, distributors,
dealers, bowling centers, and retailers by Company sales personnel and
manufacturers' representatives. Recreation products are distributed worldwide
from regional warehouses, sales offices and factory stocks of merchandise.
Marine
The Marine segment consists of the Mercury Marine, US Marine and Sea Ray
Divisions. The Company believes its Marine segment has the largest dollar
sales volume of recreational marine engines and pleasure boats in the world.
The Mercury Marine Division markets and manufactures a full range of
outboard engines, sterndrives and inboard engines and propless water-jet
systems under the familiar Mercury, Mariner, Force, MerCruiser and SportJet(R)
brand names. A portion of Mercury Marine's outboards and its Quicksilver parts
and accessories, including steering systems, instruments, controls,
propellers, service aids and marine lubricants, are sold directly to end-users
through a dealer network. The remaining outboards and virtually all of the
sterndrive and inboard engines and the water-jet systems are sold to boat
builders, including the Company's boat divisions.
In 1996 Mercury introduced the OPTIMAX(R) 200-horsepower outboard engine
featuring its new direct fuel injection ("DFI") technology. DFI is part of
Mercury's plan to reduce engine emissions by 75 percent over a nine-year
period beginning in mid-1997 to comply with Environmental Protection Agency
requirements. Mercury's line of low emission engines also includes four-cycle
versions of its smaller two-cycle outboards, which require no modification to
meet reduced emission levels.
Mercury Marine products are manufactured in North America for global
distribution. International assembly facilities are located in Belgium and
Mexico, and offshore distribution centers are in Belgium, Japan and Australia.
The boat divisions consist of US Marine and Sea Ray, makers and marketers of
fiberglass pleasure and offshore fishing boats. US Marine, known for its
Bayliner brand of motor yachts, cabin cruisers, sport fishing boats, runabouts
and jet powered boats, also markets and manufactures Maxum runabouts and cabin
cruisers, Robalo and Trophy sport fishing boats and Quantum(R) fish 'n' ski
boats.
The US Marine Division is vertically integrated, producing many of the parts
and accessories which make up the boats. Escort boat trailers also are
produced by the Division and are sold with smaller boats as part of boat-
motor-trailer packages. Outboard motors and sterndrives are purchased from the
Mercury Marine Division.
The Sea Ray Division, best recognized for its luxury motor yachts, cabin
cruisers, sport fishing boats, sport boats, runabouts, water skiing boats and
jet powered boats marketed and manufactured under the same name, also makes
and sells Baja(R) high-performance boats and Boston Whaler(R) offshore boats.
The Division purchases its outboard motors and most of its sterndrives and
gasoline inboard engines from the Mercury Marine Division.
US Marine and Sea Ray boats are sold through worldwide dealer networks.
The Company has a minority interest in Tracker Marine, L.P., a limited
partnership, which manufactures and markets boats, motors, trailers and
accessories. The Company has various agreements with Tracker Marine, L.P.,
including contracts to supply outboard motors, trolling motors and various
other Brunswick products for Tracker Marine boats.
2
<PAGE>
The Company's Marine segment sales to unaffiliated customers include sales
of the following principal products for the three years ended December 31,
1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN MILLIONS, UNAUDITED)
<S> <C> <C> <C>
Boats.......................................... $1,175.2 $ 978.4 $ 796.0
Engines........................................ 1,112.1 1,168.7 1,086.6
-------- -------- --------
$2,287.3 $2,147.1 $1,882.6
======== ======== ========
</TABLE>
Boat sales include the value of engines when such engines are sold as a
component of a finished boat. Engine sales include sales to boat manufacturers
which are not Company-owned, marine dealers and others, when the engine is not
sold with a Company-manufactured boat.
The Company's fresh water fishing boat operations, which comprised
substantially all of the assets of the Fishing Boat Division, were sold during
1996.
RAW MATERIALS
Many different raw materials are purchased from various sources. At the
present time, no critical raw material shortages are anticipated. General
Motors Corporation is a significant supplier of the gasoline engine blocks
used to manufacture the Company's gasoline sterndrives.
PATENTS, TRADEMARKS AND LICENSES
The Company has and continues to obtain patent rights, consisting of patents
and patent licenses, covering certain features of the Company's products and
processes. The Company's patents, by law, have a limited life, and rights
expire periodically.
In the Recreation segment, patent rights principally relate to computerized
bowling scorers and business systems, bowling lanes and related equipment,
game tables, fishing reels, electric trolling motors, camping equipment,
bicycles, ice chests, coolers and thermoelectric cooler/warmer products.
In the Marine segment, patent rights principally relate to boats and
features of outboard motors and inboard-outboard drives including die-cast
powerheads, cooling and exhaust systems, drive train, clutch and gearshift
mechanisms, boat/engine mountings, shock absorbing tilt mechanisms, ignition
systems, propellers, spark plugs, and fuel and oil injection systems.
Although the Company has important patent and patent license positions, the
Company believes that its performance is mainly dependent upon its
engineering, manufacturing and marketing capabilities.
The Company has many trademarks associated with its various divisions and
applied to its products. Many of these trademarks are well known to the public
and are considered valuable assets of the Company.
ORDER BACKLOG
Order backlog is not considered to be a significant factor in the businesses
of the Company, except for bowling capital equipment. The backlog of bowling
capital equipment at December 31, 1996 was $22.6 million, and the Company
expects to fill all of such orders during 1997. The backlog of bowling capital
equipment at December 31, 1995 was $38.3 million.
COMPETITIVE CONDITIONS AND POSITION
The Company believes that it has a reputation for quality in its highly-
competitive lines of business. The Company competes in its various markets by
utilizing efficient production techniques and innovative marketing,
advertising and sales efforts, and by providing high-quality products at
competitive prices.
3
<PAGE>
Strong competition exists with respect to each of the Company's product
groups, but no single manufacturer competes with the Company in all product
groups. In each product area, competitors range in size from large, highly
diversified companies to small producers. The following paragraphs summarize
what the Company believes its position is in each area.
Recreation. The Company competes directly with many manufacturers of
recreation products. In view of the diversity of its recreation products, the
Company cannot identify the number of its competitors. The Company believes,
however, that in the United States, it is one of the largest manufacturers of
fishing reels, bicycles, camping equipment, ice chests, beverage coolers and
thermoelectric cooler/warmer products. For these recreation products,
competitive emphasis is placed on product innovation, quality, marketing
activities, pricing and the ability to meet delivery and performance
requirements.
The Company believes it is the world's largest manufacturer of bowling
capital equipment. Certain bowling products, such as automatic scorers and
computerized management systems, represent innovative developments in the
market. For other bowling products competitive emphasis is placed on quality,
marketing activities and pricing. The Company operates 123 recreation centers
and four family entertainment centers worldwide. Each center competes directly
with centers owned by other parties in its immediate geographic area.
Competitive emphasis is, therefore, placed on customer service, quality
facilities and personnel, and prices.
Marine. The Company believes it has the largest dollar sales volume of
recreational marine engines and pleasure boats in the world. The domestic
marine engine market includes relatively few major competitors. There are
approximately 11 competitors in outboard engine markets worldwide, and foreign
competition continues in the domestic marine engine market. There are many
competitors in the highly competitive marine accessories business. Competitive
advantage in the marine engine and accessories markets is a function of
product features, technology leadership and effective distribution in addition
to pricing.
There are many manufacturers of pleasure and fishing boats, and
consequently, this business is highly competitive. The Company competes on the
basis of product features and technology, quality, value, performance,
durability, styling and price. Demand for pleasure boats and marine engines is
influenced by a number of factors, including consumer education about boating,
economic conditions and, to some extent, prevailing interest rates and
consumer confidence in spending discretionary dollars.
RESEARCH AND DEVELOPMENT
Company-sponsored research activities, relating to the development of new
products or to the improvement of existing products, are shown below:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Recreation.............................................. $11.1 $13.9 $11.5
Marine.................................................. 75.4 74.0 55.5
----- ----- -----
$86.5 $87.9 $67.0
===== ===== =====
</TABLE>
NUMBER OF EMPLOYEES
The number of employees at December 31, 1996 is shown below by industry
segment:
<TABLE>
<S> <C>
Recreation......................................................... 8,350
Marine............................................................. 14,300
Corporate.......................................................... 150
------
22,800
======
</TABLE>
There are approximately 1,800 employees in the Recreation segment and 2,300
employees in the Marine segment who are represented by labor unions. The
Company believes that relations with these labor unions are good.
4
<PAGE>
ENVIRONMENTAL REQUIREMENTS
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. The Company believes that it has established adequate reserves
to cover all known claims.
ITEM 2. PROPERTIES
The Company's headquarters are located in Lake Forest, Illinois. The Company
has numerous manufacturing plants, distribution warehouses, sales offices and
test sites. Research and development facilities are division-related, and most
are located at individual manufacturing sites.
The Company's plants are deemed to be suitable and adequate for the
Company's present needs. The Company believes that all of its properties are
well maintained and in good operating condition. Most plants and warehouses
are of modern, single-story construction, providing efficient manufacturing
and distribution operations.
The Company's plants are operating at approximately 70 percent of current
capacity.
The Company's headquarters and all of its principal plants are owned by the
Company. Some bowling recreation centers, three small plants, two test
facilities and an overseas distribution center are leased.
The Company's primary facilities are in the following locations:
Mercury Marine Division
Fond du Lac, Hartford and Milwaukee, Wisconsin; Stillwater, Oklahoma;
Placida and St. Cloud, Florida; Juarez, Mexico; and Petit Rechain, Belgium.
US Marine Division
Arlington and Spokane, Washington; Roseburg, Oregon; Miami and Claremore,
Oklahoma; Pipestone, Minnesota; Cumberland and Salisbury, Maryland; Dandridge,
Tennessee; Valdosta, Georgia; and Tallahassee, Florida.
Sea Ray Division
Knoxville, Riverview and Vonore, Tennessee; Edgewater, Merritt Island, Sykes
Creek and Palm Coast, Florida; Bucyrus, Ohio; Phoenix, Arizona; Cork, Ireland;
and Amsterdam, The Netherlands.
Brunswick Outdoor Recreation Group
Haleyville, Alabama; Olney and Effingham, Illinois; Tulsa, Oklahoma;
Starkville, Mississippi; Houston, Katy and Lancaster, Texas; and St. George,
Utah.
Brunswick Indoor Recreation Group
Muskegon, Michigan; Bristol, Wisconsin; Des Moines, Iowa; Stockach, Germany;
and 123 bowling centers and four family entertainment centers in the United
States, Canada and Europe.
5
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Concord Boat Corporation, et al v. Brunswick Corporation. On December 7,
1995, Independent Boat Builders, Inc. ("IBBI"), a boat materials buying group,
and eighteen of its boat building members, brought suit against the Company in
the United States District Court for the Eastern District of Arkansas alleging
that the Company has unlawfully acquired and maintained a monopoly in the
domestic sterndrive marine engine market and has attempted to monopolize the
domestic sterndrive recreational boat market through (i) its acquisitions of
the Company's current boat companies, (ii) its failure to perform its
obligations under an alleged joint venture agreement to manufacture sterndrive
engines for Yamaha Motor Co., Ltd., forcing Yamaha to exit the domestic
sterndrive marine engine market, (iii) its sterndrive engine buying programs
to IBBI members which offer the best discounts to members purchasing at least
70% of their sterndrive engine requirements from the Company, (iv) its
negotiation in supply contracts of price cap provisions for IBBI members on
sterndrive engines which the Company allegedly knew were going to be
discontinued, (v) its alleged disclosure of IBBI members' confidential
business information to members' competitors, (vi) its condition that engine
and boat dealers purchase a substantial share of their engine and boat
requirements from the Company in order to receive the Company's best engine
and boat discounts, and (vii) its alleged offer of cash payments to boat
dealers to terminate their relationship with competing sterndrive boat
manufacturers. The Plaintiffs also maintain that some of this same alleged
conduct by the Company constitutes a breach of the Company's sterndrive engine
purchasing contract with them, a breach of the Company's covenant of good
faith and fair dealing under that contract, and fraudulent misrepresentations.
On February 29, 1996, the Plaintiffs and five additional members of IBBI filed
an Amended Complaint making similar allegations with respect to the Company's
manufacture and sale of outboard engines and boats powered by outboard
engines, and asserting that certain of the Company's agreements with its
dealers violate the antitrust laws. The Plaintiffs have requested an
injunction requiring the Company to divest its boat manufacturing operations
and to cease the alleged practices set forth above, as well as actual damages,
treble damages, punitive damages, and attorneys' fees and costs.
The Company believes, based upon its assessment of the complaint and in
consultation with counsel, that this litigation is without merit and intends
to defend itself vigorously. The Company has filed its Answer to the complaint
and the parties have begun the discovery process. On February 12, 1996, the
Company filed a counterclaim against the Plaintiffs alleging that the
Plaintiffs have conspired to restrain trade in violation of federal antitrust
law by (i) pressuring the Company to replace its market share sterndrive
engine discounts with volume discounts to the disadvantage of smaller
sterndrive boat builders who are not members of a buying group, (ii)
soliciting the Company to limit its boat building divisions' competition with
the Plaintiffs in the manufacture and sale of sterndrive boats, (iii)
soliciting the Company to raise the price of its sterndrive engines to certain
other buyers to favor the Plaintiffs in competition with those buyers, and
(iv) agreeing to limit the display of boats equipped with the Company's
sterndrive engines at industry boat shows. The Company's counterclaim seeks
injunctive relief against the Plaintiffs and the dissolution of IBBI, actual
and treble damages, attorneys' fees and costs.
In December 1996 the Internal Revenue Service notified the Company that it
allocated $190.0 million in short-term capital gains and $18.1 million in
ordinary income to the Company and its subsidiaries for 1990 and 1991 in
connection with two partnership investments by the Company. The IRS alleges
that these investments lacked economic substance, were prearranged and
predetermined, and had no legitimate business purpose. The Company strongly
disagrees with the IRS position, and on January 23, 1997 the Company filed
petitions in the United States Tax Court contesting the IRS allocations. If
the IRS were to prevail, the Company would owe the IRS approximately $60
million in taxes plus accrued interest. The Company intends to defend itself
vigorously and does not believe that this case will have an unfavorable impact
on the Company's results of operations.
The Company has agreed to payment of a civil penalty in the amount of
$112,500 to the State of Ohio in settlement of claims relating to air
emissions in excess of permitted levels at the Company's former defense plant
in Willard, Ohio, during the years 1989 through 1992.
6
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Executive Officers of the Company
The Company's executive officers are listed in the following table:
<TABLE>
<CAPTION>
OFFICER PRESENT POSITION AGE
------- ---------------- ---
<C> <S> <C>
P. N. Larson........... Chairman and Chief Executive Officer 57
P. B. Hamilton......... Senior Vice President, Chief Financial 50
Officer and Secretary
K. J. Chieger.......... Vice President-Corporate and Investor 48
Relations
J. W. Dawson........... Corporate Vice President and President- 62
Brunswick Outdoor Recreation Group
F. J. Florjancic, Jr. . Corporate Vice President and President- 50
Brunswick Indoor Recreation Group
D. D. Jones............ Corporate Vice President and President- 53
Mercury Marine Division
R. T. McNaney.......... Vice President and General Counsel 62
R. S. O'Brien.......... Vice President and Treasurer 47
V. J. Reich............ Vice President and Controller 39
K. B. Zeigler.......... Vice President and Chief Human Resources 48
Officer
W. J. Barrington....... President-Sea Ray Division 46
J. A. Schenk........... Staff Vice President-Corporate Planning 54
R. C. Steinway......... President-US Marine Division 45
</TABLE>
There are no family relationships among these officers. The term of office
of all elected officers expires April 23, 1997. The Division Presidents and
Staff Vice Presidents are appointed from time to time at the discretion of the
Chief Executive Officer.
Peter N. Larson has been Chairman and Chief Executive Officer of the Company
since 1995. He was Chairman of the Worldwide Consumer and Personal Care Group,
Johnson & Johnson, a leading health care company from 1994 to 1995 and Company
Group Chairman, Johnson & Johnson from 1991 to 1994.
Peter B. Hamilton has been Senior Vice President and Chief Financial Officer
of the Company since 1995, and Secretary since 1996. He was Vice President and
Chief Financial Officer, Cummins Engine Company, Inc., a leading worldwide
designer and manufacturer of diesel engines and related products from 1988 to
1995.
Kathryn J. Chieger has been Vice President-Corporate and Investor Relations
of the Company since 1996. She was Vice President-Corporate Affairs of Gaylord
Container Corporation, a paper manufacturer ("Gaylord"), from 1994 to 1996 and
Director of Corporate Affairs of Gaylord from 1989 to 1994.
Jim W. Dawson has been Corporate Vice President since 1994, and President-
Brunswick Outdoor Recreation Group since 1996. He was President-Zebco Division
from 1989 to 1996.
Frederick J. Florjancic, Jr. has been Corporate Vice President since 1988,
and President-Brunswick Indoor Recreation Group since 1995. He was President-
Brunswick Division from 1988 to 1995.
David D. Jones has been Corporate Vice President since 1995 and President-
Mercury Marine Division since 1989.
Robert T. McNaney has been Vice President of the Company since 1996 and
General Counsel since 1985.
Richard S. O'Brien has been Vice President of the Company since 1996 and
Treasurer of the Company since 1988.
7
<PAGE>
Victoria J. Reich has been Vice President and Controller of the Company
since 1996. She was Finance Manager of the General Electric Company's Wiring
Devices business from 1994 to 1996, Manager of the G.E. Plastics Customer
Financial Services Operation from 1993 to 1994 and Manager of the G.E.
Plastics Commercial Finance Unit from 1990 to 1993.
Kenneth B. Zeigler has been Vice President and Chief Human Resources Officer
of the Company since 1995. He was Senior Vice President, The Continental
Corporation, a property and casualty insurance holding company, from 1992 to
1995.
William J. Barrington has been President-Sea Ray Division and President of
Ray Industries, Inc. since 1989.
James A. Schenk has been Staff Vice President-Corporate Planning since 1996.
He was Corporate Director of Planning and Development of the Company from 1988
to 1996.
Robert C. Steinway has been President-US Marine Division since 1994. From
1992 to 1994 he was Senior Vice President-Marketing, US Marine Division. From
1989 to 1992 he was General Manager of the Aluminum Fishing Boat Division.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York, Chicago, Pacific, and
London Stock Exchanges. Quarterly information with respect to the high and low
sales prices for the common stock and the dividends declared on the common
stock is set forth in Note 17 on page 39. As of December 31, 1996, there were
approximately 18,400 shareholders of record of the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
Net sales, net earnings, earnings per common share, cash dividends declared
per common share, assets of continuing operations, and long-term debt are
shown in the Six Year Financial Summary on page 42.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis is presented on pages 15 to 18.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements are set forth on pages 19 to
39 and are listed in the index on page 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors of the Company is set forth on
pages 2-4 of the Company's definitive Proxy Statement dated March 20, 1997
(the "Proxy Statement") for the Annual Meeting of Stockholders to be held on
April 23, 1997. All of the foregoing information is hereby incorporated by
reference. The Company's executive officers are listed herein on pages 7 and
8.
8
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth on pages 5-
21 of the Proxy Statement and is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the securities of the Company owned by the
directors and certain officers of the Company, by the directors and officers
of the Company as a group and by the only persons known to the Company to own
beneficially more than 5 percent of the outstanding voting securities of the
Company is set forth on pages 6 and 7 of the Proxy Statement, and such
information is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A) FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
Financial statements and schedules are incorporated in this Annual Report on
Form 10-K, as indicated in the index on page 14.
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company filed
as Exhibit 19.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1987, and hereby
incorporated by reference.
3.2 Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
1995, and hereby incorporated by reference.
3.3 By-Laws of the Company.
4.1 Indenture dated as of March 15, 1987, between the Company
and Continental Illinois National Bank and Trust Company of
Chicago filed as Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1987,
and hereby incorporated by reference.
4.2 Officers' Certificate setting forth terms of the Company's
$125,000,000 principal amount of 7 3/8% Debentures due
September 1, 2023 filed as Exhibit 4.3 to the Company's
Annual Report on Form 10-K for 1993, and hereby
incorporated by reference.
4.3 Form of the Company's $250,000,000 principal amount of
6.75% Notes due December 15, 2006 filed as Exhibit 4.1 to
the Company's Current Report on Form
8-K dated December 10, 1996 and hereby incorporated by
reference.
4.4 The Company's Agreement to furnish additional debt
instruments upon request by the Securities and Exchange
Commission filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for 1980, and hereby incorporated by
reference.
4.5 Rights Agreement dated as of February 5, 1996, between the
Company and Harris Trust and Savings Bank filed as Exhibit
1 to the Company's Registration Statement for Preferred
Share Purchase Rights on Form 8-A dated March 13, 1996, and
hereby incorporated by reference.
10.1* Third Amended and Restated Employment Agreement entered as
of December 30, 1986, between the Company and Jack F.
Reichert filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for 1986 and hereby incorporated by
reference.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S> <C>
10.2* Amendment dated October 24, 1989, to Employment Agreement
by and between the Company and Jack F. Reichert filed as
Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1989 and hereby
incorporated by reference.
10.3* Supplemental Agreement to Employment Agreement dated
December 30, 1986, by and between the Company and Jack F.
Reichert filed as Exhibit 19.3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1989 and hereby incorporated by reference.
10.4* Amendment dated February 12, 1991 to Employment Agreement
by and between the Company and Jack F. Reichert filed as
Exhibit 10.4 to the Company's Annual Report on Form 10-K
for 1990 and hereby incorporated by reference.
10.5* Amendment dated March 20, 1992 to Employment Agreement by
and between the Company and Jack F. Reichert filed as
Exhibit 10.5 to the Company's Annual Report on Form 10-K
for 1992 and hereby incorporated by reference.
10.6* Amendment dated December 15, 1992 to Employment Agreement
by and between the Company and Jack F. Reichert filed as
Exhibit 10.6 to the Company's Annual Report on Form 10-K
for 1992 and hereby incorporated by reference.
10.7* Amended and Restated Employment Agreement dated February 3,
1997 by and between the Company and Peter N. Larson.
10.8* Employment Agreement dated December 1, 1995 by and between
the Company and Peter B. Hamilton filed as Exhibit 10.8 to
the Company's Annual Report on Form
10-K for 1995 and hereby incorporated by reference.
10.9* Form of Employment Agreement by and between the Company and
each of W. J. Barrington, K. J. Chieger, J. W. Dawson, F.
J. Florjancic, Jr., P. B. Hamilton, D. D. Jones, R. S.
O'Brien, V. J. Reich, J. A. Schenk, R. C. Steinway and K.
B. Zeigler filed as Exhibit 10.9 to the Company's Annual
Report on Form 10-K for 1995 and hereby incorporated by
reference.
10.10* 1994 Stock Option Plan for Non-Employee Directors filed as
Exhibit A to the Company's definitive Proxy Statement dated
March 25, 1994 for the Annual Meeting of Stockholders on
April 27, 1994 and hereby incorporated by reference.
10.11* 1995 Stock Plan for Non-Employee Directors filed as Exhibit
B to the Company's definitive Proxy Statement dated March
19, 1996 for the Annual Meeting of Stockholders on April
24, 1996 and hereby incorporated by reference.
10.12* Supplemental Pension Plan filed as Exhibit 19.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1989 and hereby incorporated by reference.
10.13* Form of Insurance Policy issued for the life of each of the
Company's officers, together with the specifications for
each of these policies, filed as Exhibit 10.21 to the
Company's Annual Report on Form 10-K for 1980 and hereby
incorporated by reference. The Company pays the premiums
for these policies and will recover these premiums, with
some exceptions, from the policy proceeds.
10.14* Insurance policy issued by The Prudential Insurance Company
of America insuring all of the Company's officers and
certain other senior management employees for medical
expenses filed as Exhibit 10.23 to the Company's Annual
Report on Form 10-K for 1980 and hereby incorporated by
reference.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S> <C>
10.15* Form of Indemnification Agreement by and between the
Company and each of N. D. Archibald, M. J. Callahan, J. P.
Diesel, M. A. Fernandez, P. Harf, G. D. Kennedy, B. K.
Koken, J. W. Lorsch, B. M. Musham, K. Roman and R. W.
Schipke filed as Exhibit 19.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1986 and hereby incorporated by reference.
10.16* Indemnification Agreement dated September 16, 1986, by and
between the Company and J. F. Reichert filed as Exhibit
19.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1986 and hereby incorporated by
reference.
10.17* Indemnification Agreement dated April 1, 1995 by and
between the Company and P. N. Larson filed as Exhibit 10.17
to the Company's Annual Report on Form 10-K for 1995 and
hereby incorporated by reference.
10.18* Form of Indemnification Agreement by and between the
Company and each of W. J. Barrington, K. J. Chieger, J. W.
Dawson, F. J. Florjancic, Jr., P. B. Hamilton, D. D. Jones,
R. T. McNaney, R. S. O'Brien, V. J. Reich, J. A. Schenk, R.
C. Steinway, and K. B. Zeigler filed as Exhibit 19.4 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1986 and hereby incorporated by
reference.
10.19* 1991 Stock Plan filed as Exhibit A to the Company's
definitive Proxy Statement dated March 19, 1996 for the
Annual Meeting of Stockholders on April 24, 1996 and hereby
incorporated by reference.
10.20* Change In Control Severance Plan filed as Exhibit 10.22 to
the Company's Annual Report on Form 10-K for 1989 and
hereby incorporated by reference.
10.21* Brunswick Performance Plan for 1996 filed as Exhibit 10.22
to the Company's Annual Report on Form 10-K for 1995 and
hereby incorporated by reference.
10.22* Brunswick Performance Plan for 1997.
10.23* Brunswick Strategic Incentive Plan for 1994-1996 and 1995-
1997 filed as Exhibit 10.23 to the Company's Annual Report
on Form 10-K for 1993 and hereby incorporated by reference.
10.24* Brunswick Strategic Incentive Plan for 1996-1997 filed as
Exhibit 10.24 to the Company's Annual Report on Form 10-K
for 1995 and hereby incorporated by reference.
10.25* Brunswick Strategic Incentive Plan for 1997-1998.
21.1 Subsidiaries of the Company.
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
b) REPORTS ON FORM 8-K
The Company filed the following reports on Form 8-K during the three months
ended December 31, 1996.
1. Report on Form 8-K dated November 19, 1996 reporting in Item 5 that
the Company had signed a definitive agreement to acquire Igloo Holdings,
Inc.
2. Report on Form 8-K dated December 10, 1996 reporting in Item 5 that
the Company had closed an offering of 6 3/4% Notes due December 15, 2006.
- --------
*Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) of this Report.
11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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
March 27, 1997 By___________________________________
Victoria J. Reich,
Vice President and Controller
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Peter N. Larson Chairman and Chief Executive Officer
(Principal Executive Officer) and
Director
Peter B. Hamilton Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
Victoria J. Reich Vice President and Controller (Principal
Accounting Officer)
Nolan D. Archibald Director
Michael J. Callahan Director
John P. Diesel Director
Manuel A. Fernandez Director
George D. Kennedy Director
Bernd K. Koken Director
Jay W. Lorsch Director
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Bettye Martin Musham Director
</TABLE>
<TABLE>
<S> <C>
Jack F. Reichert Director
Kenneth Roman Director
Roger W. Schipke Director
</TABLE>
Victoria J. Reich, as Principal Accounting Officer and pursuant to a Power
of Attorney (executed by each of the other officers and directors listed above
and filed with the Securities and Exchange Commission, Washington, D.C.), by
signing her name hereto does hereby sign and execute this report of Brunswick
Corporation on behalf of each of the officers and directors named above in the
capacities in which the names of each appear above.
March 27, 1997 _____________________________________
Victoria J. Reich
13
<PAGE>
BRUNSWICK CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Discussion and Analysis....................................... 15
Consolidated Statements of Income 1996, 1995 and 1994...................... 19
Consolidated Balance Sheets December 31, 1996 and 1995..................... 20
Consolidated Statements of Cash Flows 1996, 1995 and 1994.................. 22
Notes to Consolidated Financial Statements 1996, 1995 and 1994............. 23
Report of Management....................................................... 40
Report of Independent Public Accountants................................... 41
Six-Year Financial Summary................................................. 42
Consent of Independent Public Accountants.................................. 43
Schedule II--Valuation and Qualifying Accounts 1996, 1995 and 1994......... 44
</TABLE>
All other schedules are not submitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements or in the notes thereto. These notes should be read in
conjunction with these schedules.
The separate financial statements of Brunswick Corporation (the parent
company Registrant) are omitted because consolidated financial statements of
Brunswick Corporation and its subsidiaries are included. The parent company is
primarily an operating company, and all consolidated subsidiaries are wholly
owned and do not have any indebtedness (which is not guaranteed by the parent
company) to any person other than the parent or the consolidated subsidiaries
in an amount that is material in relation to consolidated assets.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
The Company's strategy is to build its active recreation business and
strengthen its positions in leadership brands. Actions taken in 1996 in
pursuit of this strategy resulted in increased earnings from continuing
operations for the fifth consecutive year.
In the Recreation segment, the Company formed the Brunswick Outdoor
Recreation Group and acquired new businesses which have been included in this
organization. The group consists of the Zebco, MotorGuide and Browning fishing
tackle units; the American Camper operation, which was acquired as the
Nelson/Weather-Rite camping unit on March 8, 1996; and the Roadmaster bicycle
business, which was acquired on September 6, 1996. On January 3, 1997, the
Company added, through acquisition, the Igloo cooler and thermoelectric
products business. The Outdoor Recreation Group represents a key growth area
for the Company as it pursues additional acquisitions, focusing on consumer
products and services aimed at active recreation enthusiasts.
Also included in the Recreation segment is the Brunswick Indoor Recreation
Group, which is responsible for the bowling products, recreation centers and
billiards businesses. During 1996, the group experienced rapid growth in
equipment sales into China. While these sales did not fully offset a decline
in sales into the mature Korean and Taiwanese markets, by the fourth quarter
of 1996, the group experienced its first quarter-over-quarter increase from
the combined sales to these markets. The group also successfully completed the
sale of its golf shaft business which, along with the divestiture of the
Circus World pizza operations in 1995, improved the group's product mix.
In the Marine segment, the Company invested in product marketing programs,
cost management actions and new product introductions. This is reflected in a
$20.0 million or 23.5 percent increase in capital expenditures and continued
investment in research and development activities. The Company improved its
product mix by divesting its freshwater fishing boat unit (accounted for as a
discontinued operation) and by acquiring the Boston Whaler line of offshore
fishing boats on May 31, 1996.
RESULTS OF OPERATIONS
Consolidated
The following table sets forth certain ratios and relationships calculated
from the consolidated statements of income:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- ------
<S> <C> <C> <C>
Percentage increases in
Net sales............................................ 8.7% 12.1% 22.0%
Operating earnings (1)............................... 18.0% 24.8% 109.6%
Earnings from continuing operations (1).............. 17.6% 24.3% 136.2%
Earnings per share (1)............................... 14.6% 23.3% 137.5%
Expressed as a percentage of net sales
Gross margin......................................... 27.7% 27.8% 27.9%
Research and development expense..................... 2.7% 3.0% 2.6%
Selling, general and administrative expense.......... 15.3% 15.9% 17.3%
Operating margin (1)................................. 9.6% 8.9% 8.0%
</TABLE>
- --------
(1) Excludes the effect of restructuring charges of $40.0 million ($24.4
million, after-tax) recorded in 1995 and reflects results from continuing
operations.
Sales increased by $254.0 million in 1996 and $314.3 million in 1995. In
1996, the Marine segment recorded a sales increase of $140.2 million, and the
Recreation segment added $113.8 million. These increases reflect growth in
sales of higher-priced large boats and the effect of revenues from the
companies acquired in 1996. Double-digit sales gains in both the domestic and
international marine markets delivered $264.5 million of the 1995 sales
increase.
The Company's gross margin percentages remained relatively unchanged over
the past three years, as benefits from productivity enhancements and product
innovations offset cost increases. Acquisitions and
15
<PAGE>
investments in marketing activities resulted in a $23.1 million increase in
selling, general and administrative expenses in 1996. During the past three
years, selling, general and administrative expenses as a percentage of sales
have decreased from 17.3 percent in 1994, to 15.9 percent in 1995 and 15.3
percent in 1996. This trend is due to effective cost management designed to
keep the growth in costs at rates below the growth in revenues. This
relationship resulted in operating margin improvement over the three-year
period.
In 1996, an 18.0 percent increase in operating earnings was achieved on an
8.7 percent sales gain. These comparisons exclude the effect of restructuring
charges recorded in 1995, discussed below. Earnings from continuing operations
increased 17.6 percent in 1996 and 24.3 percent in 1995, excluding the effects
of the 1995 restructuring charges.
The Company's effective tax rate increased to 36.0 percent in 1996 from 35.5
percent in 1995 and 35.0 percent in 1994 reflecting a changing mix of
international earnings. Between 1996 and 1995, weighted average shares
outstanding increased to 98.8 million from 96.2 million primarily due to the
sale of 1.8 million shares to the master trust of the Company's defined
benefit plans in December 1995.
Earnings per share from continuing operations increased to $1.88 in 1996
from $1.38 in 1995 and $1.33 in 1994. Excluding the impact of the 1995
restructuring charges, 1995 earnings per share were $1.64, resulting in a 14.6
percent increase in 1996 and a 23.3 percent increase in 1995.
Restructuring charges and discontinued operations. In the second quarter of
1995, the Company recorded restructuring charges of $40.0 million, which
reduced earnings from continuing operations by $24.4 million and earnings per
share by $0.26. The charges included $25.8 million recorded in the Recreation
segment relating to the divestitures of the Circus World and golf shaft
businesses, and $14.2 million for management transition costs included in
Corporate expenses.
The Company has accounted for the divested freshwater fishing boat unit and
the Technical segment as discontinued operations. In 1995, the Company
recorded an after-tax charge of $7.0 million, or $0.07 per share, relating to
the disposition of the Technical Group.
MARINE SEGMENT
The following table pertains to the Marine segment:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales............................... $2,287.3 $2,147.1 $1,882.6
Percentage increase..................... 6.5% 14.0% 30.1%
Operating earnings...................... $ 260.5 $ 229.6 $ 172.5
Percentage increase..................... 13.5% 33.1% 227.9%
Operating margin........................ 11.4% 10.7% 9.2%
Capital expenditures.................... $ 105.2 $ 85.2 $ 66.0
</TABLE>
The Marine segment posted sales gains of 6.5 percent and 14.0 percent over
the past two years. The gain in 1996 was the result of higher boat revenues
due to effective marketing programs, investment in new products and
acquisitions. The increase was partially offset by a decline in outboard
engine sales, as inclement weather dampened retail and wholesale activity in
the first half of 1996 versus 1995 and dealers adjusted field inventories.
The 1995 sales increase was favorably affected by growth in international
boat sales, primarily in Europe, and strong global demand for marine engines,
especially in the first six months of 1995.
Operating earnings for the segment reached $260.5 million in 1996, $229.6
million in 1995 and $172.5 million in 1994. Operating margins improved to 11.4
percent in 1996 from 10.7 percent in 1995. This margin improvement resulted
from effective cost management actions and increased investments in product
and process improvements.
In 1995, the previously discussed domestic and international sales increases
accounted for the improvement in operating earnings, offset in part by
increased advertising, marketing and product research and development
expenses.
16
<PAGE>
RECREATION SEGMENT
The following table pertains to the Recreation segment:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C> <C>
Net sales............... $873.0 $759.2 $709.4
Percentage increase..... 15.0% 7.0% 11.6%
Operating earnings (1).. $ 86.1 $ 76.4 $ 82.8
Percentage increase
(decrease) (1)......... 12.7% (7.7)% 3.5%
Operating margin (1).... 9.9% 10.1% 11.7%
Capital expenditures.... $ 52.7 $ 31.1 $ 34.5
</TABLE>
- --------
(1)1995 amounts exclude the $25.8 million restructuring charge.
In 1996, Recreation segment sales increased 15.0 percent to $873.0 million
while operating earnings, excluding the effects of the 1995 restructuring
charge, increased 12.7 percent to $86.1 million. These gains reflect the
contribution of the acquisitions discussed previously, partially offset by a
decline in the sale of bowling capital equipment into East Asian markets.
Operating margins for the segment declined slightly to 9.9 percent in 1996
from 10.1 percent in 1995, excluding the 1995 restructuring charge, reflecting
the effects of retail inventory reductions in fishing tackle and lower margins
experienced in acquired businesses as full benefits of integration activities
had not yet been realized.
The Recreation segment's sales increased 7.0 percent in 1995, to $759.2
million. The improvement resulted primarily from strong East Asian demand for
bowling capital equipment and increased domestic sales of the consumer
products and billiards product lines. Sales of fishing tackle increased both
domestically and internationally.
The Recreation segment operating earnings were $50.6 million in 1995
compared to $82.8 million in 1994. Excluding the restructuring charge, 1995
operating earnings were $76.4 million. The decline resulted from increased
research and development, marketing and manufacturing expenses related to the
Brunswick Indoor Recreation Group's Frameworx capital equipment line, where
shipments began in the third quarter of 1995, and lower margins on sales of
German-manufactured pinsetters due to currency fluctuations. The decline in
1995 was partially offset by higher operating earnings resulting from the
previously discussed increase in fishing tackle sales.
LOOKING TO THE FUTURE
The Company's future performance will be influenced by a number of factors.
Revenues will be affected by the changes in domestic and international
marine market conditions. The Company will emphasize new product
introductions, marketing initiatives and cost management efforts to mitigate
the effects of any adverse changes in market conditions and to enhance its
financial performance. The Company will also benefit from the acquisitions
completed in 1996 and 1997. While these acquisitions will have an immediate
positive effect on the Company's revenues, the full earnings benefits will not
be recognized until integration efforts are near completion.
The Company will also continue to evaluate the profit margins of existing
businesses, making investments where necessary to improve quality, efficiency
and cost; actively managing the supply chain; and adjusting cost structures,
if appropriate.
Engine Emissions Regulations. U.S. Environmental Protection Agency (EPA)
regulations require that certain exhaust emissions from two-cycle, gasoline
marine outboard engines be reduced by 8.3 percent each year for nine years
beginning with the 1998 model year. The Company is implementing a plan that
meets the EPA compliance schedule. It includes both modifying automotive fuel
injection technology for marine use and converting certain two-cycle engines
to four-cycle engines. In 1995, the Company introduced a new 200 horsepower
DFI (direct fuel injection) outboard engine and will begin offering models in
other horsepower
17
<PAGE>
ranges in 1997. The new technology requires adjustments to the design of
existing models and will increase manufacturing costs in the near term;
however, per unit costs are expected to decline as sales of these engines
increase.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operating activities, available cash balances and
selected borrowings are the Company's major sources of funds for investments
and dividend payments.
Cash and cash equivalents totalled $238.5 million at the end of 1996, down
from $344.3 million in 1995.
Cash generated from operating activities totalled $400.1 million in 1996, up
significantly from $280.1 million in 1995 and $121.2 million in 1994. The
primary components of cash generated from operating activities include the
Company's net earnings adjusted for noncash revenues and expenses; the timing
of cash flows relating to operating expenses, sales, and income taxes; and the
management of inventory levels. The increase in cash generated from operating
activities between 1995 and 1996 reflects stronger operating results and
improved inventory management. Included in 1995 and 1994 amounts are $42.2
million and $40.0 million, respectively, of contributions to the Company's
defined benefit plans. Additionally, 1994 includes a payment to the Internal
Revenue Service of approximately $55.0 million in settlement of a prior-year
tax audit obligation.
During 1996, the Company invested $169.9 million in capital expenditures,
compared to $118.0 million in 1995 and $101.1 million in 1994. The $51.9
million increase between 1996 and 1995 reflects the Company's emphasis on
investing to achieve improved production efficiencies and product quality,
growth from new products and expansion of existing product lines. Management
anticipates that 1997 capital expenditures could approach $200.0 million,
principally for growth and productivity.
The Company invested $360.6 million in 1996 to acquire various businesses
including the Roadmaster bicycle and American Camper (formerly the
Nelson/Weather-Rite camping division) businesses from Roadmaster Industries,
Inc., and the Boston Whaler line of boats from Meridian Sports. Management
continues to evaluate acquisition opportunities to build the Company's active
recreation business.
Total debt at year-end 1996 was $568.0 million versus $318.9 million at the
end of 1995, with debt-to-capitalization ratios at those dates of 32.2 percent
and 23.4 percent, respectively. Excluding $100.0 million of debt to be retired
in April 1997, the debt-to-capitalization ratio would have been 28.1 percent
at December 31, 1996. The Company issued $250.0 million of 10-year notes at
6.75 percent during the fourth quarter of 1996 and, on January 3, 1997, $143.0
million was used to fund the acquisition of Igloo Holdings, Inc. The remainder
will be used to retire $100.0 million of 8.125 percent notes maturing on April
1, 1997. The cash used to acquire Igloo Holdings, Inc. was classified as
unrestricted cash held for acquisition of Igloo Holdings, Inc. on the December
31, 1996, balance sheet.
The Company has a substantial amount of financial flexibility and access to
the capital markets stemming from its strong balance sheet, investment-grade
credit ratings and ability to generate significant cash from operating
activities. The Company has $400.0 million available under a long-term line of
credit with a group of banks (see Note 7-Debt) and $350.0 million under a
universal shelf registration filed in 1996 with the Securities and Exchange
Commission for the issuance of equity and/or debt securities.
The Company uses its cash balances and other sources of liquidity to invest
in its active recreation businesses to enhance current product lines, to
acquire complementary businesses and to improve operating efficiencies. These
investments are designed to improve the Company's financial performance and
enhance shareholder value.
FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report are forward looking as defined in
the Private Securities Litigation Reform Law. These statements involve certain
risks and uncertainties that may cause actual results to differ materially
from expectations as of the Date of this Report. These risks include, but are
not limited to, adverse weather conditions retarding sales; inventory
adjustments by major retailers; competitive pricing pressures; success of
planned acquisitions; marketing and cost-management programs and shifts in
market demand.
18
<PAGE>
BRUNSWICK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN MILLIONS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net sales........................................ $3,160.3 $2,906.3 $2,592.0
Cost of sales.................................... 2,285.0 2,099.2 1,869.2
Selling, general and administrative expense...... 484.0 460.9 448.9
Research and development expense................. 86.5 87.9 67.0
Restructuring charges............................ -- 40.0 --
-------- -------- --------
Operating earnings............................... 304.8 218.3 206.9
-------- -------- --------
Interest expense................................. (33.4) (32.5) (28.5)
Other income and expense......................... 18.9 21.0 16.9
-------- -------- --------
Earnings before income taxes..................... 290.3 206.8 195.3
Income tax provision............................. 104.5 73.2 68.2
-------- -------- --------
Earnings from continuing operations.............. 185.8 133.6 127.1
Loss on disposition of Technical segment....... -- (7.0) --
Earnings from discontinued operations.......... -- 0.6 1.9
-------- -------- --------
Net earnings..................................... $ 185.8 $ 127.2 $ 129.0
======== ======== ========
Earnings (loss) per common share
Continuing operations.......................... $ 1.88 $ 1.38 $ 1.33
Loss on disposition of Technical segment....... -- (.07) --
Earnings from discontinued operations.......... -- .01 .02
-------- -------- --------
Net earnings per common share.................... $ 1.88 $ 1.32 $ 1.35
======== ======== ========
Average shares used for computation of earnings
per share....................................... 98.8 96.2 95.7
======== ======== ========
</TABLE>
The notes are an integral part of these consolidated statements.
19
<PAGE>
BRUNSWICK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN MILLIONS,
EXCEPT SHARE
DATA)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents, at cost, which approximates
market................................................... $ 238.5 $ 344.3
Marketable securities..................................... 3.6 11.2
Accounts and notes receivable, less allowances of $17.2
and $16.9................................................ 326.9 253.2
Inventories
Finished goods........................................... 225.3 195.5
Work-in-process.......................................... 137.2 127.7
Raw materials............................................ 82.4 63.4
-------- --------
Net inventories........................................ 444.9 386.6
-------- --------
Prepaid income taxes....................................... 184.4 203.8
Prepaid expenses........................................... 33.6 34.0
Income tax refunds receivable.............................. 9.9 15.0
-------- --------
Current assets......................................... 1,241.8 1,248.1
-------- --------
Property
Land...................................................... 65.0 61.5
Buildings................................................. 404.6 369.1
Equipment................................................. 825.7 683.1
-------- --------
Total land, buildings and equipment.................... 1,295.3 1,113.7
Accumulated depreciation................................... (670.3) (594.1)
-------- --------
Net land, buildings and equipment...................... 625.0 519.6
Unamortized product tooling costs.......................... 60.4 63.3
-------- --------
Net property........................................... 685.4 582.9
-------- --------
Other assets
Unrestricted cash held for acquisition of Igloo Holdings,
Inc...................................................... 143.0 --
Goodwill.................................................. 352.4 119.0
Other intangibles......................................... 137.9 158.9
Investments............................................... 87.5 85.0
Other long-term assets.................................... 154.4 116.7
-------- --------
Other assets........................................... 875.2 479.6
-------- --------
Assets of continuing operations............................ 2,802.4 2,310.6
Net assets of discontinued operations...................... -- 23.5
-------- --------
Total assets........................................... $2,802.4 $2,334.1
======== ========
</TABLE>
The notes are an integral part of these consolidated statements.
20
<PAGE>
BRUNSWICK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN MILLIONS,
EXCEPT SHARE
DATA)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt, including current maturities of long-term
debt..................................................... $ 112.6 $ 6.1
Accounts payable.......................................... 202.4 149.6
Accrued expenses.......................................... 516.1 498.4
-------- --------
Current liabilities.................................... 831.1 654.1
-------- --------
Long-term debt
Notes, mortgages and debentures........................... 455.4 312.8
-------- --------
Deferred items
Income taxes.............................................. 155.6 157.8
Postretirement and postemployment benefits................ 131.7 138.3
Compensation and other.................................... 30.9 28.0
-------- --------
Deferred items......................................... 318.2 324.1
-------- --------
Common shareholders' equity
Common stock; authorized: 200,000,000 shares, $.75 par
value; issued: 102,537,692 76.9 76.9
Additional paid-in capital................................ 302.0 299.4
Retained earnings......................................... 951.3 814.8
Treasury stock, at cost: 4,071,644 shares and 4,633,036
shares................................................... (75.4) (85.0)
Cumulative translation adjustments........................ 11.2 13.7
Unamortized ESOP expense and other........................ (68.3) (76.7)
-------- --------
Common shareholders' equity............................ 1,197.7 1,043.1
-------- --------
Total liabilities and shareholders' equity............. $2,802.4 $2,334.1
======== ========
</TABLE>
The notes are an integral part of these consolidated statements.
21
<PAGE>
BRUNSWICK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings.......................................... $185.8 $127.2 $129.0
Depreciation and amortization......................... 129.7 118.0 118.0
Changes in noncash current assets and current
liabilities of continuing operations:
Change in accounts and notes receivable.............. (26.9) (34.6) (48.5)
Change in inventories................................ 24.2 2.7 (79.1)
Change in prepaid expenses........................... 2.4 (1.1) (9.5)
Change in accounts payable........................... 11.7 (2.5) 33.4
Change in accrued expenses........................... 3.6 6.0 65.1
Income taxes.......................................... 35.2 25.6 (45.4)
Dividends received from equity investments............ 24.5 6.4 2.5
Pension funding (in excess of) less than provision.... 5.0 (33.3) (32.6)
Other, net............................................ 4.9 14.2 (11.7)
Restructuring charges................................. -- 40.0 --
Loss on discontinued operations....................... -- 11.5 --
------ ------ ------
Net cash provided by operating activities.......... 400.1 280.1 121.2
------ ------ ------
Cash flows from investing activities
Acquisitions of businesses............................ (360.6) (10.3) (7.1)
Unrestricted cash held for acquisition of Igloo
Holdings, Inc........................................ (143.0) -- --
Capital expenditures.................................. (169.9) (118.0) (101.1)
Proceeds from businesses disposed..................... 24.1 22.0 --
Investments in marketable securities.................. 7.6 7.0 (18.2)
Payments advanced for long-term supply arrangements... (44.9) -- --
Other, net............................................ (12.3) (5.7) (2.9)
------ ------ ------
Net cash used for investing activities............. (699.0) (105.0) (129.3)
------ ------ ------
Cash flows from financing activities
Net proceeds from issuances of long-term debt......... 248.2 -- --
Net proceeds from equity issuance to pension plan..... -- 40.0 --
Payments of long-term debt............................ (5.8) (6.0) (6.2)
Cash dividends paid................................... (49.3) (47.9) (42.0)
Other, net............................................ -- (2.1) (7.3)
------ ------ ------
Net cash provided by (used for) financing
activities........................................ 193.1 (16.0) (55.5)
------ ------ ------
Net increase (decrease) in cash and cash equivalents... (105.8) 159.1 (63.6)
Cash and cash equivalents at beginning of year......... 344.3 185.2 248.8
------ ------ ------
Cash and cash equivalents at end of year............... $238.5 $344.3 $185.2
====== ====== ======
Supplemental cash flow disclosures:
Interest paid......................................... $ 32.7 $ 34.2 $ 35.1
Income taxes paid, net................................ 69.3 43.8 114.9
Noncash investing and financing activities:
Fair market value of treasury stock issued for
compensation plans and other......................... $ 11.8 $ 11.9 $ 4.0
</TABLE>
The notes are an integral part of these consolidated statements.
22
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Restatement. The Company's consolidated financial statements have been
restated to segregate the results of operations and net assets of the
Company's divested freshwater fishing boat unit and Technical segment as
discontinued operations.
Principles of consolidation. The Company's consolidated financial statements
include the accounts of its significant domestic and foreign subsidiaries,
after eliminating transactions between Brunswick Corporation and such
subsidiaries. Investments in certain affiliates are reported using the equity
method.
Use of estimates in the financial statements. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect reported
amounts and related disclosures. Actual results could differ from those
estimates.
Cash and cash equivalents. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Inventories. Approximately 51 percent of the Company's inventories are
valued at the lower of first-in, first-out (FIFO) cost or market (replacement
cost or net realizable value). Inventories valued at last-in, first-out (LIFO)
cost were $83.6 million and $83.5 million lower than the FIFO cost of
inventories at December 31, 1996 and 1995, respectively. Inventory cost
includes material, labor and manufacturing overhead.
Property. Property, including major improvements and product tooling costs,
is recorded at cost. Maintenance and repair costs are charged against results
of operations as incurred.
Depreciation is charged against results of operations over the estimated
service lives of the related assets principally using the straight-line
method.
Intangibles. The excess of cost over net assets of businesses acquired is
recorded as goodwill and amortized using the straight-line method, principally
over 40 years. Accumulated amortization was $42.8 million and $35.0 million at
December 31, 1996 and 1995, respectively. The costs of other intangible assets
are amortized over their expected useful lives using the straight-line method.
Accumulated amortization was $293.2 million and $266.9 million at December 31,
1996 and 1995, respectively.
Long-lived assets. The Company continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated useful life
of its intangible and other long-lived assets may warrant revision or that the
remaining balance of such assets may not be recoverable. The Company uses an
estimate of the related undiscounted cash flows or, in the case of goodwill,
undiscounted operating earnings, over the remaining life of the asset in
measuring whether the asset is recoverable.
2. ACQUISITIONS
In 1996, the Company acquired the assets of certain businesses, including
the Roadmaster bicycle business from Roadmaster Industries, Inc. on September
6, 1996; the Nelson/Weather-Rite camping division (now American Camper) of
Roadmaster Industries, Inc. on March 8, 1996; and the Boston Whaler line of
boats from Meridian Sports on May 31, 1996. Cash consideration paid in 1996
for these businesses totalled $198.4 million, $119.2 million and $26.6
million, respectively. In January 1997, the Company received an $8.2 million
payment from Roadmaster Industries, Inc. in settlement of the final purchase
price adjustment on the bicycle business, which reduces the final cash
consideration paid for the business to $190.2 million.
In addition to the cash consideration paid in 1996 for these businesses, the
Company assumed certain liabilities. The acquisitions were accounted for as
purchases, and resulted in goodwill of $241.6 million that will be amortized
using the straight-line method over 40 years. The assets and liabilities of
the acquired companies have been recorded in the Company's consolidated
financial statements at their estimated fair values at the
23
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
acquisition dates. These estimates of fair value are subject to change when
final information concerning asset and liability valuations is obtained. The
operating results of each acquisition are included in the Company's results of
operations since the date of acquisition.
On a pro forma basis, the net sales (unaudited) of the Company would have
been $3,305.4 million in 1996 and $3,263.5 million in 1995. These pro forma
sales amounts assume that the acquisitions of Roadmaster, American Camper and
Boston Whaler would have occurred at the beginning of each period presented.
On a pro forma basis, the results of operations of the companies acquired
would not have had a material effect on the Company's net earnings and
earnings per share in 1996 and 1995.
Cash consideration paid for other acquisitions totalled $16.4 million in
1996, $10.3 million in 1995, and $7.1 million in 1994.
On November 18, 1996, the Company signed a definitive agreement to acquire
the stock of Igloo Holdings, Inc. The purchase was completed on January 3,
1997. At December 31, 1996, cash of $143.0 million was classified in long-term
assets as unrestricted cash held for acquisition of Igloo Holdings, Inc.
3. SEGMENT INFORMATION
The Company is a multinational manufacturer and marketer of branded consumer
products designed for outdoor and indoor recreation participants, primarily in
fishing, camping, biking, bowling, billiards and pleasure boating. The
Company's business segments are Recreation and Marine.
Within the Recreation segment, the Company markets fishing products,
including fishing reel and reel/rod combinations, trolling motors and other
fishing accessories; camping products, including tents, sleeping bags,
backpacks, cookware and other accessories; a complete line of ice chests,
beverage coolers and thermoelectric cooler/warmer products; bicycles; bowling
capital equipment, including lanes, pinsetters, and automatic scorers; bowling
balls and other accessories; and billiards tables and accessories. These
products are primarily manufactured in plants throughout the United States and
in some cases sourced from or manufactured in foreign locations. Fishing,
camping, and cooler products, along with bicycles, bowling balls and billiards
equipment are predominantly sold in the United States and are distributed
primarily through mass merchants, sporting goods stores and specialty shops.
Bowling capital equipment is sold through a direct sales force into the United
States and foreign markets. The segment also includes a chain of bowling and
family entertainment centers, primarily located in the United States.
The Marine segment includes a complete line of pleasure boats including
runabouts, cruisers, yachts, high-performance boats and offshore fishing
boats, which are marketed through worldwide dealer networks. The Company also
manufactures outboard, sterndrive and inboard engines, and marine parts and
accessories, which are sold directly to boat builders or through a worldwide
dealer network. The Company's boat and engine manufacturing plants are located
primarily in the United States. The sales of this segment are primarily in the
United States.
INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
ASSETS OF CONTINUING
SALES TO CUSTOMERS OPERATING EARNINGS OPERATIONS
-------------------------- ---------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Marine.................. $2,287.3 $2,147.1 $1,882.6 $260.5 $229.6 $172.5 $1,195.3 $1,086.8 $1,070.3
Recreation.............. 873.0 759.2 709.4 86.1 50.6 82.8 826.8 464.2 437.1
Corporate............... -- -- -- (41.8) (61.9) (48.4) 780.3 759.6 540.9
-------- -------- -------- ------ ------ ------ -------- -------- --------
Total................ $3,160.3 $2,906.3 $2,592.0 $304.8 $218.3 $206.9 $2,802.4 $2,310.6 $2,048.3
======== ======== ======== ====== ====== ====== ======== ======== ========
</TABLE>
24
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DEPRECIATION AND RESEARCH AND DEVELOPMENT
CAPITAL EXPENDITURES AMORTIZATION EXPENSE
-------------------------- ---------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Marine.................. $ 105.2 $ 85.2 $ 66.0 $ 95.3 $ 87.7 $ 91.0 $ 75.4 $ 74.0 $ 55.5
Recreation.............. 52.7 31.1 34.5 32.0 28.2 24.6 11.1 13.9 11.5
Corporate............... 12.0 1.7 0.6 2.4 2.1 2.4 -- -- --
-------- -------- -------- ------ ------ ------ -------- -------- --------
Total................ $ 169.9 $ 118.0 $ 101.1 $129.7 $118.0 $118.0 $ 86.5 $ 87.9 $ 67.0
======== ======== ======== ====== ====== ====== ======== ======== ========
GEOGRAPHIC SEGMENTS
<CAPTION>
ASSETS OF
SALES TO CUSTOMERS OPERATING EARNINGS CONTINUING OPERATIONS
-------------------------- ---------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States........... $2,722.3 $2,397.1 $2,104.6 $312.2 $229.3 $202.3 $1,799.2 $1,367.2 $1,343.5
Foreign................. 438.0 509.2 487.4 34.4 50.9 53.0 222.9 183.8 163.9
Corporate............... -- -- -- (41.8) (61.9) (48.4) 780.3 759.6 540.9
-------- -------- -------- ------ ------ ------ -------- -------- --------
Total................ $3,160.3 $2,906.3 $2,592.0 $304.8 $218.3 $206.9 $2,802.4 $2,310.6 $2,048.3
======== ======== ======== ====== ====== ====== ======== ======== ========
</TABLE>
SUPPLEMENTAL SALES INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Intersegment sales
U.S. to foreign................................... $209.2 $237.1 $231.2
Foreign to U.S.................................... 43.7 38.5 30.3
Export sales........................................ 346.2 288.2 188.1
Sales to unconsolidated affiliates.................. 186.8 125.0 85.8
</TABLE>
Sales between domestic and foreign operations generally are priced with
reference to prevailing market prices.
Operating earnings of segments do not include the expenses of corporate
administration, other expenses and income of a nonoperating nature, and
provisions for income taxes.
The Recreation segment's 1995 operating earnings include a $25.8 million
charge for the losses on the divestitures of the golf club shaft business and
Circus World Pizza operations.
The Corporate operating expenses for 1995 include $14.2 million of
management transition expenses and costs associated with an early retirement
and selective separation program at the Company's corporate office.
Corporate assets consist primarily of cash and marketable securities,
prepaid income taxes, unrestricted cash held for acquisition of Igloo
Holdings, Inc. and investments in unconsolidated affiliates.
4. COMMITMENTS AND CONTINGENCIES
Financial Commitments. The Company has entered into agreements, which are
customary in the marine industry, that provide for the repurchase of its
products from a financial institution in the event of repossession upon a
dealer's default. Repurchases and losses incurred under these agreements have
not had and are not expected to have a significant impact on the Company's
results of operations. The maximum potential repurchase commitments at
December 31, 1996 and 1995, were approximately $186.0 million and $158.0
million, respectively.
25
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company also has various agreements with financial institutions that
provide limited recourse on marine and bowling capital equipment sales.
Recourse losses have not had and are not expected to have a significant impact
on the Company's results of operations. The maximum potential recourse
liabilities outstanding under these programs were approximately $39.0 million
at December 31, 1996 and 1995.
The Company had outstanding standby letters of credit and financial
guarantees of approximately $35.2 million and $50.3 million at December 31,
1996 and 1995, respectively, representing conditional commitments whereby the
Company guarantees performance to a third party. The majority of these
commitments include guarantees of premium payment under certain of the
Company's insurance programs and other guarantees issued in the ordinary
course of business.
Legal and Environmental. The Company is subject to certain legal and
environmental proceedings and claims which have arisen in the ordinary course
of its business.
The Independent Boat Builders, Inc. ("IBBI"), a boat materials buying group
and a portion of its boat building members, has brought a suit against the
Company in United States District Court, alleging that the Company has
unlawfully acquired and maintained a monopoly in the domestic sterndrive and
outboard engine markets and has attempted to monopolize the domestic
sterndrive and outboard recreational boat markets through its acquisition of
the Company's current boat companies and its marketing, sales and business
practices. The plaintiffs have requested an injunction requiring the Company
to divest its boat manufacturing operations and to cease the alleged
monopolizing practices, as well as actual and treble damages, punitive
damages, and attorneys' fees and costs. The Company has filed its answer to
the complaint and the parties have begun the discovery process. The Company
filed a counterclaim in this litigation against the plaintiffs alleging that
the plaintiffs have unlawfully conspired to restrain trade in violation of
Federal antitrust laws. The Company believes, based upon its assessment of the
complaint and in consultation with counsel, that this litigation is without
merit and plans to aggressively pursue its counterclaim, which seeks
injunctive relief, the dissolution of IBBI, actual and treble damages,
attorneys' fees and costs.
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 Baja Boats, Inc. 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.
The Federal Trade Commission has been conducting an investigation since 1993
of whether the formation or operations of Tracker Marine, L.P. and the
Company's contracts with Tracker Marine, L.P. violate antitrust laws. The
Company has received and responded to subpoenas 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.
In light of existing reserves, the Company's litigation and environmental
claims, including those discussed, 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.
5. FINANCIAL INSTRUMENTS
The Company enters into various financial instruments in the normal course
of business and in connection with the management of its assets and
liabilities. The Company does not hold or issue financial instruments for
trading purposes. The Company prepares periodic analyses of its positions in
derivatives to assess the current and projected status of these agreements.
26
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Gains and losses related to qualifying hedges of firm commitments and
anticipated transactions are deferred and recognized in income, or as
adjustments of carrying amounts, when the hedged transaction occurs. Gains and
losses on instruments that do not qualify as hedges are recognized as
incurred.
The Company monitors and controls market risk from financial instrument
activities by utilizing floating rates that historically have moved in tandem
with each other, matching positions and limiting the terms of contracts to
short durations. To minimize credit risk, the Company enters into contracts
with banks and investment firms that the Company has continuing business
relationships with and regularly monitors the credit ratings of its
counterparties.
The fair market value of the financial instruments is determined through
dealer quotes and may not be representative of the actual gains or losses that
will be recorded when these instruments mature due to the volatility of the
markets in which they are traded. The impact of financial instruments
transactions is not material to the Company's results of operations.
The carrying values of the Company's short-term financial instruments,
including cash and cash equivalents, marketable securities, accounts and notes
receivable, short-term debt and the current maturities of long-term debt,
approximate their fair value because of the short maturity of these
instruments.
Interest Rate Swaps. The Company has entered into interest rate swap
agreements to reduce the impact of changes in interest rates on the Company's
investments and borrowings.
At December 31, 1996 and 1995, the Company had three outstanding floating-
to-floating interest rate swap agreements each with a notional principal
amount of $260.0 million that expire in September 2003. The estimated
aggregate market values of these three agreements at December 31, 1996 and
1995, which represents the costs to settle outstanding agreements, were not
material.
Forward Exchange Contracts. The Company enters into forward exchange
contracts, whose durations are usually less than two years, to hedge the U.S.
dollar exposure of its foreign operations. Forward exchange contracts
outstanding at December 31, 1996 and 1995, had contract values of $17.1
million and $72.0 million, respectively, with fair values which were not
materially different from the contract values. The contracts outstanding at
December 31, 1996, mature during 1997.
Commodity Swaps. The Company uses commodity swap agreements to hedge
anticipated purchases of key raw materials. Commodity swap contracts
outstanding at December 31, 1996 and 1995, had a notional value of $24.0
million and $32.0 million, respectively, with fair values that approximate the
notional values. The contracts outstanding at December 31, 1996, mature
through 1998.
6. ACCRUED EXPENSES
Accrued expenses at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
Payroll and other compensation............................. $ 94.1 $ 94.5
Product warranties......................................... 92.7 84.8
Dealer allowances and discounts............................ 79.9 68.2
Litigation and claims...................................... 32.6 39.4
Health and liability insurance............................. 60.7 57.1
Disposition costs and restructuring charges................ 45.3 59.2
Taxes, other than income taxes............................. 15.5 15.5
Other...................................................... 95.3 79.7
------ ------
Accrued expenses........................................... $516.1 $498.4
====== ======
</TABLE>
27
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Mortgage notes and other, 3% to 10% payable through
2001................................................ $ 33.7 $ 26.8
Notes, 6.75% due 2006, net of discount of $2.2....... 247.8 --
Notes, 8.125% due 1997, net of discount of $0.1...... 100.0 99.9
Debentures, 7.375% due 2023, net of discount of $0.8
and $0.9............................................ 124.2 124.1
Guaranteed ESOP debt, 8.13% payable through 2004..... 62.0 67.8
------ ------
567.7 318.6
------ ------
Current maturities................................... (112.3) (5.8)
------ ------
Long-term debt....................................... $455.4 $312.8
====== ======
Scheduled maturities
1998............................................... $ 11.2
1999............................................... 10.3
2000............................................... 8.3
2001............................................... 8.6
Thereafter......................................... 417.0
------
Total............................................ $455.4
======
</TABLE>
At December 31, 1996 and 1995, the fair value of the Company's long-term
debt was $450.0 million and $332.9 million, respectively, as estimated by
using quoted market prices or discounted cash flows based on market rates for
similar types of debt.
The Company has a $400.0 million long-term credit agreement with a group of
banks that terminates on December 31, 2000.
Under terms of the amended agreement, the Company has multiple borrowing
options, including borrowing at a corporate base rate, as announced by The
First National Bank of Chicago, or a rate tied to the Eurodollar rate. The
Company must pay a facility fee of 0.11% per annum on the agreement.
Under the agreement, the Company is subject to interest coverage, net worth
and leverage tests, as well as a restriction on secured debt, as defined. The
Company was in compliance with these covenants at December 31, 1996.
On December 10, 1996, the Company sold $250.0 million of 6.75% notes due
December 15, 2006. The proceeds from the sale of the notes were used to
purchase Igloo Holdings, Inc. on January 3, 1997 and will be used to repay, at
maturity, the Company's $100.0 million principal amount of 8.125% notes due
April 1, 1997. Pending such uses, the net proceeds will be used for general
corporate purposes.
8. DISCONTINUED OPERATIONS
In April 1996, the Company announced its intention to divest its freshwater
fishing boat operations, which comprised substantially all of the assets and
certain liabilities of the discontinued Fishing Boat Division in the Marine
segment and included the Starcraft, Fisher, MonArk, Spectrum, Astro and
Procraft brands. Certain assets and liabilities of discontinued operations,
which are being retained by the Company, are reflected in the Company's
continuing operations in 1996 and reserves to cover related exposures have
been established. These disposition transactions, which were completed in the
third quarter of 1996, did not have a significant effect upon the Company's
consolidated results of operations.
28
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net sales of the freshwater fishing boat unit for the years ended
December 31, 1996, 1995 and 1994, were $82.5 million, $200.2 million and
$175.7 million, respectively. Intercompany sales between the continuing and
discontinued operations that were previously eliminated in consolidation have
been included in continuing operations.
In April 1995, the Company completed the sale of substantially all of the
assets of its Technical Group, which was in the discontinued Technical
segment, with the final disposition of remaining assets occurring in June
1996. Certain liabilities of discontinued operations, which were retained by
the Company, are reflected in the Company's continuing operations and are
adequately covered by existing reserves. In the second quarter of 1995, the
Company recorded a provision of $11.5 million ($7.0 million after-tax)
reflecting a lower than anticipated selling price for the Technical Group. The
net sales of the Technical Group were $7.6 million, $35.1 million, and $135.5
million, for the years 1996, 1995 and 1994, respectively. Operating results of
the Technical Group for 1996, 1995 and 1994 have been recorded against the
divestiture reserve.
9. RESTRUCTURING CHARGES
In the second quarter of 1995, the Company recorded restructuring charges of
$40.0 million ($24.4 million after-tax). The charges consisted of losses of
$25.8 million recorded in the Recreation segment on the divestitures of the
golf club shaft business, completed in the second quarter of 1996, and Circus
World Pizza operations, completed in 1995. Also included were $14.2 million of
management transition expenses including the costs of an early retirement and
selective separation program at the Company's corporate office which was
completed in 1995.
The net sales and operating earnings (losses) (excluding divestiture
provisions) of the divested businesses for each of the three years ended
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Net sales.................................................. $10.2 $21.0 $17.2
===== ===== =====
Operating earnings (losses)................................ $ 1.4 $(7.6) $(6.4)
===== ===== =====
</TABLE>
10. STOCK PLANS AND MANAGEMENT COMPENSATION
Under the 1991 Stock Plan, the Company may grant stock options, stock
appreciation rights, restricted stock and other various types of awards to
executives and other management employees. Issuances under the plan may be
from either authorized, but unissued shares or treasury shares. The plan
provides for the issuance of a maximum of 11,200,000 shares. The option price
per share has not been less than the fair market value at the date of grant.
The stock options are generally exercisable over a period of 10 years or as
determined by the Human Resource and Compensation Committee of the Board of
Directors. Options vest over 3 years, although the Company provides for
accelerated vesting should certain earnings per share or stock price levels be
attained, or immediately in the event of a change in control.
The Company adopted the disclosure-only provision under Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock-
Based Compensation," as of December 31, 1996, while continuing to measure
compensation cost under APB Opinion No. 25, "Accounting for Stock Issued to
Employees." If the accounting provisions of SFAS No. 123 had been adopted as
of the beginning of 1995, the effect on net earnings for 1996 and 1995 would
have been immaterial.
29
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock option activities for the three years ending December 31, 1996, were
as follows:
<TABLE>
<CAPTION>
WEIGHTED
STOCK AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
----------- --------
(SHARES IN
THOUSANDS)
<S> <C> <C>
At January 1, 1994................................... 1,585 $ --
Granted............................................ 719 $18.22
Exercised.......................................... (125) $14.60
Forfeited.......................................... (82) $16.40
----- ------
At December 31, 1994................................. 2,097 $16.27
Granted............................................ 1,396 $19.42
Exercised.......................................... (114) $15.04
Forfeited.......................................... (46) $17.91
----- ------
At December 31, 1995................................. 3,333 $17.61
Granted............................................ 3,054 $21.40
Exercised.......................................... (262) $16.33
Forfeited.......................................... (184) $22.18
----- ------
At December 31, 1996................................. 5,941 $19.48
===== ======
</TABLE>
<TABLE>
<CAPTION>
EXERCISABLE WEIGHTED
STOCK AVERAGE SHARES
OPTIONS EXERCISE AVAILABLE
OUTSTANDING PRICE FOR GRANT
----------- -------- ---------
(OPTIONS AND SHARES IN
THOUSANDS)
<S> <C> <C> <C>
At December 31, 1994....................... 607 $14.88 2,508
At December 31, 1995....................... 1,386 $15.88 897
At December 31, 1996....................... 1,969 $16.91 4,147
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996.
<TABLE>
<CAPTION>
(OPTIONS IN THOUSANDS) OPTIONS OUTSTANDING
---------------------- ---------------------------------
NUMBER
OUTSTANDING WEIGHTED WEIGHTED
AT AVERAGE AVERAGE
RANGE OF EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE
PRICE 1996 LIFE PRICE
----------------- ------------ ----------- --------
<S> <C> <C> <C>
$13.88 to $16.75........................ 1,111 5 years $15.38
$16.75 to $20.25........................ 3,063 8 years $18.76
$20.25 to $25.50........................ 1,767 9 years $23.31
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
---------------------
NUMBER
EXERCISABLE WEIGHTED
AT AVERAGE
DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICE 1996 PRICE
----------------------- ------------ --------
<S> <C> <C>
$13.88 to $16.75................................... 1,111 $15.38
$16.75 to $20.25................................... 844 $18.83
$20.25 to $25.50................................... 14 $22.78
</TABLE>
The Company maintains a leveraged employee stock ownership plan (ESOP). In
April 1989, the ESOP borrowed $100 million to purchase 5,095,542 shares of the
Company's common stock at $19.625 per share. The debt of the ESOP is
guaranteed by the Company and is recorded in the Company's financial
statements.
30
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The ESOP shares are maintained in a suspense account until released and
allocated to participants' accounts. Shares committed-to-be-released,
allocated and remaining in suspense at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
(SHARES IN
THOUSANDS)
<S> <C> <C>
Committed-to-be-released...................................... 301 298
Allocated..................................................... 1,542 1,451
Suspense...................................................... 2,461 2,789
</TABLE>
All ESOP shares are considered outstanding for earnings per share purposes.
Under the grandfather provisions of SOP 93-6, the expense recorded by the
Company is based on cash contributed or committed to be contributed by the
Company to the ESOP during the year, net of dividends received which are
primarily used by the ESOP to pay down debt. The Company's contributions to
the ESOP were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Compensation expense................................... $ 4.1 $ 3.1 $ 2.9
Interest expense....................................... 5.3 5.8 6.2
Dividends.............................................. 1.8 2.3 2.1
----- ----- -----
Total debt service payments........................ $11.2 $11.2 $11.2
===== ===== =====
</TABLE>
The Company has certain employment agreements and a severance plan that
become effective upon a change in control of the Company which will result in
compensation expense in the period that a change in control occurs.
11. RETIREMENT AND EMPLOYEE BENEFIT COSTS
The Company has pension and retirement plans covering substantially all of
its employees, including certain employees in foreign countries. Plan benefits
are based on years of service, and for some plans, the average compensation
prior to retirement. Pension costs, which are primarily computed using the
projected unit credit method, are generally funded based on the legal
requirements, tax considerations and investment opportunities for the
Company's domestic pension plans and in accordance with local laws and income
tax regulations for foreign plans. Plan assets generally consist of debt and
equity securities, real estate and investments in insurance contracts.
Pension costs of continuing operations for 1996, 1995 and 1994, included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits earned during the period....... $16.0 $11.6 $11.7
Interest cost on projected benefit obligation........ 43.1 34.2 31.2
Actual return on assets.............................. (91.9) (90.8) 3.0
Net amortization and deferral........................ 41.9 57.7 (34.7)
----- ----- -----
Net pension cost..................................... $ 9.1 $12.7 $11.2
===== ===== =====
</TABLE>
31
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the plans and the amounts recognized in the Company's
balance sheets at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit
obligation.............. $(461.4) $(26.1) $(440.1) $(43.9)
Nonvested benefit
obligation.............. (29.7) (0.3) (30.5) (0.4)
------- ------ ------- ------
Accumulated benefit
obligation................ (491.1) (26.4) (470.6) (44.3)
Effects of anticipated
future compensation levels
and other events.......... (60.9) (8.0) (59.3) (7.5)
------- ------ ------- ------
Projected benefit
obligation................ (552.0) (34.4) (529.9) (51.8)
Plan assets at fair value.. 616.9 2.5 543.3 13.7
------- ------ ------- ------
Plan assets in excess of
(less than) projected
benefit obligation........ 64.9 (31.9) 13.4 (38.1)
Unrecognized net transition
obligation (asset)........ (0.7) 1.3 (6.6) 1.6
Unrecognized prior service
cost...................... 17.7 (0.3) 17.2 (0.1)
Net unrecognized (gain)
loss from past experience
different from assumed and
effects of changes in
assumptions............... (2.9) 5.0 60.4 10.0
Adjustment to recognize
minimum liability......... -- (0.5) -- (6.1)
------- ------ ------- ------
Pension asset (liability)
recognized in financial
statements................ $ 79.0 $(26.4) $ 84.4 $(32.7)
======= ====== ======= ======
</TABLE>
The projected benefit obligations were determined primarily using assumed
weighted average discount rates of 7.75% in 1996 and 7.25% in 1995, and an
assumed compensation increase of 5.5% in 1996 and 1995. The assumed weighted
average long-term rate of return on plan assets was primarily 9% in 1996 and
1995.
Two of the Company's salaried pension plans provide that in the event of a
termination, merger or transfer of assets of the plans during the five years
following a change in control of the Company occurring on or before April 1,
2001, benefits would be increased so that there would be no excess net assets.
The Company's supplemental pension plan provides for a lump sum payout to plan
participants equal to the present value of accumulated benefits upon a change
in control of the Company.
The Company also sponsors other defined contribution retirement plans whose
costs are not material.
In addition to providing benefits to present employees, the Company
currently provides certain health care and life insurance benefits for
eligible retired employees that have fulfilled specific age and service
requirements. The Company monitors the cost of these plans and reserves the
right to make additional changes or terminate these benefits in the future.
The plans contain requirements for retiree contributions generally based on
years of service as well as other cost sharing features such as deductibles
and copayments. The Company's plans are not funded; claims are paid as
incurred.
32
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net periodic postretirement benefit cost of continuing operations for 1996,
1995 and 1994 included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits attributed to service during the
period................................................ $1.7 $1.2 $1.5
Interest cost on accumulated postretirement benefit
obligation............................................ 4.0 4.3 4.2
Net amortization and deferral.......................... (0.7) (1.0) (0.4)
---- ---- ----
Net periodic postretirement benefit cost............... $5.0 $4.5 $5.3
==== ==== ====
</TABLE>
The postretirement benefit amounts recognized in the Company's balance
sheets at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
(IN
MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................... $33.9 $40.9
Fully eligible active plan participants..................... 5.7 6.5
Other active plan participants.............................. 28.5 29.3
----- -----
Total..................................................... 68.1 76.7
Unrecognized prior service cost............................... 3.1 2.4
Unrecognized net gains........................................ 14.7 6.9
----- -----
Postretirement liability recognized in financial statements... $85.9 $86.0
===== =====
</TABLE>
The accumulated postretirement benefit obligation was determined using
weighted average discount rates of 7.75% in 1996 and 7.25% in 1995, and an
assumed compensation increase of 5.5% in 1996 and 1995. The health care cost
trend rates were assumed to be 9% and 6% in 1997 for pre-65 and post-65
benefits, respectively, gradually declining to 5% after five years and one
year, respectively, and remaining at that level thereafter. The health care
cost trend rates were assumed to be 9.7% and 7% in 1996 for pre-65 and post-65
benefits, respectively, gradually declining to 5% after six years and two
years, respectively, and remaining at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
For example, a 1% increase in the health care trend rate would increase the
accumulated postretirement benefit obligation by $8.6 million at December 31,
1996 and the net periodic cost by $1.1 million for the year then ended.
The Company also provides postemployment benefits to qualified former or
inactive employees. The liability for these benefits has been recognized in
the financial statements. The cost of providing these benefits is not
material. The Company does not fund these benefits and has the right to modify
these plans in the future.
12. INCOME TAXES
The sources of earnings before income taxes are presented as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
United States....................................... $284.9 $195.8 $188.5
Foreign............................................. 5.4 11.0 6.8
------ ------ ------
Earnings before income taxes........................ $290.3 $206.8 $195.3
====== ====== ======
</TABLE>
33
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
CURRENT TAX EXPENSE
U.S. Federal....................................... $ 73.4 $56.4 $47.3
State and local.................................... 3.4 8.5 2.4
Foreign............................................ 8.8 7.7 8.4
------ ----- -----
Total current.................................... 85.6 72.6 58.1
------ ----- -----
DEFERRED TAX EXPENSE
U.S. Federal....................................... 11.1 2.0 4.2
State and local.................................... 6.9 (2.4) 6.6
Foreign............................................ 0.9 1.0 (0.7)
------ ----- -----
Total deferred................................... 18.9 0.6 10.1
------ ----- -----
Total provision.................................. $104.5 $73.2 $68.2
====== ===== =====
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C> <C>
DEFERRED TAX ASSETS
Litigation and claims............................... $ 14.2 $ 18.3
Product warranty.................................... 37.2 36.9
Dealer allowance and discounts...................... 16.5 15.2
Bad debts........................................... 9.3 9.5
Sales of businesses................................. 10.2 16.1
Insurance reserves.................................. 31.3 28.9
Restructuring....................................... 9.0 13.5
Loss carryforwards and carrybacks................... 12.3 14.4
Compensation and benefits........................... 10.7 8.9
Other............................................... 34.0 45.3
Valuation allowance................................. (0.3) (3.2)
------ ------
Total deferred tax assets......................... $184.4 $203.8
====== ======
DEFERRED TAX LIABILITIES (ASSETS)
Depreciation and amortization....................... $ 28.7 $ 32.6
Postretirement and postemployment benefits.......... (24.2) (22.1)
Other assets and investments........................ 87.7 84.7
Other............................................... 63.4 62.6
------ ------
Total deferred tax liabilities.................... $155.6 $157.8
====== ======
</TABLE>
No other valuation allowances were deemed necessary as all deductible
temporary differences will be utilized primarily by carryback to prior years'
taxable income or as charges against reversals of future taxable temporary
differences. Based upon prior earnings history, it is expected that future
taxable income will be more than sufficient to utilize the remaining
deductible temporary differences.
Deferred taxes have been provided, as required, on the undistributed
earnings of foreign subsidiaries and unconsolidated affiliates.
34
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The difference between the actual income tax provision and the tax provision
computed by applying the statutory Federal income tax rate to earnings before
taxes is attributable to the following:
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Income tax provision at 35%........................ $101.6 $72.4 $68.4
State and local income taxes, net of Federal income
tax effect........................................ 6.7 4.0 5.6
Foreign sales corporation benefit.................. (2.5) (1.7) (1.5)
Taxes related to foreign income, net of credits.... 1.2 0.8 (2.3)
Goodwill and other amortization.................... 0.9 0.8 0.8
Other.............................................. (3.4) (3.1) (2.8)
------ ----- -----
Actual income tax provision........................ $104.5 $73.2 $68.2
====== ===== =====
Effective tax rate................................. 36.0% 35.5% 35.0%
====== ===== =====
</TABLE>
In December 1996, the Company received notification that the income
allocation and tax basis of assets distributed from two partnership
investments are being challenged by the IRS. Should the IRS prevail, it may
result in a cash payment of up to approximately $60 million for taxes due plus
accrued interest. The Company strongly disagrees with the IRS position and
will vigorously contest it. Although the outcome cannot be predicted with
certainty, it is not expected to have an unfavorable impact on the Company's
results of operations.
In January 1994, the Company reached an agreement with the U.S. Internal
Revenue Service regarding the issue of deductibility of approximately $500
million of acquired 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 for the acquired intangible assets resulted in an initial
obligation by the Company to pay the IRS approximately $55 million
representing taxes and interest, net of taxes for the years 1986 through 1993.
This agreement had no impact on the Company's consolidated results of
operations.
35
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. CONSOLIDATED COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNAMORTIZED
ADDITIONAL CUMULATIVE ESOP
COMMON PAID-IN RETAINED TREASURY TRANSLATION EXPENSE
STOCK CAPITAL EARNINGS STOCK ADJUSTMENTS AND OTHER TOTAL
------ ---------- -------- -------- ----------- ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993................... $75.5 $261.4 $648.5 $(102.7) $ 7.9 $(86.2) $ 804.4
----- ------ ------ ------- ----- ------ --------
1994
Net earnings.......... -- -- 129.0 -- -- -- 129.0
Dividends declared
($.44 per common
share)............... -- -- (42.0) -- -- -- (42.0)
Compensation plans and
other................ -- 0.1 -- 4.4 -- 5.9 10.4
Deferred
compensation--ESOP... -- -- -- -- -- 5.0 5.0
Currency translation.. -- -- -- -- 3.9 -- 3.9
----- ------ ------ ------- ----- ------ --------
Balance, December 31,
1994................... $75.5 $261.5 $735.5 $ (98.3) $11.8 $(75.3) $ 910.7
----- ------ ------ ------- ----- ------ --------
1995
Net earnings.......... -- -- 127.2 -- -- -- 127.2
Dividends declared
($.50 per common
share)............... -- -- (47.9) -- -- -- (47.9)
Compensation plans and
other................ -- (0.7) -- 13.3 -- (6.6) 6.0
Deferred
compensation--ESOP... -- -- -- -- -- 5.2 5.2
Purchase of stock by
pension plan master
trust................ 1.4 38.6 -- -- -- -- 40.0
Currency translation.. -- -- -- -- 1.9 -- 1.9
----- ------ ------ ------- ----- ------ --------
Balance, December 31,
1995................... $76.9 $299.4 $814.8 $ (85.0) $13.7 $(76.7) $1,043.1
----- ------ ------ ------- ----- ------ --------
1996
Net earnings.......... -- -- 185.8 -- -- -- 185.8
Dividends declared
($.50 per common
share)............... -- -- (49.3) -- -- -- (49.3)
Compensation plans and
other................ -- 2.6 -- 9.6 -- 2.5 14.7
Deferred
compensation--ESOP... -- -- -- -- -- 5.9 5.9
Currency translation.. -- -- -- -- (2.5) -- (2.5)
----- ------ ------ ------- ----- ------ --------
Balance, December 31,
1996................... $76.9 $302.0 $951.3 $ (75.4) $11.2 $(68.3) $1,197.7
===== ====== ====== ======= ===== ====== ========
</TABLE>
At December 31, 1996, 1995 and 1994, the Company had no preferred stock
outstanding (Authorized: 12.5 million shares, $.75 par value at December 31,
1996).
36
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common and treasury stock activities were as follows:
<TABLE>
<CAPTION>
COMMON TREASURY
STOCK STOCK
------ --------
(SHARES IN
MILLIONS)
<S> <C> <C>
Balance, December 31, 1993................................ 100.7 (5.4)
----- ----
1994
Compensation plans and other............................ -- 0.2
----- ----
Balance, December 31, 1994................................ 100.7 (5.2)
----- ----
1995
Compensation plans and other............................ -- 0.6
Purchase of stock by pension plan master trust.......... 1.8 --
----- ----
Balance, December 31, 1995................................ 102.5 (4.6)
----- ----
1996
Compensation plans and other............................ -- 0.5
----- ----
Balance, December 31, 1996................................ 102.5 (4.1)
===== ====
</TABLE>
14. LEASES
The Company has various lease agreements for offices, branches, factories,
distribution and service facilities, certain Company-operated bowling centers,
and certain personal property. These obligations extend through 2032.
Most leases contain renewal options and some contain purchase options. Many
leases for Company-operated bowling centers contain escalation clauses, and
many provide for contingent rentals based on percentages of gross revenue. No
leases contain restrictions on the Company's activities concerning dividends,
additional debt or further leasing.
Rent expense consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Basic expense........................................ $29.6 $21.5 $21.1
Contingent expense................................... 0.4 0.5 0.5
Sublease income...................................... (1.1) (1.9) (1.7)
----- ----- -----
Rent expense, net.................................... $28.9 $20.1 $19.9
===== ===== =====
</TABLE>
Future minimum rental payments at December 31, 1996, under agreements
classified as operating leases with noncancelable terms in excess of one year,
are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
1997................................................................ $17.1
1998................................................................ 16.5
1999................................................................ 14.0
2000................................................................ 12.6
2001................................................................ 9.6
Thereafter.......................................................... 13.7
-----
Total (not reduced by minimum sublease rentals of $1.4 million). $83.5
=====
</TABLE>
37
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. PREFERRED SHARE PURCHASE RIGHTS
In February 1996, the Board of Directors declared a dividend of one
Preferred Share Purchase Right (Right) on each outstanding share of the
Company's common stock. Under certain conditions, each holder of Rights may
purchase one one-thousandth of a share of a new series of junior participating
preferred stock at an exercise price of $85 for each Right held. The Rights
expire on April 1, 2006.
The Rights become exercisable at the earlier of (1) a public announcement
that a person or group acquired or obtained the right to acquire 15% or more
of the Company's common stock or (2) fifteen days (or such later time as
determined by the Board of Directors) after commencement or public
announcement of an offer for more than 15% of the Company's common stock.
After a person or group acquires 15% or more of the common stock of the
Company, other shareholders may purchase additional shares of the Company at
fifty percent of the current market price. These Rights may cause substantial
ownership dilution to a person or group who attempts to acquire the Company
without approval of the Company's Board of Directors.
The Rights, which do not have any voting rights, may be redeemed by the
Company at a price of $.01 per Right at any time prior to a person's or
group's acquisition of 15% or more of the Company's common stock. A Right also
will be issued with each share of the Company's common stock that becomes
outstanding prior to the time the Rights become exercisable or expire.
In the event that the Company is acquired in a merger or other business
combination transaction, provision will be made so that each holder of Rights
will be entitled to buy the number of shares of common stock of the surviving
Company, which at the time of such transaction would have a market value of
two times the exercise price of the Rights.
16. UNCONSOLIDATED AFFILIATES AND SUBSIDIARIES
The Company has certain unconsolidated foreign and domestic affiliates that
are accounted for using the equity method.
Summary financial information of the unconsolidated affiliates is presented
below:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales...................................... $ 489.5 $ 414.4 $ 392.3
------- ------- -------
Gross margin................................... $ 83.8 $ 62.9 $ 80.4
------- ------- -------
Net earnings................................... $ 32.1 $ 17.8 $ 26.0
------- ------- -------
Company's share of net earnings................ $ 14.7 $ 11.5 $ 10.1
------- ------- -------
Current assets................................. $ 199.3 $ 200.1 $ 178.5
Noncurrent assets.............................. 153.0 123.5 114.2
------- ------- -------
Total assets................................... 352.3 323.6 292.7
Current liabilities............................ (170.1) (157.4) (134.9)
Noncurrent liabilities......................... (27.7) (17.8) (27.2)
------- ------- -------
Net assets..................................... $ 154.5 $ 148.4 $ 130.6
======= ======= =======
</TABLE>
The net sales of affiliates include an insignificant amount of sales to the
Company.
38
<PAGE>
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
17. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
----------------------------------
1ST 2ND 3RD 4TH YEAR
------- ------- ------- ------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1996
Net sales........................ $ 738.9 $ 858.3 $ 763.6 $ 799.5 $3,160.3
Gross margin..................... 214.9 256.4 207.5 196.5 875.3
------- ------- ------- ------- --------
Earnings from continuing
operations...................... $ 46.4 $ 69.8 $ 40.5 $ 29.1 $ 185.8
Earnings (loss) from
discontinued operations....... (1.0) 1.0 -- -- --
------- ------- ------- ------- --------
Net earnings................... $ 45.4 $ 70.8 $ 40.5 $ 29.1 $ 185.8
======= ======= ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations.......... $ .47 $ .71 $ .41 $ .29 $ 1.88
Earnings (loss) from
discontinued operations....... (.01) .01 -- -- --
------- ------- ------- ------- --------
Net earnings..................... $ .46 $ .72 $ .41 $ .29 $ 1.88
======= ======= ======= ======= ========
Dividends declared............... $ .125 $ .125 $ .125 $ .125 $ .50
======= ======= ======= ======= ========
COMMON STOCK PRICE (NYSE)
High........................... $24 5/8 $23 3/4 $24 5/8 $25 3/4 $ 25 3/4
Low............................ 21 1/4 20 18 1/8 23 1/2 18 1/8
1995
Net sales........................ $ 742.5 $803.7 $ 694.6 $ 665.5 $2,906.3
Gross margin..................... 209.0 237.3 188.6 172.2 807.1
------- ------- ------- ------- --------
Earnings from continuing
operations...................... $ 40.2 $ 36.0 $ 35.0 $ 22.4 $ 133.6
Loss on disposition of
Technical segment............. -- (7.0) -- -- (7.0)
Earnings (loss) from
discontinued operations....... -- 1.1 (0.3) (0.2) 0.6
------- ------- ------- ------- --------
Net earnings..................... $ 40.2 $ 30.1 $ 34.7 $ 22.2 $ 127.2
======= ======= ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations.......... $ .42 $ .37 $ .36 $ .23 $ 1.38
Loss on disposition of
Technical segment............. -- (.07) -- -- (.07)
Earnings from discontinued
operations.................... -- .01 -- -- .01
------- ------- ------- ------- --------
Net earnings..................... $ .42 $ .31 $ .36 $ .23 $ 1.32
======= ======= ======= ======= ========
Dividends declared............... $ .125 $ .125 $ .125 $ .125 $ .50
======= ======= ======= ======= ========
COMMON STOCK PRICE (NYSE)
High........................... $ 21 $23 1/2 $21 3/8 $ 24 $ 24
Low............................ 18 7/8 16 3/8 16 7/8 19 16 3/8
</TABLE>
The 1996 and 1995 results have been restated to segregate the results of
operations of the Company's divested freshwater fishing boat unit as
discontinued operations. Second quarter net earnings in 1995 include after-tax
restructuring charges of $24.4 million for losses on the divestitures of the
golf club shaft business and Circus World Pizza operations in the Recreation
segment and management transition expenses and the cost of an early retirement
and selective separation program at the Company's corporate office.
18. SUBSEQUENT EVENT (UNAUDITED)
On March 18, 1997, the Company received notification from the Federal Trade
Commission that the investigation referenced in footnote 4 "Commitments and
Contingencies" on page 26 had been concluded, with no action warranted by the
Commission.
39
<PAGE>
REPORT OF MANAGEMENT
The financial data in this report, including the audited financial
statements, have been prepared by management, which is responsible for their
integrity and objectivity. The statements have been prepared in conformity
with generally accepted accounting principles and include some amounts that
are based upon management's best estimates and judgments to present fairly the
results of operations.
The Company maintains accounting and related internal control systems which
professional finance managers are responsible for implementing and overseeing.
These systems are intended to provide reasonable assurance, at reasonable
cost, that assets are safeguarded and to produce accurate financial records. A
staff of corporate auditors periodically reviews these systems and controls
and compliance therewith.
The Audit and Finance Committee of the Board of Directors, comprised
entirely of outside directors, meets regularly with the independent public
accountants, management and internal auditors to review the results of their
work and confirm that they are properly fulfilling their responsibilities.
40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Brunswick Corporation:
We have audited the accompanying consolidated balance sheets of Brunswick
Corporation (a Delaware Corporation) and Subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brunswick Corporation and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Chicago, Illinois
January 29, 1997
41
<PAGE>
BRUNSWICK CORPORATION
SIX-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Results of Operations
Data
Net sales............. $3,160.3 $2,906.3 $2,592.0 $2,125.0 $1,980.5 $1,756.3
Depreciation and
amortization......... 129.7 118.0 118.0 116.0 113.8 123.0
Restructuring charges. -- 40.0 -- -- -- --
Operating earnings
(loss)............... 304.8 218.3 206.9 98.7 80.4 (13.5)
Earnings (loss) before
income taxes......... 290.3 206.8 195.3 85.4 62.6 (35.5)
Earnings (loss) from
continuing operations
before extraordinary
item, cumulative
effect of accounting
changes and
discontinued
operations........... $ 185.8 $ 133.6 $ 127.1 $ 53.8 $ 40.1 $ (31.9)
Cumulative effect on
prior years of
changes in accounting
principles........... -- -- -- (14.6) (38.3) --
Extraordinary loss
from retirement of
debt................. -- -- -- (4.6) -- --
Discontinued
operations
Loss on disposition
of Technical
segment............ -- (7.0) -- (12.2) (26.0) --
Earnings (loss) from
discontinued
operations......... -- 0.6 1.9 0.7 (2.1) 8.2
-------- -------- -------- -------- -------- --------
Net earnings
(loss)........... $ 185.8 $ 127.2 $ 129.0 $ 23.1 $ (26.3) $ (23.7)
======== ======== ======== ======== ======== ========
Per Common Share Data
Earnings (loss) from
continuing operations
before extraordinary
item, cumulative
effect of accounting
changes and
discontinued
operations........... $ 1.88 $ 1.38 $ 1.33 $ .56 $ .43 $ (.36)
Cumulative effect on
prior years of
changes in accounting
principles........... -- -- -- (.15) (.41) --
Extraordinary loss
from retirement of
debt................. -- -- -- (.05) -- --
Discontinued
operations
Loss on disposition
of Technical
segment............ -- (.07) -- (.13) (.28) --
Earnings (loss) from
discontinued
operations......... -- .01 .02 .01 (.02) .09
-------- -------- -------- -------- -------- --------
Net earnings
(loss)........... $ 1.88 $ 1.32 $ 1.35 $ .24 $ (.28) $ (.27)
-------- -------- -------- -------- -------- --------
Dividends declared.... $ .50 $ .50 $ .44 $ .44 $ .44 $ .33
Dividends paid........ .50 .50 .44 .44 .44 .44
Book value............ 12.16 10.66 9.55 8.44 8.65 8.79
Balance Sheet Data
Capital expenditures.. $ 169.9 $ 118.0 $ 101.1 $ 94.3 $ 87.6 $ 73.8
Assets of continuing
operations........... 2,802.4 2,310.6 2,048.3 1,922.0 1,829.4 1,721.9
Debt
Short-term.......... $ 112.6 $ 6.1 $ 8.2 $ 11.9 $ 10.4 $ 6.3
Long-term........... 455.4 312.8 318.8 324.5 310.1 315.9
-------- -------- -------- -------- -------- --------
Total debt........ 568.0 318.9 327.0 336.4 320.5 322.2
Common shareholders'
equity............... 1,197.7 1,043.1 910.7 804.4 822.5 778.7
-------- -------- -------- -------- -------- --------
Total
capitalization..... $1,765.7 $1,362.0 $1,237.7 $1,140.8 $1,143.0 $1,100.9
======== ======== ======== ======== ======== ========
Other Data
Return on beginning
shareholders' equity. 17.8% 14.7% 15.8% 6.5% 5.1% (3.9)%
Effective tax rate
(benefit)............ 36.0% 35.5% 35.0% 37.0% 36.0% (10.1)%
Debt-to-capitalization
rate................. 32.2% 23.4% 26.4% 29.5% 28.0% 29.3%
Common Stock Price
(NYSE)
High.................. $ 25 3/4 $ 24 $ 25 1/8 $ 18 1/2 $ 17 3/4 $ 16 1/8
Low................... 18 1/8 16 3/8 17 12 1/2 12 1/4 8 3/4
Close................. 24 24 18 7/8 18 16 1/4 13 7/8
</TABLE>
The Notes to Consolidated Financial Statements should be read in conjunction
with the above summary.
42
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 29, 1997, included in this Form 10-K, into the
Company's previously filed registration statements on Form S-8 (File No. 33-
4683), Form S-3 (File No. 33-61512), Form S-8 (File No. 33-55022), Form S-8
(File No. 33-56193), Form S-8 (File No. 33-61835), Form S-8 (File No. 33-
65217), Form S-8 (File No. 333-04289) and Form S-3 (File No. 333-9997).
Arthur Andersen LLP
Chicago, Illinois
March 27, 1997
43
<PAGE>
BRUNSWICK CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
CHARGES
TO
BALANCE AT PROFIT BALANCE
ALLOWANCES FOR POSSIBLE BEGINNING AND AT END OF
LOSSES ON RECEIVABLES OF PERIOD LOSS WRITE-OFFS RECOVERIES OTHER PERIOD
- ----------------------- ---------- ------- ---------- ---------- ----- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
1996................... $16.9 $5.3 $(7.0) $ 0.4 $ 1.6* $17.2
===== ==== ===== ===== ===== =====
1995................... $18.1 $5.1 $(6.4) $ 0.4 $(0.3) $16.9
===== ==== ===== ===== ===== =====
1994................... $15.8 $5.9 $(4.3) $ 1.1 $(0.4) $18.1
===== ==== ===== ===== ===== =====
- --------
* Includes $2.1 million relating to acquisitions
This schedule reflects only the financial information of continuing
operations.
<CAPTION>
DEFERRED TAX ASSET
VALUATION ALLOWANCE
- -------------------
<S> <C> <C> <C> <C> <C> <C>
1996................... $ 3.2 $ -- $ -- $(2.9) $ -- $ 0.3
===== ==== ===== ===== ===== =====
1995................... $ 3.2 $ -- $ -- $ -- $ -- $ 3.2
===== ==== ===== ===== ===== =====
1994................... $ 5.8 $ -- $ -- $(2.6) $ -- $ 3.2
===== ==== ===== ===== ===== =====
</TABLE>
This account reflects the adoption of SFAS No. 109, "Accounting for Income
Taxes", which was adopted effective January 1, 1992. The Company utilized $2.6
million of foreign tax credits in 1994 and $2.9 million of capital loss
carryforwards in 1996 to reduce income tax expense for the year.
This schedule reflects only the financial information of continuing
operations.
44
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------- -----------
3.1 Restated Certificate of Incorporation of the Company filed as
Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1987 and hereby incorporated by reference.
3.2 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for 1995 and hereby
incorporated by reference.
3.3 By-Laws of the Company.
4.1 Indenture dated as of March 15, 1987, between the Company and
Continental Illinois National Bank and Trust Company of Chicago
filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1987 and hereby incorporated by
reference.
4.2 Officers' Certificate setting forth terms of the Company's
$125,000,000 principal amount of 7-3/8% Debentures due September 1,
2023 filed as Exhibit 4.3 to the Company's Annual Report on Form
10-K for 1993 and hereby incorporated by reference.
4.3 Form of the Company's $250,000,000 principal amount of 6.75% Notes
due December 15, 2006 filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K dated December 10, 1996 and hereby incorporated
by reference.
4.4 The Company's Agreement to furnish additional debt instruments upon
request by the Securities and Exchange Commission filed as Exhibit
4.10 to the Company's Annual Report on Form 10-K for 1980 and hereby
incorporated by reference.
<PAGE>
4.5 Rights Agreement dated as of February 5, 1996, between the Company
and Harris Trust and Savings Bank filed as Exhibit 1 to the
Company's Registration Statement for Preferred Share Purchase Rights
on Form 8-A dated March 13, 1996 and hereby incorporated by
reference.
10.1* Third Amended and Restated Employment Agreement entered as of
December 30, 1986, between the Company and Jack F. Reichert filed as
Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1986
and hereby incorporated by reference.
10.2* Amendment dated October 24, 1989, to Employment Agreement by and
between the Company and Jack F. Reichert filed as Exhibit 19.2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989 and hereby incorporated by reference.
10.3* Supplemental Agreement to Employment Agreement dated December 30,
1986, by and between the Company and Jack F. Reichert filed as
Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989 and hereby incorporated by
reference.
10.4* Amendment dated February 12, 1991 to Employment Agreement by and
between the Company and Jack F. Reichert filed as Exhibit 10.4 to
the Company's Annual Report on Form 10-K for 1990 and hereby
incorporated by reference.
10.5* Amendment dated March 20, 1992 to Employment Agreement by and
between the Company and Jack F. Reichert filed as Exhibit 10.5 to
the Company's Annual Report on Form 10-K for 1992 and hereby
incorporated by reference.
10.6* Amendment dated December 15, 1992 to Employment Agreement by and
between the Company and Jack F. Reichert filed as Exhibit 10.6 to
the
-2-
<PAGE>
Company's Annual Report on Form 10-K for 1992 and hereby
incorporated by reference.
10.7* Amended and Restated Employment Agreement dated February 3, 1997 by
and between the Company and Peter N. Larson.
10.8* Employment Agreement dated December 1, 1995 by and between the
Company and Peter B. Hamilton filed as Exhibit 10.8 to the Company's
Annual Report on Form 10-K for 1995 and hereby incorporated by
reference.
10.9* Form of Employment Agreement by and between the Company and each of
W. J. Barrington, K. J. Chieger, J. W. Dawson, F. J. Florjancic,
Jr., P. B. Hamilton, D. D. Jones, R. S. O'Brien, V. J. Reich, J. A.
Schenk, R. C. Steinway and K. B. Zeigler filed as Exhibit 10.9 to
the Company's Annual Report on Form 10-K for 1995 and hereby
incorporated by reference.
10.10* 1994 Stock Option Plan for Non-Employee Directors filed as Exhibit A
to the Company's definitive Proxy Statement dated March 25, 1994 for
the Annual Meeting of Stockholders on April 27, 1994 and hereby
incorporated by reference.
10.11* 1995 Stock Plan for Non-Employee Directors filed as Exhibit B to the
Company's definitive Proxy Statement dated March 19, 1996 for the
Annual Meeting of Stockholders on April 24, 1996 and hereby
incorporated by reference.
10.12* Supplemental Pension Plan filed as Exhibit 19.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1989
and hereby incorporated by reference.
10.13* Form of Insurance Policy issued for the life of each of the
Company's officers, together with the specifications for each of
these policies, filed as Exhibit 10.21 to the Company's Annual
-3-
<PAGE>
Report on Form 10-K for 1980 and hereby incorporated by reference.
The Company pays the premiums for these policies and will recover
these premiums, with some exceptions, from the policy proceeds.
10.14* Insurance policy issued by The Prudential Insurance Company of
America insuring all of the Company's officers and certain other
senior management employees for medical expenses filed as Exhibit
10.23 to the Company's Annual Report on Form 10-K for 1980 and
hereby incorporated by reference.
10.15* Form of Indemnification Agreement by and between the Company and
each of N. D. Archibald, M. J. Callahan, J. P. Diesel, M. A.
Fernandez, P. Harf, G. D. Kennedy, B. K. Koken, J. W. Lorsch, B. M.
Musham, K. Roman and R. W. Schipke filed as Exhibit 19.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1986 and hereby incorporated by reference.
10.16* Indemnification Agreement dated September 16, 1986, by and between
the Company and J. F. Reichert filed as Exhibit 19.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1986 and hereby incorporated by reference.
10.17* Indemnification Agreement dated April 1, 1995 by and between the
Company and P. N. Larson filed as Exhibit 10.17 to the Company's
Annual Report on Form 10-K for 1995 and hereby incorporated by
reference.
10.18* Form of Indemnification Agreement by and between the Company and
each of W. J. Barrington, K. J. Chieger, J. W. Dawson, F. J.
Florjancic, Jr., P. B. Hamilton, D. D. Jones, R. S. O'Brien, V. J.
Reich, J. A. Schenk, R. C. Steinway, and K. B. Zeigler filed as
-4-
<PAGE>
Exhibit 19.4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1986 and hereby incorporated by
reference.
10.19* 1991 Stock Plan filed as Exhibit A to the Company's definitive Proxy
Statement dated March 19, 1996 for the Annual Meeting of
Stockholders on April 24, 1996 and hereby incorporated by reference.
10.20* Change In Control Severance Plan filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for 1989 and hereby
incorporated by reference.
10.21* Brunswick Performance Plan for 1996 filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for 1995 and hereby
incorporated by reference.
10.22* Brunswick Performance Plan for 1997.
10.23* Brunswick Strategic Incentive Plan for 1994-1996 and 1995-1997 filed
as Exhibit 10.23 to the Company's Annual Report on Form 10-K for
1993 and hereby incorporated by reference.
10.24* Brunswick Strategic Incentive Plan for 1996-1997 filed as Exhibit
10.24 to the Company's Annual Report on Form 10-K for 1995 and
hereby incorporated by reference.
10.25* Brunswick Strategic Incentive Plan for 1997-1998.
21.1 Subsidiaries of the Company.
24.1 Power of Attorney.
27.1 Financial Data Schedule
-5-
<PAGE>
EXHIBIT 3.3
-----------
BRUNSWICK CORPORATION
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices in the City of Lake
Forest, State of Illinois, and at such other places as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders may be held at such time and place,
within or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. An annual meeting of stockholders shall be held at such time
and on such day in the month of April or in such other month as the board of
directors may specify by resolution. At the annual meeting the stockholders
shall elect by a plurality vote of those stockholders voting at the meeting, by
ballot, a board of directors, and transact such other business as may properly
be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. At least ten days before every election of directors, a
complete list of the stockholders entitled to vote at said election arranged in
alphabetical order, shall be prepared or caused to be prepared by the secretary.
Such list shall be open at the place where the election is to be held for said
ten days, to the examination of any stockholder, and shall be produced and kept
at the time and place of election during the whole time thereof, and subject to
the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called
<PAGE>
by the chairman of the board and shall be called by the president or secretary
at the request in writing of a majority of the board of directors. Such request
shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting of stockholders stating the
place, date and hour of meeting, and the purpose or purposes for which the
meeting is called shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the shares of the capital stock of
the corporation, issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall be requisite and shall constitute a quorum
at all meetings of the stockholders for the transaction of business except as
otherwise provided by statute or by the certificate of incorporation or by these
by-laws. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified.
Section 9. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the certificate of incorporation or of these by-laws, a different
vote is required, in which case such express provisions shall govern and control
the decision of such question.
Section 10. At any meeting of the stockholders every stockholder having
the right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such stockholder and bearing a date not
more than three years prior to said meeting, unless said instrument provides for
a longer period. Each stockholder shall have one vote for each share of stock
having voting power, registered in his name on the books of the corporation.
Except where the transfer books of the corporation shall have been closed or a
date shall have been fixed as a record date for the determination of its
stockholders entitled to vote, no share of stock shall be voted on at any
election for directors which shall have been transferred on the books of the
corporation within twenty days next proceeding such election of directors.
-2-
<PAGE>
ARTICLE III
DIRECTORS
Section 1. The number of directors shall be fourteen, but the number of
directors may, from time to time, be altered by amendment of these by-laws in
accordance with the certificate of incorporation.
Section 2. Subject to the rights of holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation, nominations for the election of directors may be made by the board
of directors or a committee appointed by the board of directors or by any
stockholder entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors generally may
nominate one or more persons for election as directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the secretary of the corporation not later than (a)
with respect to an election to be held at an annual meeting of stockholders,
ninety days prior to the anniversary date of the immediately preceding annual
meeting, and (b) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the tenth
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is the holder of record
of stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (v) the consent of each nominee to serve
as a director of the corporation if so elected. The presiding officer of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
Section 3. The property and business of the corporation shall be managed
by its board of directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
-3-
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board shall be held
immediately after, and at the same place as, the annual meeting of stockholders
at which such board shall have been elected, for the purpose of electing
officers, and for the consideration of any other business that may properly be
brought before the meeting. No notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present.
Section 6. Regular meetings of the board of directors shall be held on
such dates, not less often than once each calendar quarter, as may be fixed from
time to time by resolution of the board of directors. No notice need be given
of such meetings, provided that notice of such resolution has been furnished to
each director. Such meetings shall be held at the Lake Forest office of the
corporation or at such other place as is stated in the notice of the meeting.
Upon the assent, given either verbally or in writing, of a majority of the whole
board, any regular meeting may be cancelled, the time changed, or may be held at
such other place and time, as a majority of the whole board may designate,
either verbally or in writing, upon reasonable notice given to each director,
either personally or by mail or by telegram.
Section 7. Special meetings of the board of directors may be called by the
chairman of the board, or by the secretary on the written request of two
directors, to be held either at the Lake Forest office of the corporation or at
such other place as may be convenient and may be designated by the officer
calling the meeting. Reasonable notice of such special meeting shall be given
to each director, either personally or by mail or telegram; provided, that a
majority of the whole board of directors present at a meeting called by any of
said officers, in matters requiring prompt attention by the board, may hold a
valid meeting and transact business without the giving of notice to each
director as above provided.
Section 8. At all meetings of the board the presence of a majority of the
whole board shall be necessary and sufficient to constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation or by these by-laws. If a quorum shall not be
present at any meeting of the board of directors the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
-4-
<PAGE>
EXECUTIVE COMMITTEE
Section 9. (a) The board of directors of the corporation at the annual or
any regular or special meeting may, by resolution adopted by a majority of the
whole board, designate three or more directors, one of whom shall be either the
chairman of the board or the president of the corporation, to constitute an
executive committee. Vacancies in the executive committee may be filled at any
meeting of the board of directors. Each member of the executive committee shall
hold office until his successor shall have been duly elected, or until his
death, or until he shall resign or shall have been removed from office or shall
cease to be a director. Any member of the executive committee may be removed by
resolution adopted by a majority of the whole board of directors whenever in its
judgment the best interests of the corporation would be served thereby. The
compensation, if any, of members of the executive committee shall be established
by resolution of the board of directors.
(b) The executive committee shall have and may exercise all of the
authority of the board of directors in the management of the corporation,
provided such committee shall not have the authority of the board of directors
in reference to amending the certificate of incorporation, adopting a plan of
merger or consolidation with another corporation or corporations, recommending
to the stockholders the sale, lease, exchange, mortgage, pledge or other
disposition of all or substantially all of the property and assets of the
corporation if not made in the usual and regular course of its business,
recommending to the stockholders a voluntary dissolution of the corporation or a
revocation thereof, amending, altering or repealing the by-laws of the
corporation, electing or removing officers of the corporation or members of the
executive committee, fixing the compensation of officers, directors, or any
member of the executive committee, declaring dividends, amending, altering or
repealing any resolution of the board of directors which by its terms provides
that it shall not be amended, altered or repealed by the executive committee,
the acquisition or sale of companies, businesses or fixed assets where the fair
market value thereof or the consideration therefor exceeds $10,000,000,
authorizing the issuance of any shares of the corporation, or authorizing the
creation of any indebtedness for borrowed funds, in excess of $2,000,000.
(c) The executive committee shall have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Minutes of all
meetings of the executive committee shall be submitted to the board of directors
of the corporation at each meeting following a meeting of the executive
committee. The minute books of the executive committee shall at all times be
open to the inspection of any director.
(d) The executive committee shall meet at the call of the chairman of the
executive committee, chairman of the board, the president, or any two members of
the executive committee. Three members of the executive committee shall
constitute a quorum for the transaction of business and the act of a majority of
those present shall constitute the act of the committee.
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AUDIT COMMITTEE
Section 10. (a) The board of directors of the corporation at the annual or
any regular or special meeting shall, by resolution adopted by a majority of the
whole board, designate three or more independent directors to constitute an
audit committee and appoint one of the directors so designated as the chairman
of the audit committee. Membership on the audit committee shall be restricted to
those directors who are independent of the management of the corporation and are
free from any relationship that, in the opinion of the corporation's board of
directors, would interfere with the exercise of independent judgment as a member
of the committee. Vacancies in the committee may be filled at any meeting of
the board of directors. Each member of the committee shall hold office until
his successor shall have been duly elected, or until his death, or until he
shall resign or shall have been removed from the audit committee by the board or
shall cease to be a director. Any member of the audit committee may be removed
from the committee by resolution adopted by a majority of the whole board of
directors whenever in its judgment (1) such person is no longer an independent
director or free from any relationship with the corporation or any of its
officers prohibited by this section, or (2) the best interests of the
corporation would be served thereby. The compensation, if any, of members of
the committee shall be established by resolution of the board of directors.
(b) The audit committee shall be responsible for recommending to the board
of directors the appointment or discharge of independent auditors, reviewing
with management and the independent auditors the terms of engagement of
independent auditors, including the fees, scope and timing of the audit and any
other services rendered by such independent auditors; reviewing with independent
auditors and management the corporation's policies and procedures with respect
to internal auditing, accounting and financial controls, and dissemination of
financial information; reviewing with management, the independent auditors and
the internal auditors, the corporation's financial statements, audit results and
reports and the recommendations made by the auditors with respect to changes in
accounting procedures and internal controls; reviewing the results of studies of
the corporation's system of internal accounting controls; and performing any
other duties or functions deemed appropriate by the board of directors. The
committee shall have such powers and rights as may be necessary or desirable to
fulfill these responsibilities including, the power and right to consult with
legal counsel and to rely upon the opinion of such legal counsel. The audit
committee is authorized to communicate directly with the corporation's financial
officers and employees, internal auditors and independent auditors on such
matters as it deems desirable and to have the internal auditors and independent
auditors perform such additional procedures as it deems appropriate. The audit
committee shall periodically report to the board of directors on its activities.
(c) Minutes of all meetings of the audit committee shall be submitted to
the board
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of directors of the corporation. The minute books of the committee shall at all
times be open to the inspection of any director.
(d) The audit committee shall meet at the call of its chairman or any two
members of the committee. Two members of the audit committee shall constitute a
quorum for the transaction of business and the act of a majority of those
present, but no less than two members, shall constitute the act of the
committee.
COMPENSATION COMMITTEE
Section 11. (a) The board of directors of the corporation at the annual or
any regular or special meeting shall, by resolution adopted by a majority of the
whole board, designate three or more directors to constitute a compensation
committee and appoint one of the directors so designated as the chairman of the
compensation committee. Membership on the compensation committee shall be
restricted to disinterested persons which for this purpose shall mean any
director, who, during the time he is a member of the compensation committee is
not eligible, and has not at any time within one year prior thereto been
eligible, for selection to participate in any of the compensation plans
administered by the compensation committee, except for the 1988 Stock Plan for
Non-Employee Directors. Vacancies in the committee may be filled at any meeting
of the board of directors. Each member of the committee shall hold office until
his successor shall have been duly elected, or until his death or resignation,
or until he shall have been removed from the committee by the board of
directors, or until he shall cease to be a director or a disinterested person.
Any member of the compensation committee may be removed by resolution adopted by
a majority of the whole board of directors whenever in its judgment the best
interests of the corporation would be served thereby. A majority of the
compensation committee shall constitute a quorum and an act of the majority of
the members present at any meeting at which a quorum is present, or an act
approved in writing by each of the members of the committee without a meeting,
shall be the act of the compensation committee. The compensation, if any, of
members of the committee shall be established by resolution of the board of
directors.
(b) The compensation committee shall administer the CEO Incentive Plan,
Brunswick Performance Plan, Strategic Incentive Plan, 1971 Stock Option Plan,
1984 Restricted Stock Plan, 1988 Stock Plan for Non-Employee Directors, 1991
Stock Plan, and Supplemental Pension Plan. The compensation committee shall have
the power and authority vested in it by any plan of the corporation which the
committee administers. The compensation committee shall from time to time
recommend to the board of directors the compensation of the officers of the
corporation except for assistant officers whose compensation shall be fixed by
the officers of the corporation. The compensation committee shall also make
recommendations to the board of directors with regard to the
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compensation of the board of directors and its committees except the
compensation committee.
CORPORATE GOVERNANCE COMMITTEE
Section 12. (a) The board of directors of the corporation at the annual or
any regular or special meeting shall, by resolution adopted by a majority of the
whole board, designate three or more directors to constitute a corporate
governance committee of the board of directors and appoint one of the directors
so designated as its chairman. Members on the corporate governance committee of
the board of directors shall be restricted to disinterested persons which for
this purpose shall mean any director who, during the time the director is a
member of the corporate governance committee of the board of directors, is
neither an officer or employee of the corporation. Vacancies in the committee
may be filled at any meeting of the board of directors. Each member of the
committee shall hold office until his successor shall have been duly elected, or
until his death or resignation, or until he shall have been removed from the
committee by the board of directors, or until he shall cease to be a director.
Any member of the corporate governance committee of the board of directors may
be removed by resolution of the whole board of directors whenever in its
judgment the best interests of the corporation would be served thereby. A
majority of the corporate governance committee of the board of directors shall
constitute a quorum and an act of the majority of the members present at any
meeting at which a quorum is present, or an act approved in writing by each of
the members of the committee without a meeting, shall be the act of the
corporate governance committee. The compensation, if any, of members of the
committee shall be established by resolution of the board of directors.
(b) The corporate governance committee of the board of directors shall be
responsible for all matters of corporate governance and director affairs
including, but not limited to:
(i) considering and making recommendations to the board with regard to
changes in the size of the board;
(ii) developing and maintaining appropriate criteria for the
composition of the board of directors and its nominees;
(iii) overseeing the selection of and making recommendations to the
board regarding nominees for election as directors to be submitted to the
stockholders and nominees to fill vacancies on the board of directors as they
occur;
(iv) coordinating an annual evaluation by the board, with input from
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senior management, of the structure of the board and its
committees and the processes employed in their deliberations; and
(v) periodically evaluating the performance of members of the board.
(c) Nothing in this by-law is intended to prevent any individual director
from making a recommendation of a person to be a director of the corporation
either to the corporate governance committee or to the board.
OTHER COMMITTEES
Section 13. The board of directors may from time to time create and
appoint such committees in addition to the executive, audit, compensation and
nominating committees as it deems desirable. Each additional committee shall
bear such designation, shall have such powers and shall perform such duties, not
inconsistent with these by-laws or with law, as may be assigned to it by the
board of directors; provided that no such additional committee may exercise the
powers of the board of directors in the management of the business and affairs
of the corporation except such as shall be expressly delegated to it. The board
of directors shall have the power to change the members of any such additional
committee at any time, to fill vacancies, and to discharge any such additional
committee at any time. The compensation, if any, of members of any such
committee shall be established by resolution of the board of directors.
COMPENSATION OF DIRECTORS
Section 14. Directors shall receive such fees and reimbursement of
reasonable expenses as may be fixed from time to time by resolution of the
board. Members of special or standing committees shall also be allowed such
fees and reimbursements for reasonable expenses in connection with service on
such committees as may from time to time be fixed by resolution of the board.
Such fees may be fixed on the basis of meetings attended or on an annual basis
or both and may be payable currently or deferred.
ACTION BY WRITTEN CONSENT
Section 15. Any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
ACTION BY TELEPHONE OR OTHER COMMUNICATIONS EQUIPMENT
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Section 16. Directors may participate in a meeting of the board or any
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this section shall constitute
presence in person at such meeting.
ALTERNATE COMMITTEE MEMBERS
Section 17. The board of directors may designate one or more directors as
alternate members of any committee, any of whom may be selected by the chairman
of a committee to replace any absent or disqualified member at any meeting of a
committee. In the absence or disqualification of a member of a committee and of
the alternate members of such committee, the member or members thereof present
at any meeting and not disqualified from voting, whether or not such member or
members constitutes a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in place of any such absent or
disqualified member.
ARTICLE IV
NOTICES
Section 1. Except as may be otherwise provided for in these by-laws,
whenever under the provisions of the statutes or of the certificate of
incorporation or of these by-laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder at such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall be mailed.
Notice to directors may also be given by telegram or telex.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation, or of these
by-laws, a waiver thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be elected by the board
of directors and shall be a chairman of the board, a president, one or more vice
presidents, a secretary, a treasurer and a general counsel. The board of
directors may also elect a senior vice president, an executive vice president, a
controller and one or more assistant
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vice presidents, assistant secretaries, assistant treasurers and assistant
general counsels. Two or more offices may be held by the same person, except as
where the offices of president and secretary are held by the same person, such
person shall not hold any other office.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall elect a chairman of the board from among the
directors, and shall elect a president, one or more vice presidents, a secretary
and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may elect such other officers as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the board.
Section 4. The board of directors shall fix the salaries of all officers of
the corporation, except that the salaries of the assistant vice presidents,
assistant secretaries, and assistant treasurers may be fixed by the chairman of
the board or the president of the corporation.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the whole board of directors. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
board of directors.
THE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board shall be an officer of the corporation
and shall preside at all meetings of the stockholders and the board of directors
and shall perform such other duties as appertain to the office of the chairman
of the board and as may be assigned to him from time to time by the board of
directors.
THE PRESIDENT
Section 7. The president shall be the chief executive officer of the
corporation and, subject to the board of directors and the executive committee,
shall be in general charge of the affairs of the corporation and shall possess
such powers and perform such duties as usually appertain to the chief executive
officer in business corporations. In the absence of the chairman of the board,
he shall preside at all meetings of the stockholders and the board of directors
and shall perform such other duties as may from time to time be assigned to him
by the board of directors. He shall see that all orders and resolutions of the
board of directors and the executive committee are carried into effect.
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THE EXECUTIVE VICE PRESIDENT
Section 8. The executive vice president shall exercise such supervision
over the business and affairs of the corporation as shall be prescribed from
time to time by the board of directors or by the president. In the absence or
disability of the president, and unless otherwise determined by the board of
directors, the executive vice president shall perform the duties and exercise
the powers of the president.
THE VICE PRESIDENTS
Section 9. The vice presidents shall perform such duties and have such
powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 10. The secretary shall attend all meetings of the board of
directors, the executive committee, and all meetings of the stockholders, and
shall record all of the proceedings of said meetings in books to be kept for
that purpose, and shall perform like duties for the standing committees when
required. The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or the
chairman of the board, under whose supervision the secretary shall be. The
secretary may sign with the president or a vice president, in the name of the
corporation, all contracts and instruments of conveyance authorized by the board
of directors, and the secretary shall keep in safe custody the seal of the
corporation and, when authorized by the board of directors, affix the same to
any instrument requiring it and, when so affixed, it shall be attested by the
signature of the secretary or an assistant secretary, and the secretary shall in
general perform all the duties incident to the office of secretary. The
secretary shall have charge of the stock certificate books, transfer books and
stock ledgers; provided, however, that the secretary may employ corporate
transfer agents and registrars whom the secretary reasonably believes to be
financially responsible and competent in the performance of their duties to
maintain such stock certificate books, transfer books and stock ledgers and such
other books and paper as may be appropriate and all of such records may be kept
either in the form of writings, punch cards, magnetic tape, photographs, micro-
photographs or any other information storage device as appropriate, so long as
the form of such records is designed to allow reasonably prompt and appropriate
access thereto and retrieval of information in clearly legible form therefrom.
Section 11. An assistant secretary shall, in the absence or disability of
the secretary, perform the duties and exercise the powers of the secretary. The
assistant
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secretaries shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors. The board of
directors, in its discretion, may delegate its responsibilities regarding the
designation of depositories contained in this section to any officer or officers
of the corporation. The treasurer shall in general perform all the duties
incident to the office of the treasurer.
Section 13. He shall be responsible for the disbursement of the funds of
the corporation and shall take proper vouchers for such disbursements, and upon
the request of the president or the board of directors, shall render an account
of all his transactions as treasurer and of the financial condition of the
corporation.
Section 14. If required by the board of directors, he shall give the
corporation a bond, which shall be renewed regularly, in such sum and with such
surety or sureties as shall be satisfactory to the board of directors for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 15. The assistant treasurers, unless otherwise determined by the
board of directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer. They shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE CONTROLLER
Section 16. The controller shall maintain adequate records of all assets,
liabilities, and other financial transactions of the corporation and, in
general, shall perform all the duties ordinarily connected with the office of
controller and such other duties as, from time to time, may be assigned to him
by the board of directors or the president.
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THE GENERAL COUNSEL AND ASSISTANT GENERAL COUNSELS
Section 17. The general counsel shall be in charge of the law department
and patent functions, shall supervise all legal matters affecting the
corporation and render all necessary advice in connection therewith and shall
give such legal advice as may be appropriate to the directors, officers and
employees of the corporation. He may retain such law firms and other legal
counsel who are not employees of the corporation as he considers desirable for
the purpose of effectively carrying out his duties as general counsel.
Section 18. The assistant general counsels shall perform such duties and
have such powers as the board of directors may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. The corporation may indemnify to the fullest extent that is
lawful, any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines, taxes, penalties and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding.
Section 2. The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not he would be entitled to indemnity against the same liability
under the provisions of this article.
Section 3. The corporation may enter into an indemnity agreement with any
director, officer, employee or agent of the corporation, upon terms and
conditions that the board of directors deems appropriate, as long as the
provisions of the agreement are not inconsistent with this article.
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ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by the chairman
of the board, the president or a vice president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, designations, preferences and relative,
participating, optional and other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions or such
preferences and rights shall be set forth in full or summarized on the face or
back of the certificate which the corporation shall issue to represent such
class or series of stock; provided, however, that, to the full extent allowed by
law, in lieu of the foregoing requirements, there may be set forth on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and rights.
Section 2. If such certificate is countersigned (1) by a transfer agent, or
(2) by a registrar, any other signature on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may authorize the transfer agents and
registrars of the corporation to issue and register, respectively, new
certificates in place of any certificates alleged to have been lost, stolen or
destroyed, and in its discretion and as a condition precedent to the issuance
thereof, may prescribe such terms and conditions as it deems expedient, and may
require such indemnities as it deems necessary to protect the corporation and
said transfer agents and registrars.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to
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issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the party of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation,if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from
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time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. The board of directors shall present at each annual meeting and
when called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate. The board of directors,
in its discretion, may delegate its responsibilities contained in this section
to any officer or officers of the corporation.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall begin on the first day
of January, and terminate on the thirty-first day of December, in each year.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Incorporated Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE IX
TENNESSEE AUTHORIZED CORPORATION PROTECTION ACT
Section 1. This corporation shall be subject to Section 24(a) of Chapter 30
of the Tennessee Business Corporation Act.
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ARTICLE X
AMENDMENTS
Section 1. The holders of shares of capital stock of the corporation
entitled at the time to vote for the election of directors shall have the power
to adopt, alter, amend, or repeal the by-laws of the corporation by vote of such
percentage of such shares as is required by the Certificate of Incorporation, or
if no percentage is specified by the Certificate of Incorporation, by vote of
not less than 66-2/3% of such shares. The board of directors shall also have the
power to adopt, alter, amend or repeal the by-laws of the corporation by vote of
such percentage of the entire board as is required by the Certificate of
Incorporation, or if no percentage is specified by the Certificate of
Incorporation, by vote of not less than a majority of the entire board.
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Exhibit 10.7
------------
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
This Agreement, made and entered into as of February 3, 1997 (the "Effective
Date"), by and between BRUNSWICK CORPORATION, a Delaware corporation (the
"Company"), and Peter N. Larson (the "Executive");
WITNESSETH THAT:
---------------
WHEREAS, the Executive has been employed by the Company as its Chief
Executive, immediately prior to the Effective Date, pursuant to an employment
agreement dated April 1, 1995 (the "Prior Agreement"); and
WHEREAS, the parties hereto desire to enter into this Agreement pertaining to
the continued employment of the Executive by the Company;
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 Chief Executive during the Agreement Term (as defined
below), and the Executive hereby agrees to remain in the employ of the
Company during the Agreement Term. During the Agreement Term, the Executive
shall be a member and Chairman of the Board of Directors of the Company
(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
<PAGE>
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) 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.
(d) 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
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.
(e) The "Agreement Term" shall be the period, the first day of which shall be
the Effective Date and the last day of which shall be April 1, 1999. The
Agreement Term shall be automatically extended for an additional one-year
period on each April 1, beginning with April 1, 1999, 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
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Company has provided to the Executive the following one-time payments:
(i) The Executive has previously received an award of 149,079 share units of
common stock of the Company ("Company Stock"), with such share units to be
settled in shares of Common Stock in accordance with the provisions of
paragraph 2(p) of this Agreement. The Executive shall be fully vested in
the share units, and their resulting settlement in shares, described in
this paragraph (i).
(ii) The Executive has previously received a non-qualified stock option award to
purchase of 500,000 shares of Company Stock, which is subject to terms
comparable to those included in stock options granted under the Brunswick
Corporation 1991 Stock Plan (the "1991 Plan") to other officers of the
Company. The purchase price under such option is $20.125, the option
exercise period expires ten years after grant (or such earlier time
following termination of employment as provided in stock options granted to
officers under the 1991 Plan). On April 1, 1996, the option became
exercisable with respect to 60,000 shares of Company Stock. The remaining
portion of the option shall become 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:
- ------------------- ------------------------
April 1, 1997 60,000
April 1, 1998 80,000
The first date on which the
Stock Price attains $25.00 or,
if earlier, the first day of the
quarter of the Company following
the occurrence of four consecutive
quarters during which aggregate
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net earnings for such four
quarters exceeds $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
quarter of the Company following
the occurrence of four consecutive
quarters during which aggregate
net earnings for such four
quarters exceeds $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
quarter of the Company following
the occurrence of four consecutive
quarters during which aggregate
net earnings for such four
quarters exceeds $2.70 per share 120,000
As of the effective date of this Agreement, the foregoing schedule shall
supersede the schedule set forth in paragraph 2(a)(ii) of the Prior Agreement.
The net earnings per share shall be such amount as determined for purposes of
the Company's public financial reporting obligations. 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 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 continues through April 1, 1998, then any portion of the option
described in this paragraph 2(a)(ii) not previously exercisable shall become
exercisable on April 1, 1998. 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).
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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. As soon as practicable after
the Effective Date, the terms of the option agreement set forth in
paragraph 5 of Supplement A (relating to transferability of the
option) shall be modified to permit transfer to the Executive's family
members (as set forth in Supplement A). 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.
(b) One-Time Stock Option Award. The Company shall provide to the Executive the
following one-time stock option award, which shall be a non-qualified stock
option award to purchase of 100,000 shares of Company Stock, subject to
terms comparable to those included in stock options granted under the 1991
Plan to other officers of the Company; provided that the purchase price
shall equal the fair market value of the stock as of the date this
Agreement is fully executed by the Executive (but not earlier than the date
the option is approved by the Compensation Committee), with the option
exercise period expiring on the tenth anniversary of such date (or such
earlier time following termination of employment as provided in stock
options granted to officers under 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:
- ------------------- ------------------------
April 1, 1997 30,000
April 1, 1998 30,000
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April 1, 1999 40,000
The stock option award described in this paragraph 2(b) shall be subject to
terms substantially comparable to the terms set forth in the stock option
agreement included in Supplement B, 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 (b) and other applicable terms of this Agreement shall
govern the awards made under this paragraph. If the stock options granted under
this paragraph 2(b) are granted 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.
(c) Salary. The Executive's annual base salary rate shall be $800,000, which
shall not be increased or reduced during the Agreement Term (determined
without extensions after March 31, 1999). The salary shall be payable
monthly or more frequently in accordance with Company practice and shall be
subject to all normal deductions and withholdings.
(d) 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 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; provided, however, that if the
Executive has satisfied the Company's applicable stock ownership guidelines
on the date such award is determined, the Executive may elect (on or before
the date such award is determined) to receive the entire award in cash.
The value of Company Stock distributed as a bonus in accordance with this
paragraph (d) 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 has received an award
under the annual bonus program of share
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units to be settled in Company Stock in accordance with the provisions of
paragraph 2(p) of this Agreement, with such share units representing
Company Stock having a value of $960,000, determined as of the last
business day prior to the date on which the amount of the bonus was
determined by the Board. The Executive shall be fully vested in the share
units, and their resulting settlement in shares, described in this
paragraph (d).
(e) Long-Term Incentive Share Award. The Executive was entitled to a Long-Term
Incentive Share Award of Company Stock for the fiscal year ending December
31, 1995, and shall be entitled to a Long-Term Incentive Share Award of
Company Stock for the fiscal year ending December 31, 1996, subject to the
following:
(i) The Executive has previously received a Long-Term Incentive Share
Award of Company Stock for the fiscal year ending December 31, 1995, based
on Company performance for that year. The award was made in share units of
Company Stock, with such share units to be settled in shares of Company
Stock in accordance with the provisions of paragraph 2(p). The share units
had a market value of $720,000 as of the last business day prior to the
date on which the amount of the award was determined by the Board. 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)(i) and other applicable terms of this Agreement shall govern
the awards made under this paragraph.
(ii) The Executive shall be entitled to a Long-Term Incentive Share Award
of Company Stock for the fiscal year ending December 31, 1996, based on
Company performance for that year, and subject to the requirements set
forth in Supplement C, which is attached to, and forms a part of this
Agreement. The market value of the Company Stock granted pursuant to such
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.
(iii) Except as otherwise provided in paragraph 5, the Executive's vesting
of benefits described in paragraph (e)(i) shall be subject to the
following:
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(A) The Executive shall forfeit the shares granted under paragraph (e)(i)
as of his Date of Termination, if such Date of Termination occurs prior to
April 1, 1998 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).
(B) The Executive shall become vested on his Date of Termination in the
shares granted under paragraph (e)(i) if such Date of Termination occurs
prior to April 1, 1998 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 April 1, 1998 in the shares
granted under paragraph (e)(i) if the Executive remains employed by the
Company through such date.
(iv) Except as otherwise provided in paragraph 5, the Executive's vesting
of benefits described in paragraph (e)(ii) shall be subject to the
following:
(A) The Executive shall forfeit the shares granted under paragraph (e)(ii)
as of his Date of Termination, if such Date of Termination occurs prior to
February 15, 1998 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).
(B) The Executive shall become vested on his Date of Termination in the
shares granted under paragraph (e)(ii) if such Date of Termination occurs
prior to February 15, 1998
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<PAGE>
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 February 15, 1998 in the shares
granted under paragraph (e)(ii) if the Executive remains employed by the
Company through such date.
The Executive shall be entitled to dividends for dividend record dates on
or after the date of grant with respect to shares of Company Stock granted
under this paragraph (e), to the extent that the dividends are payable with
respect to dates prior to termination of employment, regardless of the
reason for such termination.
(f) SIP. For periods after December 31, 1996, the Executive shall not be
entitled to any Long-Term Incentive Share Awards, but shall be entitled to
participate in the Strategic Incentive Plan (the "SIP") in accordance with
its terms as in effect from time to time; subject to the following:
(i) The amount of the maximum award opportunity for the Executive under
the SIP for each SIP performance period shall be not less than 100% of the
Executive's salary for the period of the entire 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.
(ii) Notwithstanding the provisions of the SIP to the contrary, the
Executive's rights to benefits under the SIP on termination of employment
shall be determined in accordance with the provisions of paragraph 4 of
this Agreement.
(g) Stock Options.
(i) Yearly Grant. In each calendar year, beginning with the 1996 calendar
year, the Executive shall be entitled to a grant of a non-qualified stock
option. The option granted for each
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<PAGE>
calendar year under this paragraph (g)(i) 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). Stock options to be granted in any calendar year under
this paragraph (g)(i) shall be granted at the time stock options are
granted to other officers of the Company during the calendar year, provided
that if the Company makes more than one option grant to officers during any
calendar year, the Company shall not be required to grant stock options
under this paragraph (g)(i) (but determined without regard to the grant
under paragraph (g)(ii)) having an aggregate value of more than $750,000
per calendar year. Subject to paragraph 4, the Executive shall not be
entitled to a stock option award under this paragraph (g)(i) during any
calendar year if he is not employed by the Company on the date that such
award would otherwise be granted under this paragraph (g)(i). In January,
1996 (prior to the Effective Date of this revised Agreement), an option to
purchase 72,255 shares of Company Stock was granted to the Executive, which
was in satisfaction of the requirement under this paragraph (g)(i) to grant
a stock option to the Executive in calendar year 1996 (and was also in
satisfaction of the obligation under paragraph 2(e) of the Prior Agreement
to grant a stock option for the fiscal year ending December 31, 1995).
(ii) July 1996 Grant. In July, 1996, the Executive was granted a non-
qualified stock option to purchase 90,000 shares of Company Stock (which
was in addition to the other options granted under this Agreement). The
option award described in this paragraph is in lieu of the award for the
calendar year beginning January 1, 1999, and the Executive shall not be
entitled to a stock option award under this paragraph (g) for the 1999
calendar year.
(iii) General Option Terms. Stock options granted under paragraph (g)(i) or
paragraph (g)(ii) shall be subject to the following:
(A) Each option granted under this paragraph (g) shall be subject to
terms comparable to those included in stock options granted 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
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<PAGE>
price equal to the fair market value of such stock as of the date of grant,
and the exercise period shall expire ten years after grant, or such earlier
time following termination of employment as provided in stock options
granted to officers under the 1991 Plan, or successor to the 1991 Plan.
(B) Each option granted under this paragraph (g) 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
(C) 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 (g) and other applicable terms of this
Agreement shall govern the awards made under this paragraph.
(iv) Exercisability on Termination. If the Executive's employment with the
Company continues through April 1, 1998, all options which were granted to
the Executive pursuant to paragraph (g)(i) prior to January 1, 1998, and
the option granted to the Executive pursuant to paragraph (g)(ii), shall
become (or remain) exercisable until the earlier of (A) the expiration date
of the option or (B) five years following termination of the Executive's
employment. If the Executive's employment with the Company continues
through April 1, 1999, all options which were granted to the Executive
pursuant to paragraph (g)(i) after December 31, 1997 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.
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<PAGE>
(h) Life Insurance. The Company shall provide aggregate life insurance death
benefit coverage to the Executive of at least 3-1/2 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 (h), 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.
(i) 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 (i) in the form
of a single life annuity for the life of the Executive commencing at his
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).
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If the pension benefits are payable to the Executive pursuant to this
paragraph (i) 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 (i), 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. The Executive, by filing a written
election with the Company not later than thirty days after the Executive's
Date of Termination, may elect to receive the benefits otherwise payable to
him under the Supplemental Plan and this paragraph (i) in the form of an
actuarially equivalent lump sum. Payments under this paragraph (i) shall be
made (or shall commence if not in the form of a lump sum) on the 60th day
after the Date of Termination (or the first business day occurring after
such 60th day); provided that no such payment shall be made prior to such
60th day.
(j) 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.
(k) Security Protection. The Company shall make security protection available
to the Executive and his family on a reasonable basis for business and
personal use.
(l) 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.
(m) Benefits. The Executive shall be a participant in any and all plans
maintained by the Company from time to time to provide
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benefits for its 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 (m) 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.
(n) 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 (n) 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.
(o) Expenses. The Executive has been reimbursed for all reasonable expenses
incurred in performing his obligations under this Agreement.
(p) Elective 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 (p) shall be
credited to a deferred compensation account (the Executive's "Elective
Deferral Account", which was referred to in the Prior Agreement as the
"Account") maintained by the Company in his name. The opening balance
of such Elective Deferral Account on the Effective Date shall be the
amount credited to the Participant's Account in accordance with
paragraph 2(n) of the Prior Agreement immediately prior to the
Effective Date of this Agreement (with the adjustment for investment
returns and interest to take into account such returns and interest
both before and after this Agreement becomes effective). The portion
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of the Executive's Elective Deferral Account that is not invested in
accordance with paragraph 2(p)(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.
(ii) The Company, after consultation with the Executive, may invest
amounts credited to his Elective Deferral 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
Elective Deferral 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 Elective Deferral 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) (provided that this clause (D) shall not be construed to permit
a reduction for the cost of taxes).
(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
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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 paragraph (p) 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(p)(iv), during the period of deferral, any dividends
will be deemed reinvested in accordance with paragraph 2(p)(iii)
above. The deferral under this paragraph (vi) shall apply to:
(A) The one-time stock award described in paragraph 2(a)(i) of the
Prior Agreement, 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) of the Prior Agreement, 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) of the Prior Agreement
with the period of
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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.
(vii) The Executive's entitlement to distributions under this paragraph (p)
shall include the right to receive amounts deferred under paragraph
(n) of the Prior Agreement, to the extent such deferred amounts were
not distributed prior to the Effective Date of this Agreement.
(q) Automatic deferral. The Executive and the Company shall enter into an
agreement in the form set forth in Supplement D (relating to automatic
deferral), which is attached to and forms a part 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.
(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(e) 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
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(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 Chief Executive 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
payment is due.
(v) The failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement.
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(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 retained as a member and Chairman
of the Board.
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(e) indicating that 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).
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<PAGE>
(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(e), 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(d) for the performance period in which the Date of Termination
occurs (including the portion of such performance period, if any,
occurring under the Prior Agreement). In determining the amount of the
bonus payable under this paragraph (ii), the performance through the
end of the performance period
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<PAGE>
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(e) with respect to the performance period in
which the Date of Termination occurs (including the portion of such
performance period, if any, occurring under the Prior Agreement). 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) A pro-rata payment with respect to the SIP award described in
paragraph 2(f) for the performance period in which the Date of
Termination occurs (including the portion of such performance period,
if any, occurring under the Prior Agreement). In determining the
amount of the SIP award payable under this paragraph (iv), the
performance through the end of the performance period shall be
extrapolated based on the performance through the Date of
Termination.
(v) Lapse of exercise restrictions with respect to stock options;
provided, however, that with respect to stock options granted
pursuant to paragraph 2(a)(ii), the lapse of restrictions shall apply
only to non-performance exercise restrictions. 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.
(vi) The performance-related exercise restrictions with respect to stock
options granted pursuant to paragraph 2(a)(ii) 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
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<PAGE>
Date of Termination.
(vii) The portion of any stock option granted 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(e), 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 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(c), 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(d), 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
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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(e) 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 SIP award described in
paragraph 2(f) 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 SIP award payable under this paragraph
(iv), the performance through the end of the performance period shall
be extrapolated based on the performance through the Date of
Termination.
(v) The Executive shall be entitled to the life insurance coverage
described in paragraph 2(h), 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.
(vi) The exercise restrictions with respect to stock options shall lapse
as of the Date of Termination; provided, however, that with respect
to stock options granted pursuant to paragraph 2(a)(ii), the lapse of
restrictions shall apply only to non-performance exercise
restrictions. The performance-related
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<PAGE>
exercise restrictions with respect to stock options granted pursuant
to paragraph 2(a)(ii) shall lapse to the extent that the Board, in
its 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.
(vii) The portion of any stock option granted 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).
(viii) The pension benefits described in paragraph 2(i) 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(j) (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.
(ix) The Executive shall be entitled to any additional benefits that
would have been provided to him pursuant to paragraph 2(m),
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 (ix) 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)(viii).
Payments and benefits due under this paragraph 4(b) shall be subject to the
following:
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(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 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
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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.
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(p) 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,
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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 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 constitute a majority of the Board
following the election.
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<PAGE>
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,
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
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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.
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
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<PAGE>
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 canceled 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
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).
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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:
to the Company:
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Brunswick Corporation
1 North Field Court
Lake Forest, Illinois 60045
or to the Executive:
Peter N. Larson
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. However, except as
otherwise provided in this Agreement, the obligations of the Company and the
Executive with respect to compensation and benefits that were paid or
distributed prior to the Effective Date, and with respect to services performed
prior to the Effective Date, shall be governed by the Prior Agreement.
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
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with the rules of the American Arbitration Association, except with respect to
the selection of arbitrators which shall be as 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
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.
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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: February 3, 1997
BRUNSWICK CORPORATION
By /s/ Peter B. Hamilton
---------------------------
Peter B. Hamilton
Its Senior Vice President
and Chief Financial Officer
Date: February 3, 1997
ATTEST:
/s/ Michael D. Schmitz
- -----------------------
(Seal)
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Supplement A
Stock Option Agreement
----------------------
THIS AGREEMENT, dated as of February 3, 1997 (the "Effective Date"), by and
between BRUNSWICK CORPORATION, a Delaware corporation, having its principal
executive offices at 1 N. Field Court, Lake Forest, Illinois 60045 (hereinafter
called "Company") and Peter N. Larson, an employee of the Company (hereinafter
called the "Option Holder").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has adopted
the 1991 Stock Plan (the "Plan") and the Company's stockholders have approved
the Plan; and
WHEREAS, the Company has entered into an employment agreement with the
Option Holder dated April 1, 1995 (the "Prior Employment Agreement"), and the
option reflected by this Agreement is intended to satisfy the requirements of
paragraph 2(a)(ii) of the Prior Employment Agreement;
WHEREAS, the Company has entered into a revised employment agreement with
the Option Holder dated February 3, 1997 (the "Employment Agreement"), which
amends the option intended to satisfy the requirements of paragraph 2(a)(ii) of
the Prior Employment Agreement, and this Agreement reflects such amendment;
NOW, THEREFORE, in consideration of the mutual promises and representations
herein contained and other good and valuable consideration, it is agreed by and
between the parties hereto as follows:
GRANT OF OPTION
---------------
1. On April 1, 1995, the Company granted to the Option Holder the right
and option to purchase on the terms and conditions hereinafter set forth, and
subject to the provisions of the Plan, all or any part of an aggregate of
500,000 shares of the Common Stock ($.75 par value) of the Company at the
purchase price of $20.125 per share. The option is exercisable by the Option
Holder in accordance with the following schedule:
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<TABLE>
<CAPTION>
<S>
The option shall
If the Option become exercisable with
Holder is respect to the following
employed through number of shares on
the following date: and after that date:
- ------------------- --------------------
<S> <C>
1st anniversary of
April 1, 1995 60,000
2nd anniversary of
April 1, 1995 60,000
3d anniversary of
April 1, 1995 80,000
The first date on which the
Stock Price attains $25.00 or,
if earlier, the first day of the
quarter of the Company following
the occurrence of four consecutive
quarters during which aggregate
net earnings for such four
quarters exceeds $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
quarter of the Company following
the occurrence of four consecutive
quarters during which aggregate net
earnings for such four quarters
exceeds $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
quarter of the Company following
the occurrence of four consecutive
quarters during which aggregate
net earnings for such four
quarters exceeds $2.70 per share 120,000
</TABLE>
-36-
<PAGE>
provided, however, that all options herein granted, to the extent not previously
exercised, shall terminate at 4:00 p.m. CST on the tenth anniversary of April 1,
1995, upon the termination of employment of the Option Holder as specified in
paragraph 4 of this Agreement or at such other time as is hereinafter provided.
If the Option Holder's employment by the Company continues through the three-
year anniversary of April 1, 1995, then any portion of the option herein granted
and not previously exercisable shall become exercisable on such three-year
anniversary. In addition, notwithstanding any provisions herein to the contrary,
in the event a Change in Control (as defined in the Plan) of the Company occurs,
the Option Holder may exercise all unexercised options in whole or in part upon
the later of six-month anniversary of April 1, 1995 or such Change in Control
and until the earlier of the stated expiration of the options or two years
following termination of employment. For purposes of this paragraph 1, the
"Stock Price" for any date shall be the closing market composite price for the
Common Stock (as reported for the New York Stock Exchange - Composite
Transactions).
2. The Compensation Committee of the Board (the "Committee"), in
consultation with the Option Holder, shall adjust the net earnings per share
requirement and the Stock Price requirement applicable to Common Stock under
paragraph 1 above as appropriate from time to time to reflect material mergers,
consolidations, recapitalizations, reclassifications, stock dividends, stock
splits, combinations of shares, other capital adjustments and other unusual and
extraordinary events.
NOTICE
------
3. This option or any part thereof may be exercised by giving a written
notice of exercise to the Secretary of the Company, specifying the number of
shares to be purchased and the method of payment of the aggregate option price
of the number of shares purchased. Such exercise shall be effective upon the
actual receipt of such written notice and payment to the Secretary of the
Company. The aggregate option price of all shares purchased pursuant to an
exercise of the option shall be paid (A) in cash (including check, bank draft,
or money order), (B) in Common Stock of the Company (valued at the fair market
value thereof on the date of exercise), (C) by a combination of cash and Common
Stock or (D) in accordance with a cashless exercise program under which, if so
instructed by the Option Holder, shares of Common Stock may be
-37-
<PAGE>
issued directly to the Option Holder's broker or dealer upon receipt of the
option price in cash from the broker or dealer. No rights or privileges of a
stockholder of the Company in respect of any of the shares issuable upon the
exercise of any part of this option shall inure to the Option Holder, or any
other person entitled to exercise this option as herein provided unless and
until certificates representing such shares shall have been issued and
delivered.
TERMINATION OF EMPLOYMENT
-------------------------
4. This option may not be exercised after the termination of employment of
the Option Holder with the Company or any of its subsidiaries, subject to the
following:
(a) The portion of the option that becomes exercisable in accordance paragraph
1 of this Agreement based on the Option Holder's completion of one, two and
three years of service after April 1, 1995 shall become (or remain)
exercisable on termination of the Option Holder's employment, if the
termination occurs under circumstances described in paragraphs 4(a)(i),
4(a)(ii), or 4(a)(iii) below.
(i) Termination occurs upon retirement at or after age 65.
(ii) Termination occurs due to disability.
(iii) Termination occurs by reason of the Option Holder's death (in which case
such exercise shall be by the person or persons to whom the Option
Holder's rights under such option are transferred by will or the laws of
descent and distribution).
(iv) Termination is by the Company for reasons other than Cause under
circumstances described in paragraph 3(g) of the Employment Agreement, or
termination occurs for Good Reason under circumstances that satisfy the
requirements of paragraph 3(e) of the Employment Agreement.
The portion of the option that becomes exercisable in accordance paragraph 1 of
this Agreement based on the Option Holder's completion of one, two and three
years of service after April 1, 1995 and which is exercisable immediately prior
-38-
<PAGE>
to the date of the Option Holder's termination of employment, as well as
the portion of the option that becomes exercisable by reason of this
paragraph (a), shall remain exercisable for five years after such
termination, but in no event subsequent to the date fixed herein for
expiration of the option.
(b) The portion of the option that becomes exercisable in accordance paragraph
1 of this Agreement based on the Stock Price or earnings per share of the
Company, and which is not exercisable on the date of the Option Holder's
termination of employment, shall become exercisable on termination of the
Option Holder's employment, to the extent that the Committee, in its
discretion, determines to be appropriate. The determination by the
Committee shall be based on such factors as the Committee determines to be
appropriate, including the progress toward the performance goals that have
been achieved as of the date of the Option Holder's termination of
employment. This paragraph (b) shall apply to the Option Holder if his
termination of employment occurs under circumstances described in
paragraphs 4(b)(i), 4(b)(ii), or 4(b)(iii) below.
(i) Termination occurs upon retirement at or after age 65.
(ii) Termination occurs due to disability.
(iii) Termination occurs by reason of the Option Holder's death (in which
case such exercise shall be by the person or persons to whom the
Option Holder's rights under such option are transferred by will or
the laws of descent and distribution).
(iv) Termination is by the Company, for reasons other than Cause under
circumstances described in paragraph 3(g) of the Employment
Agreement, or termination occurs for Good Reason under circumstances
that satisfy the requirements of paragraph 3(e) of the Employment
Agreement.
The portion of the option that becomes exercisable in accordance paragraph 1 of
this Agreement based on the Stock Price or earnings per share of the Company,
and which is exercisable immediately prior to the date of the Option Holder's
termination of employment, as well as the portion of
-39-
<PAGE>
the option that becomes exercisable by reason of this paragraph (b), shall
remain exercisable for five years after such termination, but in no event
subsequent to the date fixed herein for expiration of the option.
(c) During any authorized leave of absence from employment, the option may not
be exercised. After return to active employment the Option Holder may
exercise the option, to the extent it is exercisable under paragraph 1 of
this Agreement, up to the date fixed herein for expiration of the option.
NON-TRANSFERABILITY OF THE OPTION
---------------------------------
5. Except as otherwise herein provided, the option and the rights and
privileges conferred by this Agreement shall not be transferred, assigned,
pledged or hypothecated in any way, whether by operation of law or otherwise,
and the option shall be exercised during the lifetime of the Option Holder only
by the Option Holder. Upon any attempt so to transfer, assign, pledge,
hypothecate or otherwise dispose of said option or any right or privilege
conferred hereby contrary to the provisions hereof, this option and the rights
and privileges conferred hereby shall immediately become null and void.
Notwithstanding the foregoing provisions of this paragraph 5, the Option may be
transferred by the Option Holder for no consideration to or for the benefit of
the Option Holder's Immediate Family (including, without limitation, to a trust
for the benefit of the Option Holder's Immediate Family or to a partnership for
members of the Option Holder's Immediate Family), subject to such limits as the
Committee may establish, and the transferee shall remain subject to all the
terms and conditions applicable to the Option prior to such transfer. The
foregoing right to transfer the Option shall also apply to the right to consent
to amendments to the Option agreement. The Option Holder's "Immediate Family"
shall mean the Option Holder's spouse, children, stepchildren, adoptive
relationships, sisters, brothers and grandchildren (and, for this purpose, shall
also include the Option Holder).
TAX WITHHOLDING
---------------
6. When an option is exercised, the Company will withhold from the Option
Holder the amount required to meet federal, state and local withholding tax
requirements. The Option Holder will have the option of paying the required
amount to the Company in cash, delivering previously acquired shares of Common
Stock, or
-40-
<PAGE>
requesting that the Company withhold a number of shares of Common Stock equal in
value to the withholding tax amount.
SHARE ADJUSTMENTS
-----------------
7. The number or kinds of shares or securities subject to this option and
the purchase price therefor are subject to adjustment as provided in paragraph
5(c) of the Plan.
ADDRESSES FOR NOTICES
---------------------
8. Any notice to be given to the Company shall be addressed to the Secretary
of the Company at the principal executive offices of the Company, and any notice
to be given to the Option Holder shall be addressed to the address then
appearing in the personnel records of the Company for such Option Holder, or at
such other address as either party may hereafter designate in writing to the
other. Any such notice shall be effective upon receipt by the party to which it
is addressed.
MISCELLANEOUS
-------------
9. Subject to the terms of any existing contractual agreement to the
contrary, nothing herein contained shall affect the right of the Company or its
subsidiaries to terminate at any time the Option Holder's employment, services,
responsibilities, duties or authority to represent the Company or confer any
rights to continued employment by the Company or its subsidiaries.
10. All decisions or interpretations made by the Committee with regard to
any question arising hereunder or under the Plan shall be binding and conclusive
to the Company and the Option Holder.
11. This Agreement shall bind and inure to the benefit of the parties hereto
and the successors and assigns of the Company and, to the extent provided in
paragraph 4 of this Agreement, the executors, administrators, legatees and heirs
of the Option Holder.
-41-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
year and date above written.
BRUNSWICK CORPORATION
By: /s/ Peter B. Hamilton
----------------------
/s/ Peter N. Larson
-------------------------
Option Holder
-------------------------
Home Address
-------------------------
-------------------------
Social Security Number
-42-
<PAGE>
Supplement B
Stock Option Agreement
----------------------
THIS AGREEMENT, dated as of February 3, 1997 (the "Effective Date"), by and
between BRUNSWICK CORPORATION, a Delaware corporation, having its principal
executive offices at 1 N. Field Court, Lake Forest, Illinois 60045 (hereinafter
called "Company") and Peter N. Larson, an employee of the Company (hereinafter
called the "Option Holder").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has adopted
the 1991 Stock Plan (the "Plan") and the Company's stockholders have approved
the Plan; and
WHEREAS, the Company has entered into an employment agreement with the
Option Holder dated February 3, 1997 (the "Employment Agreement"), and the
option reflected by this Agreement is intended to satisfy the requirements of
paragraph 2(b) of the Employment Agreement;
NOW, THEREFORE, in consideration of the mutual promises and representations
herein contained and other good and valuable consideration, it is agreed by and
between the parties hereto as follows:
GRANT OF OPTION
---------------
1. The Company hereby grants to the Option Holder the right and option to
purchase on the terms and conditions hereinafter set forth, and subject to the
provisions of the Plan, all or any part of an aggregate of 100,000 shares of the
Common Stock ($.75 par value) of the Company at the purchase price of $______
per share. The option shall be exercisable by the Option Holder in accordance
with the following schedule:
The option shall
If the Option become exercisable with
Holder is respect to the following
employed through number of shares on
the following date: and after that date:
------------------- --------------------
-43-
<PAGE>
April 1, 1997 30,000
April 1, 1998 30,000
April 1, 1999 40,000
provided, however, that all options herein granted, to the extent not previously
exercised, shall terminate at 4:00 p.m. CST on the tenth anniversary of the
Effective Date, upon the termination of employment of the Option Holder as
specified in paragraph 3 of this Agreement or at such other time as is
hereinafter provided. If the Option Holder's employment by the Company continues
through April 1, 1999, then any portion of the option herein granted and not
previously exercisable shall become exercisable on April 1, 1999. In addition,
notwithstanding any provisions herein to the contrary, in the event a Change in
Control (as defined in the Plan) of the Company occurs, the Option Holder may
exercise all unexercised options in whole or in part upon the later of six-month
anniversary of the Effective Date or such Change in Control and until the
earlier of the stated expiration of the options or two years following
termination of employment. For purposes of this paragraph 1, the "Stock Price"
for any date shall be the closing market composite price for the Common Stock
(as reported for the New York Stock Exchange - Composite Transactions).
NOTICE
------
2. This option or any part thereof may be exercised by giving a written
notice of exercise to the Secretary of the Company, specifying the number of
shares to be purchased and the method of payment of the aggregate option price
of the number of shares purchased. Such exercise shall be effective upon the
actual receipt of such written notice and payment to the Secretary of the
Company. The aggregate option price of all shares purchased pursuant to an
exercise of the option shall be paid (A) in cash (including check, bank draft,
or money order), (B) in Common Stock of the Company (valued at the fair market
value thereof on the date of exercise), (C) by a combination of cash and Common
Stock or (D) in accordance with a cashless exercise program under which, if so
instructed by the Option Holder, shares of Common Stock may be issued directly
to the Option Holder's broker or dealer upon
-44-
<PAGE>
receipt of the option price in cash from the broker or dealer. No rights or
privileges of a stockholder of the Company in respect of any of the shares
issuable upon the exercise of any part of this option shall inure to the Option
Holder, or any other person entitled to exercise this option as herein provided
unless and until certificates representing such shares shall have been issued
and delivered.
TERMINATION OF EMPLOYMENT
-------------------------
3. This option may not be exercised after the termination of employment of
the Option Holder with the Company or any of its subsidiaries, subject to the
following:
(a) The option shall become (or remain) exercisable on termination of the
Option Holder's employment, if the termination occurs under circumstances
described in paragraphs 3(a)(i), 3(a)(ii), 3(a)(iii) or 3(a)(iv) below.
(i) Termination occurs upon retirement at or after age 65.
(ii) Termination occurs due to disability.
(iii) Termination occurs by reason of the Option Holder's death (in which
case such exercise shall be by the person or persons to whom the
Option Holder's rights under such option are transferred by will or
the laws of descent and distribution).
(iv) Termination is by the Company for reasons other than Cause under
circumstances described in paragraph 3(g) of the Employment
Agreement, or termination occurs for Good Reason under circumstances
that satisfy the requirements of paragraph 3(e) of the Employment
Agreement.
The portion of the option which is exercisable immediately prior to the
date of the Option Holder's termination of employment, as well as the
portion of the option that becomes exercisable by reason of this paragraph
(a), shall remain exercisable for five years after such termination, but in
no event subsequent to the date fixed herein for expiration of the option.
-45-
<PAGE>
(b) During any authorized leave of absence from employment, the option may not
be exercised. After return to active employment the Option Holder may
exercise the option, to the extent it is exercisable under paragraph 1 of
this Agreement, up to the date fixed herein for expiration of the option.
NON-TRANSFERABILITY OF THE OPTION
---------------------------------
4. Except as otherwise herein provided, the option and the rights and
privileges conferred by this Agreement shall not be transferred, assigned,
pledged or hypothecated in any way, whether by operation of law or otherwise,
and the option shall be exercised during the lifetime of the Option Holder only
by the Option Holder. Upon any attempt so to transfer, assign, pledge,
hypothecate or otherwise dispose of said option or any right or privilege
conferred hereby contrary to the provisions hereof, this option and the rights
and privileges conferred hereby shall immediately become null and void.
Notwithstanding the foregoing provisions of this paragraph 5, the Option may be
transferred by the Option Holder for no consideration to or for the benefit of
the Option Holder's Immediate Family (including, without limitation, to a trust
for the benefit of the Option Holder's Immediate Family or to a partnership for
members of the Option Holder's Immediate Family), subject to such limits as the
Committee may establish, and the transferee shall remain subject to all the
terms and conditions applicable to the Option prior to such transfer. The
foregoing right to transfer the Option shall also apply to the right to consent
to amendments to the Option agreement. The Option Holder's "Immediate Family"
shall mean the Option Holder's spouse, children, stepchildren, adoptive
relationships, sisters, brothers and grandchildren (and, for this purpose, shall
also include the Option Holder).
TAX WITHHOLDING
---------------
5. When an option is exercised, the Company will withhold from the Option
Holder the amount required to meet federal, state and local withholding tax
requirements. The Option Holder will have the option of paying the required
amount to the Company in cash, delivering previously acquired shares of Common
Stock, or requesting that the Company withhold a number of shares of Common
Stock equal in value to the withholding tax amount.
-46-
<PAGE>
SHARE ADJUSTMENTS
-----------------
6. The number or kinds of shares or securities subject to this option and
the purchase price therefor are subject to adjustment as provided in paragraph
5(c) of the Plan.
ADDRESSES FOR NOTICES
---------------------
7. Any notice to be given to the Company shall be addressed to the
Secretary of the Company at the principal executive offices of the Company, and
any notice to be given to the Option Holder shall be addressed to the address
then appearing in the personnel records of the Company for such Option Holder,
or at such other address as either party may hereafter designate in writing to
the other. Any such notice shall be effective upon receipt by the party to which
it is addressed.
MISCELLANEOUS
-------------
8. Subject to the terms of any existing contractual agreement to the
contrary, nothing herein contained shall affect the right of the Company or its
subsidiaries to terminate at any time the Option Holder's employment, services,
responsibilities, duties or authority to represent the Company or confer any
rights to continued employment by the Company or its subsidiaries.
9. All decisions or interpretations made by the Compensation Committee of
the Board with regard to any question arising hereunder or under the Plan shall
be binding and conclusive to the Company and the Option Holder.
10. This Agreement shall bind and inure to the benefit of the parties
hereto and the successors and assigns of the Company and, to the extent provided
in paragraph 3 of this Agreement, the executors, administrators, legatees and
heirs of the Option Holder.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the year and date above written.
BRUNSWICK CORPORATION
By: /s/ Peter B. Hamilton
------------------------------
/s/ Peter N. Larson
----------------------------------
Option Holder
----------------------------------
Home Address
----------------------------------
----------------------------------
Social Security Number
-48-
<PAGE>
Supplement C
1996 Long-Term Incentive Share Award
------------------------------------
This Supplement C sets forth the terms that shall be applicable to the
Long-Term Incentive Share Award to be granted to Peter N. Larson (the
"Executive") in accordance with paragraph 2(e)(ii) of the employment agreement
to which this Supplement C is attached.
The Executive shall be eligible to receive a Long Term Incentive Share
Award for 1996 in accordance with the following performance measurements:
1. (40%) To achieve net sales growth versus 1995 (base):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Payout Level 25% 50% 75% 100%*
------------ ---- ---- ---- -----
1996-97 3340 3500 3600 3800
% Chg +5% +7.5% +10% +12%
1996 % Chg +4% +5% +6% +8.6%
2. (40%) To achieve operating profit improvement over 1995 as a percentage
of net sales:
Payout Level 25% 50% 75% 100%*
------------ ---- ---- ---- -----
1996-97 +0.5% +1.0% +1.5% +2.0%
Proposed '96 +0.2 +0.4 +0.8 +1.1
</TABLE>
* Board approved target levels.
1 and 2 above will be treated on an "as reported" basis reflecting the
stockholders/market view; i.e., without adjustments for divestitures
or acquisitions; this approach was used to compute both levels above.
3. (20%) Progress on the effective management of investor relations.
The maximum award for 1996 shall be $800,000 (100% of his salary) in
cash or stock at Mr. Larson's discretion; this amount is half of the
potential maximum award he is eligible to receive for the two year
1996-1997 Strategic Incentive Plan cycle.
-49-
<PAGE>
Supplement D
AUTOMATIC DEFERRAL AGREEMENT
----------------------------
THIS AGREEMENT, made and entered into as of February 3, 1997 (the
"Effective Date"), by and between Peter N. Larson (the "Executive") and
BRUNSWICK CORPORATION (the "Company");
WITNESSETH THAT:
---------------
WHEREAS, the parties desire to enter into this Agreement to provide for
deferral of compensation payable to the Executive by the Company and the Related
Companies (as defined below) that would otherwise be non-deductible by reason of
section 162(m) of the Code (as defined below), and thereby avoid the loss of
such deduction, and to compensate the Executive for his consent to such
deferral;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Executive and the Company
as follows:
1. Effective Date. This Agreement shall be effective with respect to
compensation amounts payable on or after the Effective Date.
2. Deferred Amount. If any compensation otherwise payable to the
Executive by the Company or any Related Company would be non-deductible by
reason of Code section 162(m), such amount shall not be paid to the Executive
when otherwise due, but an amount equal to the foregone payment shall instead be
credited to the Executive's Automatic Cash Deferral Account or Automatic Stock
Deferral Account in accordance with this paragraph 2 and paragraphs 3 and 4. In
determining the amounts subject to deferral under this paragraph 2, the
following shall apply:
(a) To the extent that the compensation is otherwise payable in cash to the
Executive, that cash shall be deferred under the Automatic Cash Deferral
Account, in accordance with this paragraph 2.
(b) To the extent that the compensation is otherwise payable in common stock of
the Company ("Company Stock"), delivery of those shares shall be deferred
under the Automatic Stock Deferral Account, in accordance with this
paragraph 2.
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<PAGE>
(c) To the extent necessary in determining whether amounts payable to the
Executive would be non-deductible for any year, the Committee (as defined
below) shall make the determinations required under this paragraph 2 based
on an estimate of the total compensation to be paid to the Executive for
the year (including both cash and non-cash compensation and benefits that
would be taken into account in determining whether the limitations of Code
section 162(m) are exceeded).
(d) In estimating the Executive's total compensation for any year, the
Committee may request that the Executive forecast whether, for the year, he
will be receiving any compensation the timing of which is in the
Executive's discretion; provided, however, that such forecast shall not
preclude the Executive from taking action that would change the time of
receipt of such compensation.
3. Automatic Cash Deferral Account. The Automatic Cash Deferral Account
balance shall be credited with the amount determined in accordance with
paragraph 2(a), as of the date on which such amount would otherwise have been
paid to the Executive were it not for deferral under this Agreement. The
Automatic Cash Deferral Account shall be adjusted from time to time in
accordance with the following:
(a) Unless the Executive makes an advance election to have paragraph (b) next
below apply, the Automatic Cash Deferral Account shall be credited as of
the last day of each calendar month with interest for that month at a rate
equal to the greater of: (a) the prime rate in effect at The First National
Bank of Chicago on the first day of the month plus four percentage points,
or (b) the Company's short-term borrowing rate.
(b) If the Executive elects application of this paragraph (b), the Company,
after consultation with the Executive, may invest amounts credited to his
Automatic Cash Deferral 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 Automatic Cash Deferral 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 Automatic Cash
Deferral Account shall be
-51-
<PAGE>
determined, to reflect (i) 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;
(ii) any gains or losses (whether or not realized) on such investment;
(iii) 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 (iv)
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 (b) (provided that
this clause (iv) shall not be construed to permit a reduction for the cost
of taxes).
4. Automatic Stock Deferral Account. The Automatic Stock Deferral Account
balance shall be credited with the number of share units equal to number of
shares of Company Stock as of the date on which such shares would otherwise have
been paid to the Executive were it not for deferral under this Agreement. The
Automatic Stock Deferral Account shall be adjusted from time to time to reflect
the deemed reinvestment of dividends in accordance with the terms of the
Company's dividend reinvestment program, as in effect from time to time.
5. Time of Payment of Deferred Amount. Amounts credited to the Executive's
Automatic Cash Deferral Account and Automatic Stock Deferral Account shall be
paid or distributed upon the earliest of the following:
(a) As soon as practicable after the Committee determines that such amounts
will be deductible when paid (provided that the Committee reasonably
determines that payment of such amounts will not cause other amounts
(whether cash or non-cash) to become non-deductible by reason of Code
section 162(m)).
(b) As soon as practicable after the Committee determines that such amounts
will not be deductible by the Company when paid, and that further deferral
will not result in such amounts becoming deductible.
-52-
<PAGE>
(c) As soon as practicable (but not more than 15 days) following the occurrence
of a Change in Control.
(d) As soon as practicable after the January 15 (but not later than January 30)
of the first calendar year following the first anniversary of the date the
Executive ceases to be employed by the Company and all Related Companies.
Payment shall be made under this paragraph 5 not later than the date determined
under paragraph (d), regardless of whether such payments are deductible by the
Company.
6. Form of Payment of Deferred Amount. To the extent that an amount is
payable to or on behalf of the Executive with respect to the Automatic Cash
Deferral Account in accordance with paragraph 5, it shall be paid by the Company
in a cash lump sum. To the extent that an amount is payable to or on behalf of
the Executive with respect to the Automatic Stock Deferral Account in accordance
with paragraph 5, it shall be distributed by the Company in shares of Company
Stock in a lump sum.
7. Other Costs and Benefits. This Agreement is intended to defer, but
not to eliminate, payment of compensation to the Executive. Accordingly, if any
compensation or benefits that would otherwise be provided to the Executive in
the absence of this Agreement are reduced or eliminated by reason of deferral
under this Agreement, the Company shall equitably compensate the Executive for
such reduction or elimination, and the Company shall reimburse the Executive for
any increased or additional penalty taxes which he may incur by reason of
deferral under this Agreement which would not have been incurred in the absence
of such deferral, except that no reimbursement will be made for taxes resulting
from an increase or decrease in individual income tax rates, or resulting from
an increase in the amount of compensation payable to the Executive by reason of
the accrual of earnings or any other provision of this Agreement.
8. Benefit May Not be Assigned or Alienated. Neither the Executive nor
any other person shall have any voluntary or involuntary right to commute, sell,
assign, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate or convey in advance of actual receipt the amounts, if any, payable
hereunder, or any part hereof, which are expressly declared to be unassignable
and non-transferable. No part of the amounts payable shall be,
-53-
<PAGE>
prior to actual payment, subject to seizure or sequestration for payment of any
debts, judgements, alimony or separate maintenance owned by the Executive or any
other person, or be transferred by operation of law in the event of the
Executive's or any other person's bankruptcy or insolvency. Payments to or on
behalf of the Executive under this Agreement are not subject to reduction or
offset for amounts due or alleged to be due from the Company or any Related
Company.
9. Disability. If, in the Committee's opinion, the Executive or a
beneficiary is under a legal disability or is in any way incapacitated so as to
be unable to manage his financial affairs, the Committee may direct that payment
be made to a relative or friend of such person for his benefit until claim is
made by a conservator or other person legally charged with the care of his
person or his estate, and such payment shall be in lieu of any such payment to
the Executive or the beneficiary. Thereafter, any benefits under this Agreement
to which the Executive or the beneficiary is entitled shall be paid to such
conservator or other person legally charged with the care of his person or his
estate.
10. Beneficiary. Subject to the terms of this Agreement, any benefits
payable to the Executive under this Agreement that have not been paid at the
time of the Executive's death shall be paid at the time and in the form
determined in accordance with the foregoing provisions of this Agreement, to the
beneficiary designated by the Executive in writing filed with the Committee in
such form and at such time as the Committee shall require. If the Executive
fails to designate a beneficiary, or if the designated beneficiary of the
deceased Executive dies before the Executive or before complete payment of the
amounts distributable under this Agreement, the Committee shall, in its
discretion, direct that amounts to be paid under this Agreement be paid to:
(a) one or more of the Executive's relatives by blood, adoption or marriage and
in such proportion as the Committee decides; or
(b) the legal representative or representatives of the estate of the last to
die of the Executive and his beneficiary.
11. Change in Control. "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
-54-
<PAGE>
the Securities Exchange Act of 1934), other than 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.
12. Related Companies. The term "Related Company" means any company
during any period in which compensation paid to the Executive by such company
would be required to be aggregated with compensation paid to the Executive by
the Company, in accordance with the affiliated group rules applicable to Code
section 162(m). The Company shall enter into such arrangements with the Related
Companies as it shall deem appropriate to implement the terms of this Agreement,
and shall inform the Executive of any material failure to provide for such
implementation.
13. Committee. This Agreement shall be administered by a committee
(the "Committee"), which shall be the Compensation Committee of the Board, or
such other person or persons as may be designated by the Board from time to
time. The amount to be deferred under paragraph 2 and the amount that is payable
under paragraph 5(a) and paragraph 5(b) shall be based on such estimates as the
Committee determines in good faith to be appropriate.
14. Statements. On a quarterly basis (or more frequent basis if
requested by the Executive), the Committee shall provide the
-55-
<PAGE>
Executive with statements of the Executive's Automatic Cash Deferral Account and
Automatic Stock Deferral Account. Upon request of the Executive, the Committee
shall provide the computations of amounts under paragraph 2 and paragraph 5.
15. Notices. Any notices required to be given by the Company to the
Executive shall be provided in writing, and either personally delivered to the
Executive, or mailed by registered mail, postage prepaid, to the Executive at
the last mailing address provided by the Executive to the Company.
16. Source of Benefit Payments. The amount of any benefit payable
under this Agreement shall be paid from the general assets of the Company.
Neither the Executive nor any other person shall acquire by reason of this
Agreement any right in or title to any assets, funds or property of the Company
whatsoever, including, without limiting the generality of the foregoing, any
specific funds, assets, or other property which the Company, in its sole
discretion, may set aside in anticipation of a liability under this Agreement.
The Executive shall have only a contractual right to the amounts, if any,
payable under this Agreement, unsecured by any assets of the Company. Nothing
contained in this Agreement shall constitute a guarantee by the Company that the
assets of the Company shall be sufficient to pay any benefits to any person.
17. Code. For purposes of this Agreement, the term "Code" means the
Internal Revenue Code of 1986, as amended. References to sections of the Code
also refer to any successor provisions thereof. References in this Agreement to
an amount being "deductible" refer to its being deductible by the Company or a
Related Company for Federal income tax purposes; provided, however, that if
deductibility would not be precluded by reason of Code section 162(m), then it
shall be deemed to be "deductible" for purposes of this Agreement, regardless of
whether it is non-deductible for any other reason. If, after the Effective Date,
there is a change in the provisions or interpretation of Code section 162(m)
which would have a material effect on the benefits to the Executive or the
Company, the parties shall negotiate in good faith to preserve the benefit of
this Agreement for both parties; provided, however, that nothing in this
Agreement shall be construed to require the Executive to consent to any change
in the Agreement without reasonable compensation therefore.
-56-
<PAGE>
18. Amendment. This Agreement may be amended or canceled 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.
19. Applicable Law. This Agreement shall be construed and administered
in accordance with the laws of the State of Illinois to the extent that such
laws are not preempted by the laws of the United States of America.
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
BRUNSWICK CORPORATION
By /s/ Peter B. Hamilton
---------------------------
Its Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
ATTEST:
/s/ Michael D. Schmitz
- -----------------------
(Seal)
-57-
<PAGE>
EXHIBIT 10.22
1997 BRUNSWICK PERFORMANCE PLAN
===============================================================================
PURPOSE: To motivate and reward Senior Executives and other management
employees of the Company for the achievement of specified
annual financial goals and the enhancement of management talent
in the organization.
ELIGIBILITY: Approximately top 400 managers in the Company.
MAXIMUM
AWARD: Maximum awards under the Plan range from 30% to 100% of a
participant's base salary at the beginning of the performance
period depending upon the participant's level of
responsibility.
PERFORMANCE
MEASURES: Established annually by the CEO. Measures and weightings may be
modified year to year. Weightings for 1997 are as follows:
Groups
-------
. 60% Division Contribution
. 20% Working Capital Turnover
. 20% People/Organizational Enhancement
Division Contribution is defined as operating earnings plus
other income and expense.
Working Capital Turnover is defined as:
1997 Net Sales
-----------------------------------------------------
1997 Avg. Receivable + Avg. Inventory - Avg. Payables
The average is to be compiled using a 5 quarter average
consisting of 1996 year-end actual and each of the quarters in
1997.
Corporate
---------
. 80% Earnings per share (EPS)
. 20% People/Organizational Enhancement
RELATIONSHIP
OF PERFORMANCE
TO PAYOUT: Performance Level Payout Level
----------------- ------------
100% 100%
90% 70%
80% 50%
70% 40%
<PAGE>
1997 BRUNSWICK PERFORMANCE PLAN (cont'd)
================================================================================
PERFORMANCE
TO PAYOUT (cont'd) Bonuses would not be paid for performance below the 80%
level which was less than the prior year's actual reported
results, unless part of a budgeted/Board approved target.
Performance levels have been established by the CEO and may
not be linear relationships to the targets. The payout for
performance between levels will be prorated.
PAYOUT FORM: Payment will be in cash for all participants except those
whose maximum award is 100% of base salary. Payment for this
group of participants will be 50% cash and 50% stock
(deferrable) until mandated stock ownership levels are
achieved; thereafter the mix of cash and stock will be at
the participant's election.
PAYMENT: Bonus payments will be made after the year-end financial
results have been reviewed and certified by Arthur Andersen
& Co. Proposed bonus payments to Senior Executives will be
reviewed and approved by the Compensation Committee.
WITHHOLDING: Participants receiving a portion of their bonus payment in
stock may elect to pay Federal, state and local withholding
tax obligations to the Company in cash or request that the
Company withhold a number of shares of common stock equal in
value to the withholding tax amount, at the discretion of
the Committee.
<PAGE>
EXHIBIT 10.25
1997-1998 STRATEGIC INCENTIVE PLAN
================================================================================
PURPOSE: To attract, retain, and significantly reward a select group of
individuals for the achievement of aggressive, measurable
standards of corporate performance. Payments in stock are
intended to assist participants in achieving specified
ownership guidelines and promote an entrepreneurial approach to
the business.
ELIGIBILITY: Approximately top 150 executives in the Company.
PERFORMANCE
PERIOD: Two years
PERFORMANCE
MEASURES: Groups
------
50% Division Contribution in 1998.
50% Operating Margin percentage in 1998 (operating earnings/net
sales)
Corporate
---------
100% Earnings Per Share (EPS) in 1998.
Division Contribution is defined as operating earnings plus
other income and expense.
PERFORMANCE
WEIGHTINGS: Corporate performance - 30%; Group performance - 70% for
those participants with a maximum award of 100% of base salary.
Corporate performance - 20%; Group performance - 80% for those
participants with a maximum award of 75% of base salary.
Corporate performance - 10%; Group performance - 90% for those
participants with a maximum award of 40%-60% of base salary.
RELATIONSHIP
OF PERFORMANCE
TO PAYOUT: Performance Level Payout Level
----------------- ------------
100% 100%
90% 70%
80% 50%
70% 40%
The payout for performance between levels will be prorated.
<PAGE>
1997-1998 STRATEGIC INCENTIVE PLAN (cont'd)
================================================================================
MAXIMUM
AWARD: There are three levels of maximum awards as follows:
For those participants with a maximum award equivalent to 100%
of base pay, the award is denominated 100% in stock units based
on the stock price at the beginning of the performance period.
For those participants with a maximum award equivalent to 75%
of base pay, the award is denominated 75% in stock units based
on the stock price at the beginning of the performance period.
For those participants with a maximum award equivalent to 40%-
60% of base pay, the award is denominated 50% stock units based
on the stock price at the beginning of the performance period.
PAYOUT FORM: The mix of payments under this Plan between cash and stock will
change as specified ownership guidelines are achieved. Payments
will be made in stock for that portion of the award which was
initially denominated in stock units as described above.
Upon achievement of the ownership guidelines, the participant
may elect the form of payment, either cash or stock, with the
opportunity for voluntary deferrals of stock into a Rabbi
trust.
PAYMENT: Bonus payments will be made after the year-end financial
results have been reviewed and certified by Arthur Andersen &
LLP. Proposed bonus payments to Senior Executives will be
reviewed and approved by the Compensation Committee.
WITHHOLDING: Participants receiving a portion of their bonus payment in
stock may elect to pay Federal, state and local withholding tax
obligations to the Company in cash or request that the Company
withhold a number of shares of common stock equal in value to
the withholding tax amount, at the discretion of the Committee.
<PAGE>
EXHIBIT 21.1
------------
SUBSIDIARIES OF THE COMPANY
---------------------------
The following corporations are direct or in-direct wholly-owned subsidiaries of
Brunswick Corporation:
Place of
Incorporation
-------------
Appletree Ltd. Bermuda
Baja Marine Corporation Delaware
Bayliner Marine Corporation Delaware
Boston Whaler, Inc. Delaware
Brunswick AG Switzerland
Brunswick Bowling & Billiards Corporation Delaware
Brunswick Bowling & Billiards Mexico, Mexico
S.A. de C.V.
Brunswick Bowling & Billiards (U.K.) Limited England
Brunswick Bowling e Billiards Industria e Brazil
Comercia Ltda.
Brunswick Bowling GmbH West Germany
Brunswick Bowling Pin Corporation Delaware
Brunswick Centres, Inc. Ontario
Brunswick GmbH West Germany
Brunswick International (Canada) Limited Ontario
Brunswick International GmbH West Germany
Brunswick International Holdings, Inc. Delaware
Brunswick International Limited Delaware
Brunswick International Sales Corporation U.S. Virgin Islands
Brunswick Technology Corporation Delaware
Centennial Assurance Company, Ltd. Bermuda
Escort Trailer Corporation Washington
Igloo Holdings Inc. Delaware
Igloo Products Corp. Delaware
Jupiter Marine, Inc. Delaware
Leiserv, Inc. Delaware
Marine Power Australia Pty. Limited Australia
Marine Power Europe, Inc. Delaware
Marine Power International Limited Delaware
Marine Power International Pty. Limited Delaware
Marine Power Italia S.p.A. Italy
Marine Power New Zealand Limited Delaware
Marine Xpress Corporation Delaware
Mercury Marine Limited Ontario
Mercury Marine Sdn Bhd Malaysia
<PAGE>
Place of
Incorporation
-------------
Normalduns B.V. Netherlands
OBC International Holdings Inc. Delaware
Productos Marine de Mexico, S.A. de C.V. Mexico
Quality Bowling Corporation California
Ray Industries, Inc. Arizona
Ray Industries, Inc. Delaware
SBC International Holdings Inc. Delaware
Sea Ray Boats Europe B.V. Netherlands
Sea Ray Boats, Inc. Arizona
Sea Ray Boats, Inc. Florida
Sea Ray Boats, Inc. Tennessee
Skokie Investment Corporation Delaware
Starcraft Power Boats Corp. Delaware
Wintergreen Finance, Inc. Delaware
Zebco Corporation Delaware
Zebco Sales Corporation Delaware
Zebco Sports France S.A. France
In addition, Brunswick Corporation owns 50% of the outstanding stock of Nippon
Brunswick Kabushiki Kaisha, a Japanese corporation.
The names of a number of subsidiaries have been omitted. Such subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
<PAGE>
EXHIBIT 24.1
------------
POWER OF ATTORNEY
-----------------
The undersigned director and officers of Brunswick Corporation, a Delaware
corporation (the "Company"), do hereby nominate, constitute and appoint Peter B.
Hamilton and Victoria J. Reich and each of them individually, the true and
lawful attorney or attorneys of the undersigned, with power to act with or
without the others and with full power of substitution and resubstitution, to
execute in the name and on behalf of the undersigned as directors and officers
of the Company, the Annual Report of the Company on Form 10-K for the fiscal
year ended December 31, 1996 and any and all amendments thereto; and each of the
undersigned hereby ratifies and approves all that said attorneys or any of them
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney in one or more counterparts on the date set opposite his name.
Capacity Signature Date
-------- --------- ----
Chairman of the Board, /s/ Peter N. Larson February 11, 1997
Chief Executive Officer ---------------------
(Principal Executive Peter N. Larson
Officer) and Director
Senior Vice President /s/ Peter B. Hamilton February 11, 1997
and Chief Financial Officer ---------------------
(Principal Financial Officer) Peter B. Hamilton
Vice President and Controller /s/ V. J. Reich February 11, 1997
(Principal Accounting Officer) --------------------
Victoria J. Reich
Director /s/ Nolan D. Archibald February 11, 1997
----------------------
Nolan D. Archibald
Director /s/ Michael J. Callahan February 11, 1997
-----------------------
Michael J. Callahan
<PAGE>
Capacity Signature Date
-------- --------- ----
Director /s/ J. P. Diesel February 11, 1997
--------------------------
John P. Diesel
Director /s/ M. A. Fernandez February 11, 1997
--------------------------
Manuel A. Fernandez
Director /s/ Peter Harf February 11, 1997
--------------------------
Peter Harf
Director /s/ Geo D. Kennedy February 11, 1997
--------------------------
George D. Kennedy
Director /s/ B. K. Koken February 11, 1997
--------------------------
Bernd K. Koken
Director /s/ Jay W. Lorsch February 11, 1997
--------------------------
Jay W. Lorsch
Director /s/ Bettye Martin Musham February 11, 1997
--------------------------
Bettye Martin Musham
Director /s/ Jack F. Reichert February 11, 1997
--------------------------
Jack F. Reichert
Director /s/ Kenneth Roman February 11, 1997
----------------------------
Kenneth Roman
Director /s/ Roger W. Schipke February 11, 1997
---------------------------
Roger W. Schipke
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 238,500
<SECURITIES> 3,600
<RECEIVABLES> 344,100
<ALLOWANCES> 17,200
<INVENTORY> 444,900
<CURRENT-ASSETS> 1,241,800
<PP&E> 1,355,700
<DEPRECIATION> 670,300
<TOTAL-ASSETS> 2,802,400
<CURRENT-LIABILITIES> 831,100
<BONDS> 455,400
<COMMON> 76,900
0
0
<OTHER-SE> 1,120,800
<TOTAL-LIABILITY-AND-EQUITY> 2,802,400
<SALES> 3,160,300
<TOTAL-REVENUES> 3,160,300
<CGS> 2,285,000
<TOTAL-COSTS> 2,285,000
<OTHER-EXPENSES> 570,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,400
<INCOME-PRETAX> 290,300
<INCOME-TAX> 104,500
<INCOME-CONTINUING> 185,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185,800
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.88
</TABLE>
