<PAGE> 1
OUTBOARD MARINE CORPORATION
100 SEA HORSE DRIVE
WAUKEGAN, ILLINOIS 60085
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about July 31, 1997, to
the holders of the Common Stock (as defined below) of Outboard Marine
Corporation (the "Company"). You are receiving this Information Statement in
connection with the possible election of persons designated by Detroit Diesel
Corporation ("DDC") to at least a majority of the seats on the Company's Board
of Directors (the "Board"). The Company, DDC and OMC Acquisition Corp., a wholly
owned subsidiary of DDC (the "Offeror"), entered into a merger agreement dated
as of July 8, 1997 (the "Merger Agreement") pursuant to which the Offeror
agreed, among other things, to commence a tender offer (the "Offer") to purchase
13,842,619 shares of the Company's $0.15 par value common stock (the "Common
Stock") at a price of $16.00 per share, payable in cash. If the Offer is
consummated, and subject to certain conditions, the Offeror will be merged with
and into the Company, with the Company becoming a wholly-owned subsidiary of
DDC.
The Merger Agreement requires the Company, upon the purchase of shares of
Common Stock pursuant to consummation of the Offer, to use its reasonable
efforts to cause DDC's designees (the "Designees") to be elected to that number
of the seats on the Board, rounded up to the next whole number, as will give DDC
representation on the Board equal to the product of (i) the number of directors
on the Board and (ii) the percentage that the number of shares of Common Stock
purchased by DDC or the Offeror or any affiliate thereof bears to the aggregate
number of shares of Common Stock outstanding. This Information Statement is
required by Section 14(f) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 14f-1 thereunder. You are urged to read this Information
Statement carefully. However, you are not required to take any action.
Pursuant to the Merger Agreement, on July 15, 1997, the Offeror commenced
the Offer and filed with the Securities and Exchange Commission a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer, which contained an Offer
to Purchase, a related Letter of Transmittal and other ancillary documents
pursuant to which the Offer was made. The Offer is scheduled to expire at
midnight, Eastern Daylight Savings Time, on August 11, 1997, subject to
extension as described in the Merger Agreement.
The information contained in this Information Statement (including
information listed in Schedule I attached hereto) concerning DDC, the Offeror
and the Designees has been furnished to the Company by DDC and the Offeror, and
the Company assumes no responsibility for the accuracy or completeness of such
information.
The Common Stock constitutes the only class of voting securities of the
Company outstanding. Each share of Common Stock has one vote. As of June 30,
1997, there were 20,205,515 shares of Common Stock outstanding.
BOARD OF DIRECTORS
GENERAL
The Board currently consists of nine members ("Directors"). Members of the
Board are elected to serve three-year terms and each Director holds office until
his successor is elected and qualified or until his earlier death, resignation
or removal.
BUYER DESIGNEES
Pursuant to the Merger Agreement, upon the acquisition by the Offeror of
the 13,842,619 shares subject to the Offer, DDC is entitled to have its
Designees hold that number of the seats on the Board, rounded up to
<PAGE> 2
the next whole number, as will give DDC representation on the Board equal to the
product of (i) the number of directors on the Board and (ii) the percentage that
the number of shares of Common Stock purchased by DDC or the Offeror or any
affiliate thereof bears to the aggregate number of shares of Common Stock
outstanding. The Company has agreed in the Merger Agreement to use its
reasonable efforts to cause the Designees to be elected to the Board.
DDC has informed the Company that the directors and executive officers
listed in Schedule I attached hereto constitute DDC's Designees. DDC has
informed the Company that each of the persons listed in Schedule I has consented
to act as a Director, if so designated. The business address of DDC and the
Offeror is 13400 Outer Drive, West, Detroit, Michigan 48239-4001.
It is expected that the Designees may assume office at any time following
the consummation of the Offer and that, upon assuming office, the Designees will
thereafter constitute a majority of the Board.
<PAGE> 3
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following tables set forth information with respect to (i) persons or
groups who are known to the Company to be beneficial owners, as of June 30,
1997, of more than 5% of the outstanding Common Stock (the "Investor Table") and
(ii) beneficial ownership of Common Stock held, as of June 30, 1997, by each of
the Company's Directors, Named Executives (as defined below) and all the
Company's Directors and the Company's elected and appointed corporate officers
(the "Executive Officers") as a group (the "Director and Executive Officer
Table"). Beneficial ownership is defined as the sole or shared power to vote, or
direct the disposition of, a security. Except as otherwise indicated, beneficial
ownership in the following tables includes sole voting and dispositive power.
INVESTOR TABLE(1)
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS
---------------- ------------ ----------
<S> <C> <C>
ICM Asset Management, Inc.(2)
601 West Main Avenue
Spokane, Washington 99201................................. 2,096,215 10.38%
Greenway Partners, L.P.(3)
277 Park Avenue 27th Floor
New York, New York 10017.................................. 2,000,000 9.92%
John Hancock Asset Management(4)
P.O. Box 111
Boston, MA 02199.......................................... 1,490,539 7.4%
FMR Corp.(5)
82 Devonshire Street
Boston, Massachusetts 02109-3614.......................... 1,241,100 6.14%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, California 90401............................ 1,023,900 5.07%
</TABLE>
- -------------------------
(1) Based upon Schedules 13D and Schedules 13G as filed with the Securities and
Exchange Commission pursuant to the Exchange Act and other publicly
available information.
(2) Pursuant to its Schedule 13G, ICM Asset Management, Inc. has sole
dispositive power and beneficial ownership of the Common Stock.
(3) A Schedule 13D was filed by and on behalf of Greenway Partners, L.P.
("Greenway"), Greentree Partners, L.P. ("Greentree"), Greenhouse Partners,
L.P. ("Greenhouse"), Greenhut, L.L.C. ("Greenhut"), Greenbelt Corp.
("Greenbelt"), Greensea Offshore, L.P. ("Greensea"), Greenhut Overseas,
L.L.C. ("Greenhut Overseas"), Alfred D. Kingsley and Gary K. Duberstein
(collectively, the "Reporting Persons"). Each of Greenway, Greentree and
Greenhouse is a Delaware limited partnership. Each of Greenhut and Greenhut
Overseas is a Delaware limited liability company. Greenbelt is a Delaware
corporation. Greensea is an exempted limited partnership formed under the
laws of the Cayman Islands. The principal business of Greenway, Greentree
and Greensea is investing in securities. The principal business of
Greenhouse is being the general partner of Greenway. The principal business
of Greenhut is being the general partner of Greentree. The principal
business of Greenhut Overseas is being the investment general partner of
Greensea. The principal business of Greenbelt is managing a small number of
accounts containing securities for which Greenbelt has voting and
dispositive power, and, consequently, is the beneficial owner. The principal
occupation of each of Messrs. Kingsley and Duberstein is serving as the
general partners of Greenhouse and members of both Greenhut and Greenhut
Overseas. In addition, Mr. Kingsley is senior managing director, and Mr.
Duberstein is managing director, of both Greenway and Greentree. Also, Mr.
Kingsley is president, and Mr. Duberstein is vice president, secretary and
treasurer of Greenbelt. Messrs. Kingsley and Duberstein are both citizens of
the United States.
<PAGE> 4
(4) Pursuant to its Schedule 13G, 1,433,339 shares of Common Stock are owned
through its indirect, wholly-owned subsidiary, NM Capital Management Inc.,
56,700 through its indirect wholly-owned subsidiary John Hancock Adviser,
Inc., and 500 through its direct, wholly-owned subsidiary, Independence
Associates, Inc.
(5) Pursuant to its Schedule 13G, the Common Stock is owned through its
wholly-owned subsidiaries Fidelity Management & Research Company and
Fidelity Management Trust Company. In addition, Edward C. Johnson III and
FMR Corp., through its control of these subsidiaries, each has dispositive
power over the Common Stock held.
DIRECTOR AND EXECUTIVE OFFICER TABLE
<TABLE>
<CAPTION>
SHARES OPTION SHARES
BENEFICIALLY BENEFICIALLY
OWNED(1) OWNED(2)
------------ -------------
<S> <C> <C>
D. Jeffrey Baddeley......................................... 27,353 20,825
Frank Borman................................................ 4,423 0
Harry W. Bowman............................................. 25,000 84,550
William C. France........................................... 5,460 0
Ilene S. Gordon............................................. 2,496 0
Richard T. Lindgren......................................... 29,361 0
David R. Lumley(3).......................................... 262 1,800
J. Willard Marriott, Jr..................................... 10,461 0
Richard H. Medland.......................................... 27,057 21,000
Donald L. Runkle............................................ 1,996 0
George L. Schueppert........................................ 44,259 0
Richard J. Stegemeier....................................... 6,361 0
Richard F. Teerlink......................................... 6,360 0
Directors and Executive Officers as a group (20 persons).... 270,733 161,725
</TABLE>
- -------------------------
(1) Except as otherwise noted, the named individuals and members of the group
have sole voting and investment power as to the shares they own beneficially
except for restricted shares, which are included, over which they currently
have voting power only and receive dividends and phantom restricted shares
for which they receive dividend equivalents, but have no voting or
investment power. All Directors and Executive Officers as a group own
approximately 1.262% of the Company's outstanding Common Stock. No Director
or Executive Officer owns beneficially more than 1% of such stock.
(2) Shares that could be acquired within 60 days following June 30, 1997 through
the exercise of stock options prior to any cancellation thereof, as
described herein.
(3) Mr. Lumley resigned his employment with the Company on February 3, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
officers and 10 percent holders of the Common Stock to file reports concerning
their ownership of Company securities as of the end of the fiscal year 1996. The
Company has adopted procedures to assist its Directors and Executive Officers in
complying with this section, including the actual preparation and filing of the
necessary reports. The Company failed to timely file the following reports on
behalf of the listed Directors and Executive Officers: Harry W. Bowman, one
report involving one transaction; D. Jeffrey Baddeley, one report involving four
transactions; Laurin M. Baker, one report involving one transaction; L. Earl
Bentz, three reports involving four transactions; Carlisle R. Davis, one report
involving one transaction; John D. Flaig, two reports involving four
transactions; David R. Lumley, two reports involving six transactions; Richard
H. Medland, two reports involving four transactions; Howard Malovany, two
reports involving six transactions; James R. Maurice, one report involving one
transaction; Christopher R. Sachs, one report involving two transactions; George
L. Schueppert,
2
<PAGE> 5
one report involving two transactions; Frank Borman, one report involving one
transaction; William C. France, three reports involving four transactions;
Richard T. Lindgren, three reports involving five transactions; J. Willard
Marriott, three reports involving five transactions; Richard J. Stegemeier,
three reports involving five transactions; Richard F. Teerlink, three reports
involving five transactions. In all cases the appropriate reports have now been
filed.
CURRENT EXECUTIVE OFFICERS OF THE COMPANY
All officers are elected or appointed for terms which expire on the date of
the meeting of the Board following the annual meeting of shareholders or until
their successors are elected or appointed and qualify.
Harry W. Bowman
See CURRENT DIRECTORS OF THE COMPANY below.
George L. Schueppert
Elected Executive Vice President and Chief Financial Officer in 1996, had
previously been employed with CBI Industries, Inc., from 1987 to 1995 as
Executive Vice President-Finance and served as a Director. Age 59.
Carlisle R. Davis
Appointed Vice President in 1995 and was elected Senior Vice President,
Operations for the Marine Power Products Group in 1996, had previously been
employed with General Motors from 1958 to 1995, most recently as Program Manager
- -- Midsize Car Division from 1992 to 1995 and Platform Manager -- "A" Cars and
Corvette from 1988 to 1992. Age 61.
Richard H. Medland
Elected Vice President in 1991 and Senior Vice President and Chief
Administrative Officer in 1996, had previously been employed as Vice President,
Human Resources of the Tenneco Automotive Division of Tenneco, Inc. Age 55.
Clark J. Vitulli
Elected Senior Vice President and President, OMC Boat Group in 1996, had
previously been employed with Mark III Industries, Inc. from 1993 to 1995 as
President and CEO and prior to that with Mazda Motor of America, Inc. from 1989
to 1993 as Senior Vice President and Chief Operating Officer. Age 51.
D. Jeffrey Baddeley
Elected Secretary and Associate General Counsel in 1990, General Counsel in
1993, Vice President and General Counsel in 1994, and Vice President, Secretary
and General Counsel in 1996. Age 59.
Miles E. Dean
Appointed Vice President and Controller in 1996, had previously been a
Peace Corps privatization consultant to state owned companies and business
valuation instructor in Poland from 1990-1992 and following that was self
employed from 1992-1996. From 1985 to 1990 he was Vice President -- Division
Director, Industry Analysis for Continental Bank. Age 56.
John D. Flaig
Elected Vice President, Product Integrity in 1996, had been employed by the
Company as Vice President in various engineering, research and manufacturing
capacities for the Company's Marine Power Products
3
<PAGE> 6
Group since 1992, and had previously been employed by the Company in various
capacities for at least one year prior thereto. Age 50.
Edgar M. Frandle
Appointed Vice President in 1996, had previously been employed with
AmeriData Technologies from 1993 to 1996 as the Chief Information Officer/Vice
President of Information Systems and prior to that with DataCard Corporation
from 1987 to 1993 as Vice President, MIS. Age 57.
Thomas G. Goodman
Elected Treasurer in 1996, had previously been employed by the Company as
Director, Financial Planning since 1993, and had previously been employed by the
Company in various capacities for at least two years prior thereto. Age 44.
Robert J. Moerchen
Appointed Assistant Treasurer in 1989. Age 54.
Robert S. Romano
Appointed Assistant Secretary in 1996 and Assistant General Counsel in
1994, had previously been employed by the Company as Senior Counsel since 1993,
and by the Company in various capacities for at least two years prior thereto.
Age 42.
CURRENT DIRECTORS OF THE COMPANY
Names of the current Directors of the Company, together with certain
additional information, are set forth below. To the knowledge of the Company,
there are no family relationships between any Director or Executive Officer and
any other Director or Executive Officer.
CLASS I DIRECTORS
(TERMS EXPIRE IN 1999)
William C. France
Chairman of the Board and Chief Executive Officer of International Speedway
Company (Daytona Beach, FL), an owner and operator of automobile racing
facilities. Mr. France has been President and Chief Executive Officer since 1981
and Chairman since 1987. Mr. France is also President of the National
Association of Stock Car Automobile Racing (Daytona Beach, FL). He is also a
director of Penske Motorsports, Inc.
A Director since 1985. Mr. France is a member of the Audit and Corporate
Governance Committees. Age 64.
Ilene S. Gordon
Vice President and General Manager, Folding Carton Business, Tenneco
Packaging, since March 1997. Prior to that, Ms. Gordon was Vice President,
Operations of Tenneco, Inc. (parent of Tenneco Packaging) since 1994. Prior to
that, Ms. Gordon held numerous positions with Tenneco Packaging including Senior
Vice President, Total Quality Management from 1992 to 1994 and Vice President,
Area Manager, Containerboard Division from 1990 to 1992.
A Director since 1996. Ms. Gordon is a member of the Audit and Corporate
Governance Committees. Age 43.
4
<PAGE> 7
Donald L. Runkle
Vice President of General Motors Corporation and General Manager of their
Delphi Energy and Engine Management Systems division (Flint, MI), an energy and
engine management system component manufacturer for the worldwide automotive
market. Mr. Runkle has been General Manager since May, 1996. Prior to that Mr.
Runkle held numerous positions with GM including Vice President, GM Advanced
Engineering, from 1988 to 1993, and General Manager of Delphi Saginaw Steering
Systems from 1993 to 1996.
A Director since 1996. Mr. Runkle is a member of the Compensation and
Corporate Governance Committees. Age 52.
CLASS II DIRECTORS
(TERMS EXPIRE IN 2000)
Frank Borman
Chairman of the Board and Chief Executive Officer of Patlex Corporation
(Las Cruces, NM), a laser technology patent royalty company. Mr. Borman has been
Chairman and Chief Executive Officer since 1988.
Mr. Borman was Chairman of the Board and Chief Executive Officer of Eastern
Airlines, Inc. from 1976 until he retired in 1986. He is also a Director of
American Superconductor Corp. (Watertown, MA), Home Depot Companies (Atlanta,
GA), Database Online (Ft. Lauderdale, FL) and Thermo Instrument Systems, Inc.
(Boston, MA) and is a member of the Board of Trustees of the National Geographic
Society.
A Director since 1985. Mr. Borman is a member of the Audit and Corporate
Governance Committees. Age 69.
Harry W. Bowman
Chairman of the Board, President and Chief Executive Officer of the Company
since February, 1995. Mr. Bowman held numerous positions with Whirlpool
Corporation from 1971 to 1995, most recently as Executive Vice President, Global
Business Process Integration from 1994 to 1995, President, Whirlpool Europe from
1992 to 1994 and Senior Vice President, North American Operations 1991 to 1992.
He is also a Director of Premark International, Inc. (Deerfield, IL).
A Director since 1995. Age 54.
J. W. Marriott, Jr.
Chairman of the Board and Chief Executive Officer of Marriott
International, Inc. (Washington, D.C.), a diversified lodging and services
management company. Mr. Marriott became Chief Executive Officer of Marriott
Corporation in 1972 and was named Chairman of the Board in 1985. Mr. Marriott is
also a Director of Host Marriott Corporation (Washington, D.C.), Host Marriott
Services Corporation (Washington, D.C.), General Motors Corporation (Detroit,
MI), and a member of the U.S. -- Russia Business Council and the Business
Roundtable. He also serves on the boards of trustees of the Mayo Foundation, the
National Geographic Society, Georgetown University, and on the advisory board of
the Boy Scouts of America. He is on the President's Advisory Committee of the
American Red Cross and the Executive Committee of the World Travel & Tourism
Council.
A Director since 1986. Mr. Marriott is a member of the Compensation and
Corporate Governance Committees. Age 65.
CLASS III DIRECTORS
(TERMS EXPIRE IN 1998)
Richard T. Lindgren
President, The Lorr Corporation (Detroit, MI), a private investment
company. Mr. Lindgren has been President since 1989. Mr. Lindgren was President,
Chief Executive Officer and a Director of Cross and
5
<PAGE> 8
Trecker Corporation from 1982 until 1988. Mr. Lindgren is also Chairman of the
Board of Robert Sinto Corporation (Lansing, MI), a foundry engineering and
equipment manufacturer, Chairman of the Board of Wixom Products, Inc., a
Director of Sinto America, Inc., parent of Robert Sinto Corporation and Wixom
Products, Inc., a Director of Atmosphere Group, Inc. (Birmingham, MI) and
Trustee of Suomi College (Hancock, MI).
A Director since 1980. Mr. Lindgren is Chairman of the Audit Committee and
a member of the Corporate Governance Committee. Age 69.
Richard J. Stegemeier
Chairman Emeritus of the Board of Unocal Corporation (Los Angeles, CA), an
integrated petroleum company. Mr. Stegemeier was Chairman from April 1989 to May
1995, and was Chief Executive Officer from 1988 to 1994. From December 1985 to
June 1992 he was President, and from December 1985 to July 1988 he was Chief
Operating Officer. Mr. Stegemeier is also a Director of Wells Fargo Bank (San
Francisco, CA), Northrop Grumman Corporation (Los Angeles, CA), Halliburton
Company (Dallas, TX), Foundation Health Systems, Inc. (Pueblo, CO), and Pacific
Enterprises (Los Angeles, CA).
A Director since 1990. Mr. Stegemeier is Chairman of the Compensation
Committee and a member of the Corporate Governance Committee. Age 69.
Richard F. Teerlink
Chairman of the Board, President and Chief Executive Officer of
Harley-Davidson, Inc. (Milwaukee, WI), the only major American-based
manufacturer that produces heavyweight motorcycles and a complete line of
motorcycle parts and accessories. Mr. Teerlink has been President and Chief
Operating Officer since August 1988. He has been Chief Executive Officer since
March 1989 and Chairman of the Board since May 1996. Mr. Teerlink is also a
Director of Johnson Controls, Inc. (Milwaukee, WI), FirstStar Bank Milwaukee
(Milwaukee, WI) and Holiday Rambler LLC (Wakarusa, IN).
A Director since 1990. Mr. Teerlink is Chairman of the Corporate Governance
Committee and a member of the Compensation Committee. Age 60.
6
<PAGE> 9
BOARD OF DIRECTORS, COMMITTEES AND EXECUTIVE OFFICERS
The Board met eight times during the 1996 fiscal year. Board Committees
include Audit, Compensation and Corporate Governance which during the year met
two, four and three times, respectively.
The Audit Committee consists of four non-employee Directors. This Committee
oversees the Company's financial reporting process and internal controls,
reviews any significant issues concerning litigation and contingencies, meets
with independent public accountants and internal auditors to discuss the results
of their examinations, reviews the insurance programs of the Company and
monitors compliance with the Company's Code of Conduct and other policies on
ethical business practices. This Committee also consults with management, the
internal auditors and the independent public accountants on matters related to
the annual audit plan, audit procedures applied, audit and non-audit fees,
status of federal tax returns and related reserves, the published financial
statements, the accounting principles applied and any material changes thereto.
The Compensation Committee consists of four non-employee Directors. This
Committee reviews and approves management's recommendations with respect to a
competitive, fair and equitable compensation and benefits policy designed to
retain personnel, stimulate their useful and profitable efforts on behalf of the
Company and attract necessary and qualified additions to staff; reviews,
approves and administers the Company's executive compensation plans and, after
taking into consideration the recommendations of management, determines the
salaries and incentive compensation of the Executive Officers of the Company and
its foreign and domestic subsidiaries, including but not limited to annual
bonuses and grants of stock options, restricted stock and performance units or
shares; carries out the administrative responsibilities for the Company's
compensation programs applicable to executives; reviews annually the performance
of the Company's Chief Executive Officer vis-a-vis the Company's performance
and, based upon such review, recommends to the Board appropriate compensation
adjustments and bonus awards, if any; and acts on, reports to and makes
recommendations with respect to specific matters within delegated authority.
The Corporate Governance Committee consists of eight non-employee
Directors. This Committee develops and recommends the criteria for the selection
of candidates to serve on the Board which include whether the potential
candidate's principal employment, occupation or association involves an active
leadership role, whether the potential candidate has expertise or experience
relevant to the Company's business that would not be otherwise readily available
to the Board, whether the potential candidate brings diversity to the Board, and
with respect to incumbent directors, how the potential candidate performed and
contributed during his or her most recent term; develops and recommends the
procedure for the selection of candidates to serve on the Board; reviews and
recommends the number of members of the Board; recommends the slate of nominees
to be proposed for election by the shareholders of the Company at the Company's
annual meeting; recommends nominees to fill vacancies on the Board; considers
and recommends the number, size and composition of committees of the Board
including rotation of members and Chairperson responsibilities; reviews and
recommends the compensation and retirement programs for members of the Board;
reviews the performance of the members of the Board including any change in a
member's status from date of nomination; annually performs a self-assessment of
the Board as a whole to ensure that its members still possess the necessary
skills, talents, experience and qualities; reviews the performance of the Chief
Executive Officer; reviews, develops and recommends plans and proposals for
management succession with respect to the Chief Executive Officer; and acts on,
reports to and makes recommendations with respect to specific matters within a
delegated authority.
In fiscal year 1996, no Director attended fewer than 75 percent of the
aggregate number of meetings of the Board and the Board Committees on which such
Director served.
Directors who are not employees of the Company receive an annual retainer
of $25,000 and a fee of $1,000 for each Board and Board Committee meeting
attended, provided no Director will be paid for more than two meetings held in
any one day. Directors who are employees of the Company receive no remuneration
or fees, as such, for serving as Directors.
7
<PAGE> 10
As of January 1, 1996, each Director, except Ms. Gordon and Mr. Runkle, was
a vested participant in the Retirement Plan for Non-Employee Directors (the
"Directors Retirement Plan"). The Directors Retirement Plan provides an annual
retirement benefit equal to ten percent (10%) of the Director's retainer, as of
the date of retirement, times the years of service as a Director, up to a
maximum of one hundred percent (100%) of the retainer. The benefit begins to
vest after six (6) years of service, is fully vested after ten (10) years and is
payable for the life of the Director. The Directors Retirement Plan was frozen
effective January 1, 1996 and replaced by the Outboard Marine Corporation
Non-Employee Director Equity Compensation Plan (the "Equity Plan").
The Equity Plan has two primary components. The first component is designed
to provide an equity based alternative for those non-employee Directors who, as
of January 1, 1996, had a vested benefit under the Directors Retirement Plan.
Under the Equity Plan, a non-employee Director had the option to convert the
present value of his or her cash benefit under the Directors Retirement Plan
into deferred stock units under the Equity Plan. Five of the six Directors
eligible to make the election elected to convert from the Directors Retirement
Plan to the Equity Plan. The present value of the Directors Retirement Plan
benefit was arrived at by adjusting the fully vested benefit of each Director as
of January 1, 1996 using standard actuarial assumptions.
For those Directors who made the election, the conversion took place on
November 15, 1996 based on the average fair market value per share of the Common
Stock for the period October 15, 1996 through November 15, 1996. The deferred
stock units are tracked in an account established by the Company and will
fluctuate with the value of a share of the Common Stock. In addition,
non-employee Directors will earn dividends, based on actual dividends, paid in
the form of an equivalent number of additional deferred stock units. The value
of the Directors account will be distributed in cash upon his or her reaching
the then existing mandatory retirement age, currently age 70, upon the death of
the non-employee Director, or upon a change in control of the Company and he or
she will be taxed as ordinary income based upon the value of the account at the
time of distribution. The non-employee Director will not have the right to vote
the deferred stock units.
The second component is designed to provide an equity based benefit to
those non-employee Directors not vested in the Directors Retirement Plan and to
provide a vehicle for future retainer increases for all non-employee Directors
without increasing the Director's cash retainer. As such, each non-employee
Director will receive an annual grant of 300 shares of Common Stock. Receipt of
the shares of Common Stock and any dividends paid by the Company on such shares
of Common Stock can be deferred for any period determined by the non-employee
Director. To defer all or some of the shares of Common Stock, the election must
be made more than six months prior to the date of the annual grant. Directors
will have the right to vote the shares and will be taxed as ordinary income on
the value of the annual grant on the date of the grant. Dividends will also be
taxable upon receipt. The Company will have an accounting charge corresponding
to the value of the annual grant.
The following table sets forth the number of deferred stock units and
shares of Common Stock that were received by the non-employee Directors pursuant
to the Equity Plan during fiscal 1997:
<TABLE>
<CAPTION>
DEFERRED COMMON
UNITS STOCK
NAME AND POSITION (#) (#)
----------------- -------- ------
<S> <C> <C>
Non-employee Directors..................................... 46,877 4,800
</TABLE>
Under the Stock Purchase Plan for Non-Employee Directors, non-employee
Directors of the Company are entitled to have all or a portion of their retainer
used to purchase Common Stock at a price not less than eighty-five percent (85%)
of the fair market value of the Common Stock on the date of purchase. Receipt of
the Common Stock may be deferred for any period of time chosen by the Director.
The Director must make the election to receive or defer receipt of stock, or
change any such election, no less than six (6) months prior to the date the
retainer would ordinarily have been received. As long as the stock is held or
deferred the Director will receive dividends, as and if declared, and will have
the right to vote the stock. Payment of deferred amounts may be altered by the
Committee in the case of financial hardship or change in control. Currently, all
non-employee Directors have elected to have all of their retainer used to
purchase Common Stock.
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation paid or to be paid to those persons who were, at
September 30, 1996, (i) the Chief Executive Officer or served in such capacity
during fiscal 1996, (ii) the other four most highly compensated Executive
Officers of the Company and (iii) individuals who would have been one of the
four most highly paid Executive Officers but for the fact that they were not
serving as an Executive Officer on September 30, 1996 (the "Named Executives")
for services rendered in all capacities to the Company for the 1996, 1995 and
1994 fiscal years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ---------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS AWARDS OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) SARS # ($) ($)(2)
--------------------------- ---- ------ ----- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. W. Bowman,(3).................. 1996 428,341 0 0 38,200 0 16,856
Chairman of the Board, President 1995 246,928 240,000 0 150,000 0 12,812
and Chief Executive Officer 1994 -- -- -- -- -- --
D. R. Lumley,(4).................. 1996 226,250 0 607,500 11,000 0 6,761
Senior Vice President, Sales and 1995 175,208 106,332 0 0 0 2,767
Marketing, MPPG 1994 36,070 0 0 3,600 0 0
G. L. Schueppert,(5).............. 1996 225,000 0 810,000 10,000 0 80,031
Executive Vice President and 1995 -- -- -- -- -- --
Chief Financial Officer 1994 -- -- -- -- -- --
D. J. Baddeley,................... 1996 199,170 0 303,750 7,500 52,096 15,374
Vice President, Secretary and 1995 190,000 100,415 0 0 39,366 15,269
General Counsel 1994 175,000 92,273 0 6,100 21,392 20,871
R. H. Medland,.................... 1996 193,083 0 303,750 6,000 45,056 13,939
Senior Vice President and Chief 1995 183,000 96,716 0 0 52,024 16,316
Administrative Officer 1994 170,000 89,637 0 4,600 24,284 10,474
</TABLE>
- -------------------------
(1) In fiscal 1996 the Named Executives, except Mr. Bowman, and certain other
employees of the Company received grants of Restricted Stock at prices of
$16.00-$20.25 per share based on the closing price of a share of Common
Stock on the date of grant. The number of shares granted was 255,000 having
an aggregate value on the date of grant of $5,037,500. Based on the value of
a share of Common Stock as of September 30, 1996, the aggregate value of all
outstanding restricted stock was $4,930,762. The restricted stock granted in
fiscal year 1996, like prior grants of restricted stock, will not vest for a
period of five years, except for one grant of 5,000 shares which will not
vest for a period of three years. During the restricted period, the
recipients will receive dividends in the form of additional shares of
restricted stock and shall not have the right to vote the stock, unlike
prior grants of restricted stock where the recipients receive dividends and
do have the right to vote the stock. If the recipient does not remain in the
employ of the Company for the entire five or three year period, other than
as a result of retirement, death, disability or a change-in-control, such
recipient's restricted stock shall be forfeited.
(2) For fiscal 1996 includes matching contributions to the OMC Employees Taxed
Deferred Savings Plan in the amount of $0, $1,497, $0, $1,500 and $1,455 and
the dollar value of insurance premiums paid by the Company of $16,856,
$3,764, $20,031, $11,386 and $10,054 for the benefit of Messrs. Bowman,
Lumley, Schueppert, Baddeley and Medland, respectively, restricted stock
dividends in the amount of $1,500, $2,490 and $2,430 for the benefit of
Messrs. Lumley, Baddeley and Medland, respectively, and a sign-on bonus in
the amount of $60,000 for the benefit of Mr. Schueppert.
(3) Mr. Bowman was hired by the Company on February 19, 1995 and therefore
information prior to that date does not exist.
(4) Mr. Lumley was hired by the Company on July 15, 1994 and therefore
information prior to that date does not exist. Mr. Lumley resigned his
employment with the Company on February 3, 1997.
9
<PAGE> 12
(5) Mr. Schueppert was hired by the Company on January 2, 1996 and therefore
information prior to that date does not exist.
OPTION EXERCISES IN THE 1996 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table shows information on the exercise in the 1996 fiscal
year of options to purchase Common Stock by the Named Executives, all current
Executive Officers as a group and all other employees as a group. Also shown are
the unexercised options to purchase Common Stock as of September 30, 1996 and
the value of in-the-money options as of such date.
<TABLE>
<CAPTION>
NUMBER OF OPTIONS UNEXERCISED OPTIONS
SHARES UNEXERCISED AT YEAR END AT YEAR END(1)
ACQUIRED OR VALUE ---------------------------- ----------------------------
EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. W. Bowman................ 0 0 37,500 150,700 0 0
D. R. Lumley(2)............. 0 0 1,800 12,800 0 0
G. L. Schueppert............ 0 0 0 10,000 0 0
D. J. Baddeley.............. 0 0 17,775 13,625 0 0
R. H. Medland............... 0 0 19,450 11,450 0 0
</TABLE>
- -------------------------
(1) Value of in-the-money options determined by multiplying the number of
exercisable or unexercisable options by $15.375, the closing price of the
Company's Common Stock on September 30, 1996, and subtracting the option
exercise price.
(2) Mr. Lumley resigned his employment with the Company on February 3, 1997.
LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL YEAR 1996
The following table describes the performance shares granted to the Named
Executives during the Company's 1996 fiscal year under the 1994 OMC Long-Term
Incentive Plan (the "LTIP"). The grants cover the three year award cycle October
1, 1995 through September 30, 1998. As a result of timing issues, grants for the
three year award cycle October 1, 1996 through September 30, 1999 were made in
fiscal year 1997 and are not disclosed herein. No distribution of performance
shares, whether in cash or stock, will be made until after the end of the three
year award cycle and the Compensation Committee has determined the extent to
which the Company has achieved the performance goals set at the beginning of
each award cycle. The initial value of each performance share granted under the
LTIP was $21.865. The initial value was the average of the closing price for a
share of Common Stock on the New York Stock Exchange for the month of September
1995. The performance goals set for these performance shares are (1) the average
of the absolute return on net assets for the three year award cycle, (2) return
on net assets improvement for the three year award cycle over the prior three
year award cycle and (3) total shareholder return on the Common Stock as
compared to the return on the S&P 400 measured over the three year award cycle.
For a complete description of these performance goals, see the Report of the
Compensation Committee under the heading "Long-Term Incentive
10
<PAGE> 13
Compensation" below. The performance shares will be paid in stock or cash at the
discretion of the Compensation Committee.
<TABLE>
<CAPTION>
ESTIMATED FUTURE
PAYOUTS(1) (POTENTIAL
NUMBER OF PERFORMANCE SHARES)
PERFORMANCE PERIOD ------------------------------
SHARES UNTIL THRESHOLD TARGET MAXIMUM
NAME GRANTED PAYOUT (#) (#) (#)
- ---- ----------- ----------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
G. L. Schueppert............................ 5,317 3 years 5.32 5,317 7,976
</TABLE>
- -------------------------
(1) The number of shares to be paid upon the completion of an award cycle will
depend entirely on the extent to which the Company achieves the performance
goals set at the beginning of the award cycle. The payout at the Threshold
level will be 0.1%, the payout at the Target level will be 100% and the
payout at the Maximum level will be 150% of the number of performance shares
originally granted. If the payment is in cash, as determined by the
Compensation Committee, the amount of the payout will be the number of
performance shares earned, as set forth above, times the average price of a
share of Common Stock on the date the Committee approves such payment.
OPTION GRANTS IN THE 1996 FISCAL YEAR
The following table provides information on the grants of options to
purchase Common Stock made to the Named Executives in fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE POTENTIAL REALIZABLE
UNDERLYING GRANTED TO PRICE VALUE($)(4)
GRANT OPTIONS/SARS ALL EMPLOYEES PER SHARE EXPIRATION ---------------------------
NAME DATE GRANTED(#)(1) IN 1996(2) ($)(3) DATE 0% 5% 10%
- ---- ----- ------------- ------------- --------- ---------- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H. W. Bowman......... 01/31/96 38,200 16.36 20.000 01/31/07 0 $542,699 $1,415,781
D. R. Lumley(5)...... 01/31/96 11,000 4.71 20.000 01/31/07 0 $156,275 $ 407,686
G. L. Schueppert..... 01/31/96 10,000 4.28 20.000 01/31/07 0 $142,068 $ 307,623
D. J. Baddeley....... 01/31/96 7,500 3.21 20.000 01/31/07 0 $106,551 $ 277,968
R. H. Medland........ 01/31/96 6,000 2.57 20.000 01/31/07 0 $ 85,241 $ 222,374
</TABLE>
- -------------------------
(1) All options vest over a four-year period; 25% of the option grant being
exercisable at the end of the first year after the grant date, and an
additional 25% each year thereafter.
(2) In the 1996 fiscal year 118 employees received stock options.
(3) The exercise price of $20.00 was the closing price of a share of Common
Stock on the New York Stock Exchange on January 31, 1996.
(4) The amounts set forth reflect the potential realizable value of the options
granted at assumed annual rates of stock price appreciation of 5% and 10%
through the expiration date of the options (eleven years) using the closing
price of a share of Common Stock on the grant date. The use of 5% and 10% is
pursuant to Securities and Exchange Commission requirements and is not
intended by the Company to forecast possible future appreciation.
(5) Mr. Lumley resigned his employment with the Company on February 3, 1997 and
as such, all options granted above were forfeited.
RETIREMENT PLANS
The Outboard Marine Corporation Employees Retirement Plan (the "Employees
Retirement Plan") provides a fixed benefit determined on the basis of years of
service and final average base earnings. In addition to the benefits from the
Employees Retirement Plan, certain participants in the Company's annual
incentive compensation plan(s) are eligible for retirement benefits from a
supplemental non-qualified retirement plan. The retirement benefits under the
non-qualified plan are based upon amounts paid under the annual bonus
11
<PAGE> 14
plan as well as salary, and the total retirement benefits payable under the
plans may exceed the maximum benefits payable under the Employee Retirement
Income Security Act of 1974, as amended. Upon a change in control of the Company
and certain other actions by an acquiror, all participants of the Employees
Retirement Plan would become vested in any excess of plan assets over total
accumulated benefit obligations.
Participants in the plans who are not Executive Officers receive an
aggregate benefit equal to 1.2% of total pay and .5% above social security
covered compensation for each year of credited service times the average of the
five highest consecutive annual earnings (base annual salary rate plus incentive
compensation earned in the same year under an annual incentive compensation
plan) during such participant's last ten years of employment. An Executive
Officer who participates in the plans will receive the 1.2% of total pay and .5%
above social security covered compensation for each year of credited service as
a non-Executive Officer and 2.55% for each year of credited service as an
Executive Officer times the average of the three highest annual earnings during
such participant's last ten years of employment. The total annual benefit
payable from these two plans is shown in the table below for selected average
base earnings levels and years of service based upon certain assumptions
including all years of credited service as an Executive Officer, retirement at
age 65 and election of a single life annuity for the benefit payment.
The approximate annual benefits shown in the table below are for the Named
Executive participants and are not subject to social security offset but are
subject to offset for any benefits payable from retirement programs of the
Company's foreign subsidiaries.
ANNUAL BENEFIT FOR NAMED EXECUTIVE PARTICIPANTS
FOR SELECTED YEARS OF SERVICE
<TABLE>
<CAPTION>
AVERAGE ANNUAL 5 10 15 20 OR MORE
BASE EARNINGS YEARS YEARS YEARS YEARS
-------------- ----- ----- ----- ----------
<S> <C> <C> <C> <C>
$ 150,000.............. $ 19,125 $ 38,250 $ 57,375 $ 76,500
250,000............. 31,875 63,750 95,625 127,500
300,000............. 38,250 76,500 114,750 153,000
500,000............. 63,750 127,500 191,250 255,000
900,000............. 114,750 229,500 344,250 459,000
1,300,000............. 165,750 331,500 497,250 663,000
</TABLE>
As of December 31, 1996, Messrs. Bowman, Lumley, Schueppert, Baddeley and
Medland had 1.9, 2.5, 1.0, 7.0 and 5.5, respectively, credited years of service
under the Company's retirement plans of which 1.9, 2.5, 1.0, 7.0 and 5.5,
respectively, credited years of service will be as an Executive Officer of the
Company. The total estimated annual benefit payable from these two plans for
Messrs. Bowman, Lumley, Schueppert, Baddeley and Medland based upon certain
assumptions including actual years of credited service as a non-Executive
Officer and Executive Officer, as the case may be, current age and base earning
levels, and election of a single life annuity for the benefit payment is
$26,881, $15,647, $7,650, $50,322 and $40,367 respectively, which payments are
not subject to social security offset but are subject to offset for any benefits
payable from retirement programs of the Company's foreign subsidiaries.
EMPLOYMENT CONTRACTS AND SEVERANCE AGREEMENTS
As of February 19, 1995, the Company and Mr. Bowman entered into an
agreement which (1) guarantees salary payments for three years from February 19,
1995, starting at $400,000 for the first year with warranted merit increases for
the second and third years, unless termination occurs by reason of his death,
disability or termination for cause prior thereto, (2) guaranteed a bonus for
the 1995 fiscal year of at least $240,000 (which represented the target annual
bonus to which he would have been entitled had he been employed by the Company
for the entire fiscal year), (3) authorized the granting of stock options and
12
<PAGE> 15
performance shares and (4) guarantees a special supplemental retirement benefit
if termination of employment with the Company occurs after age 55, as follows:
<TABLE>
<CAPTION>
RETIREMENT BENEFITS
AS % OF
AGE AT FINAL AVERAGE
TERMINATION COMPENSATION
----------- -------------------
<S> <C>
55.......................................................... 54
56.......................................................... 56
57.......................................................... 58
58 and over................................................. 60
</TABLE>
which benefits will be reduced by (a) 1/4% for each month termination occurs
between the ages of 60 and 65, (b) 1/2% for each month termination occurs
between the ages of 55 and 60 and (c) retirement benefits received from his
previous employer.
The Company has entered into an Amended and Restated Severance Agreement
dated as of March 31, 1997, with Mr. Bowman, (the "Bowman Severance Agreement").
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 cease for any reason to constitute at least a
majority of the Board 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 Board shall be deemed to be an incumbent member
of the Board; (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) a majority of the members of the board of
directors of the entity resulting from such Business Combination were incumbent
members of the Board at the time of the execution of the initial agreement or of
the action of the Board providing for such Business Combination; or (iv)
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
13
<PAGE> 16
(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 Severance
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
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 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 fourteen of its appointed
corporate officers and key employees ("Key Employees"). 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
14
<PAGE> 17
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 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"). The following summary of these agreements (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 Board at the
15
<PAGE> 18
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 Board 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 Board; (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 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.
REPORT OF THE COMPENSATION COMMITTEE
GOALS OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") is made up of four
non-employee Directors and it met four times in the 1996 fiscal year. Its
charter is to:
1. Review and approve a competitive, fair and equitable compensation and
benefits policy designed to retain personnel, to stimulate their useful
and profitable efforts on behalf of the Company and to attract necessary
additions to the staff with appropriate qualifications;
2. Review, approve and administer the Company's executive compensation
plans and determine the salaries and incentive compensation of the
Executive Officers of the Company and its foreign and domestic
subsidiaries; and
3. Review annually the performance of the Company's Chief Executive Officer
vis-a-vis the Company's performance and, based upon such review,
recommend to the Board appropriate compensation adjustments and bonus
awards, if any.
To carry out this charter, the Compensation Committee's current objective
is to rely more heavily on incentive compensation to support the Company's
strategies and provide personnel with ownership opportunities for their
successful execution, thereby aligning personnel with the Shareholders.
Section 162(m) of the Code denies a tax deduction to any publicly held
corporation, such as the Company, for compensation in excess of $1 million paid
to any Named Executive. Certain performance-based compensation, however, is
specifically exempt from the deduction limit. The determination of whether
compensation is performance-based depends on several factors including: whether
the compensation is payable solely on account of the attainment of one or more
nondiscretionary objective performance goals established by an independent
compensation committee of the board of directors; whether there has been
disclosure to and approval by the shareholders of performance standards to be
used in determining awards under the plan; whether the company's compensation
committee is composed solely of "outside" directors; and whether prior to the
payment of such compensation, the compensation committee has certified that
applicable performance standards have been satisfied. The Committee will, in
order to satisfy Section 162(m) of the Code, certify the attainment of those
standards.
The Committee's compensation philosophy is based on several criteria,
including, but not limited to, the financial and operational goals recommended
by the Company's senior management and approved by the Board for the Company, as
a whole, as well as for significant business units; performance by the personnel
in achieving these goals; the need to attract, retain and motivate personnel to
execute and exceed the Company's plans and programs; the need to reward
sustained corporate, functional, and/or individual performance with an
appropriate base salary and incentive opportunity; the need to increase
management ownership in the Company to more closely align management with the
shareholders; the need to link personnel rewards with
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shareholder value and profitability; and the need to communicate the Company's
goals through performance measures linked to pay that focus personnel on
achievement of business objectives.
In addition to reports and recommendations from senior management, the
Committee has relied on the services of various nationally known executive
compensation consulting firms for information regarding appropriate compensation
levels and programs, including Hewitt Associates and KPMG Peat Marwick.
For the Company's 1996 fiscal year, the primary criteria used in evaluating
Company performance were (1) return on net assets, both in absolute terms and as
compared to prior years, (2) the total shareholder return of the Common Stock
compared to the total return of the S&P 400 Index and (3) business unit
profitability for evaluating business unit performance. The Company's
performance for the fiscal year just ended failed to achieve the goals set at
the beginning of the year.
There are three components of executive compensation reviewed by the
Committee: base salary, annual incentive compensation and long-term incentive
compensation. The combination of these programs produces total direct
compensation.
BASE SALARY
It is the Committee's practice to target base annual salary at the 50th
percentile of executives with comparable levels of responsibility and individual
performance at other manufacturing companies, including competitors. Individual
performance is evaluated each year by the Committee and recommendations for
salary adjustments for all Executive Officers are made by the Committee to the
Board each November. The Committee has the authority, without Board approval, to
set the salary ranges and adjustments for all other employees. For fiscal year
1996 merit salary increases for all exempt employees, including the Named
Executives, averaged approximately 4.5%. For fiscal year 1997 merit salary
increases for all exempt employees averaged 2%, except for the Named Executives
who received no merit increase.
ANNUAL INCENTIVE COMPENSATION
The Executive Bonus Plan is designed to add incentive for participants to
execute and exceed the Company's plans and their personal goals and receive
annual rewards for that execution. Under the Executive Bonus Plan the reward is
based on corporate, business unit, where applicable, and individual goals. The
corporate goal is based on return on net assets ("RONA") for the fiscal year.
Business unit goals, where applicable, are developed in accordance with Company
guidelines and are the same for all participants in the unit. Individual goals
are developed jointly by the participant and their supervisor. The target amount
of annual incentive compensation is determined by the participant's salary
grade. The Named Executives' target bonus amounts range from 35% to 60% of
annual base salary. The Chief Executive Officer's target bonus amount equals 60%
of salary and is based entirely on corporate goals. The target award, when added
to annual base salary, is intended to result in total annual compensation at
approximately the 50th percentile of competitive annual compensation, as
discussed under the heading "Base Salary" above. Each executive can earn up to
200% of that target amount depending on the extent to which the Company, and the
business unit where applicable, achieves its annual performance targets and the
individual performs vis-a-vis their pre-determined individual annual goals.
There will be no corporate bonus paid for fiscal 1997 unless RONA exceeds 1.4%
and earnings before tax ("EBT") exceeds $15 million and a maximum award if RONA
equals or exceeds 3.8% and EBT equals or exceeds $41 million.
For fiscal 1994 the corporate component of incentive compensation was
earned at 150.6% of target as a result of an absolute return on net assets
("ARONA") of 10.8% and a return on investment improvement ("ROII") of over
10.8%. For fiscal 1995 the corporate component of incentive compensation was
earned at 151% of target as a result of an ARONA of 10.8% and a return on net
asset improvement ("RONAI") of over 10.8%. For fiscal 1996 the corporate
component of incentive compensation was earned at 0% of target as a
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result of a RONA of less than 8%. No bonuses were paid to the Named Executives
and Executive Officers for fiscal 1996.
LONG-TERM INCENTIVE COMPENSATION
The LTIP provides for the grant of stock options, restricted stock,
performance units and performance shares. The purpose of the LTIP is to create
an opportunity for participants to share in the enhancement of shareholder value
through equity based awards. The overall goal is to create a link between the
Company's management and its shareholders through stock ownership and incentive
compensation based on the achievement of specific financial measures.
Each Executive Officer has a target amount of performance shares, ranging
between 20% and 70% of annual base salary, with a maximum amount that can be
earned equal to 150% of the target amount depending on the extent to which
performance targets are achieved over a three year award cycle. The Chief
Executive Officer's target award equals 70% of salary. In addition, stock
options are granted to Executive Officers in amounts ranging between 40% and
140% of salary, depending solely on such Executive Officer's salary grade. The
Chief Executive Officer's option grant equals 140% of salary. The stock option
and performance share grants, when added to base annual salary (when the
performance share grant is paid at the target level), are intended to result in
total long-term incentive compensation at approximately the 50th percentile of
executives with comparable levels of responsibility and individual performance
at other manufacturing companies, including competitors.
It is intended that payment for the achievement of the performance goals
set with respect to performance shares be paid in shares of Common Stock or
cash, at the discretion of the Compensation Committee. The performance goals for
the outstanding award cycles are: (1) three year average of ARONA, (2) three
year average of RONAI and (3) the monthly average of total shareholder return on
the Common Stock versus the total return of the S&P 400 Index for the three year
award cycle ("TSR"). Under the LTIP, 50% of the award will be based upon the TSR
goal, 25% on the ARONA goal and 25% on the RONAI goals. The ARONA thresholds for
payment and the maximum award are the same as those for Annual Incentive
Compensation above, determined, however, on a cumulative basis for the three
year award cycle. The RONAI is also based on a cumulative three year award cycle
but has a threshold for payment greater than 0 points, and a maximum award for 8
points or greater. Under the TSR goals, there will be no award until the total
shareholder return of the Common Stock is greater than 80% of the S&P 400
Index's total return and there will be a maximum award if the Company's TSR
exceeds 120% of the S&P 400's total return.
EXECUTIVE OFFICER BENEFITS
In addition to base salary and annual and long-term incentive compensation,
the Company also provides Executive Officers with a broad range of benefits
available to all employees as well as specific, supplemental benefits, designed
to be comparable to those offered to executives with similar levels of
responsibility and individual performance. These supplemental benefits include a
Company-leased automobile, financial and estate planning, tax preparation and
advice and supplemental life insurance coverage.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The salary, annual and long-term incentive compensation and executive
benefits for the Chief Executive Officer ("CEO") are determined by the Committee
substantially in conformance with the policies described above for all other
Executive Officers of the Company. In addition, the Committee evaluates the
CEO's contribution to the Company's achievement of its long-term financial and
non-financial objectives on an on-going basis. The Committee also evaluates the
CEO's performance at least annually based upon a variety of factors including
the extent to which strategic and business plan goals are met and targets for
earnings per share, return on net assets, growth in sales and earnings, market
share and total return to shareholders are achieved.
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Mr. Bowman was elected Chairman of the Board, President and Chief Executive
Officer of the Company on February 19, 1995. For more detail on Mr. Bowman's
compensation see "Executive Compensation" and "Employment Contracts and
Severance Agreements" above. For the 1997 fiscal year, Mr. Bowman received no
merit salary increase.
Submitted by the Compensation Committee of the Board:
Richard J. Stegemeier, Chairman
J. Willard Marriott, Jr.
Donald L. Runkle
Richard F. Teerlink
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PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock with the cumulative returns of the Standard & Poor's 500 Stock Index and
Standard & Poor's Leisure Time Index weighted by the year-end market value of
each company for the Company's last five fiscal years. "Cumulative total return"
is defined as stock price appreciation plus dividends paid, assuming
reinvestment of all such dividends.
[LINE GRAPH]
9/91 9/92 9/93 9/94 9/95 9/96
OUTBOARD MARINE CORPORATION $100 $ 95 $115 $144 $139 $101
S&P 500 $100 $111 $125 $130 $169 $203
S&P LEISURE TIME (PRODUCTS) $100 $163 $188 $188 $236 $279
$100 INVESTED ON 9/30/91 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
The Company is using the same published industry indexes it has in previous
years. Standard & Poor's Corporation, without any direction or input from the
Company, modified the list of issuers which comprise the Leisure Time Index. The
Company has provided the necessary comparisons for the required time period
using the published industry index as modified.
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<PAGE> 23
SCHEDULE I
The following presents certain information concerning the directors and
executive officers of DDC and the Offeror who are the Designees of DDC and the
Offeror to the Board. The information contained herein concerning the Designees
has been furnished by DDC and Offeror. The Company assumes no responsibility for
the accuracy or completeness of such information.
<TABLE>
<CAPTION>
NAME CURRENT POSITIONS WITH DDC AND THE OFFEROR
---- ------------------------------------------
<S> <C>
Roger S. Penske........................ Chief Executive Officer and Chairman of the Board of
Directors of DDC and the Offeror
Timothy D. Leuliette................... Vice Chairman and Director of DDC and the Offeror
Ludvik F. Koci......................... President and Director of DDC and the Offeror
Robert R. Allran....................... Senior Vice President -- Operations of DDC
J. Randall Lawrence.................... Senior Vice President -- Finance of DDC, Senior Vice
President of the Offeror
David F. Merrion....................... Senior Vice President -- Engineering of DDC
</TABLE>
Roger S. Penske is 60 years old. He has been Chairman and a director of DDC
since its organization in 1987. Mr. Penske is also Chairman of the Board and
Chief Executive Officer of Penske Corporation. Penske Corporation is a
privately-owned diversified transportation services company which (among other
things) holds, through its subsidiaries, interests in a number of businesses,
including Penske Truck Leasing Co., L.P., Penske Motorsports, Inc., and Diesel
Technology Company. Mr. Penske is also a member of the Boards of Directors of
Philip Morris Companies Inc., General Electric Company, Penske Motorsports, Inc.
and Gulfstream Aerospace Corporation.
Timothy D. Leuliette is 47 years old. He has been a director and Vice
Chairman of DDC since 1996. Before that, Mr. Leuliette had been President and
Chief Executive Officer of ITT Automotive, Inc., and Senior Vice President of
ITT Industries, Inc., since 1991, and was President and Chief Executive Officer
of Siemens Automotive, L.P. from 1988 to 1991. Mr. Leuliette is also a director
and the President and Chief Operating Officer of Penske Corporation. Mr.
Leuliette is a director of Libbey-Owens-Ford and the Detroit Branch of The
Federal Reserve Bank of Chicago. His other affiliations have been with the
Leukemia Society of America, Children's Center, Vision 2000, Arthritis
Foundation and Junior Achievement.
Ludvik F. Koci is 61 years old. He has been a director of DDC since its
organization in 1987. Mr. Koci has been President and Chief Operating Officer
since December 1989. Before that, Mr. Koci had been Executive Vice President of
DDC since its organization in 1987. Prior to DDC's commencement of operations in
January 1988, Mr. Koci had been employed by General Motors since 1954. Mr. Koci
is also a Director of Wabash National Corporation.
Robert R. Allran is 54 years old and has been Senior Vice President --
Operations of DDC since DDC's organization in 1987.
J. Randall Lawrence is 47 years old and was appointed Senior Vice President
- -- Finance of DDC in January 1995. Prior to this appointment, Mr. Lawrence was
Chief Financial Officer of Penske Automotive Group, Inc. since 1986.
David F. Merrion is 60 years old and has been Senior Vice President --
Engineering of DDC since DDC's organization in 1987.
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