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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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OUTBOARD MARINE CORPORATION
(NAME OF SUBJECT COMPANY)
OUTBOARD MARINE CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.15 PER SHARE
(TITLE OF CLASS OF SECURITIES)
690020102
(CUSIP NUMBER OF CLASS OF SECURITIES)
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HARRY W. BOWMAN
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
OUTBOARD MARINE CORPORATION
100 SEA HORSE DRIVE
WAUKEGAN, ILLINOIS 60085
(847) 689-6200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
With a copy to:
D. JEFFREY BADDELEY, ESQ.
VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
OUTBOARD MARINE CORPORATION
100 SEA HORSE DRIVE
WAUKEGAN, ILLINOIS 60085
(847) 689-6200
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Outboard Marine Corporation, a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is 100 Sea Horse Drive, Waukegan, Illinois 60085. The
title of the class of equity security to which this Schedule 14D-9 relates is
the common stock, par value $0.15 per share, of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to a tender offer by Greenmarine
Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly-owned
subsidiary of Greenmarine Holdings LLC, a Delaware limited liability company
(the "Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1 dated
August 8, 1997, as amended by Amendment No. 1 thereto dated August 14, 1997
(the "Greenmarine Schedule 14D-1"), to purchase all outstanding shares of
common stock, par value $0.15 per share (the "Shares"), of the Company,
together with (unless and until the Offeror declares that the Rights Condition
(as defined below) is satisfied) the associated preferred stock purchase rights
(the "Rights") issued pursuant to the Rights Agreement, dated as of April 24,
1996, as amended (the "Rights Agreement"), by and between the Company and First
Chicago Trust Company of New York, as Rights Agent, at a price of $18.00 per
Share (and associated Right), net to the seller in cash, without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offeror's Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"). Unless the context otherwise requires,
all references to Shares include the Rights and all references to the Rights
include all benefits that may inure to holders of the Rights pursuant to the
Rights Agreement.
According to the Greenmarine Schedule 14D-1: The members of the
Parent are Greenlake Holdings LLC, a Delaware limited liability company
("Greenlake"), Quasar Strategic Partners LDC, a Cayman Islands limited duration
company ("QSP"), and Quantum Industrial Partners LDC, a Cayman Islands limited
duration company ("QIP"); Each of Greenlake, QSP and QIP has approximately a
30.5%, 34.75% and 34.75% interest in the Parent, respectively; Greenlake is
controlled by Mr. Alfred D. Kingsley and Mr. Gary K. Duberstein, each of whom
are principals of Greenway Partners, L.P.; The principal business of Greenway
Partners, L.P. is investing in securities; QSP is an indirect subsidiary of
Quasar International Fund N.V., a Netherlands Antilles limited liability
company ("Quasar"); QIP is the principal operating subsidiary of Quantum
Industrial Holdings Ltd., a British Virgin Islands corporation ("QIH"); and
Quasar and QIH are investment funds which have as their principal investment
advisors Soros Fund Management LLC ("SFM LLC"), of which Mr. George Soros
serves as Chairman.
The Offeror, the Parent, QSP, QIP and Greenlake are sometimes
collectively referred to herein as, the "Offering Group."
All information contained in this Schedule 14D-9 or incorporated herein
by reference concerning the Offeror, the Parent, the Offering Group or their
affiliates, or actions or events with respect to any of them, was provided by
the Offeror, the Parent or the Offering Group, and the Company takes no
responsibility for the accuracy or completeness of such information or for any
failure by such entities to disclose events or circumstances that may have
occurred and may affect the significance, completeness or accuracy of any such
information.
Based on information in the Offer, the principal executive offices of
the Offeror and the Parent are located at 277 Park Avenue, 27th Floor, New
York, New York 10172.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 hereof.
(b) Except as set forth in this Item 3, to the knowledge of the
Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings, or actual or potential conflicts of
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interest, between the Company or any of its affiliates and (i) the Company, its
executive officers, directors or affiliates or (ii) the Parent, the Offeror,
the Offering Group or their partners, members, executive officers, directors or
affiliates.
SEVERANCE AGREEMENTS. The Company has entered into an Amended and
Restated Severance Agreement dated as of March 31, 1997, with Harry W. Bowman,
the Company's Chairman of the Board, President and Chief Executive Officer (the
"Bowman Severance Agreement"). A copy of the Bowman Severance Agreement is filed
as Exhibit 99.1 to this Schedule 14D-9 and is incorporated herein by reference.
The following summary of the Bowman Severance Agreement does not purport to be
complete and is qualified in its entirety by reference to the Bowman Severance
Agreement. Capitalized terms used but not otherwise defined herein are used
herein as defined in the Bowman Severance Agreement.
The Bowman Severance Agreement will become operative only upon a Change
in Control of the Company. A "Change in Control" is defined in the Bowman
Severance Agreement as having occurred when: (a) any individual, entity or group
(within the meaning of the Securities Exchange Act of 1934 (the "Exchange Act"))
(a "Person") acquires beneficial ownership of securities representing 15% or
more of the combined voting power of the voting stock of the Company; (b)
individuals who, as of the date of the Bowman Severance Agreement, constitute
the "incumbent" members of the Board of Directors of the Company (the "Company's
Board of Directors") cease for any reason to constitute at least a majority of
the Company's Board of Directors, provided that an individual whose election (or
nomination for election by the Company's shareholders) was approved by at least
two-thirds of the incumbent members of the Company's Board of Directors shall be
deemed to be an incumbent member of the Company's Board of Directors; (c)
consummation of a reorganization, merger or consolidation or a sale or
disposition of all or substantially all of the assets of the Company shall occur
(each, a "Business Combination"), unless immediately following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners of voting stock of the Company immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
80% of the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the Company or, if applicable, other entity resulting
from such Business Combination in substantially the same proportions relative to
each other as their ownership of the voting stock of the Company immediately
prior to such Business Combination, (ii) no Person (other than the Company or,
if applicable, other entity resulting from such Business Combination, or any
employee benefit plan sponsored or maintained by the Company, any subsidiary of
the Company or, if applicable, other entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 15% or more of the then
outstanding shares of common stock of the entity resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of such
entity, and (iii) at least a majority of the members of the Board of Directors
of the entity resulting from such Business Combination were incumbent members of
the Company's Board of Directors at the time of the execution of the initial
agreement or of the action of the Company's Board of Directors providing for
such Business Combination; or (d) approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company shall occur, except
pursuant to a Business Combination that complies with subclauses (i), (ii) and
(iii) of clause (c) above.
Under the Bowman Severance Agreement, Mr. Bowman will remain employed
by the Company during the Severance Period, which is defined in the Bowman
Severance Agreement as the period of time commencing on the date of the first
occurrence of a Change in Control and continuing until the earliest of (a) the
third anniversary of the occurrence of the Change in Control, (b) the death of
Mr. Bowman or (c) Mr. Bowman's attainment of age 65; provided, however, that
commencing on each anniversary of the Change in Control, the Severance Period
will automatically be extended for an additional year unless, not later than 90
calendar days prior to such anniversary date, either the Company or Mr. Bowman
shall give written notice to the other that the Severance Period is not to be so
extended. Mr. Bowman will be entitled to severance pay if (a) he is terminated
by the Company during the Severance Period for any reason other than (i) in the
event of his death, (ii) in the event of his permanent disability and receipt of
disability benefits or (iii) "cause" (as defined in the Bowman Employment
Agreement), or (b) Mr. Bowman terminates his own employment for, among other
reasons, (i) failure of the surviving corporation of a Business Combination to
maintain Mr. Bowman in the same or a similar office or position or removal of
Mr. Bowman as a director of any such surviving corporation, (ii) a material
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reduction in duties, responsibilities, compensation or benefits (iii) a
determination by Mr. Bowman that a change in circumstances has occurred which
has rendered him substantially unable to carry out, has substantially hindered
his performance of, or has caused him to suffer a substantial reduction in, any
of the authorities, powers, functions, responsibilities or duties attached to
his position prior to the Change in Control, (iv) the occurrence of a Business
Combination, unless the successor or successors to which all or substantially
all its business or assets have been transferred shall have assumed all duties
and obligations of the Company under the Bowman Severance Agreement, (v) a
relocation of his principal work location more than 35 miles from the location
thereof immediately prior to the Change in Control, (vi) any material breach of
the Bowman Severance Agreement, or (vii) any reason or without reason during the
one-year period commencing upon a Change in Control.
If Mr. Bowman is terminated or resigns with the right to receive
severance pay under the Bowman Severance Agreement, that severance pay will
include (i) a lump-sum payment of approximately $3.4 million, which includes an
amount equal to 300% of his base salary, as in effect immediately prior to a
change in control, plus Incentive Pay (determined in accordance with the
standards set forth in Section 1(h) of the Bowman Severance Agreement) and (ii)
health and welfare benefits for a period of one year. The Bowman Severance
Agreement stipulates that payments and benefits available to Mr. Bowman will be
increased by an amount (the "Gross-up Payment") such that, after the payment of
all income and excise taxes, Mr. Bowman will be in the same after-tax position
that he would have been in had no excise tax under Section 4999 of the Internal
Revenue Code been imposed; provided, however, that no Gross-up Payment shall be
made with respect to any excise tax attributable to any incentive stock option
granted prior to the execution of the Bowman Severance Agreement or any stock
appreciation or similar right granted in tandem with any such incentive stock
option.
The Bowman Severance Agreement also contains a non-compete provision
that prohibits Mr. Bowman from certain participation in the business of any
company engaged in a Competitive Activity (as defined in the Bowman Severance
Agreement) without the prior written consent of the Company, which shall not be
unreasonably withheld, for a period ending one year following his termination
with the right to receive severance pay.
The Company has entered into Amended and Restated Severance Agreements
(the "Elected Officer and Key Employee Severance Agreements") with seven of its
elected corporate officers ("Elected Officers") and fifteen of its appointed
corporate officers and key employees ("Key Employees"). A form of the Elected
Officer and Key Employee Severance Agreements is filed as Exhibit 99.2, to this
Schedule 14D-9 and incorporated herein by reference. The following summary of
the Elected Officer and Key Employee Severance Agreements does not purport to be
complete and is qualified in its entirety by reference to the Elected Officer
and Key Employee Severance Agreements.
The Elected Officer and Key Employee Severance Agreements will become
operative only upon a Change in Control. The definition of Change in Control in
the Elected Officer and Key Employee Severance Agreements is substantially the
same as that in the Bowman Severance Agreement. Under the Elected Officer and
Key Employee Severance Agreements, Elected Officers and Key Employees will
remain employed by the Company during the Severance Period. The definition of
Severance Period in the Elected Officer and Key Employee Severance Agreements is
substantially the same as that in the Bowman Severance Agreement. The Elected
Officers and the Key Employees will be entitled to severance pay if terminated
by the Company during the Severance Period for any reason other than (i) in the
event of death, (ii) in the event of permanent disability and receipt of
disability benefits or (iii) "cause" (as defined in the Elected Officer and Key
Employee Severance Agreements), or if the Elected Officer or Key Employee
terminates employment for, among other reasons, (i) failure of the surviving
corporation of a Business Combination to maintain such Elected Officer or Key
Employee in the same or a similar office or position or removal of such Elected
Officer or Key Employee as a director of any such surviving corporation if such
Elected Officer or Key Employee shall have been a director prior to the Change
in Control, (ii) a material reduction in duties, responsibilities, compensation
or benefits, (iii) a determination by such Elected Officer or Key Employee that
a change in circumstances has occurred which has rendered such Elected Officer
or Key Employee substantially unable to carry out, has substantially hindered
such Elected Officer's or Key Employee's performance of, or has caused such
Elected Officer or Key Employee to suffer a substantial reduction in, any of the
authorities, powers, functions, responsibilities or duties attached to
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the position held by such Elected Officer or Key Employee prior to the Change in
Control, (iv) the occurrence of a Business Combination unless the successor or
successors to which all or substantially all its business or assets have been
transferred assumed all duties and obligations of the Company under such Elected
Officer's or Key Employee's Elected Officer and Key Employee Severance
Agreement, (v) a relocation of such Elected Officer's or Key Employee's
principal work location more than 35 miles from the location thereof immediately
prior to the Change in Control, or (vi) any material breach of such Elected
Officer's or Key Employee's Elected Officer and Key Employee Severance
Agreement.
If an Elected Officer or Key Employee is terminated or resigns with the
right to receive severance pay under the Elected Officer and Key Employee
Severance Agreements, that severance pay will include (i) a lump-sum payment
equal to 200%, in the case of an Elected Officer, or 100%, in the case of a Key
Employee, of his or her annual base salary, as in effect immediately prior to a
Change in Control, plus Incentive Pay (determined in accordance with the
standards set forth in Section 1(h) of the Elected Officer and Key Employee
Severance Agreements) and (ii) health and welfare benefits for a period of one
year. To the extent that any amount or benefit to be paid or provided under the
Elected Officer and Key Employee Severance Agreements would be an "Excess
Parachute Payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended, the Elected Officer and Key Employee Severance
Agreements impose a reduction on any amount or benefit to be paid to the minimum
amount necessary to ensure that no portion of any such payment or benefit, as so
reduced, constitutes an Excess Parachute Payment.
The Elected Officer and Key Employee Severance Agreements also contain
a non-compete provision that prohibits an Elected Officer or Key Employee from
certain participation in the business of any company engaged in a Competitive
Activity (as defined in the Elected Officer and Key Employee Severance
Agreements) without the prior written consent of the Company, which shall not be
unreasonably withheld, for a period ending one year following the Elected
Officer's or Key Employee's termination with the right to receive severance pay.
The Company has also entered into severance agreements with four
managers of the Company ("Managers"). A form of these agreements, as amended
(the "Manager Severance Agreements"), is filed as Exhibit 99.3 to this Schedule
14D-9 and incorporated herein by reference. The following summary of the Manager
Severance Agreements does not purport to be complete and is qualified in its
entirety by reference to the Manager Severance Agreements.
Each of the Manager Severance Agreements has a one-year term that is
automatically extended from year to year. The Manager Severance Agreements,
which apply only upon a Change in Control of the Company, provide that if a
Manager elects to resign his employment for certain specified reasons or is
terminated by the Company other than for "cause" (as defined in the Manager
Severance Agreements), the Company will pay the Manager an amount in cash, equal
to (i) a fraction, the numerator of which is equal to the lesser of twelve and
the number of full and partial months existing between the date the Manager
terminates his employment and his 65th birthday and the denominator of which is
twelve, multiplied by (ii) the Manager's then current base salary plus the
highest amount of incentive compensation received by the Manager in the five
years preceding the Change in Control. In addition, the Company will pay the
Manager, in cash, amounts accelerated, earned, allocated or deferred under the
Company's pension, retirement, compensation or annual and long-term incentive
plans.
For purposes of the Manager Severance Agreements, a Change in Control
of the Company shall generally be deemed to have occurred if (i) any person,
other than the Company or fiduciaries holding securities under an employee
benefit plan of the Company, is or becomes the beneficial owner of securities of
the Company representing 15% or more of the combined voting power of the
Company's then outstanding securities, (ii) during any period of two consecutive
years, individuals who constitute the Company's Board of Directors at the
beginning of such period, as well as new directors (other than certain directors
designated by a person who has entered into certain change-in-control
transactions) whose election by the Company's Board of Directors or nomination
for election by the Company's shareholders is approved by a vote of at least
two-thirds of the directors then still in office, cease for any reason to
constitute a majority of the Company's Board of Directors, (iii) the
shareholders of the Company approve a merger or consolidation of the Company
with any other company, other than certain transactions in which the voting
securities of the Company continue to represent at
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least 80% of the combined voting power of the Company or other surviving entity
of such transaction or certain recapitalizations in which no person acquires
more than 15% of the combined voting power of the Company's then outstanding
securities, (iv) the shareholders of the Company approve a plan of complete
liquidation of the Company, or (v) the Company enters into an agreement for the
disposition of all or substantially all the Company's assets or the Company
otherwise disposes of such assets.
Upon a "Change in Control" of the Company: (i) all outstanding options
to purchase Shares granted to executive officers under the Company's Executive
Equity Incentive Plan (the "EEIP") or the Company's 1994 Long-Term Incentive
Plan (the "LTIP") will immediately become fully vested and exercisable; (ii)
all outstanding performance share awards granted to executive officers under
the LTIP will immediately become payable in Shares in an amount equal to the
number of Shares covered thereby multiplied by a fraction, the numerator of
which is the number of days that shall have then elapsed in the applicable
three-year performance cycle and the denominator of which is 1,095; and (iii)
all outstanding phantom restricted stock awards granted to executive officers
under the LTIP will become fully vested and immediately payable in Shares. In
addition, options granted to executive officers under the EEIP or the LTIP
include limited stock appreciation rights that, upon a Change in Control, are
automatically exercised for cash in an amount equal to (1) the excess, if any,
of (a) the greater of (i) the highest closing price of the Shares on the New
York Stock Exchange during the 180-day period preceding the date of the Change
in Control or (ii) the highest price per Share paid in the Change in Control
over (b) the option exercise price per Share, multiplied by (2) the number of
Shares for which the option shall not have theretofore been exercised. For the
purposes of the EEIP and the LTIP, a Change in Control is deemed to occur if:
(a) any "person" (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")), other than the Company, any trustee
or other fiduciary holding securities under any employee benefit plan of the
Company or a company owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of stock of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the Company
representing 15% or more of the combined voting power of the Company's then
outstanding securities; (b) during the period of two consecutive years (not
including any period prior to the shareholders approval of the Plan) there
shall cease to be a majority of the Board comprised as follows: individuals who
at the beginning of such period constitute the Board and any new director(s)
(other than a director designated by a "person" who has entered into an
agreement with the Company to effect a transaction described in Sections (a),
(c) or (d) of this definition), whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved; (c) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a
merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or a
similar transaction in which no "person" acquires 15% or more of the combined
voting power of the Company's then outstanding securities); or (d) the
shareholders of the Company approve a plan of complete liquidation of the
Company or the Company enters into an agreement for the sale or other
disposition of all or substantially all of the Company's assets or the Company
otherwise disposes of such assets. Copies of the EEIP and the LTIP are filed
as Exhibit 99.4 and Exhibit 99.5, respectively, to this Schedule 14D-9 and are
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
BACKGROUND. Early in fiscal year 1997, the Company embarked on a
program to substantially decrease dealer inventories. While the Company
anticipated that this program would result in a marked decrease in sales for the
first six months of fiscal year 1997 as compared to a similar period in fiscal
year 1996, the Company also experienced an unexpected inability to adjust
manufacturing costs commensurate with these sales declines. As a result, by
February 1997, the Company's projected operating earnings for the first five
months of fiscal 1997 were significantly lower than the comparable prior year
period. In an effort to address these circumstances and the possibility that
continued financial deterioration could negatively impact the Company's ability
to comply with certain financial covenants under the Company's bank revolving
credit agreement, the Company requested the assistance of Salomon Brothers Inc
("Salomon Brothers") in analyzing certain of the issues facing the Company.
On March 10, 1997, following a management presentation regarding the
Company's current financial position (including a summary of the Company's
results for the first two months of the second fiscal quarter), the prospects
for the Company's operations and business (including potential difficulties in
achieving the objectives of the Company's business plan), the status of matters
relating to the Company's bank revolving credit agreement and possible
strategic alternatives designed to address certain of these issues and a
discussion by Salomon Brothers of the various strengths and weaknesses of the
Company, the deterioration of the Company's recent operating performance, the
Company's lack of success in implementing previously adopted restructuring
plans, management's acknowledgment that achievement of the objectives set forth
in the Company's current business plan would be difficult and the significant
adverse impact that these factors have had on the Company's enterprise value,
the Company's Board of Directors directed management to explore, with the
assistance of outside professionals, further alternative strategic proposals to
maximize the value of the Company for the shareholders. The Company's Board of
Directors also instructed management to retain Salomon Brothers to render
financial advisory and investment banking services to the Company in connection
with its pursuit of strategic alternatives for the future of the Company and,
in connection with the evaluation of various alternatives, authorized Salomon
Brothers to contact a limited number of strategic and financial parties with
regard to evaluating alternatives involving a sale of the Company or a possible
equity investment in the Company.
On April 2, 1997, following a management presentation of the Company's
recent results and financial condition (including management's expectation
relative to the Company's ability to comply with, or negotiate a waiver or
amendment of, certain financial covenants under the Company's bank revolving
credit agreement) and a presentation by Salomon Brothers of the results of its
review of the strategic alternatives available to the Company and an analysis of
the likelihood of success of each alternative (including Salomon Brothers'
conclusion that, based on that analysis, a transaction resulting in a change in
control of the Company would be the most likely alternative to maximize
shareholder value and resolve the risks and uncertainties facing the Company),
the Company's Board of Directors instructed Salomon Brothers to solicit
indications of interest from potential parties that might be interested in
acquiring the Company or in making a significant equity investment in the
Company.
In response to this instruction, Salomon Brothers contacted over 50
parties, including Penske Corporation, an affiliate of Detroit Diesel
Corporation ("DDC"), to determine whether they were interested in investing in
or acquiring the Company. By April 24, 1997, the Company had signed
confidentiality agreements with 30 entities, including Penske Corporation, that
had responded to the solicitations of Salomon Brothers. Each of these parties
received information about the Company and many of these parties indicated an
interest in conducting further due diligence.
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On May 15, 1997, Salomon Brothers informed the Company of the terms of
nine strategic proposals received through that date. After review of these
various proposals, in consultation with management and members of the Company's
Board of Directors, Salomon Brothers was instructed to further explore the
proposals presented by five of the parties that had proposed strategic
transactions. During the following four weeks, the interested parties conducted
extensive due diligence reviews of the Company, and on June 10, 1997, Salomon
Brothers, on behalf of the Company, sent invitations to submit a written offer
for the acquisition of the Company to four interested parties. The invitation
set June 25, 1997, as the deadline for submitting proposals.
As a result of this process, on June 25, 1997, DDC submitted an offer
to Salomon Brothers, which provided that an affiliate of DDC would acquire by
tender offer approximately 67% of the issued and outstanding Shares for $16.00
per Share in cash, followed by a merger in which the shareholders would receive
a combination of shares of common stock, par value $0.01 per share, of DDC ("DDC
Common Shares") and cash. In consultation with management and the Company's
legal counsel and at the direction of the Company's Board of Directors, Salomon
Brothers thereafter negotiated and clarified with DDC the terms of DDC's
proposal. Those negotiations culminated in the execution of an Agreement and
Plan of Merger dated as of July 8, 1997 (the "DDC Merger Agreement"), among
the Company, DDC and OMC Acquisition Corp., a wholly-owned subsidiary of DDC
("OMC Acquisition Corp."), which provided that the OMC Acquisition Corp. would
acquire by tender offer (the "DDC Offer") 13,842,619 shares for $16.00 per
share in cash, followed by a merger (the "DDC Merger") in which the
shareholders of the Company would receive a combination of DDC Common Shares
and cash.
On July 15, 1997, pursuant to the DDC Merger Agreement, OMC
Acquisition Corp. filed a Schedule 14D-1 relating to the DDC Offer and
commenced the DDC Offer. The DDC Offer provided that, unless extended, it
would expire at midnight, Eastern Daylight Savings Time, on August 11, 1997.
Previously, the Greenway Entities had filed with the Securities and
Exchange Commission (the "Commission") a Schedule 13D dated August 21, 1996
(the "Greenway Schedule 13D"), disclosing, among other things, the Greenway
Entities' beneficial ownership of 1,710,000 Shares (representing approximately
8.5% of the Shares outstanding at such time). In addition, on October 1, 1996,
the Greenway Entities filed with the Commission Amendment No. 1 to the Greenway
Schedule 13D disclosing, among other things, the Greenway Entities' beneficial
ownership of 2,000,000 Shares (representing approximately 9.9% of the Shares
outstanding at such time).
On August 1, 1997, the Greenway Entities filed with the Commission
Amendment No. 2 to the Greenway Schedule 13D disclosing, among other things,
that: "The [Greenway Entities] are actively exploring the possibility of
making an offer to the Company and/or its stockholders that would represent a
superior transaction for the shareholders of the Company as compared with the
transaction set forth in the Agreement and Plan of Merger, dated as of July 8,
1997, among Detroit Diesel Corporation, OMC Acquisition Corp. and the
Company. There can be no assurance that the [Greenway Entities] will determine
to proceed with a competing offer."
On August 8, 1997, the Offering Group filed with the Commission the
Greenmarine Schedule 14D-1 commencing the Offer.
On August 8, 1997, the Offeror commenced the Offer and sent a
letter to the Company's Board of Directors, advising that the Offer had
commenced, requesting that the Company's Board of Directors recommend the
Offer to the Company's shareholders and withdraw its prior recommendation of
the DDC Offer and the DDC Merger.
On August 8, 1997, the Offeror also commenced litigation in the Court
of Chancery for the State of Delaware seeking, among other things, an order
compelling the Company's Board of Directors to redeem the Rights or to amend the
Rights Agreement to make the Rights inapplicable to the Offer and the proposed
Merger on the grounds that failure to do so would constitute a breach of
fiduciary duty to the Company's shareholders. The Company intends to file
appropriate responses to these allegations.
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<PAGE> 8
On August 10, 1997, the Company's Board of Directors met and authorized
management and Salomon Brothers to contact the Offeror for the purposes of
clarifying certain terms and conditions of the Offer.
On the morning of August 11, 1997, Salomon Brothers contacted
representatives of the Offering Group by telephone to arrange a meeting as soon
as possible. During this conversation, the Offering Group representatives
indicated that they would be unavailable to meet with representatives of the
Company until August 13, 1997. In anticipation of this meeting, Salomon
Brothers also transmitted a form of confidentiality agreement.
On August 11, 1997, the Company exercised its right under the DDC
Merger Agreement to request that the Offeror extend the DDC Offer for an
additional 10 business days. As a result, DDC extended the DDC Offer until
midnight, Eastern Daylight Savings Time, on August 25, 1997.
On the evening of August 11, 1997, the Offeror sent a letter to the
Company's Board of Directors, indicating that, at this point, it did not
believe a confidentiality agreement was necessary and it did not intend to sign
a confidentiality agreement.
On August 13, 1997, Salomon Brothers met, on behalf of the Company,
with representatives of the Offeror. During this meeting Salomon Brothers
indicated that, based on information available to the Company, it appeared
that the Offeror would need funding in addition to that available from the
sources specified in the Offer. In addition, Salomon Brothers noted that the
Company was concerned about the possibility that a number of the conditions to
the Offer may not be satisfied.
On August 14, 1997, the Offeror and the Company executed a
confidentiality agreement. In addition, on August 14, 1997, the Offeror filed
Amendment No. 1 to the Greenmarine Schedule 14D-1, which, among other things,
filed a Credit Agreement dated August 13, 1997 (the "Credit Agreement"),
among the Offeror and American Annuity Group, Inc. and Great American Insurance
Company.
On August 15, 1997, representatives of the Offeror and Salomon
Brothers conferred by telephone. During this conference, the Offeror requested
certain documents and information relating to the Company's employee benefit
plans and severance agreements, and Salomon Brothers continued to seek
additional information or assurances regarding possible funding deficiences in
the Offer.
On August 16, 1997, the Company delivered to the Offeror the documents
and information requested on August 15, 1997.
On August 18, 1997, Harry W. Bowman, the Company's Chairman of the
Board, President and Chief Executive Officer, sent a letter to Alfred D.
Kingsley, the Offeror's Chief Executive Officer and President, confirming some
of the issues and matters raised by Salomon Brothers with Mr. Kingsley during
the telephone conference held on August 15, 1997. The letter addressed some
of the Company's concerns with regard to the adequacy of the funding and
conditional aspects of the Credit Agreement supporting the Offer. Mr. Bowman
then emphasized that the Company's Board of Directors was committed to its
responsibility to respond to the Offer, but that in order to do so, the
Company needed to receive further information regarding the Offer to clarify
the issues and alleviate the uncertainties associated with the Offer in its
present form.
In addition, on August 18, 1997, Mr. Bowman sent a separate letter to
the Offeror encouraging the Offeror to visit the Company's "data room" and take
the opportunity to discuss any relevant matters with members of the Company's
management.
On August 19 and 20, 1997, the Offeror's legal counsel delivered letters
to the Company, requesting certain additional documents and analyses relating
to employee benefit plans and severance agreement matters. Responses to these
requests were delivered by the Company later that day and on August 20 and 21,
1997.
On the afternoon of August 20, 1997, the Offeror sent a letter to Mr.
Bowman referencing certain of the matters raised by Mr. Bowman's August 18th
letter and enclosing a draft of a merger agreement and plan of merger which the
Offeror and Parent proposed be entered into by the Parent, the Offeror and the
Company. The Company has not yet had an opportunity to review or analyze this
proposed merger agreement.
At a meeting held on August 20, 1997, the Company's Board of Directors
directed the Company's management to continue to seek to obtain information
from the Offering Group with regard to the outstanding issues relating
to the Offer. The Company's Board of Directors also directed the Company's
management to conduct a review and analysis of the Offeror's proposed merger
agreement and seek to discuss any issues which may arise out of such review
and analysis with appropriate members of the Offering Group.
SHAREHOLDER SUITS. On August 8, 1997, plaintiffs Anita Kleinman and
William Steiner, filed suit against the individual members of the Company's
Board of Directors and the Company seeking injunctive and declaratory relief
and monetary damages with respect to the directors' and the Company's alleged
breach of fiduciary duty to the Company's shareholders in connection with the
proposed sale of the Company. The Company intends to file appropriate responses
to these allegations.
On August 14, 1997, plaintiff Harry P. Schoenberg, filed a class action
against the individual members of the Company's Board of Directors and the
Company seeking injunctive and declaratory relief and monetary damages with
respect to the directors' and the Company's alleged breach of fiduciary duty to
the Company's shareholders for failing to act in a manner consistent with
maximizing shareholder value. The Company intends to file appropriate responses
to these allegations.
RECOMMENDATION OF BOARD. The Company's Board of Directors remains
committed to maximizing shareholder value. Although the price being offered
pursuant to the Offer is greater than the price being offered in the DDC Offer,
there are uncertainties and contingencies associated with the Offer that
are beyond the Company's control and could result in the termination of the
Offer. For example, the consummation of the Offer is conditioned upon the
following:
(1) there being validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on Monday, September 8, 1997, unless
extended by the Offeror (the "Expiration Date"), that number
of Shares that, when added to the 2,000,000 Shares
beneficially owned by the Offeror and the Parent, would
represent 90% of all outstanding Shares on the date of
purchase and, as a result thereof, the Offeror being
satisfied, in its sole discretion, that on the date of
purchase it will be able to consummate the merger of the
Company with and into the Offeror (the "Merger") as a
"short-form merger" pursuant to the provisions of Section 253
of the DGCL immediately after consummation of the Offer;
(2) the Offeror receiving the loan proceeds committed to be
provided by American Financial Group, Inc. ("AFG") in
accordance with the Commitment Letter (the "Commitment
Letter") issued by AFG to the Offeror, dated August 7, 1997,
and the Credit Agreement;
8
<PAGE> 9
(3) the Offeror being satisfied, in its sole discretion,
that, upon consummation of the Offer and the Merger, the
Company will not be in default under any instrument
evidencing the Company's then outstanding indebtedness, or,
if in default, the Offeror and the Parent having obtained,
prior to the expiration date of the Offer, on terms
reasonably acceptable to the Parent, sufficient financing to
enable the Company to refinance or redeem any such
indebtedness upon consummation of the Offer and the Merger;
(4) the Rights having been redeemed by the Company's Board of
Directors, or the Offeror being satisfied, in its sole
discretion, that the Rights have been invalidated or are
otherwise inapplicable to the Offer and to the Merger (the
"Rights Condition");
(5) the Offeror being satisfied, in its sole discretion, that the
proposed Merger can be consummated without the need for a
supermajority vote of the Company's stockholders pursuant to
Article Eighteenth of the Company's Restated Certificate of
Incorporation; and
(6) the Offeror being satisfied, in its sole discretion, that the
DDC Merger Agreement has been terminated in accordance with
its terms.
As indicated in Item 4 of this Schedule 14D-9, the Company is
continuing to obtain additional information regarding the Offer in an effort to
better evaluate the likelihood of success of the Offer. In addition, the
Company is continuing to seek assurances from the Offering Group that the
apparent deficiencies in the Offer's available funding sources can and will be
satisfied. Since the Company's Board of Directors believes that the
consideration payable pursuant to the DDC Merger Agreement is a fair price for
the Company, accordingly the Company's Board of Directors does not believe it
would be in the best interests of the Company's shareholders to take a
position with respect to the Offer that could result in the termination of the
DDC Merger Agreement unless and until the uncertainties and contingencies
associated with the Offer have been satisfactorily resolved. The Company has
commenced discussions with the Offeror regarding the Offer, and the Offeror
has expressed a willingness to cooperate with the Company to resolve the
uncertainties and contingencies associated with the Offer. There can be no
assurances, however, that all uncertainties and contingencies associated with
the Offer will be resolved satisfactorily. Therefore, at this time, the
Company's Board of Directors is unable to make a recommendation either in
favor of or in opposition to the Offer.
9
<PAGE> 10
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained the services of Salomon Brothers pursuant to a
letter agreement (the "Salomon Letter Agreement") dated March 12, 1997, to
render financial advisory and investment banking services to the Company in
connection with possible transactions including: (a) sale of the Company or an
interest in the Company to another corporation or other business entity; (b)
placement of the Company's equity securities with an investor or investors; (c)
developing and implementing a common stock buy back program; and (d)
restructuring, refinancing or recapitalizing the Company's indebtedness and
shareholder equity. In exchange for the services provided, the Company agreed to
pay Salomon Brothers $150,000 upon the execution of the Salomon Letter
Agreement, plus an additional fee (subject to a credit for the $150,000 paid
upon execution) equal to 0.75% of the Aggregate Consideration (as defined in the
Salomon Letter Agreement) of any sale of the Company or an interest in the
Company, such additional fee to be contingent upon the consummation of a sale of
the Company or of an interest therein and payable at the closing thereof. The
Salomon Letter Agreement also provided that the Company would pay Salomon
Brothers for reasonable expenses whether or not any transaction is proposed or
consummated. The Company and Salomon also entered into a separate letter
agreement, dated March 12, 1997, whereby the Company agreed to indemnify Salomon
Brothers in connection with Salomon Brothers' engagement under the Salomon
Letter Agreement.
Salomon Brothers has provided certain investment banking services to
the Company from time to time for which it has received customary compensation.
In the ordinary course of its business, Salomon Brothers may trade the equity
securities of the Company for its own account and for the accounts of customers
and may, therefore, at any time hold a long or short position in such
securities.
On May 2, 1997, the Company's Board of Directors engaged the services
of Merrill Lynch, pursuant an engagement letter dated May 2, 1997, to serve as
financial advisor to the outside directors in connection with an evaluation and
assessment of strategic and financial alternatives available to the Company in
order to maximize shareholder value. Merrill Lynch agreed to perform a financial
review of the Company and provide an assessment of valuation, analyze the
strategic alternatives available to the Company, assist the outside directors in
evaluating such strategic and financial alternatives as they become available
through the efforts of the Company, monitor the process conducted by the Company
to evaluate its strategic and financial alternatives, and provide strategic and
financial advice to the outside directors relating to such process.
In exchange for the services provided, the Company agreed to pay
Merrill Lynch $350,000, payable in cash within 90 days of the date of the
agreement. The agreement also provided that the Company would pay Merrill Lynch
reasonable expenses not to exceed $25,000 without the Company's prior written
consent. The Company agreed to indemnify Merrill Lynch in connection with
Merrill Lynch's engagement under the agreement dated May 2, 1997. Merrill Lynch
subsequently resigned its engagement on July 7, 1997, due to an "indirect
conflict of interest."
Neither the Company nor any person acting on its behalf currently
intends to employ, retain or compensate any other person to make solicitations
or recommendations to the shareholders of the Company on its behalf concerning
the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, no transaction in Shares has been effected
by the Company or, to the Company's knowledge, by any executive officer,
director or affiliate of the Company.
(b) To the Company's knowledge, to the extent permitted by applicable
securities laws, rules or regulations, as of the date hereof, in light of the
position of the Company's Board of Directors with respect to the Offer, none of
the Company's executive officers and directors intends to tender any Shares
over which such executive officer or director has sole dispositive power
pursuant to the Offer.
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<PAGE> 11
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) The Company has agreed in the DDC Merger Agreement not to engage
in certain activities in connection with any proposal to engage in a business
combination with, or acquire an interest in or assets of, the Company, except
under the circumstances described in the DDC Merger Agreement. As described in
Item 4 of this Schedule 14D-9, the Company discussed certain provisions of the
Offer with the Offeror. In addition, on August 20, 1997, the Offeror delivered
a proposed draft of a merger agreement relating to the transactions
contemplated by the Offer. After the Company has had an opportunity to review
this proposed merger agreement, the Company may enter into discussions with the
Offeror relating to any issues or uncertainties discovered as a result of this
review. However, no discussions relating to this proposed merger agreement
have taken place to date.
Except in accordance with the terms of the DDC Merger Agreement, in
connection with the exercise of fiduciary duties after consultation with
outside counsel and Salomon Brothers, the Company does not presently intend to
undertake any negotiations in response to the Offer that relate to or would
result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any of its subsidiaries, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any of its subsidiaries, (iii) a tender offer for or other acquisition of
securities by or of the Company or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described herein, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the events referred to
in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
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<PAGE> 12
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
The following Exhibits are filed herewith:
<S> <C>
Exhibit 99.1: Severance Agreement dated as of March 31, 1997, between Harry W.
Bowman and the Company.
Exhibit 99.2: Form of Severance Agreement between Outboard Marine Corporation and
each of George L. Schueppert, Carlisle R. Davis, Richard H. Medland, Clark
J. Vitulli, D. Jeffrey Baddeley, John D. Flaig and Thomas G. Goodman,
providing for a lump-sum payment of 200% of the sum of Base Pay and
Incentive Pay; and between Outboard Marine Corporation and each of Peter
W. Brown, Miles E. Dean, Hans Lamens, Robert S. Romano, Peter L.
Schelle, Gary F. Swartz, Raymond M. Cartade, Edgar M. Frandle, Grainger B.
McFarlane, Russell J. VanRens, Paul R. Rabe, Robert F. Young, George L.
Broughton, Paula S. Rummage and Peter J. VanLancker, provide for a lump-sum
payments of 100% of the sum of Base Pay and Incentive Pay.
Exhibit 99.3: The form of Amended and Restated Severance Agreement between Outboard
Marine Corporation and each of Jack L. Feurig, Dennis G. Holmes, Robert J.
Moerchen and J.P. Murphy.
Exhibit 99.4: The OMC Executive Equity Incentive Plan
Exhibit 99.5: The OMC 1994 Long-Term Incentive Plan
</TABLE>
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<PAGE> 13
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule 14D-9 is true, complete
and correct.
Dated: August 21, 1997 OUTBOARD MARINE CORPORATION
By: /s/ HARRY W. BOWMAN
-----------------------------------------
Name: Harry W. Bowman
Title: Chairman of the Board,
President and Chief
Executive Officer
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<PAGE> 1
EXHIBIT 99.1
SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this Agreement) dated as of
March 31, 1997, is made and entered by and between Outboard Marine Corporation,
a Delaware corporation (the "Company"), and Harry W. Bowman (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive or a key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short- and long-term profitability,
growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum severance
benefits for certain of its senior executives and key employees, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives and key
employees are not practically disabled from discharging their duties in respect
of a proposed or actual transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a rate not
less than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in Control or
such higher rate as may be determined from time to time by the Board or a
committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to Section
3(b), the Executive shall have been:
(i) convicted of a criminal violation involving fraud, embezzlement
or theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary;
(ii) committed intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) committed intentional wrongful disclosure of secret processes
or confidential information of the Company or any Subsidiary; or
(iv) intentionally, wrongfully engaged in any Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act on
the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted
<PAGE> 2
by the affirmative vote of not less than two-thirds of the Board then in
office at a meeting of the Board called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in
the good faith opinion of the Board, the Executive had committed an act
constituting "Cause" as herein defined and specifying the particulars
thereof in detail. Nothing herein will limit the right of the Executive
or his beneficiaries to contest the validity or propriety of any such
determination.
(d) "Change in Control" means the occurrence during the Term of any of
the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of the combined
voting power of the then outstanding Voting Stock; provided, however,
that for purposes of this Section 1(d)(i), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly
from the Company that is approved by the Incumbent Board, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, or (D) any acquisition by any Person pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d); or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
Director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least two-thirds of the Directors then comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be deemed to have been a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11
of the Exchange Act) with respect to the election or removal of
Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) consummation of (A) a reorganization, merger or
consolidation, (B) a sale or other disposition of all or substantially
all of the assets of the Company, or (C) a sale or other disposition of
all or substantially all of the assets ("Boat Group Assets") of the
Company used in its Boat Group businesses (each, a "Business
Combination"), unless, in each case, immediately following such Business
Combination, (I) all or substantially all of the individuals and
entities who were the beneficial owners of Voting Stock of the Company
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
Directors of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions relative to each other as their
ownership, immediately prior to such Business Combination, of the Voting
Stock of the Company, (II) no Person (other than the Company, such
entity resulting from such Business Combination, or any employee benefit
plan (or related trust) sponsored or maintained by the Company, any
Subsidiary or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 15% or more of the then
outstanding shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors of such entity, and (III) at least a majority of the
members of the Board of Directors of the entity resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
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<PAGE> 3
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d).
(e) "Competitive Activity" means the Executive's participation,
without the written consent of an officer of the Company, in the management
of any business enterprise if such enterprise engages in substantial and
direct competition with the Company and such enterprise's sales of any
product or service competitive with any product or service of the Company
amounted to 10% of such enterprise's net sales for its most recently
completely fiscal year and if the Company's net sales of said product or
service amounted to 10% of the Company's net sales for its most recently
completed fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of rights
appurtenant thereto or (ii) participation in the management of any such
enterprise other than in connection with the competitive operations of such
enterprise.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs or arrangements in
which Executive is entitled to participate, including without limitation
any stock option, performance share, performance unit, stock purchase,
stock appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital or
other insurance (whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement and other
employee benefit policies, plans, programs or arrangements that may now
exist or any equivalent successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company, providing perquisites,
benefits and service credit for benefits at least as great in the aggregate
as are payable thereunder prior to a Change in Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Pay" means an annual amount equal to not less than the
highest aggregate annual bonus, incentive or other payments of cash
compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any fiscal year during the five fiscal years
immediately preceding, or, if greater, the two fiscal years immediately
following, the fiscal year in which the Change in Control occurred pursuant
to any bonus, incentive, profit-sharing, performance, discretionary pay or
similar agreement, policy, plan, program or arrangement (whether or not
funded) of the Company, or any successor thereto, providing benefits at
least as great as the benefits payable thereunder prior to a Change in
Control.
(i) "Retirement Plans" means the retirement income, supplemental
executive retirement, excess benefits and retiree medical, life and similar
benefit plans providing retirement perquisites, benefits and service credit
for benefits at least as great in the aggregate as are payable thereunder
prior to a Change in Control.
(j) "Severance Period" means the period of time commencing on the date
of the first occurrence of a Change in Control and continuing until the
earliest of (i) the third anniversary of the occurrence of the Change in
Control, (ii) the Executive's death, or (iii) the Executive's attainment of
age 65; provided, however, that commencing on each anniversary of the
Change in Control, the Severance Period will automatically be extended for
an additional year unless, not later than 90 calendar days prior to such
anniversary date, either the Company or the Executive shall have given
written notice to the other that the Severance Period is not to be so
extended.
(k) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(l) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 1999,
or (ii) the expiration of the Severance Period; provided, however that (A)
commencing on January 1, 1998 and each January 1 thereafter, the term of
this Agreement will automatically be extended for an additional year
unless, not later than September 30 of
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<PAGE> 4
the immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not wish to
have the Term extended and (B) subject to the last sentence of Section 9,
if, prior to a Change in Control, the Executive ceases for any reason to be
an employee of the Company and any Subsidiary, thereupon without further
action the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect. For purposes of this
Section 1(k), the Executive shall not be deemed to have ceased to be an
employee of the Company and any Subsidiary by reason of the transfer of
Executive's employment between the Company and any Subsidiary, or among any
Subsidiaries.
(m) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if
the termination is pursuant to Section 3(b)).
(n) "Voting Stock" means securities entitled to vote generally in the
election of directors.
2. OPERATION OF AGREEMENT. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, without further action, this Agreement shall become immediately
operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period and the Executive shall be entitled
to the benefits provided by Section 4 unless such termination is the result of
the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the meaning
of, and begins actually to receive disability benefits pursuant to, the
long-term disability plan in effect for, or applicable to, Executive
immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated
by the Company or any Subsidiary other than pursuant to Section 3(a)(i),
3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits
provided by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary during the
Severance Period with the right to severance compensation as provided in Section
4 upon the occurrence of one or more of the following events (regardless of
whether any other reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation other
employment):
(i) Failure to elect or reelect or otherwise to maintain the Executive
in the office or the position, or a substantially equivalent office or
position, of or with the Company and/or a Subsidiary, as the case may be,
which the Executive held immediately prior to a Change in Control, or the
removal of the Executive as a Director of the Company (or any successor
thereto) if the Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in the
aggregate of the Executive's Base Pay and Incentive Pay received from the
Company and any Subsidiary, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the scope or
value thereof, any of which is not remedied by the Company within 10
calendar days after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the case may be;
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(iii) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in
Control, including, without limitation, a change in the scope of the
business or other activities for which the Executive was responsible
immediately prior to the Change in Control, which has rendered the
Executive substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a substantial
reduction in, any of the authorities, powers, functions, responsibilities
or duties attached to the position held by the Executive immediately prior
to the Change in Control, which situation is not remedied within 10
calendar days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all its
business or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer or otherwise) to which all
or substantially all its business or assets have been transferred (directly
or by operation of law) assumed all duties and obligations of the Company
under this Agreement pursuant to Section 11(a);
(v) The Company relocates its principal executive offices, or requires
the Executive to have his principal location of work changed, to any
location that is in excess of 35 miles from the location thereof
immediately prior to the Change in Control, or requires the Executive to
travel away from his office in the course of discharging his
responsibilities or duties hereunder at least 20% more (in terms of
aggregate days in any calendar year or in any calendar quarter when
annualized for purposes of comparison to any prior year) than was required
of Executive in any of the three full years immediately prior to the Change
in Control without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto
which is not remedied by the Company within 10 calendar days after receipt
by the Company of written notice from the Executive of such breach.
(c) Notwithstanding anything contained in this Agreement to the contrary,
in the event of a Change in Control, the Executive may terminate employment with
the Company and any Subsidiary for any reason, or without reason, during the
30-day period immediately following the first anniversary of the first
occurrence of a Change in Control with the right to severance compensation as
provided in Section 4.
(d) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) or Section 3(c) will not affect any rights
that the Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof, except for any rights to severance compensation
to which Executive may be entitled upon termination of employment under name of
Executive's severance/employment agreement which rights shall, during the
Severance Period, be superseded by this Agreement.
4. SEVERANCE COMPENSATION. (a) If, following the occurrence of a Change in
Control, the Company terminates the Executive's employment during the Severance
Period other than pursuant to Section 3(a), or if the Executive terminates his
employment pursuant to Section 3(b) or Section 3(c), the Company will pay to the
Executive as severance benefits the amounts described on Annex A within five
business days after the Termination Date and will continue to provide to the
Executive the benefits described on Annex A for the periods described therein.
(b) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be made
or provided hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to the so-called
composite "prime rate" as quoted from time to time during the relevant period in
the Midwest Edition of The Wall Street Journal. Such interest will be payable as
it accrues on demand. Any change in such prime rate will be effective on and as
of the date of such change.
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(c) Notwithstanding any provision of this Agreement to the contrary, the
parties' respective rights and obligations under this Section 4 and under
Sections 5 and 7 will survive any termination or expiration of this Agreement or
the termination of the Executive's employment following a Change in Control for
any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this
Agreement to the contrary notwithstanding, in the event that this Agreement
shall become operative and it shall be determined (as hereafter provided) that
any payment or distribution by the Company or any of its affiliates to or for
the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise pursuant to
or by reason of any other agreement, policy, plan, program or arrangement,
including without limitation stock appreciation right or similar right, or the
lapse or termination of any restriction on, or the vesting or exercisability of,
any of the foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision thereto) by reason of being considered "contingent
on a change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any similar
tax imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment or payments
(collectively, a "Gross-up Payment"); provided, however, that no Gross-up
Payment shall be made with respect to the Excise Tax, if any, attributable to
(i) any incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement, or (ii) any stock appreciation
or similar right, whether or not limited, granted in tandem with any ISO
described in clause (i). The Gross-up Payment shall be in an amount such that,
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed upon the
Gross-up Payment, the Executive retains an amount of the Gross-up Payment equal
to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all determinations required
to be made under this Section 5, including whether an Excise Tax is payable by
the Executive and the amount of such Excise Tax and whether a Gross-up Payment
is required to be paid by the Company to the Executive and the amount of such
Gross-up Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole discretion.
The Executive shall direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive within 30
calendar days after the Termination Date, if applicable, and any such other time
or times as may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-up Payment to the Executive within five business
days after receipt of such determination and calculations with respect to any
Payment to the Executive. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor provision thereto) and
the possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it is
possible that Gross-up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to Section 5(f) and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and the Executive as promptly as possible. Any such Underpayment shall
be promptly paid by the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in
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connection with the preparation and issuance of the determinations and
calculations contemplated by Section 5(b). Any determination by the Accounting
Firm as to the amount of the Gross-up Payment shall be binding upon the Company
and the Executive.
(d) The federal, state and local income or other tax returns filed by the
Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-up Payment should be reduced, the
Executive shall within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determination and calculations contemplated by Section 5(b)
shall be borne by the Company. If such fees and expenses are initially paid by
the Executive, the Company shall reimburse the Executive the full amount of such
fees and expenses within five business days after receipt from the Executive of
a statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after the Executive actually received notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including interest and penalties) incurred in connection with
such contest and shall indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 5(f), the Company shall control all
proceedings taken in connection with the contest of any claim contemplated
by this Section 5(f) and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may, at
its option, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax claimed and sue
for a refund, the Company shall advance the amount of such payment to the
Executive on an interest-free basis and
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shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and provided
further, however, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to
which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested
claim shall be limited to issues with respect to which a Gross-up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(f), the Executive receives any refund with respect
to such claim, the Executive shall (subject to the Company's complying with the
requirements of Section 5(f)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-up Payment required to be paid by the Company to
the Executive pursuant to this Section 5.]
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will
be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Paragraph 2 set forth on Annex A.
7. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
(b) Without limiting the obligations of the Company pursuant to Section
7(a) hereof, in the event a Change in Control occurs, the performance of the
Company's obligations under this Section 7 shall be secured by amounts deposited
or to be deposited in trust pursuant to certain trust agreements to which the
Company shall be a party, which amounts deposited shall in the aggregate be not
less than $1,000,000 providing that the
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fees and expenses of counsel selected from time to time by the Executive
pursuant to Section 7(a) shall be paid, or reimbursed to the Executive if paid
by the Executive, either in accordance with the terms of such trust agreements,
or, if not so provided, on a regular, periodic basis upon presentation by the
Executive to the trustee of a statement or statements prepared by such counsel
in accordance with its customary practices. Any failure by the Company to
satisfy any of its obligations under this Section 7(b) shall not limit the
rights of the Executive hereunder. Subject to the foregoing, the Executive shall
have the status of a general unsecured creditor of the Company and shall have no
right to, or security interest in, any assets of the Company or any Subsidiary.
8. COMPETITIVE ACTIVITY. During a period ending one year following the
Termination Date, if the Executive shall have received or shall be receiving
benefits under Section 4, the Executive shall not, without the prior written
consent of the Company, which consent shall not be unreasonably withheld, engage
in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of employment of the Executive
or the removal of the Executive from the office or position in the Company or
any Subsidiary following the commencement of any discussion with a third person
that ultimately results in a Change in Control shall be deemed to be a
termination or removal of the Executive after a Change in Control for purposes
of this Agreement.
10. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 11(a) and 11(b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, in the event of any attempted assignment
or transfer contrary to this Section 11(c), the Company shall have no liability
to pay any amount so attempted to be assigned, transferred or delegated.
12. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express, UPS, or Purolator, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office
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and to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
14. VALIDITY. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.
15. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
17. PRIOR AGREEMENT. The Agreement dated February 19, 1995 (the "Prior
Agreement"), between the Company and the Executive shall, without further
action, be terminated and superseded as of the date first above written.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
HARRY W. BOWMAN OUTBOARD MARINE CORPORATION
/s/ HARRY W. BOWMAN By: /s/ R.J. STEGEMEIER
- -------------------------------------- -------------------------------------
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ANNEX A
SEVERANCE COMPENSATION
(1) A lump sum payment in an amount equal to three times the sum of (A)
Base Pay (at the highest rate in effect for any period prior to the Termination
Date), plus (B) Incentive Pay (determined in accordance with the standards set
forth in Section 1(h)).
(2) For a period of twelve (12) months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the Executive with
Employee Benefits that are welfare benefits (but not stock option, performance
share, performance unit, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the Termination Date (or,
if greater, immediately prior to the reduction, termination, or denial described
in Section 3(b)(ii)), except that the level of any such Employee Benefits to be
provided to the Executive may be reduced in the event of a corresponding
reduction generally applicable to all recipients of or participants in such
Employee Benefits. If and to the extent that any benefit described in this
Paragraph 2 is not or cannot be paid or provided under any policy, plan, program
or arrangement of the Company or any Subsidiary, as the case may be, then the
Company will itself pay or provide for the payment to the Executive, his
dependents and beneficiaries, of such Employee Benefits. Without otherwise
limiting the purposes or effect of Section 5, Employee Benefits otherwise
receivable by the Executive pursuant to this Paragraph 2 will be reduced to the
extent comparable welfare benefits are actually received by the Executive from
another employer during the Continuation Period following the Executive's
Termination Date, and any such benefits actually received by the Executive shall
be reported by the Executive to the Company.
(3) In addition to the retirement income, supplemental executive
retirement, and other benefits to which Executive is entitled under the
Company's Retirement Plans, a lump sum payment in an amount equal to the
actuarial equivalent of the excess of (x) the retirement pension and the
medical, life and other benefits that would be payable to the Executive under
the Retirement Plans if Executive continued to be employed through the
Continuation Period given the Executive's Base Salary (without regard to any
amendment to the Retirement Plans made subsequent to a Change in Control which
adversely affects in any manner the computation of retirement or welfare
benefits thereunder), over (y) the retirement pension and the medical, life and
other benefits that the Executive is entitled to receive (either immediately or
on a deferred basis) under the Retirement Plans. For purposes of this
subsection, "actuarial equivalent" shall be determined using the same methods
and assumptions utilized under the Company's qualified retirement plan for
salaried employees in effect immediately prior to the Change in Control.
(4) In lieu of Executive's right to receive deferred compensation under the
OMC Bonus Plan or other plan providing for deferral of amounts otherwise
currently payable to the Executive, a lump sum payment in an amount equal to
amounts deferred pursuant to such plans, together with any earnings or interest
credited on such amounts under such Plans.
(5) Outplacement services by a firm selected by the Executive, at the
expense of the Company in an amount up to 20% of the Executive's Base Pay.
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EXHIBIT 99.2
SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this "Agreement"), dated as
of March 31, 1997, is made and entered by and between Outboard Marine
Corporation, a Delaware corporation (the "Company"), and (the
"Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive or a key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short- and long-term profitability,
growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum severance
benefits for certain of its senior executives and key employees, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives and key
employees are not practically disabled from discharging their duties in respect
of a proposed or actual transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a rate not
less than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in Control or
such higher rate as may be determined from time to time by the Board or a
committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to Section
3(b), the Executive shall have been:
(i) convicted of a criminal violation involving fraud, embezzlement
or theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary;
(ii) committed intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) committed intentional wrongful disclosure of secret processes
or confidential information of the Company or any Subsidiary; or
(iv) intentionally, wrongfully engaged in any Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act on
the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted
<PAGE> 2
by the affirmative vote of not less than two-thirds of the Board then in
office at a meeting of the Board called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in
the good faith opinion of the Board, the Executive had committed an act
constituting "Cause" as herein defined and specifying the particulars
thereof in detail. Nothing herein will limit the right of the Executive
or his beneficiaries to contest the validity or propriety of any such
determination.
(d) "Change in Control" means the occurrence during the Term of any of
the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of the combined
voting power of the then outstanding Voting Stock; provided, however,
that for purposes of this Section 1(d)(i), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly
from the Company that is approved by the Incumbent Board, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, or (D) any acquisition by any Person pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d); or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board;
provided, however, that any individual becoming a Director subsequent to
the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least two-thirds of
the Directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be deemed to have been a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest (within the meaning of Rule 14a-11 of the
Exchange Act) with respect to the election or removal of Directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) consummation of (A) a reorganization, merger or
consolidation, (B) a sale or other disposition of all or substantially
all of the assets of the Company, or (C) a sale or other disposition of
all or substantially all of the assets ("Boat Group Assets") of the
Company used in its Boat Group businesses (each, a "Business
Combination"), unless, in each case, immediately following such Business
Combination, (I) all or substantially all of the individuals and
entities who were the beneficial owners of Voting Stock of the Company
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
Directors of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions relative to each other as their
ownership, immediately prior to such Business Combination, of the Voting
Stock of the Company, (II) no Person (other than the Company, such
entity resulting from such Business Combination, or any employee benefit
plan (or related trust) sponsored or maintained by the Company, any
Subsidiary or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 15% or more of the then
outstanding shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors of such entity, and (III) at least a majority of the
members of the Board of Directors of the entity resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
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<PAGE> 3
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d).
(e) "Competitive Activity" means the Executive's participation,
without the written consent of an officer of the Company, in the management
of any business enterprise if such enterprise engages in substantial and
direct competition with the Company and such enterprise's sales of any
product or service competitive with any product or service of the Company
amounted to 10% of such enterprise's net sales for its most recently
completely fiscal year and if the Company's net sales of said product or
service amounted to 10% of the Company's net sales for its most recently
completed fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of rights
appurtenant thereto or (ii) participation in the management of any such
enterprise other than in connection with the competitive operations of such
enterprise.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs or arrangements in
which Executive is entitled to participate, including without limitation
any stock option, performance share, performance unit, stock purchase,
stock appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital or
other insurance (whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement and other
employee benefit policies, plans, programs or arrangements that may now
exist or any equivalent successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company, providing perquisites,
benefits and service credit for benefits at least as great in the aggregate
as are payable thereunder prior to a Change in Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Pay" means an annual amount equal to not less than the
highest aggregate annual bonus, incentive or other payments of cash
compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any fiscal year during the five fiscal years
immediately preceding, or, if greater, the two fiscal years immediately
following, the fiscal year in which the Change in Control occurred pursuant
to any bonus, incentive, profit-sharing, performance, discretionary pay or
similar agreement, policy, plan, program or arrangement (whether or not
funded) of the Company, or any successor thereto, providing benefits at
least as great as the benefits payable thereunder prior to a Change in
Control.
(i) "Retirement Plans" means the retirement income, supplemental
executive retirement, excess benefits and retiree medical, life and similar
benefit plans providing retirement perquisites, benefits and service credit
for benefits at least as great in the aggregate as are payable thereunder
prior to a Change in Control.
(j) "Severance Period" means the period of time commencing on the date
of the first occurrence of a Change in Control and continuing until the
earliest of (i) the third anniversary of the occurrence of the Change in
Control, (ii) the Executive's death, or (iii) the Executive's attainment of
age 65; provided, however, that commencing on each anniversary of the
Change in Control, the Severance Period will automatically be extended for
an additional year unless, not later than 90 calendar days prior to such
anniversary date, either the Company or the Executive shall have given
written notice to the other that the Severance Period is not to be so
extended.
(k) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(l) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 1999,
or (ii) the expiration of the Severance Period; provided, however, that (A)
commencing on January 1, 1998 and each January 1 thereafter, the term of
this Agreement will automatically be extended for an additional year
unless, not later than September 30 of
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<PAGE> 4
the immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not wish to
have the Term extended and (B) subject to the last sentence of Section 9,
if, prior to a Change in Control, the Executive ceases for any reason to be
an employee of the Company and any Subsidiary, thereupon without further
action the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect. For purposes of this
Section 1(k), the Executive shall not be deemed to have ceased to be an
employee of the Company and any Subsidiary by reason of the transfer of
Executive's employment between the Company and any Subsidiary, or among any
Subsidiaries.
(m) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if
the termination is pursuant to Section 3(b)).
(n) "Voting Stock" means securities entitled to vote generally in the
election of directors.
2. OPERATION OF AGREEMENT. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, without further action, this Agreement shall become immediately
operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period and the Executive shall be entitled
to the benefits provided by Section 4 unless such termination is the result of
the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the meaning
of, and begins actually to receive disability benefits pursuant to, the
long-term disability plan in effect for, or applicable to, Executive
immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated
by the Company or any Subsidiary other than pursuant to Section 3(a)(i),
3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits
provided by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary during the
Severance Period with the right to severance compensation as provided in Section
4 upon the occurrence of one or more of the following events (regardless of
whether any other reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation other
employment):
(i) Failure to elect or reelect or otherwise to maintain the Executive
in the office or the position, or a substantially equivalent office or
position, of or with the Company and/or a Subsidiary, as the case may be,
which the Executive held immediately prior to a Change in Control, or the
removal of the Executive as a Director of the Company (or any successor
thereto) if the Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in the
aggregate of the Executive's Base Pay and Incentive Pay received from the
Company and any Subsidiary, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the scope or
value thereof, any of which is not remedied by the Company within 10
calendar days after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the case may be;
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<PAGE> 5
(iii) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in
Control, including, without limitation, a change in the scope of the
business or other activities for which the Executive was responsible
immediately prior to the Change in Control, which has rendered the
Executive substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a substantial
reduction in, any of the authorities, powers, functions, responsibilities
or duties attached to the position held by the Executive immediately prior
to the Change in Control, which situation is not remedied within 10
calendar days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all its
business and/or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer or otherwise) to which all
or substantially all its business and/or assets have been transferred
(directly or by operation of law) assumed all duties and obligations of the
Company under this Agreement pursuant to Section 11(a);
(v) The Company relocates its principal executive offices, or requires
the Executive to have his principal location of work changed, to any
location that is in excess of 35 miles from the location thereof
immediately prior to the Change in Control, or requires the Executive to
travel away from his office in the course of discharging his
responsibilities or duties hereunder at least 20% more (in terms of
aggregate days in any calendar year or in any calendar quarter when
annualized for purposes of comparison to any prior year) than was required
of Executive in any of the three full years immediately prior to the Change
in Control without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto
which is not remedied by the Company within 10 calendar days after receipt
by the Company of written notice from the Executive of such breach.
(d) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights that the Executive
may have pursuant to any agreement, policy, plan, program or arrangement of the
Company providing Employee Benefits, which rights shall be governed by the terms
thereof, except for any rights to severance compensation to which Executive may
be entitled upon termination of employment under name of Executive's
severance/employment agreement which rights shall, during the Severance Period,
be superseded by this Agreement.
4. SEVERANCE COMPENSATION. (a) If, following the occurrence of a Change in
Control, the Company terminates the Executive's employment during the Severance
Period other than pursuant to Section 3(a), or if the Executive terminates his
employment pursuant to Section 3(b), the Company will pay to the Executive as
severance benefits the amounts described on Annex A within five business days
after the Termination Date and will continue to provide to the Executive the
benefits described on Annex A for the periods described therein.
(b) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be made
or provided hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to the so-called
composite "prime rate" as quoted from time to time during the relevant period in
the Midwest Edition of The Wall Street Journal. Such interest will be payable as
it accrues on demand. Any change in such prime rate will be effective on and as
of the date of such change.
(c) Notwithstanding any provision of this Agreement to the contrary, the
parties' respective rights and obligations under this Section 4 and under
Sections 5 and 7 will survive any termination or expiration of this Agreement or
the termination of the Executive's employment following a Change in Control for
any reason whatsoever.
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<PAGE> 6
5. LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding any provision of
this Agreement to the contrary, if any amount or benefit to be paid or provided
under this Agreement would be an "Excess Parachute Payment," within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor provision thereto, but for the application of this sentence,
then the payments and benefits to be paid or provided under this Agreement shall
be reduced to the minimum extent necessary (but in no event to less than zero)
so that no portion of any such payment or benefit, as so reduced, constitutes an
Excess Parachute Payment; provided, however, that the foregoing reduction shall
be made only if and to the extent that such reduction would result in an
increase in the aggregate payment and benefits to be provided, determined on an
after-tax basis (taking into account the excise tax imposed pursuant to Section
4999 of the Code, or any successor provision thereto, any tax imposed by any
comparable provision of state law, and any applicable federal, state and local
income taxes). The determination of whether any reduction in such payments or
benefits to be provided under this Agreement or otherwise is required pursuant
to the preceding sentence shall be made at the expense of the Company, if
requested by the Executive or the Company, by the Company's independent
accountants. The fact that the Executive's right to payments or benefits may be
reduced by reason of the limitations contained in this Section 5 shall not of
itself limit or otherwise affect any other rights of the Executive other than
pursuant to this Agreement. In the event that any payment or benefit intended to
be provided under this Agreement or otherwise is required to be reduced pursuant
to this Section 5, the Executive shall be entitled to designate the payments
and/or benefits to be so reduced in order to give effect to this Section 5. The
Company shall provide the Executive with all information reasonably requested by
the Executive to permit the Executive to make such designation. In the event
that the Executive fails to make such designation within 10 business days of the
Termination Date, the Company may effect such reduction in any manner it deems
appropriate.
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will
be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Paragraph 2 set forth on Annex A.
7. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
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<PAGE> 7
(b) Without limiting the obligations of the Company pursuant to Section
7(a) hereof, in the event a Change in Control occurs, the performance of the
Company's obligations under this Section 7 shall be secured by amounts deposited
or to be deposited in trust pursuant to certain trust agreements to which the
Company shall be a party, which amounts deposited shall in the aggregate be not
less than $1,000,000 providing that the fees and expenses of counsel selected
from time to time by the Executive pursuant to Section 7(a) shall be paid, or
reimbursed to the Executive if paid by the Executive, either in accordance with
the terms of such trust agreements, or, if not so provided, on a regular,
periodic basis upon presentation by the Executive to the trustee of a statement
or statements prepared by such counsel in accordance with its customary
practices. Any failure by the Company to satisfy any of its obligations under
this Section 7(b) shall not limit the rights of the Executive hereunder. Subject
to the foregoing, the Executive shall have the status of a general unsecured
creditor of the Company and shall have no right to, or security interest in, any
assets of the Company or any Subsidiary.
8. COMPETITIVE ACTIVITY. During a period ending one year following the
Termination Date, if the Executive shall have received or shall be receiving
benefits under Section 4, the Executive shall not, without the prior written
consent of the Company, which consent shall not be unreasonably withheld, engage
in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of employment of the Executive
or the removal of the Executive from the office or position in the Company or
any Subsidiary following the commencement of any discussion with a third person
that ultimately results in a Change in Control shall be deemed to be a
termination or removal of the Executive after a Change in Control for purposes
of this Agreement.
10. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 11(a) and 11(b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, in the event of any attempted assignment
or transfer contrary to this Section 11(c), the Company shall have no liability
to pay any amount so attempted to be assigned, transferred or delegated.
12. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission
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<PAGE> 8
(with receipt thereof orally confirmed), or five business days after having been
mailed by United States registered or certified mail, return receipt requested,
postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS, or Purolator,
addressed to the Company (to the attention of the Secretary of the Company) at
its principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
14. VALIDITY. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.
15. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
17. PRIOR AGREEMENT. The Agreement dated , (the "Prior
Agreement"), between the Company and the Executive shall, without further
action, be terminated and superseded as of the date first above written.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
<TABLE>
<S> <C>
OUTBOARD MARINE CORPORATION
[NAME OF EXECUTIVE] By: /s/ Harry W. Bowman
- -------------------------------------------- ----------------------------------------
</TABLE>
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<PAGE> 9
ANNEX A
SEVERANCE COMPENSATION
(1) A lump sum payment in an amount equal to [two, in the case of Elected
Officers] [one, in the case of Key Employees] times the sum of (A) Base Pay (at
the highest rate in effect for any period prior to the Termination Date), plus
(B) Incentive Pay (determined in accordance with the standards set forth in
Section 1(h)).
(2) For a period of twelve (12) months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the Executive with
Employee Benefits that are welfare benefits (but not stock option, performance
share, performance unit, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the Termination Date (or,
if greater, immediately prior to the reduction, termination, or denial described
in Section 3(b)(ii)), except that the level of any such Employee Benefits to be
provided to the Executive may be reduced in the event of a corresponding
reduction generally applicable to all recipients of or participants in such
Employee Benefits. If and to the extent that any benefit described in this
Paragraph 2 is not or cannot be paid or provided under any policy, plan, program
or arrangement of the Company or any Subsidiary, as the case may be, then the
Company will itself pay or provide for the payment to the Executive, his
dependents and beneficiaries, of such Employee Benefits. Without otherwise
limiting the purposes or effect of Section 5, Employee Benefits otherwise
receivable by the Executive pursuant to this Paragraph 2 will be reduced to the
extent comparable welfare benefits are actually received by the Executive from
another employer during the Continuation Period following the Executive's
Termination Date, and any such benefits actually received by the Executive shall
be reported by the Executive to the Company.
(3) In addition to the retirement income, supplemental executive
retirement, and other benefits to which Executive is entitled under the
Company's Retirement Plans, a lump sum payment in an amount equal to the
actuarial equivalent of the excess of (x) the retirement pension and the
medical, life and other benefits that would be payable to the Executive under
the Retirement Plans if Executive continued to be employed through the
Continuation Period given the Executive's Base Salary (without regard to any
amendment to the Retirement Plans made subsequent to a Change in Control which
adversely affects in any manner the computation of retirement or welfare
benefits thereunder), over (y) the retirement pension and the medical, life and
other benefits that the Executive is entitled to receive (either immediately or
on a deferred basis) under the Retirement Plans. For purposes of this
subsection, "actuarial equivalent" shall be determined using the same methods
and assumptions utilized under the Company's qualified retirement plan for
salaried employees in effect immediately prior to the Change in Control.
(4) In lieu of Executive's right to receive deferred compensation under the
OMC Bonus Plan or other plan providing for deferral of amounts otherwise
currently payable to the Executive, a lump sum payment in an amount equal to
amounts deferred pursuant to such plans, together with any earnings or interest
credited on such amounts under such Plans.
(5) Outplacement services by a firm selected by the Executive, at the
expense of the Company in an amount up to 20% of the Executive's Base Pay.
9
<PAGE> 1
EXHIBIT 99.3 OMC
- ----------------------------------------------------------------------------
OUTBOARD MARINE CORPORATION 100 Sea Horse Drive
Waukegan, Illinois 60085
Telephone: 847/689-5207
Facsimile: 847/689-6006
Voice Mail: 847/689-5519
HW BOWMAN
CHAIRMAN OF THE BOARD
PRESIDENT
CHIEF EXECUTIVE OFFICER
[DATE]
Dear :
Outboard Marine Corporation (the "Corporation") recognizes that your
contribution to the growth and success of the Corporation has been substantial
and desires to assure the Corporation of your continued employment. In this
connection, the Board of Directors of the Corporation (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Corporation's management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, and in
consideration of your agreement set forth in paragraph (ii) Section 2 hereof
the Corporation agrees that you shall receive the severance benefits set forth
in this letter agreement ("Agreement") in the event your employment with the
Corporation is terminated subsequent to a "Change in Control of the
Corporation" (as defined in Section 2 hereof) under the circumstances described
below.
1. TERM OF AGREEMENT. This Agreement will commence on the date hereof and
shall continue in effect until December 31, , until you reach age 65, or
until your death or Disability, whichever comes first; provided, however, that
commencing on January 1, , and each January 1 thereafter, the term of this
Agreement shall automatically be renewed for one additional year unless, not
later than November 1 of the preceding year, the Corporation shall have given
notice that it does not wish to extend this Agreement; and provided, further,
that if a Change in Control of the Corporation shall have occurred during the
original or extended term of this Agreement, this Agreement shall continue in
effect for a period of thirty-six (36) months beyond the month in which such
Change in Control of the Corporation occurred.
2. CHANGE IN CONTROL OF THE CORPORATION.
(i) No benefits shall be payable hereunder unless there shall have
been a Change in Control of the Corporation, as set forth below. For
purposes of this Agreement, a "Change in Control of the Corporation" shall
be deemed to have occurred if:
(A) any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Corporation, any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, or any
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of
stock of the Corporation), is or becomes the "beneficial
<PAGE> 2
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing thirty percent
(30%) or more of the combined voting power of the Corporation's then
outstanding securities;
(B) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Corporation to effect a transaction described in
clause (A), (C), (D) or (E) of this Section) whose election by the Board
or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved
cease for any reason to constitute at least a majority thereof;
(C) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than
(1) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80%
of the combined voting power of the voting securities of the Corporation
or such surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in which no
"person" (as herein-above defined) acquires more than 20% of the
combined voting power of the Corporation's then outstanding securities;
(D) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation; or
(E) the Corporation enters into an agreement for the sale or
other disposition of all or substantially all of the Corporation's
assets or the Corporation otherwise disposes of such assets.
(ii) For purposes of this Agreement, a "potential Change in Control of
the Corporation" shall be deemed to have occurred if
(A) the Corporation enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control of the Corporation;
(B) any person (including the Corporation) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Corporation;
(C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of
stock of the Corporation, who is or becomes the beneficial owner,
directly or indirectly, of securities of the Corporation representing
9.5% or more of the combined voting power of the Corporation's then
outstanding securities increases his beneficial ownership of such
securities, by 5% or more over the percentage so owned by such person on
the date hereof; or
(D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential Change in Control of the
Corporation has occurred.
You agree that, subject to the terms and conditions of this Agreement, in the
event of a potential Change in Control of the Corporation, you will remain in
the employ of the Corporation until the earliest of (i) a date which is six (6)
months from the occurrence of such potential Change in Control of the
Corporation, (ii) the termination by you of your employment by reason of your
death or Disability, as defined in Subsection 3(a), or (iii) the occurrence of
a Change in Control of the Corporation.
<PAGE> 3
3. TERMINATION FOLLOWING A CHANGE IN CONTROL OF THE CORPORATION. If any of
the events described in Section 2(i) hereof constituting a Change in Control of
the Corporation shall have occurred, you shall be
2
<PAGE> 4
entitled to the benefits provided in Section 4(d) hereof upon the termination
of your employment during the term of this Agreement unless such termination is
(i) because of your death or Disability, (ii) by the Corporation for Cause,
(iii) by you other than for Good Reason or (iv) on or after the date that you
attain age sixty-five (65). Your entitlement to benefits under any of the
Corporation's retirement plans will not adversely affect your rights to receive
payments hereunder.
(a) DISABILITY. If, as a result of your incapacity due to physical or
mental illness which in the opinion of a licensed physician renders you
incapable of performing your assigned duties with the Corporation, you
shall have been absent from the full-time performance of your duties with
the Corporation for six (6) consecutive months, and within thirty (30)
days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, the Corporation may
terminate your employment for "Disability."
(b) CAUSE. Termination by the Corporation of your employment for
"Cause" shall mean termination upon (i) the willful and continued failure
by you to substantially perform your duties with the Corporation (other
than any such failure resulting from termination by you for Good Reason),
after a demand for substantial performance is delivered to you that
specifically identifies the manner in which the Corporation believes that
you have not substantially performed your duties, and you have failed to
resume substantial performance of your duties on a continuous basis within
fourteen (14) days of receiving such demand, (ii) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise or (iii) your conviction of a felony
or conviction of a misdemeanor which impairs your ability substantially to
perform your duties with the Corporation. For purposes of this Subsection,
no act, or failure to act, on your part shall be deemed "willful" unless
done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
the Corporation.
(c) GOOD REASON. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in
Control of the Corporation of any one or more of the following:
(i) the assignment to you of duties inconsistent with your present
position as Director of Marketing Services of the Corporation or a
reduction or alteration in the nature of your position, duties, status
or responsibilities from those in effect as of the date hereof;
(ii) a reduction by the Corporation in your base salary as in
effect on the date hereof (without regard to any temporary reduction
effected by the Corporation prior to a Change in Control) or as the same
shall be increased from time to time ("Base Salary") except for
across-the-board temporary salary reductions of 20% or less similarly
affecting all senior executives of the Corporation and all senior
executives of any person in control of the Corporation;
(iii) the Corporation's requiring you to be based at a location
other than Waukegan, Illinois;
(iv) the failure by the Corporation to continue in effect any of
the Corporation's employee benefit plans, programs, policies, practices
or arrangements in which you participate (or substantially equivalent
successor or replacement employee benefit plans, programs, policies,
practices or arrangements) or the failure by the Corporation to continue
your participation therein on substantially the same basis, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants in such plans, as existed
as of the date hereof (or as the same may be increased from time to
time);
(v) the failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; and
(vi) any purported termination by the Corporation of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of subparagraph (d) below, and for purposes
of this Agreement, no such purported termination shall be effective.
3
<PAGE> 5
Your right to terminate your employment pursuant to this Section 3 shall not be
affected by your incapacity due to physical or mental illness or your
participation in the OMC Salary Continuation Program or your receipt of
disability payments from OMC. Your continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder.
(d) Notice of Termination. Any termination by the Corporation for
Cause or by you for Good Reason shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a written notice which shall indicate
the specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination. "Date of Termination" shall mean if your
employment is terminated for Cause, or for any other reason (other than
Disability) the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty (30) days,
and in the case of any other termination shall not be less than fifteen
(15) nor more than sixty (60) days, respectively, from the date such
Notice of Termination is given); provided that if within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this proviso), the party
notifies the other party that a dispute exists concerning the termination,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties or by a
binding arbitration award; provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Corporation will continue to pay you your full
compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary) and continue you as a
participant in all compensation, benefit and insurance plans in which you
were participating when the notice giving rise to the dispute was given,
until the dispute is fully resolved in accordance with this Subsection.
Amounts paid under this Subsection are in addition to all other amounts
due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a Change
in Control of the Corporation, as defined in Section 2 hereof, upon termination
of your employment or during a period of disability you shall be entitled to
the following benefits:
(a) During any period that you fail to perform your full-time duties
with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive your Base Salary at the rate in
effect at the commencement of any such period, until your employment is
terminated pursuant to Section 3(a) hereof. Thereafter, your benefits
shall be determined in accordance with the Corporation's retirement,
insurance and other applicable programs and plans then in effect.
(b) If your employment shall be terminated by the Corporation
for Cause or by you other than for Good Reason, the Corporation shall pay
you your full Base Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given or on the Date of
Termination if no Notice of Termination is required hereunder, plus all
other amounts to which you are entitled under any compensation plan of the
Corporation at the time such payments are due, and the Corporation shall
have no further obligations to you under this Agreement.
(c) If your employment terminates by reason of your death, your
benefits shall be determined in accordance with the Corporation's
retirement, survivor's benefits, insurance and other applicable programs
and plans, then in effect.
(d) If your employment by the Corporation shall be terminated (i) by
the Corporation other than for Cause or Disability or (ii) by you for Good
Reason, you shall be entitled to the benefits (the "Severance Payments")
provided below:
4
<PAGE> 6
(A) the Corporation shall pay you your full Base Salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, or the Date of Termination where no Notice of
Termination is required hereunder; and
(B) the Corporation will pay as severance benefits to you, not
later than the fifth day following the Date of Termination, a lump sum
severance payment, in cash, equal to (1) a fraction, the numerator of
which is equal to the lesser of (x) twelve (12) or (y) the number of
full and partial months existing between the Date of Termination and
your sixty-fifth (65th) birthday and the denominator of which is equal
to twelve (12), multiplied by (2) the sum of (x) your annual Base Salary
in effect immediately prior to the occurrence of the circumstances
giving rise to such termination, and (y) the amount, if any, of the
highest annual amount awarded to you (whether paid, payable or deferred)
under the Corporation's Management Incentive Compensation Plan in the
five (5) years immediately preceding the Change in Control of the
Corporation (or, if greater, such annual amount awarded during the two
years following such Change in Control of the Corporation)
(e) The payments provided for in paragraph (d) above shall be made not
later than the fifth day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally determined on or before
such day, the Corporation shall pay to you on such day an estimate as
determined in good faith by the Corporation of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the thirtieth day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Corporation to you payable on the fifth
day after demand by the Corporation (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(f) The Corporation shall also pay to you all legal fees and
expenses incurred by you as a result of such termination of employment
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder).
(g) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. SUCCESSORS; BINDING AGREEMENT.
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation or of any
division or subsidiary thereof employing you to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle you to compensation from the Corporation in the same amount
and on the same terms as you would be entitled hereunder if you terminate your
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement, to your devisee, legatee or other designee or, if there
is not such designee, to your estate.
5
<PAGE> 7
6. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage pre-paid, addressed to the
respective addresses set forth on the first page of this Agreement.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware.
8. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance of
your right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
11. ENTIRE AGREEMENT. This Agreement supersedes any other agreement or
understanding between the parties hereto.
12. EFFECTIVE DATE. This Agreement shall become effective as of the date
set forth above. If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
OUTBOARD MARINE
By
-----------------------------------
Name:
Title:
Agreed to this ___ day
of _________ , ____
By
--------------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
6
<PAGE> 8
FIRST AMENDMENT TO SEVERANCE AGREEMENT
This Amendment to the Severance Agreement is dated as of this st day of
,
between Outboard Marine Corporation, a Delaware corporation (the "Company") and
, (the "Executive").
WHEREAS, on , the Corporation and Executive entered
into a Severance Agreement which provided for certain benefits to be payable to
the Executive upon a "change in control of the Company"; and
WHEREAS, Executive continues to be employed by the Company; and
WHEREAS, the Company and the Executive each desire to amend the Severance
Agreement to reduce the "change in control" percent from 30% to 20%.
NOW THEREFORE, for the mutual promises hereinafter provided and the
consideration hereby evidenced, the parties hereto agree as follows:
1. That Section 2(i)(A) of the Severance Agreement executed as of th
day of , between the Company and the Executive is
hereby amended by changing "thirty percent (30%)" in the Section 2(i)(A)
of
said Severance Agreement to "twenty percent (20%)".
2. All other provisions of the Severance Agreement shall be unchanged
and remain in full force and effect.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT ON THE
DATES SET OPPOSITE THEIR RESPECTIVE SIGNATURE.
OUTBOARD MARINE CORPORATION
By
---------------------------------------------------
Date
------------------------------------------------
EXECUTIVE
By
---------------------------------------------------
Date
------------------------------------------------
7
<PAGE> 9
SECOND AMENDMENT TO SEVERANCE AGREEMENT
This Amendment to the Severance Agreement (as defined below) is effective
as of the sixth day of , between Outboard Marine
Corporation, a Delaware corporation (the "Corporation") and ,
(the "Executive").
WHEREAS, on , the Corporation and Executive entered
into a Severance Agreement which provided for certain benefits to be payable to
the Executive upon a "change in control of the Corporation" (as such term is
defined in the Severance Agreement);
WHEREAS, such Severance Agreement was first amended, by mutual consent of
the parties, on July 21, 1989 (the Severance Agreement originally entered into
by Executive, as amended, shall hereinafter be referred to as the "Severance
Agreement");
WHEREAS, Executive continues to be employed by the Corporation; and
WHEREAS, the Corporation and the Executive each desire to amend the
Severance Agreement to reduce the "change in control" percent from 20% to 15%.
NOW THEREFORE, for the mutual promises hereinafter provided and the
consideration hereby evidenced, the parties hereto agree as follows:
1. That Section 2 of the Severance Agreement be, and it hereby is,
amended, by changing the words and number "twenty percent (20%)" in such
Section 2(i)(A) of said Severance Agreement to "fifteen percent (15%)".
2. All other provisions of the Severance Agreement shall be unchanged
and remain in full force and effect.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AS OF
THE FIRST DATE SET FORTH ABOVE.
OUTBOARD MARINE CORPORATION
By
---------------------------------------------------
EXECUTIVE
By
---------------------------------------------------
8
<PAGE> 10
THIRD AMENDMENT TO SEVERANCE AGREEMENT
This Amendment to the Severance Agreement (as defined below) is dated as
of this between Outboard Marine Corporation, a Delaware
corporation (the "Corporation") and , (the "Executive").
WHEREAS, on , the Corporation and Executive entered
into a Severance Agreement which provided for certain benefits to be payable to
the Executive upon a "change in control of the Corporation" (as such term is
defined in the Severance Agreement);
WHEREAS, such Severance Agreement was first amended, by mutual consent of
the parties, on , and was amended by mutual consent of the
parties as of , (the Severance Agreement originally entered
into by Executive, as amended, shall hereinafter be referred to as the
"Severance Agreement");
WHEREAS, Executive continues to be employed by the Corporation; and
WHEREAS, the Corporation and the Executive each desire to amend the
Severance Agreement as set forth below.
NOW THEREFORE, for the mutual promises hereinafter provided and the
consideration hereby evidenced, the parties hereto agree as follows:
1. That Section 2 of the Severance Agreement be, and it hereby is,
amended, by deleting the word "hereunder" in the first line of Section
2(i)
and inserting therefor the words "under this agreement".
2. That Section 5 of the Severance Agreement be, and it hereby is,
amended, by adding at the beginning of said Section, before Section 5(a)
the words: "Provided there has been a Change in control of the
Corporation,".
3. That Section 11 of the Severance Agreement be, and it hereby is,
amended, by deleting such Section in its entirety and substituting the
following therefor:
"11. ENTIRE AGREEMENT. This Agreement supersedes any other
agreement or understanding between the parties hereto except any
agreement covering inventions, writings and confidential information,
and any agreement covering non-competitive employment, which Executive
may have entered into with the Corporation."
4. All other provisions of the Severance Agreement shall be unchanged
and remain in full force and effect.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AS OF
THE DATE FIRST SET FORTH ABOVE.
OUTBOARD MARINE CORPORATION
By
---------------------------------------------------
EXECUTIVE
By
---------------------------------------------------
9
<PAGE> 1
Exhibit 99.4
THE OMC
EXECUTIVE EQUITY INCENTIVE PLAN
(AS OF SEPTEMBER 8, 1993)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purpose ................................................. 1
2. Scope of the Plan ....................................... 1
(a) Reservation of Stock ............................... 1
(b) Reservation of SARs and Performance Units .......... 1
(c) Restrictions and Limitations ....................... 1
(d) Adjustments ........................................ 2
(e) Reuse .............................................. 2
(f) Purchase of Stock and Issuance Under
the Plan ........................................ 3
3. Administration .......................................... 3
4. Eligibility ............................................. 4
5. Conditions to Grants and Awards ......................... 5
(a) Grants of Options and Option Price ................. 5
(b) Grants of Incentive Stock Options .................. 5
(c) Grant of Shares of Restricted Stock ................ 7
(d) Grant of SARs ...................................... 8
(e) Award of Performance Units ......................... 8
(f) Grant of LSARs ..................................... 9
6. Definition of "Fair Market Value" ....................... 9
7. Employees' Agreement to Serve ........................... 10
8. Non-transferability ..................................... 10
9. Exercise and Payment .................................... 10
(a) Exercise of Options ................................ 10
(b) Exercise of SARs ................................... 11
(c) Payment of Performance Units ....................... 11
(d) Exercise of LSARs .................................. 12
(e) Special Rules for Officers and Directors ........... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
10. Accelerated Exercise and Accelerated
Nonforfeitability ................................... 13
11. Notification under Section 83(b) ........................ 14
12. Withholding Taxes ....................................... 14
13. Elective Share Withholding .............................. 14
PAGE
----
14. Termination of Employment ............................... 15
15. Definition of "Change of Control" ....................... 17
16. Substituted Options, SARs and Performance
Units ............................................... 18
17. Securities Law Matters .................................. 19
18. Funding ................................................. 19
19. No Employment Rights .................................... 19
20. Stockholder Rights ...................................... 19
21. Nature of Payments ...................................... 20
22. Non-Uniform Determinations .............................. 20
23. Adjustments ............................................. 20
24. Amendment of the Plan ................................... 20
25. Termination of the Plan ................................. 21
26. Controlling Law ......................................... 21
27. Action by the Company ................................... 21
</TABLE>
ii
<PAGE> 4
The Plan. Outboard Marine Corporation (the "Company") hereby establishes
the OMC Executive Equity Incentive Plan (the "Plan"), effective January 18,
1989 (the "Effective Date"), subject to approval by the holders of a majority
of the shares of common stock of the Company present, or represented, and
voting at a meeting duly called and held. Grants and awards may be made
hereunder prior to stockholder approval, provided that any such grants or
awards shall be subject to such stockholder approval.
1. Purpose. The Board of Directors of the Company believes that the
efforts of key executive employees of the Company are the foundation for the
success of the Company and its subsidiaries, and that those efforts are
effectively stimulated by providing key executive employees with personal
financial stakes in the Company. Accordingly, the purpose of the Plan is to
advance the interests of the Company and its subsidiaries by encouraging and
facilitating the acquisition by key executive employees of personal financial
stakes in the Company and by otherwise making executive positions in the
Company and its subsidiaries more attractive. The Board of Directors also
anticipates that the opportunity to obtain such financial interests will prove
attractive to promising executive talent and will assist the Company and its
subsidiaries in attracting more highly skilled and dedicated employees.
2. Scope of the Plan.
(a) Reservation of Stock. An aggregate of 1,450,000 of the
Company's authorized but unissued shares of common stock, par value $.15
per share (the "Stock"), is hereby made available and shall be reserved
for issuance under the Plan with respect to the exercise of options, the
grant of shares of restricted stock and the payment of benefits upon
exercise of stock appreciation rights ("SARs") or performance units.
(b) Reservation of SARs and Performance Units. An aggregate of
1,200,000 SARs (not including limited stock appreciation rights
("LSARs")) is hereby made available for issuance under the Plan. An
aggregate of 1,200,000 performance units is hereby made available for
issuance under the Plan.
(c) Restrictions and Limitations. The aggregate number of shares
of Stock issued under the Plan with respect to options and the payment of
benefits upon exercise of SARs or
1
<PAGE> 5
performance units shall not exceed 1,200,000. The aggregate number of
shares of Stock granted as restricted stock shall not exceed 250,000. The
aggregate number of LSARs available for issuance under the Plan is limited
to the aggregate number of shares of Stock subject to options and shares
of restricted stock, and to the number of SARs with respect to which the
LSARs are granted under this Plan or any previously established
employee stock option plan of the Company or any of its subsidiaries.
(d) Adjustments. The aggregate number of reserved authorized but
unissued shares of Stock shall be reduced by the aggregate number of
shares of Stock acquired from time to time to be held as treasury shares
reserved for use under the Plan. The aggregate number of shares of
Stock, shares of restricted stock, SARs, performance units and LSARs
available under the Plan shall each be subject to adjustment upon the
occurrence of any of the events and in the manner set forth in Article 23
hereof.
(e) Reuse. If, and to the extent:
(i) OPTION. An option shall expire or terminate for any
reason without having been exercised in full (including,
without limitation, cancellation and re-grant pursuant to
Article 3(g)), the shares of Stock subject thereto which have
not become outstanding shall (unless the Plan shall have
terminated) become available for issuance under the Plan;
(ii) Restricted Stock. Shares of Stock granted as
restricted stock under the Plan are forfeited for any reason,
such shares of Stock shall (unless the Plan shall have
terminated) become available for issuance under the Plan;
(iii) SARs. SARs expire or terminate for any reason
without having been exercised in full, an equal number of
SARs shall (unless the Plan shall have terminated) become
available for issuance under the Plan;
2
<PAGE> 6
(iv) Performance Units. Performance units expire or
terminate for any reason without having been earned in full,
an equal number of performance units shall (unless the Plan
shall have terminated) become available for issuance under
the Plan; and
(v) LSARs. LSARs are exercised:
(1) if the LSARs were granted with respect to an
option, the shares of Stock subject thereto which have
not become outstanding shall not again become available
for issuance under the Plan, or
(2) if the LSARs were granted with respect to
SARs, such SARs shall not again become available for
issuance under the Plan.
(f) Purchase of Stock and Issuance Under the Plan. The Board of
Directors of the Company (the "Board") or such committee of the Board
that the Board shall specifically authorize or direct on its behalf shall
have the authority to cause the Company to purchase from time to time, in
such amounts and at such prices as the Board, in its discretion, shall
deem advisable or appropriate, shares of Stock to be held as treasury
shares and reserved and used solely for or in connection with grants
under the Plan, at the discretion of the Committee.
3. Administration. The Plan shall be administered by a committee, to be
known as the Stock Option Committee (the "Committee"), which shall include not
less than three persons who are directors of the Company, who are not employees
of the Company or any of its subsidiaries, and who shall be appointed, from
time to time, by the Board. Members of the Committee shall not participate in
the Plan and, at any time within one (1) year prior to appointment to the
Committee, (a) shall not have been eligible to receive options, shares of
restricted stock, SARs, performance units, or LSARs (the "Executive Benefits")
hereunder and (b) shall not have been a person to whom stock could be allocated
or to whom Executive Benefits could be granted pursuant to any other plan of
the Company or any of its subsidiaries. The Committee shall have full and
final authority, in its discretion, but subject to the express provisions of
the Plan, as follows:
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(a) to grant Executive Benefits;
(b) to determine, subject to Article 5, (i) the Option Price (as
defined in Article 5) of the Stock subject to each option, (ii) the
purchase price (if any) of each share of restricted stock granted, (iii)
the Performance Goals, Award Cycle, and Payment Value (as defined in
Article 5) with respect to performance units, (iv) the individuals to
whom, and the time or times at which, Executive Benefits shall be
granted, (v) whether or not options shall be incentive stock options (as
defined in Article 5), (vi) whether or not specific SARs shall be
identified with a specific option or specific shares of restricted stock,
(vii) whether or not specific performance units shall be identified with
a specific option or specific shares of restricted stock, and (viii)
subject to Article 2, the number of shares of restricted stock, the
number of SARs, the number of performance units, and the number of LSARs
to be granted to each Grantee (as defined in Article 5) thereof;
(c) to interpret the Plan;
(d) to prescribe, amend, and rescind rules and regulations relating
to the Plan, including, without limitation and subject to Article 14, the
rules with respect to the exercisability of options, SARs, performance
units, or LSARs or the nonforfeitability of shares of restricted stock
upon the termination of employment of a Grantee (as defined in Article
5);
(e) to determine the terms and provisions of the respective
Executive Benefit agreements (which may, but need not be, identical) by
which all Executive Benefits shall be granted or awarded hereunder and,
with the consent of the Grantee, to modify any such agreements
(including, without limitation, the acceleration of the exercisability of
options, SARs and LSARs, the payment of performance units subject to such
agreement and the acceleration of the nonforfeitability of shares of
restricted stock subject to such agreement);
(f) to prescribe the method by which grants or awards of Executive
Benefits shall be evidenced;
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<PAGE> 8
(g) to cancel, with the consent of the Grantee thereof, outstanding
options, SARs, performance units and LSARs and to grant or award new
options, SARs, performance units and LSARs in substitution thereof;
(h) to require withholding from or payment by a Grantee (as defined
in Article 5) of any federal, state, or other governmental taxes;
(i) to prohibit the election described in Article 11;
(j) to impose such additional conditions, restrictions, and
limitations upon exercise or retention of options, SARs or LSARs or
upon the grant or retention of shares of restricted stock as the
Committee may, prior to or concurrently with the grant thereof, deem
appropriate, including, but not limited to, requiring simultaneous
exercise of related identified options, SARs and LSARs and limiting
the percentage of options and SARs which may from time to time be
exercised by a Grantee; and
(k) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
The determination of the Committee on all matters relating to the Plan or any
agreement with respect to Executive Benefits shall be conclusive and final. No
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any grant thereunder.
4. Eligibility. Executive Benefits may be granted or awarded to any
employee of the Company or any of its subsidiaries whose rates of pay or fringe
benefits are not negotiated under a collective bargaining agreement. In
selecting the individuals to whom Executive Benefits shall be granted or
awarded, as well as in determining the number of shares of Stock subject to
each individual Executive Benefit to be granted or awarded, the Committee shall
take into consideration such factors as it, in its discretion, deems relevant
in connection with promoting the purposes of the Plan.
5. Conditions to Grants and Awards. The date of the grant or award (the
"Grant Date") of an option, shares of restricted stock, SARs, or performance
units (under the Plan or any other
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<PAGE> 9
employee stock option plan of the Company or any of its subsidiaries) shall be
the date on which the Committee makes the grant or the award, as the case may
be, or such later date as specified in advance by the Committee. The Grant
Date of a LSAR shall be deemed to be the date on which the underlying option or
SAR was granted, whether granted under the Plan or any other employee stock
option plan of the Company or any of its subsidiaries. Subject to the
provisions of Article 2 hereof, an individual who has been granted or awarded
one or more Executive Benefits (a "Grantee") may, if such Grantee is otherwise
eligible, be granted or awarded additional Executive Benefits if the Committee
shall in its discretion so determine. Subject to the other provisions of the
Plan, Executive Benefits may be granted or awarded under terms and conditions
which differ among the Grantees thereof. The term of each option (subject to
Article 5(b) with respect to each incentive stock option), SAR, performance
unit and LSAR granted or awarded shall be for a period of not more than fifteen
(15) years from the Grant Date, and shall be subject to earlier termination as
herein provided. To the extent not set forth in the Plan, the terms and
conditions of each grant or award of an Executive Benefit shall be set forth in
a written agreement between the Company and the Grantee thereof.
(a) Grants of Options and Option Price. Before the grant of any
option, the Committee shall determine the per share purchase price of the
Stock subject to such option (the "Option Price"); provided that the
Option Price shall not be less than eighty-five percent (85%) of the Fair
Market Value (as defined in Article 6) of the Stock on the Grant date.
(b) Grants of Incentive Stock Options. At the time of the grant of
any option, the Committee may designate that such option shall be made
subject to additional restrictions to permit it to qualify as an
"incentive stock option" under the requirements of Section 422A (or any
successor provision) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"). Any option designated as an incentive
stock option:
(i) shall have an Option Price of (1) not less than 100% of
the Fair Market Value of the Stock on the Grant Date or (2) in the
case of an employee who owns stock (including stock treated as
owned under Section 425(d) of the Internal Revenue Code) possessing
more than
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<PAGE> 10
10% of the total combined voting power of all classes of stock of
the Company or any of its subsidiaries (a "10% Owner"), not less
than 110% of the Fair Market Value of the Stock on the Grant Date;
(ii) shall be for a period of not more than ten (10) years
(five (5) years, in the case of a 10% Owner) from the Grant Date,
and shall be subject to earlier termination as herein provided;
(iii) shall, notwithstanding the provisions relating to
termination of employment set forth in Article 14(b)(i), (ii),
(iii), and (iv) hereof, not be exercisable more than three (3)
months (or one (1) year, in the case of a Grantee who is disabled
within the meaning of Section 22(e)(3) of the Internal Revenue
Code) after termination of employment;
(iv) shall not have an aggregate Fair Market Value (determined
for each incentive stock option at the time it is granted) of Stock
with respect to which incentive stock options are exercisable for
the first time by such Grantee during any calendar year (under this
Plan and any other employee stock option plan of the Grantee's
employer or any parent or subsidiary thereof ("Other Plans")),
determined in accordance with the provisions of Section 422A of the
Internal Revenue Code (after amendment by the Tax Reform Act of
1986), which exceeds $100,000 (the "$100,000 Limit");
(v) shall, if the aggregate Fair Market Value of Stock
(determined on the Grant Date) with respect to all incentive stock
options previously granted under this Plan and the Other Plans
("Prior Grants") and any incentive stock options under such grant
(the "Current Grant") which are exercisable for the first time
during any calendar year would exceed the $100,000 Limit, be
exercisable as follows:
(1) The portion of the Current Grant exercisable for
the first time by the Grantee during any calendar year which,
when added to any portions of any Prior Grants exercisable
for the first time by the Grantee during any such calendar
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<PAGE> 11
year, would be exercisable for stock which would have an
aggregate Fair Market Value (determined at the time of each
such grant) in excess of the $100,000 Limit, shall,
notwithstanding the terms of the Current Grant, be exercisable
for the first time by the Grantee in the first subsequent
calendar year or years in which it, when added to all Prior
Grants, could be exercisable for the first time by the
Grantee without exceeding the $100,000 Limit, and
(2) If, viewed as of the date of the Current Grant,
any portion of a Current Grant could not be exercised under
the provisions of the immediately preceding sentence during
any calendar year commencing with the calendar year in which
it is first exercisable through and including the last
calendar year in which it may by its terms be exercised, such
portion of the Current Grant shall not be an incentive stock
option, but shall be exercisable as a separate option at such
date or dates as are provided in the Current Grant;
(vi) shall be granted within ten (10) years from the earlier
of the date the Plan is adopted or the date the Plan is approved by
the stockholders of the Company; and
(vii) shall require the Grantee to notify the Committee of
any disposition of any Stock issued pursuant to the exercise of the
incentive stock option under the circumstances described in Section
421(b) of the Internal Revenue Code (relating to certain
disqualifying dispositions), within ten (10) days of such
disposition.
(c) Grant of Shares of Restricted Stock. Before the grant of any
shares of restricted stock, the Committee shall determine, in its
discretion:
(i) whether the certificates for such shares shall be
distributed to the Grantee or held in escrow by the Secretary of
the Company until such shares become nonforfeitable or are
forfeited,
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<PAGE> 12
(ii) the per share purchase price, if any, of such shares,
and
(iii) any other terms, conditions or restrictions applicable
to such grant.
Payment of the purchase price, if any, for shares of restricted stock
may, at the election of the Grantee, be paid (1) in cash, (2) in Stock
valued at its Fair Market Value on the date of purchase, or (3) in any
combination of cash and stock; provided, however, that the use of Stock
in payment of such purchase price by an officer or director of the
Company is subject to the prior receipt by the Company of either a
favorable opinion of legal counsel or a "no action" letter from the staff
of the Securities and Exchange Commission ("SEC") with respect to the
exemption of such use of stock from Section 16(b) of the Securities
Exchange Act of 1934 (the "1934 Act") or the nonapplicability of such
Section 16(b). If newly issued shares are granted as restricted stock,
the purchase price for each share shall be no less than the par value of
such shares.
The restrictions applicable to restricted stock granted pursuant to the
Plan shall provide that if the Grantee's share of restricted stock is
forfeited, then:
(i) the Grantee shall be deemed to have resold such share
of restricted stock to the Company at the lesser of (1) the
purchase price paid by the Grantee (such purchase price shall be
deemed to be zero dollars ($0) if no purchase price was paid) or
(2) the Fair Market Value of a share of Stock on the date of such
forfeiture,
(ii) the Company shall pay to the Grantee the amount
determined under clause (i) of this sentence, and
(iii) such share of restricted stock shall cease to be
outstanding, and shall no longer confer on the Grantee thereof any
rights as a stockholder of the Company, from and after the date of
such forfeiture and resale.
The Committee shall have the authority, in its discretion, to accelerate
the time at which any or all of the restrictions
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<PAGE> 13
may lapse prior to the expiration of the restrictions or to remove any or
all of the restrictions.
Any share of restricted stock shall bear an appropriate legend
specifying that such share is non-transferable and subject to the
restrictions set forth in this Article 5(c). If any shares of restricted
stock become nonforfeitable, the Company shall cause certificates for
such shares to be issued or reissued without a legend.
(d) Grant of SARs. When granted, SARs may, but need not, be
identified with shares of Stock subject to a specific option or specific
shares of restricted stock of the Grantee (including any option or shares
of restricted stock granted under this Plan or any other employee stock
option plan or restricted stock plan of the Company or any of its
subsidiaries on or before the Grant Date of this SARs). If a Grantee's
SARs are identified with shares of Stock subject to an option or with
shares of restricted stock, then, unless otherwise provided for in the
Grantee's SARs agreement, (i) upon the expiration, termination,
forfeiture, or cancellation of such option or shares of restricted stock,
(ii) upon the purchase of shares of Stock subject to such option, or
(iii) upon the nonforfeitability of such shares of restricted stock, as
the case may be, the Grantee's associated SARs shall terminate.
(e) Award of Performance Units. All performance units awarded
under the Plan shall be evidenced by certificates (the "Certificates").
At or before the award of any performance unit, the Committee shall:
(i) determine "Performance Goals,"
(ii) designate a period, of not less than one (1) year nor
more than three (3) years, for the measurement of the extent to
which these Performance Goals are attained (the "Award Cycle"), and
(iii) determine the value of a performance unit which shall
be a stated percentage (which may exceed 100%) of the Stock's Fair
Market Value on the date of such determination (the "Payment
Value").
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<PAGE> 14
In establishing Performance Goals, the Committee may consider any
performance factor or factors it deems appropriate.
(f) Grant of LSARs. LSARs shall automatically be granted to each
Grantee upon the grant of any option or SAR under the Plan except as
otherwise provided by the Committee, in its discretion, in such grant.
Each LSAR shall be identified with a share of Stock subject to an option
or a SAR of the Grantee and the number of LSARs granted to a Grantee
shall equal the sum of the number of shares of Stock subject to the
option or the number of SARs with which such LSARs are identified. The
Committee may also grant a LSAR with respect to any share of stock
subject to an option or SAR previously granted hereunder or under any
previously established employee stock option plan of the Company or any
of its subsidiaries. Upon (i) the expiration, termination, forfeiture,
or cancellation of a Grantee's option or SARs, or (ii) the purchase of
shares of Stock subject to such option, as the case may be, the Grantee's
associated LSARs shall terminate.
6. Definition of "Fair Market Value". The term "Fair Market Value"
means:
(a) if on the applicable date the Stock is listed for trading on a
national or regional securities exchange or authorized for quotation on
the National Association of Securities Dealers Inc.'s NASDAQ National
Market System ("NASDAQ/NMS"), the closing price of the Stock on such
exchange or NASDAQ/NMS, as the case may be, on the applicable date, or if
no sales of Stock shall have occurred on such exchange or NASDAQ/NMS, as
the case may be, on the applicable date, the closing price of the Stock
on the next preceding date on which there were such sales,
(b) if on the applicable date the Stock is not listed for trading on
a national or regional securities exchange or authorized for quotation on
NASDAQ/NMS, the mean between the closing bid price and the closing ask
price of the Stock as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") with respect to the
applicable date or, if closing bid and ask prices for Stock shall not have
been so reported with respect to the applicable date or, if closing bid
and ask prices for Stock shall not have been so reported with respect to
the applicable date, on
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<PAGE> 15
the next preceding date with respect to which such bid and ask prices
were so reported,
(c) if on the applicable date the Stock is not listed for trading on
a national or regional securities exchange or is not authorized for
quotation on NASDAQ/NMS or NASDAQ, the Fair Market Value of the Stock as
determined in good faith by the Committee, or
(d) for purposes of Article 9(d), the Fair Market Value of one share
of Stock in the event of a Change of Control shall be the highest Fair
Market Value (determined under paragraphs (a), (b) and (c) above) of one
share of Stock during the 180-day period preceding the applicable date
or, if greater, the highest price per share of Stock paid in connection
with the Change of Control.
Such price shall be subject to adjustment as provided in Article 23 hereof.
7. Employees' Agreement to Serve. Each Grantee who is granted an option,
shares of restricted stock, SARs or awarded performance units (or any
combination thereof) shall, by the terms of such Grantee's option agreement,
restricted stock agreement, SAR agreement, or performance unit certificate (as
applicable) agree that such Grantee will remain in the employ of the Company or
any of its subsidiaries for at least one (1) year after the Grant Date. No
obligation of the Company or any of its subsidiaries as to the length of
employment shall be implied by the terms of this Plan or any grant of an
option, shares of restricted stock, SARs, or award of performance units
hereunder. The Company and its subsidiaries reserve the same rights to
terminate employment of any Grantee as existed prior to the effective date of
this Plan.
8. Non-transferability. Each option, SAR, performance unit, and LSAR
granted or awarded hereunder shall by its terms not be assignable or
transferable other than by will or the laws of descent and distribution and
may be exercised, during the Grantee's lifetime, only by the Grantee. Each
share of restricted stock shall be non-transferable until such share becomes
nonforfeitable.
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<PAGE> 16
9. Exercise and Payment.
(a) EXERCISE OF OPTIONS. Subject to the provisions of Article 14
and such terms and conditions as the Committee may impose, each option
shall be exercisable in one or more installments at such time as
determined by the Committee. Each option shall be exercised by delivery
to the Company of written notice of intent to purchase a specific number
of shares of Stock subject to the option. The Option Price of any shares
of Stock as to which an option shall be exercised shall be paid in full
on the date of exercise. Payment may, at the election of the Grantee, be
made in (i) cash, (ii) Stock valued at its Fair Market Value on the date
of exercise, including, with the consent of the Committee and if the
Company obtains an opinion of counsel for the Company or a "no action"
letter from the staff of the SEC to the effect that no violation of
Section 16(b) of the 1934 Act would result, by pyramiding (i.e., paying
the Option Price with shares of Stock simultaneously acquired by option
exercise), or (iii) any combination of cash and Stock.
(b) Exercise of SARs. Subject to the provisions of Article 14 and
such terms and restrictions as the Committee may impose, each SAR shall
be exercisable at such time as determined by the Committee. SARs shall
be exercised by delivery to the Company of written notice of intent to
exercise a specific number of SARs. Unless otherwise provided in the SAR
agreement, the exercise of SARs which are identified with shares subject
to an option or shares of restricted stock shall result in the
cancellation or forfeiture of such option or shares of restricted stock,
as the case may be, to the extent of such exercise.
The benefit for each SAR exercised shall be an amount equal to the
difference between
(i) the Fair Market Value of one share of Stock on the date
of the exercise of the SAR, and
(ii) an amount which equals
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<PAGE> 17
(1) in the case of a SAR identified with a share of
Stock subject to an option, the Option Price of such option,
unless the Committee in the grant specified a higher price,
or
(2) in the case of any other SAR, the Fair Market Value
of one share of Stock on the Grant Date;
provided that the Committee, in its discretion, may provide that the
benefit for any SAR shall not exceed a stated percentage of the Fair
Market Value of one share of Stock on such Grant Date. The benefit upon
the exercise of a SAR shall be payable in cash, unless in the opinion of
the Committee, with respect to any particular exercise, it would be in
the best interests of the Company that benefits be paid wholly or partly
in Stock.
(c) Payment of Performance Units. Subject to the provisions of
Article 14 and such terms and restrictions as the Committee may impose,
the Committee shall, at the end of each Award Cycle, evaluate the
Company's or Grantee's performance in light of the Performance Goals for
such Award Cycle and shall then determine the number of performance units
which, of the total number of such performance units awarded to such Grantee,
have been earned. As soon as practicable following such determination, the
Committee shall pay to the Grantee an amount equal to the product of the number
of performance units determined to be earned and the value of each performance
unit as determined under paragraph (e)(iii) of Article 5. Payment to the
Grantee shall be made in the form of cash unless in the opinion of the
Committee, with respect to any particular payments, it would be in the best
interests of the Company that benefits be paid, wholly or partly, in Stock.
The Committee may, in its discretion, permit the deferment of the payment
provided that the election to defer is made prior to the applicable Award
Cycle.
(d) Exercise of LSARs. Notwithstanding the provisions of Article
10, but subject to the provisions of Articles 14 and 15 hereof, each LSAR
held by a Grantee who is an officer or director of the Company (for
purposes of Section 16 of the 1934 Act) at the time of a Change of
Control (as defined in
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Article 15) shall be paid in cash, the amount as determined below. No
LSAR held by any Grantee who is not an officer of director of the Company
(for purposes of Section 16 of the 1934 Act) at the time of a Change of
Control shall become payable upon such Change of Control. The payment of
LSARs which are identified with an option or SARs shall result in the
cancellation or forfeiture of such option or SARs, as the case may be.
Within five (5) days of the Change of Control, the Company shall pay
the Grantee, in cash, an amount equal to:
(i) in the case of a LSAR identified with an option, the
difference between
(1) the Fair Market Value of one share of Stock on the
date of exercise of the LSAR, and
(2) the Option Price of the option,
(ii) in the case of a LSAR identified with a SAR, the
difference between
(1) the Fair Market Value of one share of Stock on the
date of exercise of the LSAR and
(2) an amount which equals
(A) in the case of a SAR identified with an
option, the Option Price of such option, unless the
Committee in the grant specified a higher price, or
(B) in the case of any other SAR, the Fair Market
Value of one share of Stock on the Grant Date;
provided that the amount determined under this clause (ii)
shall, if the agreement relating to the associated SARs so
provides, not exceed the maximum benefit provided in such
agreement.
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(e) Special Rules for Officers and Directors. With respect to
those persons who for purposes of Section 16 of the 1934 Act are
officers or directors of the Company, (a) no SAR shall be
exercisable for six (6) months from its Grant Date, (b) no option
identified with a SAR shall be exercisable for six (6) months from
such option's Grant Date and (c) no LSAR shall be exercisable for
six (6) months from the Grant Date of the SAR or option identified
with such LSAR (except to the extent that the Company obtains an
opinion of counsel for the Company or a "no action" letter from the
staff of the SEC to the effect that such limitation is not required
by Rule 16b-3(e)(2) (or any successor provision) under the 1934
Act). This limitation shall not apply if the death or Permanent
Disability (as defined in Article 15(b)(iii)) of the Grantee occurs
prior to the expiration of the six-month period.
10. Accelerated Exercise and Accelerated Nonforfeitability.
Notwithstanding any other provisions of the Plan except Article 9(d) and 9(e)
and as otherwise provided in this article, all options and SARs granted under
the Plan shall be exercisable, all performance units awarded under the Plan
shall be payable and all shares of restricted stock shall be nonforfeitable and
freely transferable commencing on the date of a Change of Control, as defined
in Article 15.
In the event of acceleration under this Article 10, the benefit payable
with respect to any performance unit for which the Award Cycle has not ended
shall be equal to the Payment Value for such performance unit multiplied by a
fraction, the numerator of which is the number of days in the Award Cycle prior
to such acceleration and the denominator of which is the number of days in the
Award Cycle.
In the event of such acceleration, regardless of whether the Grantee
remains employed for one (1) year after the applicable Grant Date, Article 7
shall not be construed to prevent the exercise of such Grantee's options or
SARs, the payment of such Grantee's performance units or the nonforfeitability
of such Grantee's shares of restricted stock.
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11. Notification under Section 83(b). Provided that the Committee has
not prohibited such Grantee from making the following election, if a Grantee
shall, in connection with (a) the exercise of any option or SAR, (b) the
payment of any performance unit or (c) the grant of any share of restricted
stock, make the election permitted under Section 83(b) of the Internal Revenue
Code (i.e., an election to include in such Grantee's gross income in the year
of transfer the amounts specified in Section 83(b) of the Internal Revenue
Code), such Grantee shall notify the Committee, or such persons designated by
the Committee (the "Designee"), of such election within ten (10) days of filing
notice of the election with the Internal Revenue Service, in addition to any
filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Internal Revenue Code.
12. Withholding Taxes.
(a) Whenever under the Plan, cash or shares of Stock are to be
delivered upon exercise of an option, SAR, or LSAR, upon the payment of a
performance unit or upon a share of restricted stock becoming
nonforfeitable, or any other event with respect to rights and benefits
hereunder, the Company shall be entitled to require as a condition of
delivery that the Grantee remit an amount sufficient to satisfy all
federal, state, and other governmental withholding tax requirements
related thereto.
(b) If any disqualifying disposition described in Article 5(b)(vii)
is made with respect to shares of Stock acquired under an incentive stock
option granted pursuant to the Plan or any election described in Article
11 is made, then the person making such disqualifying disposition or
election shall remit to the Company an amount sufficient to satisfy all
federal, state, and other governmental withholding taxes thereby
incurred; provided that, in lieu of or in addition to the foregoing, the
Company shall have the right to withhold such sums from compensation
otherwise due to the employee.
13. Elective Share Withholding.
(a) A Grantee may, subject to Committee approval, elect (i) the
withholding by the Company of a portion of the shares of Stock otherwise
deliverable to such Grantee upon such
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Grantee's exercise of an option or SAR, payment of a performance unit or
upon a share of restricted stock becoming nonforfeitable, (ii) to tender
back to the Company shares of Stock issued upon such exercise, payment or
which become nonforfeitable, (iii) to deliver other previously owned
shares of Stock ((i), (ii) and (iii) are collectively referred to as
"Share Withholding"), in any event, having a Fair Market Value equal to:
(A) the amount necessary to satisfy such Grantee's required
federal, state, or other governmental withholding tax liability
with respect to the exercise of the option or SAR, the payment of
the performance unit or to the share of restricted stock becoming
nonforfeitable, or
(B) a greater amount, not to exceed the estimated total amount
of such Grantee's tax liability with respect to the exercise of the
option or SAR, the payment of the performance unit or to the share
of restricted stock becoming nonforfeitable.
(b) Share withholding is subject to Committee approval. Each Share
Withholding election by a Grantee shall be subject to the following
restrictions:
(i) it must be made prior to the date (the "Tax Date") on
which the amount of tax to be withheld is determined;
(ii) it shall be irrevocable;
(iii) it shall be subject to the disapproval of the
Committee;
(iv) if a Grantee is an officer or director of the Company
(for purposes of Section 16 of the 1934 Act), such election may not
be made within six (6) months after the grant of the related
option, SARs, or the award of performance units (except that this
limitation shall not apply if the death or Permanent Disability of
the participant occurs prior to the expiration of the six-month
period); and
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(v) if a Grantee is an officer or director of the Company
(for purposes of Section 16 of the 1934 Act), such elections must
be made either six (6) months prior to the Tax Date or in the ten
business day "window period" beginning on the third business day
following the release of the Company's quarterly or annual summary
statement of sales and earnings.
14. Termination of Employment.
(a) Except as otherwise provided by the Committee in the grant or
subsequent to such grant, a Grantee's shares of restricted stock that are
not nonforfeitable shall be forfeited (i) on the first date the Grantee
is no longer employed by the Company or any of its subsidiaries or (ii)
with respect to a Grantee who is an employee of a subsidiary of the
Company, on the first date on which the Company no longer owns shares of
stock conferring at least fifty percent (50%) of the aggregate voting
power of such subsidiary's outstanding stock (a "Termination of
Employment").
(b) An unexercised option or SAR shall terminate on a Grantee's
Termination of Employment, except that:
(i) if the Grantee's employment is terminated by the death
of the Grantee, subject to Article 5(b)(iii), any unexercised
option or SARs, to the extent exercisable on the date of the
Grantee's death, may be exercised, in whole or in part, at any time
within one (1) year after the date of death by the Grantee's
personal representative or by the person to whom the option or SARs
are transferred by will or the applicable laws of descent and
distribution;
(ii) if the Grantee's employment is terminated as a result
of retirement under the provisions of a retirement plan of the
Company or any of its subsidiaries applicable to the Grantee (or on
or after age 60 if no retirement plan of the Company or any of its
subsidiaries is applicable to the Grantee), subject to Article
5(b)(iii), any unexercised option or SARs, to the extent
exercisable at the date of such Termination of Employment, may be
exercised, in whole or in part, at any time within five (5) years
after the date of such
19
<PAGE> 23
Termination of Employment; provided that, if the Grantee dies
after such Termination of Employment and before the expiration of
such five-year period, such option or SARs may be exercised by the
deceased Grantee's personal representative or by the person to whom
the option or SARs are transferred by will or the applicable laws
of descent and distribution within one (1) year after the
Grantee's death;
(iii) if the Grantee's employment is terminated as a result
of the Permanent Disability of the Grantee, subject to Article
5(b)(iii), any unexercised option or SARs, to the extent
exercisable at the date of such Termination of Employment, may be
exercised, in whole or in part, at any time within one (1) year
after the date of such Termination of Employment; provided that, if
the Grantee dies after such Termination of Employment and before
the expiration of such one (1) year period, such option or SARs may
be exercised by the deceased Grantee's personal representative or
by the person to whom the option or SARs are transferred by will or
the applicable laws of descent and distribution within one (1) year
after the Grantee's death. The term "Permanent Disability" means a
mental or physical condition which, in the opinion of the
Committee, renders a Grantee unable or incompetent to carry out the
job responsibilities which such Grantee held or tasks to which such
Grantee was assigned at the time the disability was incurred and
which is expected to be permanent or for an indefinite duration; or
(iv) if the Grantee has a Termination of Employment for any
reason other than retirement, death or disability, subject to
Article 5(b)(iii), any unexercised options or SARs, to the extent
exercisable at the date of such Termination of Employment, may be
exercised, in whole or in part, at any time within 90 days after
the date of such Termination of Employment; provided that if the
Grantee dies after such Termination of Employment and before the
expiration of such 90 day period, such option or SARs may be
exercised by the deceased Grantee's personal representative or by
the person to whom the option or SARs are transferred by will or
the applicable laws of descent and distribution within one (1) year
20
<PAGE> 24
after the Grantee's death.
(c) All performance units held by a Grantee with respect to an Award
Cycle which has not ended at the time of a termination of such Grantee's
employment with the Company shall be forfeited, except that the Committee
shall pay to the Grantee in the event such termination is due to the
Grantee's retirement, disability or for such other reasons as the
Committee shall determine shall not cause a forfeiture or, in the event
of the Grantee's death, to the Grantee's personal representative or to
the person to whom the performance units are transferred by will or the
applicable laws of descent and distribution an amount determined to be
fair and equitable by the Committee under the circumstances.
(d) Notwithstanding the foregoing, any LSAR exercisable on the
Grantee's Termination of Employment shall remain exercisable until the
end of the sixty (60) day period provided for in Article 9(d).
(e) Any of the provisions herein to the contrary notwithstanding, no
option, SAR, or LSAR shall be exercisable beyond the term specified in
the related agreement thereof.
15. Definition of "Change of Control". A "Change of Control" shall be
deemed to have occurred if:
(a) any "person" (as defined in Section 13(d) and 14(d) of the 1934
Act), other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company or a company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly of securities of the Company
representing fifteen percent (15%) or more of the combined voting power
of the Company's then outstanding securities; or
21
<PAGE> 25
(b) during the period of two (2) consecutive years (not including
any period prior to the stockholders approval of the Plan) there shall
cease to be a majority of the Board comprised as follows: individuals
who at the beginning of such period constitute the Board and any new
director(s) (other than a director designated by a "person" who has
entered into an agreement with the Company to effect a transaction
described in Sections (a), (c) or (d) of this Article 15), whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved;
or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty-percent (80%) of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or a similar transaction in which no
"person" acquires fifteen percent (15%) or more of the combined voting
power of the Company's then outstanding securities); or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or the Company enters into an agreement for
the sale or other disposition of all or substantially all of the
Company's assets or the Company otherwise disposes of such assets.
The Company shall notify all Grantees of the occurrence of a Change of
Control promptly after its occurrence, but any failure of the Company so to
notify shall not deprive the Grantees of any rights accruing hereunder by
virtue of a Change of Control.
16. Substituted Options, SARs, and Performance Units. If the Committee
cancels, with the consent of a Grantee, any option or SAR granted under the
Plan or any performance unit awarded under
22
<PAGE> 26
the Plan, and a new option, SAR, or performance unit is substituted therefor,
then the Committee may, in its discretion, provide that the Grant Date of the
canceled option, SAR, or performance unit shall be the date used to determine
the earliest date or dates for exercising the new substituted option or SAR or
payment of the performance unit under Article 9 hereof so that the Grantee may
exercise the substituted option or SAR or receive payment for the substituted
performance unit at the same time as if the Grantee had held the substituted
option, SAR, or performance unit since the Grant Date of the canceled option,
SAR, or performance unit; provided, however, that no Grantee who for purposes
of Section 16 of the 1934 Act is an officer or director of the Company may
exercise a substituted SAR or a substituted option identified with a SAR or
LSAR within less than six months after the Grant Date (calculated without
reference to this Article 16) of such substituted SAR or option unless the
Company shall have received an option of counsel or "no action" letter from the
staff of the SEC to the effect that such limitation is not required by Rule
16b-3(e)(2) (or any successor provision) under the 1934 Act.
17. Securities Law Matters.
(a) Where an investment intent representation or restrictive legend
is deemed necessary to comply with the Securities Act of 1933, the
Committee may require a written representation to that effect by the
Grantee, or may require that such legend be affixed to certificates for
shares of Stock, at the time the option is exercised or a share of
restricted stock is granted or becomes nonforfeitable.
(b) If based upon the opinion of counsel to the Company, the
Committee determines that the exercise of any options, the
nonforfeitability of any shares of restricted stock, or the payment of
benefits upon the exercise of any SARs or the expiration of any
performance units would violate any applicable provision of (i) state or
federal securities law or (ii) the listing requirements of any securities
exchange registered under the 1934 Act on which are listed any of the
Company's equity securities, then the Committee may postpone any such
exercise, nonforfeitability or payment provided, however, that the
Company shall use its best efforts to cause such exercise,
nonforfeitability or payment to comply with all such provisions at the
earliest practicable date; and provided
23
<PAGE> 27
further, that all authority under this Article 17(b) shall expire from
and after the date of any Change of Control.
18. Funding. Benefits payable under the Plan to any person shall be paid
directly by the Company. The Company shall not be required to fund, or
otherwise segregate assets to be used for payment of, benefits under the Plan.
19. No Employment Rights. Neither the establishment of the Plan, nor the
granting of any option, shares of restricted stock or SARs or the award of
performance units under the Plan shall be construed to (a) give any Grantee the
right to remain employed by the Company or any of its subsidiaries or to any
benefits not specifically provided by the Plan or (b) in any manner modify the
right of the Company or any of its subsidiaries to modify, amend, or terminate
any of its employee benefit plans.
20. Stockholder Rights. A Grantee shall not, by reason of any option,
SARs, performance units, or LSARs granted or awarded hereunder, have any right
as a stockholder of the Company with respect to the shares of Stock which may
be deliverable upon exercise of such option or SARs or the payment of
performance units until such shares have been delivered to him. Shares of
restricted stock held by a Grantee shall confer on the Grantee all rights of a
stockholder of the Company, expect as otherwise provided in this Plan or the
Grantee's restricted stock agreement.
21. Nature of Payments. Any and all grants of Executive Benefits,
payments of cash, or deliveries of shares of Stock hereunder shall constitute
special performance payments to the Grantee and shall not be taken into account
in computing the amount of salary or compensation of the Grantee for the
purposes of determining any pension, retirement, death or other benefits under
(a) any pension, retirement, profit-sharing, bonus, life insurance or other
employee benefit plan of the Company or any of its subsidiaries or (b) any
agreement between the Company or any subsidiary, on the one hand, and the
Grantee, on the other hand, except as such plan or agreement shall otherwise
expressly provide.
22. Non-Uniform Determinations. No determinations under the Plan by the
Board or the Committee need be uniform and may be made by the Committee or the
Board selectively among persons who receive, or are eligible to receive,
grants and awards under the Plan (whether or not such persons are similarly
situated). Without
24
<PAGE> 28
limiting the generality of the foregoing, the Committee shall be entitled, among
other things, to make non-uniform and selective determinations, to enter into
non-uniform and selective option agreements, restricted stock agreements, SAR
agreements, performance unit agreements, or LSAR agreements as to (a) the
persons to receive grants or awards under the Plan, (b) the terms and
provisions of such grants or awards under the Plan, and (c) the treatment, under
Article 14, of leaves of absence.
23. Adjustments. Any option agreement, restricted stock agreement, SARs
agreement, or performance unit agreement entered into hereunder may contain
such provisions as the Committee shall determine for equitable adjustment of:
(a) the number of shares of Stock covered thereby,
(b) the Option Price, or
(c) the Fair Market Value of Stock to be used to determine the
amount of the benefit payable upon exercise of SARs or the payment of
performance units
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, asset spin-off,
reorganization, or similar event, of or by the Company. In any such event,
regardless of whether specified in an option agreement, restricted stock
agreement, SARs agreement, or performance unit agreement, the aggregate number
of shares of Stock, shares of restricted stock, SARs, and performance units
available under the Plan shall be appropriately adjusted to equitably reflect
such event.
24. Amendment of the Plan. The Board may make such modifications of the
Plan as it shall deem advisable, without further approval of the stockholders
of the Company, except as such stockholder approval may be required under (i)
Rule 16b-3 (or any successor provision) under the 1934 Act or (ii) the listing
requirements of any securities exchange registered under the 1934 Act on which
are listed any of the Company's equity securities.
25. Termination of the Plan. The Plan shall terminate January 19, 1995,
or at such earlier time as the Board may, in its discretion, determine. Any
termination of the Plan, whether in
25
<PAGE> 29
whole or in part, shall not affect any Executive Benefits then outstanding
under the Plan.
26. CONTROLLING LAW. The law of the State of Illinois, except its law
with respect to choice of law, shall be controlling in all matters relating to
the Plan.
27. ACTION BY THE COMPANY. Any action required by the Company under the
Plan shall be by resolution of the Board of Directors of the Company.
26
<PAGE> 1
Exhibit 99.5
THE OMC
1994 LONG-TERM INCENTIVE PLAN
(EFFECTIVE AS OF SEPTEMBER 8, 1993)
<PAGE> 2
THE OMC
1994 LONG-TERM INCENTIVE PLAN
(EFFECTIVE AS OF SEPTEMBER 8, 1993)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purpose............................................................. 1
2. Scope of the LTIP Plan.............................................. 1
(a) Amount of Stock............................................... 1
(b) Amount of Stock Subject to
Incentive Stock Options....................................... 1
(c) Amount of Stock Available for
Grant to Reporting Persons.................................... 1
(d) Adjustments................................................... 2
(e) Reuse......................................................... 2
(f) Purchase of Stock and Issuance
Under the Plan................................................ 3
3. Administration...................................................... 3
4. Eligibility......................................................... 5
5. Conditions to Grants................................................ 5
(a) Grant of Options and Option
Price......................................................... 5
(b) Grant of Incentive Stock
Options....................................................... 5
(c) Grant of Shares of Restricted
Stock......................................................... 7
(d) Grant of SARs................................................. 8
(e) Grant of Performance Shares................................... 8
(f) Grant of Performance Units.................................... 9
(g) Grant of LSARs................................................ 9
6. Definition of "Fair Market Value"................................... 10
7. Grantee's Agreement to Serve........................................ 10
8. Non-transferability................................................. 11
9. Exercise and Payment................................................ 11
(a) Exercise of Options........................................... 11
(b) Exercise of SARs.............................................. 11
(c) Payment of Performance Shares
or Performance Units.......................................... 12
(d) Exercise of LSARs............................................. 12
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
(e) Special Rules for Officers
and Directors................................................. 13
10. Accelerated Exercise and Accelerated
Nonforfeitability................................................. 13
11. Notification under Section
83(b)............................................................. 14
12. Withholding Taxes.................................................. 14
13. Elective Share Withholding......................................... 14
14. Termination of Employment.......................................... 15
15. Definition of "Change of Control".................................. 17
16. Substituted Options, SARs,
Performance Shares and Performance
Units............................................................. 18
17. Securities Law Matters............................................. 19
18. Funding............................................................ 19
19. No Employment Rights............................................... 19
20. Stockholder Rights................................................. 19
21. Nature of Payments................................................. 19
22. Non-Uniform Determinations......................................... 20
23. Adjustments........................................................ 20
24. Amendment of the Plan.............................................. 20
25. Effective Date; Termination
of the Plan....................................................... 21
26. Controlling Law.................................................... 21
27. Action by the Company.............................................. 21
</TABLE>
<PAGE> 4
The Plan. Outboard Marine Corporation (the "Company") hereby establishes
the 1994 OMC Long-Term Incentive Plan (the "LTIP Plan"), effective September 8,
1993 (the "Effective Date"), subject to approval by the holders of a majority
of the shares of common stock of the Company present, or represented, and
voting at a meeting duly called and held. Grants and awards may be made
hereunder prior to shareholder approval, provided that any such grants or
awards shall be subject to such shareholder approval.
1. Purpose. The Board of Directors of the Company believes that the
efforts of executive employees of the Company are the foundation for the
success of the Company and its subsidiaries, and that those efforts are
effectively stimulated by providing those employees with personal financial
stakes in the Company. Accordingly, the purpose of the LTIP Plan is to advance
the interests of the Company and its subsidiaries by encouraging and
facilitating the acquisition by executive employees of personal financial
stakes in the Company and by otherwise making executive positions in the
Company and its subsidiaries more attractive. The Board of Directors also
anticipates that the opportunity to obtain such financial interests will prove
attractive to promising executive talent and will assist the Company and its
subsidiaries in attracting more highly skilled and dedicated employees.
2. Scope of the LTIP Plan.
(a) Amount of Stock. The amount of the Company's common stock, par
value $.15 per share (the "Stock"), which may be made subject to grants
of options (including incentive stock options), stock appreciation rights
("SARs"), restricted stock or performance shares or units under the LTIP
Plan during the term thereof shall not exceed an amount equal to (i)
1,000,000 of the Company's authorized but unissued shares of Common
Stock, plus (ii) that number of shares previously authorized under the
OMC Executive Equity Incentive Plan effective as of January 18, 1989 (the
"1989 Plan") which are not granted under such plan as of the expiration
date thereof and (iii) the number of shares of Stock that were subject to
options or awards under the 1989 Plan but which have become available for
reuse pursuant to Section 2(e) of the 1989 Plan. Stock issued hereunder
may be such authorized or unissued shares of Stock or may be issued
shares acquired by the Company or its subsidiaries on the market or
otherwise.
(b) Amount of Stock Subject to Incentive Stock Options. In any
fiscal year, the number of shares of Stock with respect to which
incentive stock options under the requirements of
1
<PAGE> 5
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), may be granted shall not exceed 333,333.
(c) Amount of Stock Available for Grant to Reporting Persons. In
any fiscal year, the amount of Stock which may be made subject to grants
of options, SARs, restricted stock or performance shares or units to any
person subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") (a
"Reporting Person"), shall not exceed an amount equal to Stock having an
aggregate Fair Market Value (as defined in Article 6 herein) determined
as of the date of the respective grant of 400% of the Reporting Person's
base annual salary as of the first day of such fiscal year.
(d) Adjustments. The aggregate number of reserved authorized but
unissued shares of Stock shall be reduced by the aggregate number of
shares of Stock acquired from time to time to be held as treasury shares
reserved for use under the LTIP Plan. The aggregate number of shares of
Stock, shares of restricted stock, SARs, performance shares, performance
units and LSARs available under the LTIP Plan shall each be subject to
adjustment upon the occurrence of any of the events and in the manner set
forth in Article 23 hereof.
(e) Reuse. If, and to the extent:
(i) Option. An option shall expire or terminate for any
reason without having been exercised in full (including, without
limitation, cancellation and re-grant pursuant to Article 3(g)),
the shares of Stock subject thereto which have not become
outstanding shall (unless the LTIP Plan shall have terminated)
become available for issuance under the LTIP Plan;
(ii) Restricted Stock and Performance Shares. Shares of Stock
granted as restricted stock or performance shares or units under
the LTIP Plan are forfeited for any reason, such shares of Stock
shall (unless the LTIP Plan shall have terminated) become available
for issuance under the LTIP Plan; provided, however, that if any
dividends paid with respect to shares of restricted stock were paid
to the Grantee prior to the forfeiture thereof, such shares shall
not be reused for grants or awards to any Reporting Person;
2
<PAGE> 6
(iii) SARS. SARs expire or terminate for any reason without
having been exercised in full, an equal number of SARs shall
(unless the LTIP Plan shall have terminated) become available for
issuance under the LTIP Plan;
(iv) Performance Units. Performance units expire or terminate
for any reason without having been earned in full, an equal number
of performance units shall (unless the LTIP Plan shall have
terminated) become available for issuance under the LTIP Plan; and
(v) LSARS. LSARs are exercised:
(1) if the LSARs were granted with respect to an option,
the shares of Stock subject thereto which have not become
outstanding shall not again become available for issuance
under the LTIP Plan, or
(2) if the LSARs were granted with respect to SARs, such
SARs shall not again become available for issuance under the
LTIP Plan.
(f) Purchase of Stock and Issuance Under the LTIP Plan. The Board
of Directors of the Company (the "Board") or such committee of the Board
that the Board shall specifically authorize or direct on its behalf shall
have the authority to cause the Company to purchase from time to time, in
such amounts and at such prices as the Board, in its discretion, shall
deem advisable or appropriate, shares of Stock to be held as treasury
shares and reserved and used solely for or in connection with grants
under the LTIP Plan, at the discretion of the Committee.
3. Administration. The LTIP Plan shall be administered by a committee,
to be known as the Compensation Committee (the "Committee") or any successor
committee, which shall include not less than three persons who are directors of
the Company, who are not employees of the Company or any of its subsidiaries,
and who shall be appointed, from time to time, by the Board. Members of the
Committee shall not participate in the LTIP Plan and, at any time within one
(1) year prior to appointment to the Committee, or while serving on the
Committee, (a) shall not have received or been eligible to receive options,
shares of restricted stock, SARs, performance shares, performance units, or
LSARs (the "Executive Benefits") hereunder or under any other plan or program
of the Company or any subsidiary except to the extent that participation in any
such plan or receipt of any such Executive Benefits would
3
<PAGE> 7
not adversely affect the Committee member's qualification as a
disinterested person within the meaning of Rule 16b-3 under the 1934 Act; and
(b) shall not (i) have been an officer of the Company or any of its
subsidiaries at any time, (ii) be an employee of the Company or any of its
subsidiaries who is receiving compensation (A) for prior services to the
Company or any of its subsidiaries, or (B) for personal services from the
Company or any of its subsidiaries in any capacity other than as a director,
except to the extent the receipt of such compensation would not adversely
affect the Committee member's qualification as an outside director within the
meaning of Section 162(m) of the Code. The Committee shall have full and final
authority, in its discretion, but subject to the express provisions of the LTIP
Plan, as follows:
(a) to grant Executive Benefits;
(b) to determine, subject to Article 5, (i) the Option Price (as
defined in Article 5) of the Stock subject to each option, (ii) the
purchase price (if any) of each share of restricted stock granted, (iii)
the Performance Goals, Award Cycle, and Payment Value (as defined in
Article 5) with respect to performance shares or performance units, (iv)
the individuals to whom, and the time or times at which, Executive
Benefits shall be granted, (v) whether or not options shall be incentive
stock options (as defined in Article 5), (vi) whether or not specific
SARs shall be identified with a specific option or specific shares of
restricted stock, (vii) whether or not specific performance units shall
be identified with a specific option or specific shares of restricted
stock, and (viii) subject to Article 2, the number of shares of
restricted stock, the number of SARs, the number of performance units,
and the number of LSARs to be granted to each Grantee (as defined in
Article 5) thereof;
(c) to interpret the LTIP Plan;
(d) to prescribe, amend, and rescind rules and regulations relating
to the LTIP Plan, including, without limitation and subject to Article
14, the rules with respect to the exercisability of options, SARs,
performance units, or LSARs or the nonforfeitability of shares of
restricted stock upon the termination of employment of a Grantee (as
defined in Article 5);
(e) to determine the terms and provisions of the respective
Executive Benefit agreements (which may, but need not be, identical)
by which all Executive Benefits shall be
4
<PAGE> 8
granted or awarded hereunder and, with the consent of the Grantee,
to modify any such agreements (including, without limitation, the
acceleration of the exercisability of options, SARs and LSARs, the
payment of performance units subject to such agreement and the
acceleration of the nonforfeitability of shares of restricted stock
subject to such agreement);
(f) to prescribe the method by which grants or awards of Executive
Benefits shall be evidenced;
(g) to cancel, with the consent of the Grantee thereof, outstanding
options, SARs, performance units and LSARs and to grant or award new
options, SARs, performance units and LSARs in substitution thereof;
(h) to require withholding from or payment by a Grantee (as defined
in Article 5) of any federal, state, or other governmental taxes;
(i) to prohibit the election described in Article 11;
(j) to impose such additional conditions, restrictions, and
limitations upon exercise or retention of options, SARs or LSARs or upon
the grant or retention of shares of restricted stock as the Committee
may, prior to or concurrently with the grant thereof, deem appropriate,
including, but not limited to, requiring simultaneous exercise of related
identified options, SARs and LSARs and limiting the percentage of options
and SARs which may from time to time be exercised by a Grantee;
(k) to make all other determinations deemed necessary or advisable
for the administration of the LTIP Plan; and
(l) to amend the LTIP Plan to the extent permitted by Article 24.
The determination of the Committee on all matters relating to the LTIP Plan or
any agreement with respect to Executive Benefits shall be conclusive and final.
No member of the Committee shall be liable for any action or determination
made in good faith with respect to the LTIP Plan or any grant thereunder.
4. Eligibility. Executive Benefits may be granted or awarded to any
employee of the Company or any of its subsidiaries whose rates of pay or fringe
benefits are not negotiated under a collective bargaining agreement. In
selecting the individuals to
5
<PAGE> 9
whom Executive Benefits shall be granted or awarded, as well as in
determining the number of shares of Stock subject to each individual Executive
Benefit to be granted or awarded, the Committee shall take into consideration
such factors as it, in its discretion, deems relevant in connection with
promoting the purposes of the LTIP Plan.
5. Conditions to Grants. The date of the grant (the "Grant Date") of an
option, shares of restricted stock, SARs, performance shares or performance
units (under the LTIP Plan or any other employee stock option plan of the
Company or any of its subsidiaries) shall be the date on which the Committee
makes the grant, or such later date as specified in advance by the Committee.
The Grant Date of a LSAR shall be deemed to be the date on which the underlying
option or SAR was granted, whether granted under the LTIP Plan or any other
employee stock option plan of the Company or any of its subsidiaries. Subject
to the provisions of Article 2 hereof, an individual who has been granted one
or more Executive Benefits (a "Grantee") may, if such Grantee is otherwise
eligible, be granted additional Executive Benefits if the Committee shall in
its discretion so determine. Subject to the other provisions of the LTIP Plan,
Executive Benefits may be granted under terms and conditions which differ among
the Grantees thereof. The term of each option (subject to Article 5(b) with
respect to each incentive stock option), SAR, performance share, performance
unit and LSAR granted shall be for a period of not more than fifteen (15) years
from the Grant Date, and shall be subject to earlier termination as herein
provided. To the extent not set forth in the LTIP Plan, the terms and
conditions of each grant of an Executive Benefit shall be set forth in a
written agreement between the Company and the Grantee thereof.
(a) Grant of Options and Option Price. Before the grant of any
option, the Committee shall determine the per share purchase price of the
Stock subject to such option (the "Option Price"); provided that the
Option Price shall not be less than one hundred percent (100%) of the
Fair Market Value (as defined in Article 6) of the Stock on the Grant
Date.
(b) Grant of Incentive Stock Options. At the time of the grant of
any option, the Committee may designate that such option shall be an
incentive stock option under the Code and subject to additional
restrictions to permit it to qualify as an "incentive stock option" under
the requirements of Section 422 (or any successor provision) of the Code.
Any option designated as an incentive stock option:
6
<PAGE> 10
(i) shall have an Option Price of (1) not less than 100% of
the Fair Market Value of the Stock on the Grant Date or (2) in the
case of an employee who owns stock (including stock treated as
owned under Section 425(d) of the Code) possessing more than 10% of
the total combined voting power of all classes of stock of the
Company or any of its subsidiaries (a "10% Owner"), not less than
110% of the Fair Market Value of the Stock on the Grant Date;
(ii) shall be for a period of not more than ten (10) years
(five (5) years, in the case of a 10% Owner) from the Grant Date,
and shall be subject to earlier termination as herein provided;
(iii) shall, notwithstanding the provisions relating to
termination of employment set forth in Article 14(b)(i), (ii),
(iii), and (iv) hereof, not be exercisable more than three (3)
months (or one (1) year, in the case of a Grantee who is disabled
within the meaning of Section 22(e)(3) of the Code) after
termination of employment;
(iv) shall not have an aggregate Fair Market Value (determined
for each incentive stock option at the time it is granted) of Stock
with respect to which incentive stock options are exercisable for
the first time by such Grantee during any calendar year (under this
Plan and any other employee stock option plan of the Grantee's
employer or any parent or subsidiary thereof ("Other Plans")),
determined in accordance with the provisions of Section 422 of the
Code, which exceeds $100,000 (the "$100,000 Limit");
(v) shall, if the aggregate Fair Market Value of Stock
(determined on the Grant Date) with respect to all incentive stock
options previously granted under this Plan and the Other Plans
("Prior Grants") and any incentive stock options under such grant
(the "Current Grant") which are exercisable for the first time
during any calendar year would exceed the $100,000 Limit, be
exercisable as follows:
(1) The portion of the Current Grant exercisable for the
first time by the Grantee during any calendar year which,
when added to any portions of any Prior Grants exercisable
for the first time by the Grantee during any such calendar
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year, would be exercisable for stock which would have an
aggregate Fair Market Value (determined at the time of each
such grant) in excess of the $100,000 Limit, shall,
notwithstanding the terms of the Current Grant, be
exercisable for the first time by the Grantee in the first
subsequent calendar year or years in which it, when added to
all Prior Grants, could be exercisable for the first time by
the Grantee without exceeding the $100,000 Limit, and
(2) If, viewed as of the date of the Current Grant, any
portion of a Current Grant could not be exercised under the
provisions of the immediately preceding sentence during any
calendar year commencing with the calendar year in which it
is first exercisable through and including the last calendar
year in which it may by its terms be exercised, such portion
of the Current Grant shall not be an incentive stock option,
but shall be exercisable as a separate option at such date or
dates as are provided in the Current Grant;
(vi) shall be granted within ten (10) years from the earlier
of the date the LTIP Plan is adopted or the date the LTIP Plan is
approved by the shareholders of the Company; and
(vii) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the
incentive stock option under the circumstances described in Section
421(b) of the Code (relating to certain disqualifying
dispositions), within ten (10) days of such disposition.
(c) Grant of Shares of Restricted Stock. Before the grant of any
shares of restricted stock, the Committee shall determine, in its
discretion:
(i) whether the certificates for such shares shall be
distributed to the Grantee, held in escrow by the Secretary of the
Company until such shares become nonforfeitable or are forfeited or
to be recorded as owned by the Grantee in an appropriate book entry
system designed to account for such restricted stock,
(ii) the per share purchase price, if any, of such shares, and
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(iii) any other terms, conditions or restrictions applicable
to such grant.
Payment of the purchase price, if any, for shares of restricted stock
may, at the election of the Grantee, be paid (1) in cash, (2) in Stock
valued at its Fair Market Value on the date of purchase, or (3) in any
combination of cash and stock; provided, however, that the use of Stock
in payment of such purchase price by an officer or director of the
Company is subject to the prior receipt by the Company of either a
favorable opinion of legal counsel or a "no action" letter from the staff
of the Securities and Exchange Commission ("SEC") with respect to the
exemption of such use of stock from Section 16(b) of the 1934 Act or the
nonapplicability of such Section 16(b). If newly issued shares are
granted as restricted stock, the purchase price for each share shall be
no less than the par value of such shares.
The restrictions applicable to restricted stock granted pursuant to
the LTIP Plan shall provide that if the Grantee's share of restricted
stock is forfeited, then:
(i) the Grantee shall be deemed to have resold such share of
restricted stock to the Company at the lesser of (1) the purchase
price paid by the Grantee (such purchase price shall be deemed to
be zero dollars ($0) if no purchase price was paid) or (2) the Fair
Market Value of a share of Stock on the date of such forfeiture,
(ii) the Company shall pay to the Grantee the amount
determined under clause (i) of this sentence, and
(iii) such share of restricted stock shall cease to be
outstanding, and shall no longer confer on the Grantee thereof any
rights as a stockholder of the Company, from and after the date of
such forfeiture and resale.
The Committee shall have the authority, in its discretion, to accelerate
the time at which any or all of the restrictions may lapse prior to the
expiration of the restrictions or to remove any or all of the
restrictions.
Any share of restricted stock shall bear an appropriate legend
specifying that such share is non-transferable and subject to the
restrictions set forth in this Article 5(c) or as determined by the
Committee. If any shares of restricted stock become nonforfeitable, the
Company shall cause
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certificates for such shares to be issued or reissued without a legend.
(d) Grant of SARS. When granted, SARs may, but need not, be
identified with shares of Stock subject to a specific option or specific
shares of restricted stock of the Grantee (including any option or shares
of restricted stock granted under this Plan or any other employee stock
option plan or restricted stock plan of the Company or any of its
subsidiaries on or before the Grant Date of the SARs). If a Grantee's
SARs are identified with shares of Stock subject to an option or with
shares of restricted stock, then, unless otherwise provided for in the
Grantee's SARs agreement, (i) upon the expiration, termination,
forfeiture, or cancellation of such option or shares of restricted stock,
(ii) upon the purchase of shares of Stock subject to such option, or
(iii) upon the nonforfeitability of such shares of restricted stock, as
the case may be, the Grantee's associated SARs shall terminate.
(e) Grant of Performance Shares. All performance share grants under
the LTIP Plan shall be evidenced by agreements or certificates (the
"Performance Share Certificate") containing the terms and conditions of
the grant. At or before the grant of any performance shares, the
Committee shall:
(i) determine the Performance Goals applicable to the
Performance Shares;
(ii) designate a period of not less than one (1) year but not
more than three (3) years for the measurement of the extent to
which the Performance Goals have been attained (the "Award Cycle");
and
(iii) determine the percentage of the Performance Shares which
shall become nonforfeitable as a result of the Company's
performance against the Performance Goals during the Award Cycle.
(f) Grant of Performance Units. All performance units granted under
the LTIP Plan shall be evidenced by certificates (the "Certificates").
At or before the grant of any performance unit, the Committee shall:
(i) determine Performance Goals applicable to such grants,
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<PAGE> 14
(ii) designate an Award Cycle, of not less than one (1) year
nor more than three (3) years, for the measurement of the extent to
which these Performance Goals are attained, and
(iii) determine the value of a performance unit which shall be
a stated percentage (which may exceed 100%) of the Stock's Fair
Market Value on the date of such determination (the "Payment
Value").
For purposes of paragraph 5(e) and paragraph 5(f), Performance Goals
established by the Committee shall be based upon Company performance, the
performance of the Fair Market Value of the Stock in relation to its historical
performance and that of applicable market indices and market peer groups, or
such other factors as the Committee may determine. In all cases, the
Performance Goals must include a minimum performance standard below which no
portion of the performance shares or performance units shall become
nonforfeitable. Upon the completion of the Award Cycle, the Committee shall
certify the level of Performance Goals attained and the portion of award which
shall become nonforfeitable or payable as a result thereof.
(g) Grant of LSARS. LSARs shall automatically be granted to each
Grantee upon the grant of any option or SAR under the LTIP Plan except as
otherwise provided by the Committee, in its discretion, in such grant.
Each LSAR shall be identified with a share of Stock subject to an option
or a SAR of the Grantee and the number of LSARs granted to a Grantee
shall equal the sum of the number of shares of Stock subject to the
option or the number of SARs with which such LSARs are identified. The
Committee may also grant a LSAR with respect to any share of stock
subject to an option or SAR previously granted hereunder or under any
previously established employee stock option plan of the Company or any
of its subsidiaries. Upon (i) the expiration, termination, forfeiture,
or cancellation of a Grantee's option or SARs, or (ii) the purchase of
shares of Stock subject to such option, as the case may be, the Grantee's
associated LSARs shall terminate.
6. Definition of "Fair Market Value". The term "Fair Market Value"
means:
(a) if on the applicable date the Stock is listed for trading on a
national or regional securities exchange or authorized for quotation on
the National Association of Securities Dealers Inc.'s NASDAQ National
Market System ("NASDAQ/NMS"), the closing price of the Stock on such
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<PAGE> 15
exchange or NASDAQ/NMS, as the case may be, on the applicable date, or if
no sales of Stock shall have occurred on such exchange or NASDAQ/NMS, as
the case may be, on the applicable date, the closing price of the Stock
on the next preceding date on which there were such sales,
(b) if on the applicable date the Stock is not listed for trading on
a national or regional securities exchange or authorized for quotation on
NASDAQ/NMS, the mean between the closing bid price and the closing ask
price of the Stock as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") with respect to the
applicable date or, if closing bid and ask prices for Stock shall not
have been so reported with respect to the applicable date or, if closing
bid and ask prices for Stock shall not have been so reported with respect
to the applicable date, on the next preceding date with respect to which
such bid and ask prices were so reported,
(c) if on the applicable date the Stock is not listed for trading on
a national or regional securities exchange or is not authorized for
quotation on NASDAQ/NMS or NASDAQ, the Fair Market Value of the Stock as
determined in good faith by the Committee, or
(d) for purposes of Article 9(d), the Fair Market Value of one share
of Stock in the event of a Change of Control shall be the highest Fair
Market Value (determined under paragraphs (a), (b) and (c) above) of one
share of Stock during the 180-day period preceding the applicable date
or, if greater, the highest price per share of Stock paid in connection
with the Change of Control.
Such price shall be subject to adjustment as provided in Article 23 hereof.
7. Grantee's Agreement to Serve. Each Grantee who is granted an option,
shares of restricted stock, SARs, performance shares or performance units (or
any combination thereof) shall, by the terms of such Grantee's option
agreement, restricted stock agreement, SAR agreement, or performance share or
performance unit certificate (as applicable) agree that such Grantee will
remain in the employ of the Company or any of its subsidiaries for at least one
(1) year after the Grant Date. No obligation of the Company or any of its
subsidiaries as to the length of employment shall be implied by the terms of
this Plan or any grant of an option, shares of restricted stock, SARs,
performance shares or performance units hereunder. The Company and its
subsidiaries reserve the same rights to
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<PAGE> 16
terminate employment of any Grantee as existed prior to the effective date of
this Plan.
8. NON-TRANSFERABILITY. Each option, SAR, performance share, performance
unit, and LSAR granted or awarded hereunder shall by its terms not be
assignable or transferable other than by will or the laws of descent and
distribution and may be exercised, during the Grantee's lifetime, only by the
Grantee. Each share of restricted stock shall be non-transferable until such
share becomes nonforfeitable.
9. Exercise and Payment.
(a) Exercise of Options. Subject to the provisions of Article 14
and such terms and conditions as the Committee may impose, each option
shall be exercisable in one or more installments at such time as
determined by the Committee. Each option shall be exercised by delivery
to the Company of written notice of intent to purchase a specific number
of shares of Stock subject to the option. The Option Price of any shares
of Stock as to which an option shall be exercised shall be paid in full
on the date of exercise. Payment may, at the election of the Grantee, be
made in (i) cash, (ii) Stock valued at its Fair Market Value on the date
of exercise, including, with the consent of the Committee and if the
Company obtains an opinion of counsel for the Company or a "no action"
letter from the staff of the SEC to the effect that no violation of
Section 16(b) of the 1934 Act would result, by pyramiding (i.e., paying
the Option Price with shares of Stock simultaneously acquired by option
exercise), or (iii) any combination of cash and Stock.
(b) Exercise of SARS. Subject to the provisions of Article 14 and
such terms and restrictions as the Committee may impose, each SAR shall
be exercisable at such time as determined by the Committee. SARs shall be
exercised by delivery to the Company of written notice of intent to
exercise a specific number of SARs. Unless otherwise provided in the SAR
agreement, the exercise of SARs which are identified with shares subject
to an option or shares of restricted stock shall result in the
cancellation or forfeiture of such option or shares of restricted stock,
as the case may be, to the extent of such exercise.
The benefit for each SAR exercised shall be an amount equal to the
difference between:
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<PAGE> 17
(i) the Fair Market Value of one share of Stock on the date of
the exercise of the SAR, and
(ii) an amount which equals
(1) in the case of a SAR identified with a share of
Stock subject to an option, the Option Price of such option,
unless the Committee in the grant specified a higher price,
or
(2) in the case of any other SAR, the Fair Market Value
of one share of Stock on the Grant Date;
provided that the Committee, in its discretion, may provide that the
benefit for any SAR shall not exceed a stated percentage of the Fair
Market Value of one share of Stock on such Grant Date. The benefit upon
the exercise of a SAR shall be payable in cash unless, in the opinion of
the Committee, with respect to any particular exercise, it would be in
the best interests of the Company that benefits be paid wholly or partly
in Stock.
(c) Payment of Performance Shares or Performance Units. Subject to
the provisions of Article 14 and such terms and restrictions as the
Committee may impose, the Committee shall, at the end of each Award
Cycle, evaluate the Company's or Grantee's performance in light of the
Performance Goals for such Award Cycle and shall then determine the
number of performance shares or performance units which, of the total
number of such performance shares or performance units granted to such
Grantee, have been earned. As soon as practicable following such
determination, the Committee shall deliver to the Grantee a certificate
for the shares of Stock deemed earned. Payment to the Grantee may be
made in the form of cash if in the opinion of the Committee, with respect
to any particular shares, it would be in the best interests of the
Company that benefits be paid, wholly or partly, in cash. The Committee
may, in its discretion, permit the deferment of the payment provided that
the election to defer is made prior to the applicable Award Cycle.
(d) Exercise of LSARS. Notwithstanding the provisions of Article
10, but subject to the provisions of Articles 14 and 15 hereof, each LSAR
held by a Grantee who is an officer or director of the Company (for
purposes of Section 16 of the 1934 Act) at the time of a Change of
Control (as defined in Article 15) shall be paid in cash, the amount as
determined
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<PAGE> 18
below. No LSAR held by any Grantee who is not an officer or director of
the Company (for purposes of Section 16 of the 1934 Act) at the time of
a Change of Control shall become payable upon such Change of Control.
The payment of LSARs which are identified with an option or SARs shall
result in the cancellation or forfeiture of such option or SARs, as the
case may be.
Within five (5) days of the Change of Control, the Company shall pay
the Grantee, in cash, an amount equal to:
(i) in the case of a LSAR identified with an option, the
difference between
(1) the Fair Market Value of one share of Stock on the
date of exercise of the LSAR, and
(2) the Option Price of the option,
(ii) in the case of a LSAR identified with a SAR, the
difference between
(1) the Fair Market Value of one share of Stock on the
date of exercise of the LSAR and
(2) an amount which equals
(A) in the case of a SAR identified with an
option, the Option Price of such option, unless the
Committee in the grant specified a higher price, or
(B) in the case of any other SAR, the Fair Market
Value of one share of Stock on the Grant Date;
provided that the amount determined under this clause (ii)
shall, if the agreement relating to the associated SARs so
provides, not exceed the maximum benefit provided in such
agreement.
(e) Special Rules for Officers and Directors. With respect to
Reporting Persons, (a) no SAR shall be exercisable for six (6) months
from its Grant Date, (b) no option identified with a SAR shall be
exercisable for six (6) months from such option's Grant Date and (c) no
LSAR shall be exercisable for six (6) months from the Grant Date of the
SAR
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<PAGE> 19
or option identified with such LSAR (except to the extent that the
Company obtains an opinion of counsel for the Company or a "no action"
letter from the staff of the SEC to the effect that such limitation is
not required by Rule 16b-3 (or any successor provision) under the 1934
Act). Solely for purposes of measuring the six month period pursuant to
this paragraph 9(e), the Grant Date of any grant made prior to the date
of shareholder approval of this Plan shall be deemed to be the date of
such shareholder approval. This limitation shall not apply if the death
or Permanent Disability (as defined in Article 15(b)(iii)) of the Grantee
occurs prior to the expiration of the six-month period.
10. Accelerated Exercise and Accelerated Nonforfeitability.
Notwithstanding any other provisions of the LTIP Plan except Article 9(d) and
9(e) and as otherwise provided in this Article, all options and SARs granted
under the LTIP Plan shall be exercisable, all performance shares and
performance units granted under the LTIP Plan shall be payable and all shares
of restricted stock shall be nonforfeitable and freely transferable commencing
on the date of a Change of Control, as defined in Article 15.
In the event of acceleration under this Article 10, the benefit payable
with respect to any performance share or unit for which the Award Cycle has not
ended shall be equal to the Payment Value for such performance share or unit
multiplied by a fraction, the numerator of which is the number of days in the
Award Cycle prior to such acceleration and the denominator of which is the
number of days in the Award Cycle.
In the event of such acceleration, regardless of whether the Grantee
remains employed for one (1) year after the applicable Grant Date, Article 7
shall not be construed to prevent the exercise of such Grantee's options or
SARs, the payment of such Grantee's performance units or the nonforfeitability
of such Grantee's performance shares and shares of restricted stock.
11. Notification under Section 83(b). Provided that the Committee has
not prohibited such Grantee from making the following election, if a Grantee
shall, in connection with (a) the exercise of any option or SAR, (b) the
payment of any performance share or performance unit or (c) the grant of any
performance share or share of restricted stock, make the election permitted
under Section 83(b) of the Code (i.e., an election to include in such Grantee's
gross income in the year of transfer the amounts specified in Section 83(b) of
the Code), such Grantee shall notify the Committee, or such persons designated
by the Committee (the "Designee"), of such election within ten (10) days of
filing notice
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of the election with the Internal Revenue Service, in addition to any filing
and notification required pursuant to regulations issued under the authority
of Section 83(b) of the Code.
12. Withholding Taxes.
(a) Whenever under the LTIP Plan, cash or shares of Stock are to be
delivered upon exercise of an option, SAR, or LSAR, upon the payment of a
performance unit or upon a performance share or share of restricted stock
becoming nonforfeitable, or any other event with respect to rights and
benefits hereunder, the Company shall be entitled to require as a
condition of delivery that the Grantee remit an amount sufficient to
satisfy all federal, state, and other governmental withholding tax
requirements related thereto.
(b) If any disqualifying disposition described in Article 5(b)(vii)
is made with respect to shares of Stock acquired under an incentive stock
option granted pursuant to the LTIP Plan or any election described in
Article 11 is made, then the person making such disqualifying disposition
or election shall remit to the Company an amount sufficient to satisfy
all federal, state, and other governmental withholding taxes thereby
incurred; provided that, in lieu of or in addition to the foregoing, the
Company shall have the right to withhold such sums from compensation
otherwise due to the employee.
13. Elective Share Withholding.
(a) A Grantee may, subject to Committee approval, elect (i) the
withholding by the Company of a portion of the shares of Stock otherwise
deliverable to such Grantee upon such Grantee's exercise of an option or
SAR, payment of a performance unit or upon a performance share or share
of restricted stock becoming nonforfeitable, (ii) to tender back to the
Company shares of Stock issued upon such exercise, payment or which
become nonforfeitable, (iii) to deliver other previously owned shares of
Stock ((i), (ii) and (iii) are collectively referred to as "Share
Withholding"), in any event, having a Fair Market Value equal to:
(A) the amount necessary to satisfy such Grantee's
required federal, state, or other governmental withholding tax
liability with respect to the exercise of the option or SAR, the
payment of the performance unit or the performance share or the
share of restricted stock becoming nonforfeitable, or
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<PAGE> 21
(B) a greater amount, not to exceed the estimated total amount
of such Grantee's tax liability with respect to the exercise of the
option or SAR, the payment of the performance unit or to the
performance share or share of restricted stock becoming
nonforfeitable.
(b) Share withholding is subject to Committee approval. Each Share
Withholding election by a Grantee shall be subject to the following
restrictions:
(i) it must be made prior to the date (the "Tax Date") on
which the amount of tax to be withheld is determined;
(ii) it shall be irrevocable;
(iii) it shall be subject to the disapproval of the Committee;
(iv) if a Grantee is a Reporting Person, such election may not
be made within at least six (6) months after the grant of the
related option, SARs, or the award of performance shares or units
(except that this limitation shall not apply if the death or
Permanent Disability of the participant occurs prior to the
expiration of the six-month period); and
(v) if a Grantee is a Reporting Person, such elections must be
made either at least six (6) months prior to the Tax Date or in the
ten business day "window period" beginning on the third business
day following the release of the Company's quarterly or annual
summary statement of sales and earnings.
14. Termination of Employment.
(a) Except as otherwise provided by the Committee in the grant or
subsequent to such grant, a Grantee's performance shares or units and
shares of restricted stock that are not nonforfeitable shall be forfeited
(i) on the first date the Grantee is no longer employed by the Company
or any of its subsidiaries or (ii) with respect to a Grantee who is an
employee of a subsidiary of the Company, on the first date on which the
Company no longer owns shares of stock conferring at least fifty percent
(50%) of the aggregate voting power of such subsidiary's outstanding
stock (a "Termination of Employment").
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(b) An unexercised option or SAR shall terminate on a Grantee's
Termination of Employment, except that:
(i) if the Grantee's employment is terminated by the death of
the Grantee, subject to Article 5(b)(iii), any unexercised option
or SARs, to the extent exercisable on the date of the Grantee's
death, may be exercised, in whole or in part, at any time within
one (1) year after the date of death by the Grantee's personal
representative or by the person to whom the option or SARs are
transferred by will or the applicable laws of descent and
distribution;
(ii) if the Grantee's employment is terminated as a result of
retirement under the provisions of a retirement plan of the Company
or any of its subsidiaries applicable to the Grantee (or on or
after age 60 if no retirement plan of the Company or any of its
subsidiaries is applicable to the Grantee), subject to Article
5(b)(iii), all of such Grantee's unexercised options or SARs which
were granted more than one year prior to the Termination of
Employment, may be exercised, in whole or in part, at any time
within a period of years after the date of such Termination of
Employment, as such period is set by the Committee, which period
may, in no event, extend beyond the period specified in the related
option agreement; provided that, if the Grantee dies after such
Termination of Employment and before the expiration of the
applicable period, such option or SARs may be exercised by the
deceased Grantee's personal representative or by the person to whom
the option or SARs are transferred by will or the applicable laws
of descent and distribution within one (1) year after the Grantee's
death;
(iii) if the Grantee's employment is terminated as a result of
the Permanent Disability of the Grantee, subject to Article
5(b)(iii), any unexercised option or SARs, to the extent
exercisable at the date of such Termination of Employment, may be
exercised, in whole or in part, at any time within one (1) year
after the date of such Termination of Employment; provided that,
if the Grantee dies after such Termination of Employment and before
the expiration of such one (1) year period, such option or SARs may
be exercised by the deceased Grantee's personal representative or
by the person to whom the option or SARs are transferred by will or
the applicable laws of descent and distribution within one (1) year
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<PAGE> 23
after the Grantee's death. The term "Permanent Disability" means a
mental or physical condition which, in the opinion of the
Committee, renders a Grantee unable or incompetent to carry out the
job responsibilities which such Grantee held or tasks to which such
Grantee was assigned at the time the disability was incurred and
which is expected to be permanent or for an indefinite duration; or
(iv) if the Grantee has a Termination of Employment for any
reason other than retirement, death or disability, subject to
Article 5(b)(iii), any unexercised options or SARs, to the extent
exercisable at the date of such Termination of Employment, may be
exercised, in whole or in part, at any time within 90 days after
the date of such Termination of Employment; provided that if the
Grantee dies after such Termination of Employment and before the
expiration of such 90 day period, such option or SARs may be
exercised by the deceased Grantee's personal representative or by
the person to whom the option or SARs are transferred by will or
the applicable laws of descent and distribution within one (1) year
after the Grantee's death.
(c) All performance shares or units held by a Grantee with respect
to an Award Cycle which has not ended at the time of a termination of
such Grantee's employment with the Company shall be forfeited, except
that the Committee shall pay to the Grantee in the event such termination
is due to the Grantee's retirement, disability or for such other reasons
as the Committee shall determine shall not cause a forfeiture or, in the
event of the Grantee's death, to the Grantee's personal representative or
to the person to whom the performance shares or units are transferred by
will or the applicable laws of descent and distribution an amount
determined to be fair and equitable by the Committee under the
circumstances.
(d) Notwithstanding the foregoing, any LSAR exercisable on the
Grantee's Termination of Employment shall remain exercisable until the
end of the sixty (60) day period beginning on Grantee's Termination of
Employment date.
(e) Any of the provisions herein to the contrary notwithstanding, no
option, SAR, or LSAR shall be exercisable beyond the term specified in
the related agreement thereof.
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15. Definition of "Change of Control". A "Change of Control" shall be
deemed to have occurred if:
(a) any "person" (as defined in Section 13(d) and 14(d) of the 1934
Act), other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company or a company
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly of securities of the Company
representing fifteen percent (15%) or more of the combined voting power
of the Company's then outstanding securities; or
(b) during the period of two (2) consecutive years (not including
any period prior to the shareholders approval of the LTIP Plan) there
shall cease to be a majority of the Board comprised as follows:
individuals who at the beginning of such period constitute the Board and
any new director(s) (other than a director designated by a "person" who
has entered into an agreement with the Company to effect a transaction
described in Sections (a), (c) or (d) of this Article 15), whose election
by the Board or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds (23) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved;
or
(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty-percent (80%) of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or a similar transaction in which no
"person" acquires fifteen percent (15%) or more of the combined voting
power of the Company's then outstanding securities); or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or the Company enters into
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an agreement for the sale or other disposition of all or
substantially all of the Company's assets or the Company otherwise
disposes of such assets.
The Company shall notify all Grantees of the occurrence of a Change of
Control promptly after its occurrence, but any failure of the Company so to
notify shall not deprive the Grantees of any rights accruing hereunder by
virtue of a Change of Control.
16. Substituted Options, SARS, Performance Shares and Performance Units.
If the Committee cancels, with the consent of a Grantee, any option, SAR,
performance share or performance unit granted under the LTIP Plan, and a new
option, SAR, performance share or performance unit is substituted therefor,
then the Committee may, in its discretion, provide that the Grant Date of the
canceled option, SAR, performance share or performance unit shall be the date
used to determine the earliest date or dates for exercising the new substituted
option or SAR or payment of the performance share or performance unit under
Article 9 hereof so that the Grantee may exercise the substituted option or SAR
or receive payment for the substituted performance share or performance unit at
the same time as if the Grantee had held the substituted option, SAR,
performance share or performance unit since the Grant Date of the canceled
option, SAR, performance share or performance unit; provided, however, that no
Grantee who for purposes of Section 16 of the 1934 Act is an officer or
director of the Company may exercise a substituted SAR or a substituted option
identified with a SAR or LSAR within less than six months after the Grant Date
(calculated without reference to this Article 16) of such substituted SAR or
option unless the Company shall have received an opinion of counsel or "no
action" letter from the staff of the SEC to the effect that such limitation is
not required by Rule 16b-3(e)(2) (or any successor provision) under the 1934
Act.
17. Securities Law Matters.
(a) Where an investment intent representation or restrictive legend
is deemed necessary to comply with the Securities Act of 1933, the
Committee may require a written representation to that effect by the
Grantee, or may require that such legend be affixed to certificates for
shares of Stock, at the time the option is exercised or a performance
share or a share of restricted stock is granted or becomes
nonforfeitable.
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(b) If based upon the opinion of counsel to the Company, the
Committee determines that the exercise of any options, the
nonforfeitability of any performance shares or shares of restricted
stock, or the payment of benefits upon the exercise of any SARs or the
expiration of any performance units would violate any applicable
provision of (i) state or federal securities law or (ii) the listing
requirements of any securities exchange registered under the 1934 Act on
which are listed any of the Company's equity securities, then the
Committee may postpone any such exercise, nonforfeitability or payment
provided, however, that the Company shall use its best efforts to cause
such exercise, nonforfeitability or payment to comply with all such
provisions at the earliest practicable date; and provided further, that
all authority under this Article 17(b) shall expire from and after the
date of any Change of Control.
18. Funding. Benefits payable under the LTIP Plan to any person shall be
paid directly by the Company. The Company shall not be required to fund, or
otherwise segregate assets to be used for payment of, benefits under the LTIP
Plan.
19. No Employment Rights. Neither the establishment of the LTIP Plan,
nor the granting of any option, shares of restricted stock, SARs, performance
shares or performance units under the LTIP Plan shall be construed to (a) give
any Grantee the right to remain employed by the Company or any of its
subsidiaries or to any benefits not specifically provided by the LTIP Plan or
(b) in any manner modify the right of the Company or any of its subsidiaries to
modify, amend, or terminate any of its employee benefit plans.
20. Stockholder Rights. A Grantee shall not, by reason of any option,
SARs, performance shares, performance units, or LSARs granted hereunder, have
any right as a shareholder of the Company with respect to the shares of Stock
which may be deliverable upon exercise of such option or SARs or the payment of
performance shares or performance units until such shares have been delivered
to such Grantee. Shares of restricted stock held by a Grantee shall confer on
the Grantee all rights of a shareholder of the Company, except as otherwise
provided in this Plan or the Grantee's performance share certificate or
restricted stock agreement.
21. Nature of Payments. Any and all grants of Executive Benefits,
payments of cash, or deliveries of shares of Stock hereunder shall constitute
special performance payments to the Grantee and shall not be taken into account
in computing the amount
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of salary or compensation of the Grantee for the purposes of determining
any pension, retirement, death or other benefits under (a) any pension,
retirement, profit-sharing, bonus, life insurance or other employee benefit
plan of the Company or any of its subsidiaries or (b) any agreement between the
Company or any subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.
22. Non-Uniform Determinations. No determinations under the LTIP Plan by
the Board or the Committee need be uniform and may be made by the Committee or
the Board selectively among persons who receive, or are eligible to receive,
grants and awards under the LTIP Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make non-uniform and
selective determinations, to enter into non-uniform and selective option
agreements, restricted stock agreements, SAR agreements, performance share
agreements, performance unit agreements, or LSAR agreements as to (a) the
persons to receive grants or awards under the LTIP Plan, (b) the terms and
provisions of such grants or awards under the LTIP Plan, and (c) the treatment,
under Article 14, of leaves of absence.
23. Adjustments. Any option agreement, restricted stock agreement, SARs
agreement, performance share agreement or performance unit agreement or
certificate entered into hereunder may contain such provisions as the Committee
shall determine for equitable adjustment of:
(a) the number of shares of Stock covered thereby,
(b) the Option Price, or
(c) the Fair Market Value of Stock to be used to determine the
amount of the benefit payable upon exercise of SARs or the payment of
performance shares or units to reflect a stock dividend, stock split,
reverse stock split, share combination, recapitalization, merger,
consolidation, asset spin-off, reorganization, or similar event, of or by
the Company. In any such event, regardless of whether specified in an
option agreement, restricted stock agreement, SARs agreement, performance
share agreement or certificate or performance unit agreement or
certificate, the aggregate number of shares of Stock, shares of
restricted stock, SARs, and performance shares or units available under
the LTIP Plan
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shall be appropriately adjusted to equitably reflect such event.
24. Amendment of the LTIP Plan. The Board, or the Committee to the
extent authorized by the Board, may make such modifications of the LTIP Plan as
it shall deem advisable, without further approval of the shareholders of the
Company, except as such shareholder approval may be required under (i) Rule
16b-3 (or any successor provision) under the 1934 Act or (ii) the listing
requirements of any securities exchange registered under the 1934 Act on which
are listed any of the Company's equity securities, or, with respect to
provisions pertaining to incentive stock options granted or which may be
granted under the LTIP Plan, the requirements of Sections 422 and 424 of the
Code.
25. Effective Date; Termination of the LTIP Plan. The LTIP Plan shall
become effective as of September 8, 1993, by action of the Board of Directors
conditioned on and subject to approval of the LTIP Plan by the vote of the
shareholders of the Company holding a majority of the shares of Stock present
in person or by proxy at a duly held meeting of shareholders. The LTIP Plan
shall terminate January 16, 1997, or at such earlier time as the Board may, in
its discretion, determine. Any termination of the LTIP Plan, whether in whole
or in part, shall not affect any Executive Benefits then outstanding under the
LTIP Plan.
26. Controlling Law. The law of the State of Illinois, except its law
with respect to choice of law, shall be controlling in all matters relating to
the LTIP Plan.
27. Action by the Company. Any action required by the Company under the
LTIP Plan shall be by resolution of the Board of Directors of the Company
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