<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 49,100
<SECURITIES> 0
<RECEIVABLES> 186,300
<ALLOWANCES> 7,000
<INVENTORY> 193,800
<CURRENT-ASSETS> 462,900
<PP&E> 210,200
<DEPRECIATION> 11,200
<TOTAL-ASSETS> 1,152,200
<CURRENT-LIABILITIES> 504,600
<BONDS> 92,900
<COMMON> 200
0
0
<OTHER-SE> 256,900
<TOTAL-LIABILITY-AND-EQUITY> 1,152,200
<SALES> 264,300
<TOTAL-REVENUES> 264,300
<CGS> 204,200
<TOTAL-COSTS> 204,200
<OTHER-EXPENSES> 55,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,700
<INCOME-PRETAX> (2,300)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> (3,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,300)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998.
or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-2883
OUTBOARD MARINE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1589715
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 Sea Horse Drive
Waukegan, Illinois 60085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-689-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
------- -------
Number of shares of Common Stock of $0.01 par value outstanding at April 30,
1998 was 20,420,000 shares.
Exhibit Index Page 22.
-1-
<PAGE> 2
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART I, ITEM 1
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
March 31, 1998
Financial statements required by this form:
Page
----
Condensed Statements of Consolidated Earnings 3
Condensed Statements of Consolidated Financial Position 4
Condensed Statements of Consolidated Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
-2-
<PAGE> 3
OUTBOARD MARINE CORPORATION
Condensed Statements of Consolidated Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
----------------------------- -----------------------------
Post-Merger | Pre-Merger Post-Merger | Pre-Merger
Company | Company Company | Company
------- | ------- ------- | -------
(Dollars in millions except amounts per share) 1998 | 1997 1998 | 1997
------- | ------- ------- | -------
<S> <C> <C> <C> <C>
Net Sales $ 264.3 | $ 237.0 $ 475.5 | $ 434.1
| |
Cost of Goods Sold 204.2 | 200.5 377.9 | 374.9
------- | ------- ------- | -------
| |
Gross earnings 60.1 | 36.5 97.6 | 59.2
| |
Selling, General and Administrative Expense 58.2 | 49.5 102.5 | 91.9
------- | ------- ------- | -------
| |
Earnings (Loss) from operations 1.9 | (13.0) (4.9) | (32.7)
| |
Non-Operating Expense (Income): | |
Interest expense 6.7 | 4.0 14.4 | 8.4
Other, net (2.5) | (10.7) (4.9) | (21.3)
------- | ------- ------- | -------
| |
4.2 | (6.7) 9.5 | (12.9)
------- | -------- ------- | --------
| |
Earnings (Loss) before provision for income | |
taxes (2.3) | (6.3) (14.4) | (19.8)
| |
Provision for Income Taxes 1.0 | 1.0 1.8 | 1.8
------- | ------- ------- | -------
| |
Net earnings (loss) $ (3.3) | $ (7.3) $ (16.2) | $ (21.6)
======= | ======= ======= | =======
| |
Net Earnings (Loss) Per Share of Common Stock | |
| |
Basic $ (0.16) | $ (0.36) $ (0.79) | $ (1.07)
======= | ======= ======= | =======
| |
Diluted $ (0.16) | $ (0.36) $ (0.79) | $ (1.07)
======= | ======= ======= | =======
| |
Average Shares of Common Stock Outstanding 20.4 | 20.2 20.4 | 20.2
The accompanying notes are an integral part of these statements.
</TABLE>
-3-
<PAGE> 4
Outboard Marine Corporation
Condensed Statements of Consolidated Financial Position
<TABLE>
<CAPTION>
(Unaudited)
-----------
Post-Merger Post-Merger
Company Company
------- -------
March 31, September 30,
(Dollars in millions) 1998 1997
--------- ---------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 49.1 $ 54.4
Receivables 179.3 153.2
Inventories
Finished Products 79.4 62.1
Raw Material, Work in Process
and Service Parts 114.4 114.8
--------- ---------
Total Inventories 193.8 176.9
Other current assets 40.7 86.5
--------- ---------
Total Current Assets 462.9 471.0
Product Tooling, net 33.1 34.2
Goodwill 247.1 250.2
Trademarks, Patents and Other Intangibles 82.3 83.9
Other Assets 127.8 129.5
Plant and Equipment at cost 210.2 210.2
Less Accumulated Depreciation (11.2) --
--------- ---------
199.0 210.2
--------- ---------
Total Assets $ 1,152.2 $ 1,179.0
========= =========
-4-
<PAGE> 5
Liabilities and Shareholders' Investment
Current Liabilities:
Loan payable $ 220.7 $ 96.0
Accounts payable 66.6 142.0
Accrued and other 200.2 182.0
Accrued income taxes 5.9 6.6
Current maturities and sinking fund
requirements of long-term debt 11.2 72.9
--------- ---------
Total Current Liabilities 504.6 499.5
Long-Term Debt 92.9 103.8
Postretirement Benefits Other than Pensions 95.4 96.0
Other Non-Current Liabilities 202.2 202.7
Shareholders' Investment:
Common stock and capital surplus 277.1 277.0
Accumulated earnings employed in the business (16.2) --
Cumulative translation adjustments (3.8) --
--------- ---------
Total shareholders' investment 257.1 277.0
--------- ---------
Total Liabilities and Shareholders'
Investment $ 1,152.2 $ 1,179.0
========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
-5-
<PAGE> 6
Outboard Marine Corporation
Condensed Statements of Consolidated Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31
-----------------------------------
Post-Merger | Pre-Merger
Company | Company
---------------------------------
(Dollars in millions) 1998 | 1997
-------- | --------
<S> <C> <C>
Cash Flows from Operating Activities: |
|
Net earnings (loss) $ (16.2) | $ (21.6)
Adjustments to reconcile net earnings (loss) to net |
cash provided by operations: |
Depreciation and amortization 27.4 | 27.0
Changes in current accounts excluding the effects |
of acquisitions and noncash transactions: |
Decrease (increase) in receivables (27.6) | 3.9
Increase in inventories (17.8) | (9.3)
Decrease in other current assets 45.7 | 0.8
Decrease in accounts payable and accrued |
liabilities (57.1) | (3.8)
Other, net (3.9) | (5.9)
------- | -------
Net cash provided by (used for) operating |
activities (49.5) | (8.9)
|
Cash Flows from Investing Activities: |
|
Expenditures for plant and equipment, and tooling (11.9) | (22.7)
Proceeds from sale of plant and equipment 6.3 | 12.3
Other, net 0.5 | (0.3)
------- | -------
Net cash used for investing activities (5.1) | (10.7)
|
Cash Flows from Financing Activities: |
|
Net increase in short-term debt 124.7 | --
Payments of long-term debt, including current maturities (75.1) | --
Cash dividends paid -- | (6.0)
Other, net 0.1 | 0.1
------- | -------
Net cash used for financing activities 49.7 | (5.9)
|
Exchange Rate Effect on Cash (0.4) | (0.5)
------- | -------
Net decrease in Cash and Cash Equivalent (5.3) | (26.0)
Cash and Cash Equivalents at Beginning of Period 54.4 | 95.5
------- | -------
Cash and Cash Equivalents at End of Period $ 49.1 | $ 69.5
======= | =======
|
Supplemental Cash Flow Disclosures: |
Interest paid $ 12.8 | $ 8.0
Income taxes paid $ 2.4 | $ 3.3
======= | =======
The accompanying notes are an integral part of these statements
</TABLE>
-6-
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MERGER WITH GREENMARINE ACQUISITION CORP.
On September 12, 1997, Greenmarine Acquisition Corp. ("Greenmarine") acquired
control of Outboard Marine Corporation (the "Pre-Merger Company") when
shareholders tendered approximately 90 percent of the outstanding shares of
the Pre-Merger Company's common stock to Greenmarine for $18 per share in
cash. Greenmarine was formed solely to purchase the shares of the Pre-Merger
Company and merged with and into the Pre-Merger Company in a non-taxable
transaction on September 30, 1997. Outboard Marine Corporation was the
surviving entity of the merger with Greenmarine (the "Post-Merger Company")
(in either case, unless specifically referenced, Pre-Merger Company or
Post-Merger Company are also defined as "OMC" or the "Company"). All of the
outstanding Pre-Merger Company common stock was cancelled on September 30,
1997 and 20.4 million shares of new common stock were issued to Greenmarine
Holdings LLC (the "Parent") the parent company of Greenmarine. Greenmarine's
total purchase price of common stock and related acquisition costs amounted to
$373.0 million.
The Post-Merger Company Condensed Statement of Consolidated Financial Position
as of March 31, 1998 and the related Post-Merger Company Statement of
Consolidated Earnings for the three and six months ended March 31, 1998 and
Consolidated Cash Flow for the six months ended March 31, 1998 are not
comparable to the prior year because of purchase accounting adjustments. The
acquisition and the merger were accounted for using the purchase method of
accounting. Accordingly, the purchase price at September 30, 1997 has been
allocated to assets acquired and liabilities assumed based on fair market
values at the date of acquisition. The fair values of tangible assets
acquired and liabilities assumed were $844.9 million and $902.0 million,
respectively. In addition, $83.9 million of the purchase price was allocated
to intangible assets for trademarks, patents and dealer network. Purchase
accounting included liabilities of $136.9 million for implementation and
execution of business reorganizations. The financial statements reflect the
preliminary allocation of purchase price as the purchase price allocation has
not been finalized. The excess purchase price over fair value of the net
assets acquired was $250.2 million and has been classified as goodwill in the
Statement of Consolidated Financial Position at September 30, 1997. The
goodwill related to the acquisition will be amortized using the straight-line
method over a period of 40 years.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements present
information in accordance with generally accepted accounting principles for
interim financial information and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all information or footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the information furnished reflects all adjustments necessary for a
fair statement of the results of the interim periods and all such adjustments
are of a normal recurring nature. These financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K/A for the year ended September 30, 1997.
The 1998 interim results are not necessarily indicative of the results which
may be expected for the remainder of the year.
-7-
<PAGE> 8
3. SHORT-TERM BORROWINGS
The Company became obligated under a credit agreement, as amended, which
provides for loans of up to $150 million (the "Acquisition Debt"). Amounts
outstanding under this credit agreement are secured by 20.4 million shares of
common stock of the Post-Merger Company and bear interest at 10%. The
Acquisition Debt matures on June 16, 1998. On November 12, 1997, the Company
borrowed the remaining $54.0 million principal amount of Acquisition Debt in
connection with the purchase of all properly tendered 7% convertible
subordinated debentures of Outboard Marine Corporation due 2002. At March 31,
1998, the full $150 million principal amount of the Acquisition Debt was
outstanding.
The full amount of the Acquisition Debt matures on June 16, 1998. The Company
and its Parent believe the Company will be able to raise funds to refinance
such debt through the sale of debt or equity in the public or private markets
by the maturity date of the Acquisition Debt.
Effective January 6, 1998, the Company entered into a $150 million Amended and
Restated Loan and Security Agreement which expires December 31, 2000 and at
March 31, 1998, $70.7 million was outstanding. Any loans outstanding under
this agreement will be secured by the Company's inventory, receivables,
intellectual property and other current assets and are guaranteed by certain
of the Company's operating subsidiaries.
Under the various credit agreements, the Company is required to meet certain
financial covenants throughout the year. The Company is in compliance with
terms and conditions of these agreements.
4. CONTINGENT LIABILITIES
As a normal business practice, the Company has made arrangements with
financial institutions by which qualified retail dealers may obtain inventory
financing. Under these arrangements, the Company will repurchase its products
in the event of repossession upon a retail dealer's default. These
arrangements contain provisions which limit the Company's repurchase
obligation to $40 million per model year for a period not to exceed 30 months
from the date of invoice. The Company resells any repurchased products.
Losses incurred under this program have not been material. The company
accrues for losses which are anticipated in connection with expected
repurchases.
The Company is engaged in a substantial number of legal proceedings arising in
the ordinary course of business. While the result of these proceedings, as
well as those discussed below, cannot be predicted with any certainty, based
upon the information presently available, management is of the opinion that
the final outcome of all such proceedings should not have a material effect
upon the Company's Consolidated Financial Position or the Consolidated
Earnings of the Company.
Under the requirements of Superfund and certain other laws, the Company is
potentially liable for the cost of clean-up at various contaminated sites
identified by the United States Environmental Protection Agency and other
agencies. The Company has been notified that it is named a potentially
responsible party ("PRP") at various sites for study and clean-up costs. In
some cases there are several named PRPs and in others there are hundreds. The
Company generally participates in the investigation or clean-up of these sites
through cost sharing agreements with terms which vary from site to site.
Costs are typically allocated based upon the volume and nature of the
materials sent to the site. However, under Superfund, and certain other laws,
-8-
<PAGE> 9
as a PRP the Company can be held jointly and severally liable for all
environmental costs associated with a site.
Once the Company becomes aware of its potential liability at a particular
site, it uses its experience to determine if it is probable that a liability
has been incurred and whether or not the amount of the loss can be reasonably
estimated. Once the Company has sufficient information necessary to support a
reasonable estimate or range of loss for a particular site, an amount is added
to the company's aggregate environmental contingent liability accrual. The
amount added to the accrual for the particular site is determined by analyzing
the site as a whole and reviewing the probable outcome for the remediation of
the site. This is not necessarily the minimum or maximum liability at the
site but, based upon the Company's experience, most accurately reflects the
Company's liability based on the information currently available. The Company
takes into account the number of other participants involved in the site,
their experience in the remediation of sites and the Company's knowledge of
their ability to pay. As a general rule, the Company accrues remediation
costs for continuing operations on an undiscounted basis and accrues for
normal operating and maintenance costs for site monitoring and compliance
requirements. The Company also accrues for environmental close-down costs
associated with discontinued operations or facilities, including the
environmental costs of operation and maintenance until disposition. At March
31, 1998, the Company has accrued approximately $23 million for costs related
to remediation at contaminated sites including operation and maintenance for
continuing and closed-down operations. The possible recovery of insurance
proceeds has not been considered in estimating contingent environmental
liabilities.
In the six months ended March 31, 1997, the Company recovered insurance
proceeds of $6.1 million for prior environmental charges which is included in
non-operating expense (income) in the Statement of Consolidated Earnings.
Each site, whether or not remediation studies have commenced, is reviewed on a
quarterly basis and the aggregate environmental contingent liability accrual
is adjusted accordingly. Because the sites are reviewed and the accrual
adjusted quarterly, the Company is confident the accrual accurately reflects
the Company's liability based upon the information available at the time.
5. PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (UNAUDITED)
The following unaudited pro forma Condensed Statement of Consolidated Earnings
(the "Pro Forma Statement") was prepared to illustrate the estimated effects
of the merger with Greenmarine Acquisition Corp. as if the transaction had
occurred for statement of consolidated earnings purposes as of the beginning
of fiscal 1997.
The pro forma adjustments are based upon available information and upon
certain assumptions that the Company believes are reasonable. The Pro Forma
Statement does not purport to represent what the Company's results of
operations would actually have been if such transactions in fact had occurred
at the beginning of the period indicated or to project the Company's results
of operation for any future period.
The Pro Forma Statement includes adjustments, with respect to the merger, to
reflect additional interest expense, depreciation expense and amortization of
goodwill.
-9-
<PAGE> 10
Six Months Ended
March 31, 1997
(Dollars in millions, except per share data)
(Unaudited)
Net sales $ 434.1
Cost of goods sold 374.2
------
Gross earnings 59.9
Selling, general and administrative expense 95.6
------
Earnings (Loss) from operations (35.7)
Interest expense 14.5
Other (income) expense, net (21.3)
------
Loss before provision for income taxes (28.9)
Provision for income taxes 1.8
------
Net loss $ (30.7)
======
Net loss per share of common stock
(basic and diluted) $ (1.50)
======
Shares outstanding 20.4
======
6. STOCK OPTION PLAN
On March 10, 1998, the Company adopted the Outboard Marine Corporation
Personal Rewards and Opportunities Program ("PROP"). PROP was designed to
recognize and reward, through cash bonuses, stock options and other
equity-based awards, the personal contributions and achievements of key
employees of the Company. All employees are eligible to participate in PROP.
PROP replaced all long and short-term incentive plans of the Company. PROP
provides for (i) cash and/or equity annual bonuses based on performance
targets, and (ii) grants of stock options, shares of restricted stock, phantom
shares of stock or stock appreciation rights. The aggregate number of shares
of stock available for equity awards under PROP is 1,500,000 shares of
currently authorized common stock of the Company. Grants under PROP are
discretionary.
Stock option grants under PROP through March 31, 1998 were 587,245, of which,
96,133 were vested upon grant. The remaining grants vest as follows: 94,445
in fiscal 1998, 176,667 in fiscal 1999, 121,115 in fiscal 2000, and 98,885
thereafter. The grants are exercisable at $18 per share and expire ten years
after date of grant. The Company accounts for PROP under APB Opinion No. 25,
and has not recorded any compensation expense for grants through March 31,
1998 as the exercise price of the stock option approximates fair market value
of the Company's stock on the date of grant.
-10-
<PAGE> 11
7. RECENTLY ADOPTED ACCOUNTING STANDARDS
In fiscal 1999, the Company will implement three accounting standards issued
by the Financial Accounting Standards Board, SFAS 130, "Reporting
Comprehensive Income," SFAS 131, "Disclosures About Segments of an Enterprise
and Related Information," and SFAS 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits." The Company believes that these changes
will have no effect on its financial position or results of operations as they
require only changes in or additions to current disclosures.
In October 1996, the American Institute of Certified Public Accountants issued
Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation
Liabilities", which provides authoritative guidance on the recognition,
measurement, display and disclosure of environmental remediation liabilities.
The Company adopted SOP 96-1 in the quarter ended September 30, 1997. The
change in accounting estimate required the Company to accrue for future normal
operating and maintenance costs for site monitoring and compliance
requirements at particular sites. The initial expense for implementation of
SOP 96-1 was $7.0 million, charged to selling, general and administrative
expense in the quarter ended September 30, 1997.
-11-
<PAGE> 12
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART I, ITEM 2
FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1998
GENERAL
Industry Overview. In general, the recreational marine industry is highly
cyclical. Industry sales are impacted by the general state of the economy,
interest rates, consumer spending, technology, dealer effectiveness,
demographics, fuel availability and government regulations. In addition, the
Company's business is impacted by weather patterns. For example, excessive
rain during the Spring and Summer, the peak retail sales periods, or
unseasonably cool weather and prolonged winter conditions may curtail customer
demand for the Company's products.
New Management Initiatives. On September 12, 1997, Greenmarine Holdings
acquired control of the Company. Since that time the Company has assembled a
new, highly-experienced senior management team led by David D. Jones. The
new senior management team has developed a turnaround strategy to capitalize
on the Company's strong market position and leading, well-recognized brand
names and to take advantage of anticipated growth in the recreational marine
industry. As part of its strategic business plan, the Company has begun to
implement a series of initiatives to reduce operating costs, improve the
Company's operating practices, and rationalize its facilities, workforce and
product lines.
In January 1998, the Company began the rationalization of its boat
manufacturing operations by closing its Old Hickory, Tennessee facility and
consolidating the freshwater fishing operations at the Company's Murfreesboro,
Tennessee facility. The Company also began the consolidation of its saltwater
fishing operations at its Columbia, South Carolina facility. In addition, as
part of the Company's plan to improve operating efficiencies and reduce costs,
the Company has reduced its workforce by approximately 540 employees as of
March 31, 1998, primarily within the Company's boat operations. In April
1998, the Company announced that it would close its research facility in
Waukesha, Wisconsin.
In March 1998, the Company announced a lean manufacturing initiative for
its marine power manufacturing operations. The first phase of this initiative
has been introduced at the Company's final assembly plant in Calhoun, Georgia.
This initiative is expected to substantially reduce costs, shorten production
times, lower inventory and dramatically improve the Company's responsiveness
to dealer and consumer demand. The Company has also implemented a strategic
purchasing program which was announced in January 1998. This program is
designed to reduce purchasing costs by consolidating purchasing across
vendors, integrating suppliers into the product design process at an early
stage and designing products for lower cost.
Management anticipates that the measures implemented to date will result
in overall cost reductions of over $17.0 million annually, a portion of which
the Company anticipates will be realized in fiscal 1998. The Company believes
that these savings represent permanent reductions in its cost structure and
anticipates further savings from the full implementation of all elements of
the Company's strategy. There can be no assurance, however, that these
programs will achieve the anticipated savings in fiscal 1998 or that
additional cost savings will be achieved.
-12-
<PAGE> 13
Introduction of FICHT Engines. All marine engine manufacturers are facing
the challenge of meeting the EPA's emission standards which require
manufacturers to reduce hydrocarbon emissions from outboard engines, on
average, by 8.3% per year through model year 2006 beginning with the 1998
model year, and emissions from personal watercraft by 9.4% per year through
model year 2006 beginning in model year 1999. Partly in response to these EPA
emission standards, the Company introduced its new Johnson and Evinrude
engines with FICHT fuel-injection technology, which offer an average
hydrocarbon emission reduction of 80% and an approximate 35% increase in fuel
economy depending on the application. The higher manufacturing costs of the
FICHT fuel injected engines will result initially in a lower margin to the
Company; however, the Company has implemented several initiatives to reduce
the manufacturing costs of its new engines. Because of the higher retail
costs of engines incorporating the FICHT technology, consumer acceptance of
the new engines may be restrained as long as less expensive engine models,
which do not meet the new EPA standards, continue to be available. To date,
the Company estimates that it has spent approximately $50.0 million on
low-emission technology, and by the Year 2006 the Company is expected to have
expended an aggregate of approximately $90.0 million to meet the EPA's new
emission standards. The Company expenses its research and development costs
as they are incurred.
Purchase Accounting. On September 12, 1997, Greenmarine Holdings acquired
control of the Company by consummating the Tender Offer. On September 30,
1997, Greenmarine Holdings' acquisition subsidiary was merged with and into
the Company, with the Company being the surviving entity of the merger. The
Greenmarine Acquisition was completed for aggregate consideration of
approximately $373.0 million and has been accounted for under the purchase
method of accounting. Accordingly, the purchase price has been allocated to
assets acquired and liabilities assumed based on fair market values at the
date of acquisition (i.e., September 30, 1997). In the opinion of management,
accounting for the purchase as of September 30, 1997 instead of September 12,
1997 did not materially affect the Company's results of operations for fiscal
1997. The fair values of tangible assets acquired and liabilities assumed
were $844.9 million and $902.0 million, respectively. In addition, $83.9
million of the purchase price was allocated to intangible assets for
trademarks, patents and dealer network. As part of the initial purchase price
allocation, the Company accrued an aggregate amount of $136.9 million for
implementation and execution of business reorganizations, including product
line rationalization, implementation of the lean manufacturing realignment,
implementation of the Company's purchasing initiatives, plant restructuring
and reduction of the Company's workforce. The financial statements reflect
the preliminary allocation of purchase price as the purchase price allocation
has not been finalized. The excess purchase price over fair value of the net
-13-
<PAGE> 14
assets acquired was $250.2 million and has been classified as goodwill in the
Statement of Consolidated Financial Position as of September 30, 1997. The
goodwill related to the acquisition will be amortized using the straight-line
method over a period of 40 years. Accordingly, the Company's results of
operations for the six months ended March 31, 1998 are not comparable to its
results of operations in earlier periods.
Seasonality. The Company's business is seasonal due to the impact of the
buying patterns of its dealers and consumers. The Company's peak revenue
periods historically have been its third and fourth fiscal quarters ending
June 30 and September 30, respectively. Accordingly, the Company's business,
receivables, inventory and accompanying short-term borrowing to satisfy
working capital requirements are usually at their highest levels in the
Company's second fiscal quarter and decline thereafter as the Company's
products enter the peak consumer selling seasons. Short-term borrowings
averaged $2.9 million and $5.7 million in 1997 and 1996, respectively, with
month-end peak borrowings of $29.0 million and $15.0 million in February 1997
and 1996, respectively. To date in fiscal 1998, month-end peak borrowings
were $70.7 million in February and March.
RESULTS OF OPERATIONS
PERIODS ENDED MARCH 31, 1998 COMPARED TO PERIODS ENDED MARCH 31, 1997
Net Sales. Net sales increased to $264.3 million in the three months
ended March 31, 1998 from $237.0 million in the three months ended March 31,
1997, an increase of 11.5%. Net sales increased to $475.5 million in the six
months ended March 31, 1998 from $434.1 million in the six months ended March
31, 1997, an increase of 9.5%. U.S. revenues, which accounted for 75% of
total sales, increased 11.1% during the six months ended March 31, 1998 while
international sales increased 5.3%. The Company's sales increase was
attributable primarily to higher volume sales in the United States of marine
engines in the current fiscal year, which increased 25.1% over the prior year
period. Engine sales were depressed in the first half of fiscal 1997 as a
result of the Company's program to restrain engine production in order to
assist dealers in reducing inventory levels. In the first quarter of fiscal
1997, the Company suspended production of many of its larger engines for
nearly a month in order to make changes to equipment and processes necessary
in order to significantly improve the quality of those engines. This
production suspension adversely affected the Company's sales and margins in
the first half of fiscal 1997.
Cost of Goods Sold. Cost of goods sold increased to $204.2 million in the
three months ended March 31, 1998 from $200.5 million in the three months
ended March 31, 1997, an increase of $3.7 million or 1.8%. Cost of goods sold
was 77.3% of net sales in the three months ended March 31, 1998 as compared
with 84.6% of net sales in the three months ended March 31, 1997. Cost of
goods sold increased to $377.9 million in the six months ended March 31, 1998
from $374.9 in the six months ended in March 31, 1997, an increase of $3.0
million or 0.8%. Cost of goods sold was 79.5% of net sales in the six months
ended March 31, 1998 as compared with 86.4% of net sales in the six months
ended March 31, 1997. The improvements in the Company's gross margin in the
current year reflected increased manufacturing efficiencies at engine plants
and a better absorption of costs, primarily due to higher sales volume. In
addition, in the first quarter of fiscal 1997, the Company's cost of goods
sold was negatively impacted by the production suspension discussed above in
Net Sales.
Selling, General and Administrative ("SG&A") Expense. SG&A expense
increased to $58.2 million in the three months ended March 31, 1998 from $49.5
million in the three months ended March 31, 1997, an increase of $8.7 million
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<PAGE> 15
or 17.6%. SG&A expense as a percentage of net sales increased to 22.0% in the
three months ended March 31, 1998 from 20.9% in the three months ended March
31, 1997. SG&A expense increased to $102.5 million in the six months ended
March 31, 1998 from $91.9 million in the six months ended March 31, 1997, an
increase of $10.6 million or 11.5%. SG&A expense as a percentage of net
sales increased to 21.6% in the six months ended March 31, 1998 from 21.2% in
the six months ended March 31, 1997. The changes in SG&A expense in the
current year reflected higher amortization of goodwill and intangibles due to
purchase accounting and higher warranty expense due to extended warranty
coverage on certain new models.
Earnings (Loss) from Operations. Earnings from operations was $1.9
million in the three months ended March 31, 1998 compared with a loss of $13.0
million in the three months ended March 31, 1997, an improvement of $14.9
million. Loss from operations decreased to $4.9 million for the six months
ended March 31, 1998 from a loss of $32.7 million for the six months ended
March 31, 1997, a decrease of $27.8 million or 85.0%. The improvements were
primarily attributable to the increase in sales coupled with better absorption
of costs as described above.
Non-Operating Expense (Income). Interest expense increased to $6.7
million in the three months ended March 31, 1998 from $4.0 million in the
three months ended March 31, 1997, an increase of $2.7 million. Interest
expense increased to $14.4 million in the six months ended March 31, 1998 from
$8.4 million in the six months ended March 31, 1997, an increase of $6.0
million. The increases resulted from the new debt structure in place after
the Greenmarine Acquisition. Other non-operating income was $2.5 million in
the three months ended March 31, 1998 compared to $10.7 million in the three
months ended March 31, 1997. Other non-operating income was $4.9 million in
the six months ended March 31, 1998 compared to $21.3 million in the six
months ended March 31, 1997. The three months ended March 31, 1997 amount
included non-recurring income of $8.8 million which was due primarily to a
favorable lawsuit settlement and gain on sale of fixed assets. The six
months ended March 31, 1997 amount included non-recurring income, including
insurance recovery and a lawsuit settlement, as well as gains on disposition
of fixed assets.
Provision (Credit) for Income Taxes. Provision (credit) for income taxes
was $1.0 million in the three months ended March 31, 1998 and $1.0 million in
the three months ended March 31, 1997. Provision (credit) for income taxes
was $1.8 million in the six months ended March 31, 1998 and $1.8 million in
the six months ended March 31, 1997. The provision for income taxes for the
three and six months ended March 31, 1998 and 1997 resulted from the net of
expected taxes payable and benefits relating to certain international
subsidiaries. No tax benefit is allowed for domestic losses because they are
not realizable, at this time, under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES
As a result of the Greenmarine Acquisition, the Statement of Consolidated
Financial Position as of September 30, 1997 was prepared using the purchase
method of accounting which reflects the fair values of assets acquired and
liabilities assumed. The excess of the total acquisition cost over the
estimated fair value of assets acquired and liabilities assumed at the date of
acquisition was estimated initially at $250.2 million. The financial
statements reflect the preliminary allocation of purchase price, as the
purchase price allocation has not been finalized. Accordingly, the Statement
of Condensed Consolidated Financial Position as of March 31, 1998 is not
comparable to that as of March 31, 1997 because of the purchase accounting
adjustments.
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<PAGE> 16
The Company's business is seasonal in nature with receivable and inventory
levels normally increasing in the first fiscal quarter and peaking in the
second fiscal quarter. Current assets at March 31, 1998 decreased $8.1
million from September 30, 1997. Cash and cash equivalents at March 31, 1998
decreased $5.3 million from September 30, 1997, while receivables increased
$26.1 million due primarily to higher sales in line with the seasonal nature
of the Company's business. Inventories at March 31, 1998 increased $16.9
million from September 31, 1997 also due to seasonality. Other current assets
at March 31, 1998 decreased $45.8 million from September 30, 1997 primarily
due to a reduction in a trust depository that funded the remaining untendered
outstanding shares of the Company's common stock and due to the redemption of
deposits for letters of credit. Accounts payable at March 31, 1998 decreased
$75.4 million from September 30, 1997 due to payments to Company shareholders
for untendered outstanding stock and to other payments relating to the change
of control. Accrued liabilities increased $18.2 million due to higher dealer
incentive accruals relating to the seasonality of sales. Cash used by
operations was $49.5 million for the six months ended March 31, 1998 compared
with $8.9 million for the six months ended March 31, 1997.
Expenditures for plant, equipment and tooling were $11.9 million for the
six months ended March 31, 1998, representing a $10.8 million decrease from
the prior year period level of $22.7 million, primarily as a result of
deferred capital expenditures. The low level of spending to date is related
primarily to the Company's capital appropriation process. Capital spending
related to any approved capital expenditure is realized, on average,
approximately nine months after approval. A lower level of capital spending
was appropriated in fiscal 1997 as compared to prior years due to the
Company's pending sale, which was completed in September 1997. Since the
Greenmarine Acquisition, the Company's new senior management team has
evaluated and continues to evaluate its internal systems and controls.
Although the Company believes that such systems and controls are adequate, the
Company will upgrade them as it deems necessary to improve the overall
efficiency of the Company's operations. The Company estimates that total
capital expenditures for fiscal 1998 will be approximately $27.4 million,
which includes maintenance capital expenditures and various planned and
potential projects designed to increase efficiencies and enhance the Company's
competitiveness and profitability. Specifically, these capital expenditures
include continued expenditures related to the introduction of the FICHT
technology to the Company's various engine models, cost reduction programs,
product quality improvements, improvements to and upgrades of the Company's
hardware and software, and other general capital improvements and repairs.
Short-term debt was $220.7 million at March 31, 1998, including the $150.0
million principal amount of the credit agreement dated August 13, 1997, with
American Annuity Group, Inc. and Great American Insurance Company as Lenders
(the "Acquisition Debt"). The Company assumed the obligations under the Term
Loan in connection with the Greenmarine Acquisition. The full amount of the
Term Loan matures on June 16, 1998. The Company and its Parent believe the
Company will be able to raise funds to refinance such debt through the sale of
debt or equity in the public or private markets by the maturity date of the
Acquisition Debt. Current maturities and sinking fund requirements of
long-term debt decreased by $61.7 million from September 30, 1997 due
primarily to the redemption of the Company's 7% Convertible Subordinated
Debentures due 2002. The Company also borrowed approximately $30.0 million
from certain wholly-owned foreign subsidiaries. Approximately $2.0 million,
net of offsets, is due in fiscal 1998, and approximately $20.2 million is due
at the end of fiscal 1999.
The Company entered into an Amended and Restated Loan and Security
Agreement, effective as of January 6, 1998 (the "Credit Agreement"), with a
syndicate of lenders for which NationsBank of Texas, N.A. is administrative
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<PAGE> 17
and collateral agent (the "Agent"). The Credit Agreement provides a revolving
credit facility (the "Revolving Credit Facility") of up to $150.0 million,
subject to borrowing base limitations, to finance working capital with a $25.0
million sublimit for letters of credit. The Revolving Credit Facility expires
on December 31, 2000. The Revolving Credit Facility is secured by a first and
only security interest in all of the Company's existing and hereafter acquired
accounts receivable, inventory, chattel paper, documents, instruments, deposit
accounts, contract rights, patents, trademarks and general intangibles and is
guaranteed by the Company's four principal domestic operating subsidiaries.
On March 31, 1998, outstanding borrowings under the Credit Agreement
aggregated $70.7 million and six letters of credit were outstanding totaling
$17.2 million. The level of borrowings as of March 31, 1998 was due primarily
to the seasonality of the Company's business, as inventory and receivables
levels increase during the Company's first and second fiscal quarters in
preparation for the heavy selling season in the Spring and Summer. The level
of outstanding borrowings as of March 31, 1998 was also due in part to
payments of certain change of control expenses. Although there can be no
assurance, the Company expects to use the cash from the anticipated sales of
products and collection of receivables to repay all amounts outstanding under
the Revolving Credit Facility by the end of fiscal 1998. The Credit Agreement
contains a number of financial covenants, including those requiring the
Company to satisfy specific levels of (i) consolidated tangible net worth,
(ii) interest coverage ratios, and (iii) leverage ratios.
As a normal business practice, the Company has made arrangements with
financial institutions by which qualified retail dealers may obtain inventory
financing. Under these arrangements, the Company will repurchase products in
the event of repossession upon a retail dealer's default. These arrangements
contain provisions which limit the Company's repurchase obligation to $40.0
million per model year for a period not to exceed 30 months from the date of
invoice. The Company resells any repurchased products. Losses incurred under
this program have not been material. In fiscal 1997, the Company repurchased
approximately $3.9 million of products, all of which were resold at a
discounted price. The Company accrues for losses that are anticipated in
connection with expected repurchases. The Company does not expect these
repurchases to materially affect its results of operations.
As of September 30, 1997, the Company reserved a total amount equal to
$136.9 million as accrued liabilities for business reorganizations. These
reserves include accruals for rationalization of the Company's product lines,
workforce reductions, plant consolidations and closures. A total of
approximately $33.2 million of such accrued liabilities relate to non-cash
items. The Company also has other non-current liabilities of $202.2 million,
including environmental reserves and post-retirement benefits other than
pension of $95.4 million.
The Company has recorded net deferred tax assets of $40.1 million, of
which $21.1 million is reflected as a net long-term asset. The Company
believes that these net deferred tax assets will be realized. A valuation
allowance of $131.8 million was recorded at September 30, 1997 to reduce the
deferred tax assets to their estimated net realizable value. Of this
valuation allowance, $20.7 million relates to deferred tax assets established
for foreign and state loss carryforwards. As of September 30, 1997, certain
non-U.S. subsidiaries of the Company had net operating loss carryforwards for
income tax purposes of $34.8 million. Of this amount, $4.0 million will
expire by 2002, with the remaining balance being unlimited. In addition, the
Company has $103.2 million of federal net operating loss carryforwards
expiring between 2009 and 2012, and $133.8 million of state net operating loss
carryforwards expiring between 1998 and 2012. These carryforwards, however,
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<PAGE> 18
are entirely offset by the valuation allowance referred to above.
Accordingly, no benefit has been recognized with respect to these
carryforwards in the Consolidated Financial Statements. Several factors would
generally enable the Company to recognize the deferred tax assets that have
been offset by the valuation allowance. Historical profitability, forecasted
earnings, and management's determination "it is more likely than not" the
deferred tax assets will be realized against forecasted earnings, all affect
whether the remaining U.S. deferred tax assets may be recognized through a
reversal of the valuation allowance. Because the deferred tax asset
realization factors were adversely affected by the Company's results for
fiscal 1997, the Company believes it is unlikely the reversal of the valuation
allowance will occur in fiscal 1998.
During fiscal 1997, the Company assessed the steps necessary to address
matters related to "Year 2000" issues. The preliminary review included all of
the Company's hardware and software requirements worldwide. The Company has
developed a strategy for attaining Year 2000 compliance that includes
modifying existing software, purchasing new software and acquiring new
hardware, covering all the Company's equipment from mainframe applications to
personal computers. The Company estimates that it will spend a total of
between $6.0 million and $10.0 million to modify its existing systems to
attain Year 2000 compliance.
Based upon the current level of operations and anticipated cost savings,
the Company believes that its cash flow from operations, together with
borrowings under the Credit Agreement, additional financing to replace the
Term Loan and its other sources of liquidity, will be adequate to meet its
anticipated requirement for working capital and accrued liabilities, capital
expenditures, interest payments and scheduled principal payments over the next
several years. There can be no assurance, however, that the Company's
business will continue to generate cash flow at or above current levels or
that anticipated costs savings can be fully achieved. If the Company is
unable to generate sufficient cash flow from operations in the future to
service its debt and accrued liabilities and make necessary capital
expenditures, or if its future earnings growth is insufficient to amortize all
required principal payments out of internally generated funds, the Company may
be required to refinance all or a portion of its existing debt, sell assets or
obtain additional financing. There can be no assurance that any such
refinancing or asset sales would be possible or that any additional financing
could be obtained on attractive terms, particularly in view of the Company's
high level of debt.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In fiscal 1999, the Company will implement three accounting standards
issued by the Financial Accounting Standards Board, SFAS 130, "Reporting
Comprehensive Income," SFAS 131, "Disclosures About Segments of an Enterprise
and Related Information," and SFAS 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits." The Company believes that these changes
will have no effect on its financial position or results of operations as they
require only changes in or additions to current disclosures.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation
Liabilities", which provides authoritative guidance on the recognition,
measurement, display and disclosure of environmental remediation liabilities.
The Company adopted SOP 96-1 in the quarter ended September 30, 1997. The
change in accounting estimate required the Company to accrue for future normal
operating and maintenance costs for site monitoring and compliance
requirements at particular sites. The initial expense for implementation of
SOP 96-1 was $7.0 million, charged to selling, general and administrative
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<PAGE> 19
expense in the quarter ended September 30, 1997.
INFLATION
Inflation may cause or may be accompanied by increases in gasoline prices
and interest rates. Such increases may adversely affect the purchase of the
Company's products. Inflation has not had a significant impact on operating
results during the past three fiscal years.
FORWARD-LOOKING STATEMENTS
Some of the foregoing statements are forward-looking in nature and made in
reliance upon the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements involve risks and uncertainties,
including but not limited to the impact of competitive products and pricing,
product demand and market acceptance, new product development, availability of
raw materials, the availability of adequate financing on terms and conditions
acceptable to the Company, general economic conditions including interest
rates and consumer confidence and successful implementation of strategic
initiatives. Investors are also directed to other risks discussed in
documents filed by the Company with the Securities and Exchange Commission.
The Company assumes no obligation to update the information included in this
statement.
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<PAGE> 20
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Pursuant to his employment agreement with the Company, Andrew P. Hines
purchased 20,000 shares of the Company's common stock. None of the Company's
common stock is registered under the Securities Act. Mr. Hines paid $150,000
in cash for 8,333 of those shares and purchased the remaining 11,667 shares
with $210,000 borrowed from the Company pursuant to the terms of a Promissory
Note between the Company and Mr. Hines. Mr. Hines has pledged his 20,000
shares to the Company to secure his obligations under that Promissory Note.
On October 1, 1997, as a result of the change in control which occurred
September 11, 1997 from the purchase by Greenmarine Acquisition Corp. of in
excess of 90% of the Company's outstanding common stock, the Company offered
to purchase for cash, upon the terms and conditions set forth in the offer to
purchase, any and all of the outstanding 7% Convertible Subordinated
Debentures due 2002 of the Company that were properly tendered on or before
November 12, 1997. The purchase price for each debenture was 100% of the
outstanding principal amount of such debenture plus any accrued and unpaid
interest thereon up to and including the date of purchase.
Section 1209 of the Indenture dated as of June 22, 1992 between the Company
and LaSalle National Bank, as Trustee, provides that each holder of a
debenture, upon the occurrence of an event such as the merger which took place
September 30, 1997 between the Company and Greenmarine, will have the right at
such holder's option to convert all or any portion of such holder's debentures
during the period such debenture is convertible into the same kind and amount
of securities, cash or other property receivable upon the occurrence of an
event such as the merger by a holder of the number of shares of common stock
into which such debentures might have been converted immediately prior to the
occurrence of such event. Accordingly, as a result of the consummation of the
merger, debentures which were not put to the Company by the November 12, 1997
purchase date are now convertible at the conversion price, which was $22.25
per share, into the merger consideration of $18.00 per share into which the
debentures would have been convertible had the debentures been converted into
common stock immediately prior to the effective date of the merger. All
debentures which remain outstanding after the November 12, 1997 purchase date
continue to be obligations of the Company and will continue to be convertible
at the option of the holder thereof solely into the merger consideration.
Holders of debentures choosing to convert their debentures into the merger
consideration must comply with Section 1202 of the Indenture, including the
requirements that they deliver a Conversion Notice (as defined in the
Indenture) to the Company.
Item 6. Exhibits and Report on Form 8-K.
(a) Exhibits reference is made to the Exhibit Index on
Page 22.
(b) Reports on Form 8-K. The Registrant did not file
any reports on Form 8-K for the fiscal quarter ended March 31, 1998.
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<PAGE> 21
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTBOARD MARINE CORPORATION
Signature Title Date
_____________________________ _________________________ ____________
By: /s/: Andrew P. Hines Executive Vice President May 15, 1998
& Chief Financial Officer
_____________________________ _________________________ ____________
ANDREW P. HINES
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<PAGE> 22
EXHIBIT INDEX
Exhibit 3: Articles of Incorporation and By-Laws:
(A) With respect to the Registrant's Certificate of Incorporation,
reference is made to Exhibit 3(A) to the Registrant's Annual Report on Form
10-K/A for the fiscal year ended September 30, 1997, which is incorporated
herein by reference.
(B) With respect to the Registrant's By-Laws, as amended and restated
October 1, 1997, reference is made to Exhibit 3(B) to the Registrant's Annual
Report on Form 10-K/A for the fiscal year ended September 30, 1997, which is
incorporated herein by reference.
Exhibit 4: Instruments defining the rights of security holders including
indentures:
(A) With respect to the Agreement of Outboard Marine Corporation to
furnish copies upon request of the Securities and Exchange Commission covering
unregistered long-term debt, reference is made to Exhibit 4(A) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended September
30, 1996, which is incorporated herein by reference.
(B) With respect to rights of holders of the Registrant's 9-1/8% Sinking
Fund Debentures due 2017, reference is made to Exhibit 4(A) in the
Registrant's Registration Statement Number 33-12759 filed on March 20, 1987,
which is incorporated herein by reference.
(C) With respect to rights of holders of Registrant's 7% Convertible
Subordinated Debentures due 2002, reference is made to Registrant's
Registration Statement Number 33-47354 filed on April 28, 1992, which is
incorporated herein by reference and with respect to the Supplemental
Indenture dated September 30, 1997 reference is made to Exhibit 4(C) to the
Registrant's Annual Report on Form 10-K/A for the fiscal year ended September
30, 1997, which is incorporated herein by reference.
Exhibit 10: Material contracts:
(A) With respect to Severance Agreements between the Registrant and
certain elected and appointed officers and certain other executives of the
Registrant, reference is made to Exhibits 99.3 and 99.4 of the Registrant's
Schedule 14D-9 filed with the Securities and Exchange Commission on July 15,
1997, which is incorporated herein by reference.
(B) With respect to the Consulting Agreement for Mr. Bowman dated
September 24, 1997, reference is made to Exhibit 10(I) to the Registrant's
Annual Report on Form 10-K/A for the fiscal year ended September 30, 1997,
which is incorporated herein by reference.
(C) With respect to the Employment Agreement of Mr. Hines dated October
6, 1997, reference is made to Exhibit 10(J) to the Registrant's Annual Report
on Form 10-K/A for the fiscal year ended September 30, 1997, which is
incorporated herein by reference.
(D) With respect to the Credit Agreement between the Registrant and
American Annuity Group and Great American Insurance Company dated August 13,
1997, reference is made to Exhibit (b)(2) of the Schedule 14D-1, Amendment No.
1, filed by Greenmarine Acquisition Corp. with the Securities and Exchange
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<PAGE> 23
Commission September 12, 1997, which is incorporated hereby reference and with
respect to the First Amendment to Credit Agreement dated September 10, 1997,
Second Amendment to Credit Agreement dated September 12, 1997 and Third
Amendment to Credit Agreement dated November 10, 1997 reference is made to
Exhibit 10(L) to the Registrant's Annual Report on Form 10-K/A for the fiscal
year ended September 30, 1997, which is incorporated herein by reference.
(E) With respect to the Amended and Restated Loan and Security Agreement
between the Registrant and NationsBank of Texas, N.A. dated January 6, 1998,
reference is made to Exhibit 10(E) to the Registrant's Annual Report on Form
10-Q for the quarterly period ended December 31, 1997, which is incorporated
herein by reference.
(F) With respect to the Employment Agreement of Mr. Jones dated March 10,
1998, reference is made to Exhibit 10(F) attached hereto.
(G) With respect to the Personal Rewards and Opportunity Program,
reference is made to Exhibit 10(G) attached hereto.
Exhibit 11: Statements regarding computation of per share earnings.
A statement regarding the computation of per share earnings is attached
hereto as Exhibit 11.
Exhibit 19: Report furnished to security holders:
Not applicable.
Exhibit 27: Financial data schedule:
This information is filed only in the electronic filing.
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<PAGE> 24
EXHIBIT 10 (F)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is made this 10th day of March, 1998, and
effective as of September 25, 1997, by Outboard Marine Corporation, a Delaware
corporation (the "Company"), and David D. Jones, Jr. (the "Executive").
WITNESSETH
WHEREAS, the Company wishes to employ the Executive and the Executive
wishes to be employed by the Company; and
WHEREAS, the Executive is willing to make his services available to the
Company upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. Employment. As of September 25, 1997 (the "Effective Date"), the
Company shall employ Executive as President and Chief Executive Officer of the
Company, and shall use its best efforts to have Executive elected as a
Director of the Board of Directors of the Company (the "Board") as soon as
practicable after the Effective Date and to sustain and continue Executive's
election as a Director of the Company for the Term (as defined below).
Executive shall devote his full and undivided business time and attention to
his duties and responsibilities to the Company. Executive shall act, upon the
Board's request and for no additional compensation, in a Chief Executive
Officer and/or director capacity for any subsidiary of the Company. Executive
shall conduct and perform such services and activities as customarily
associated with and incident to his position with the Company and as may be
determined from time to time by the Board. Executive shall report directly to
the Board. Executive shall be permitted to make, monitor and pursue private,
passive investments that do not interfere with the performance of his duties
and are not competitive, in the good faith judgment of the Board, with the
business of the Company. Notwithstanding anything to the contrary contained
herein, nothing in this Agreement shall preclude Executive from participating
in the affairs of any governmental, educational or other charitable
institution, engaging in professional speaking and writing activities, and
serving as a non-management member of the board of directors of publicly-held
corporations so long as the Board of Directors of the Company, in good faith,
does not determine that such activities unreasonably interfere with the
business of the Company or diminish Executive's obligations under the
Agreement, and Executive shall be entitled to retain all fees, royalties and
other compensation derived from such activities in addition to the
compensation and other benefits payable to him under the Agreement.
Executive shall be entitled to four (4) weeks of paid vacation time during
each twelve-month period following the Effective Date (which shall accrue as
of the first day of each twelve-month period following the Effective Date) in
accordance with the policies and procedures of the Company as in effect from
time to time for its senior officers. Executive shall also be entitled to all
paid holidays given by the Company to its executive employees and shall be
entitled to reasonable periods of absence, subject to Section 10 below with
respect to Total Disability, due to sickness, personal injury or other
disability.
2. Term. The term of the Executive's employment hereunder (the "Term")
shall commence on the Effective Date and shall continue until September 30,
2000, or, if the Company changes its fiscal year to a calendar year, until
December 31, 2000. The Term shall automatically renew for an additional two
(2) years (the "Renewal Term") on the initial expiration date and each
expiration date thereafter, if any, unless the Executive's employment is
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<PAGE> 25
terminated sooner pursuant to the terms of this Agreement or unless the
Company or the Executive gives to the other notice of an intention not to
renew Executive's employment no later than six (6) months prior to the
expiration of the then current Term; provided, however, that, for each fiscal
year after the end of the fiscal year during which Executive attains age 62
until the end of the fiscal year during which Executive attains age 65, the
Renewal Term shall be reduced to one (1) year. At the end of the fiscal year
during which Executive attains age 65, the Term shall not be renewable
pursuant to the terms of this Agreement.
3. Base Salary. During the Term, the Company will pay Executive a base
salary (the "Base Salary") at the following rates: (i) for the first six (6)
months of the Term, at the rate of $500,000 per annum; and (ii) for the
remainder of the Term following the date that is six months after the
Effective Date, at the rate of $600,000 per annum. The Base Salary shall be
payable according to the standard salary payment schedule for executive level
employees of the Company. The Board will review the Executive's Base Salary
at least annually with a view to determining whether a further increase would
be appropriate, but any such increase shall be in the sole discretion of the
Board.
4. Annual Bonus. Executive shall be entitled to receive an annual bonus
(the "Annual Bonus") based on Executive's attaining the following levels of
annual performance goals (the "Annual Targets") established by the Board or
the Compensation Committee of the Board as soon as practicable following the
commencement of each fiscal year in the Term, and in any event within ninety
(90) days after the commencement of such fiscal year, which Annual Targets
shall be based on financial performance assumptions and forecasts that the
Board or the Compensation Committee in good faith believes to be reasonable:
Level of Attainment Amount of Annual Bonus
------------------------------ ----------------------
Less than 80% of Annual Target None
80% - 89% of Annual Target 100% of Base Salary
90% - 99% of Annual Target 125% of Base Salary
100% - 109% of Annual Target 150% of Base Salary
110% - 119% of Annual Target 175% of Base Salary
120% and above of Annual Target 200% of Base Salary
For the purposes of determining the potential Annual Bonus for the first
year of the Term, Base Salary for such year shall be deemed to be $550,000.
During each year of the initial Term (without giving effect to any Renewal
Term), one-fourth of Executive's Annual Bonus for such year, if any, shall be
paid in cash and, as payment for the remaining portion of any such Annual
Bonus for such year, the Company shall issue to Executive such number of
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), equal to the remainder of any such Annual Bonus divided by $18.00
("Bonus Stock"), subject to Executive's deferral election described in the
following paragraph. For example, if Executive is determined to be entitled
to an Annual Bonus of $1,200,000 in year 2 of the Term, Executive shall
receive $300,000 in cash and 50,000 shares of the Bonus Stock (i.e., $900,000
/ $18.00). During each year of any Renewal Term, the entire amount of
Executive's Annual Bonus shall be paid in cash. Subject to the immediately
following paragraph, the Annual Bonus shall be paid to Executive within 60
days following the end of each fiscal year or at such later time to which the
Company and Executive shall mutually agree.
Executive may, in his sole discretion, elect in writing prior to the
beginning of any fiscal year of the Company (or in the case of the first
fiscal year beginning after his date of employment, within 30 days following
his execution and delivery of this Agreement) during the Initial Term to defer
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payment of any percentage ("Deferral Percentage") of three-quarters of his
Annual Bonus, if any, for such year until the first to occur of: (i) the date
of his termination of employment for any reason (or, if such payment would not
be deductible by the Company on such date by reason of Section 162(m) of the
Code, on the first day of the Company's fiscal year beginning after such date
of termination), (ii) the date of a Change in Control, (iii) the date as of
which Common Stock becomes readily marketable following a public offering of
such stock, or (iv) any date designated by Executive (but not more than 20
years following the last day of such fiscal year). In the event that the fair
market value of Common Stock is less than $18.00 on the date of payment of any
deferred Annual Bonus, the deferred Annual Bonus payable to Executive shall be
reduced by the amount of such difference multiplied by the total number of
shares of Bonus Stock determined without regard to Executive's deferral
election and the applicable Deferral Percentage; provided, however, that the
deferred Annual Bonus shall not be reduced if Executive concurrently exercises
the non-qualified stock option relating to such deferred Annual Bonus.
In the event Executive makes a deferral election pursuant to the
immediately preceding paragraph during the Initial Term, Executive shall be
granted as of the last day of the fiscal year a fully vested and immediately
exercisable non-qualified stock option, at a per share exercise price equal to
$18.00 and with a term of not less than the period of deferral set forth in
Executive's applicable deferral election, with respect to the total number of
shares of Bonus Stock for such year determined without regard to Executive's
deferral election, multiplied by the Deferral Percentage for such year. The
non-qualified option described in this paragraph shall be cancellable by the
Company at its discretion if such option is not exercised by Executive within
ten days following the payment of the deferred bonus under the preceding
paragraph.
5. Incentive and Equity-based Compensation. To the extent the Board or
the Compensation Committee of the Board (if any) in its good faith deems it
advisable and in the best interests of the Company, Executive shall be
permitted to participate in any and all of the short-term and long-term
incentive plans, and all stock option or other equity or quasi-equity
participation plans, programs or arrangements (each a "Bonus Plan"; and any
item granted or awarded to Executive thereunder is hereinafter referred to as
"Additional Bonus") in which similarly situated senior executives are
permitted to participate; provided, however, that, except for his Annual Bonus
and the stock options contemplated hereby, unless the Board of Directors
otherwise determines, Executive shall not be entitled to any cash Additional
Bonus or any stock options or related rights under any Bonus Plan.
Executive's participation in such plans, programs or arrangements shall be in
addition to any payment received pursuant to this Agreement. Notwithstanding
the immediately preceding two sentences, Executive shall not be entitled to
participate in any plan, program or arrangement established by the Company for
the sole purpose of retaining the services following the change in control of
the Company occurring on or about September 12, 1997 of certain executives and
other key employees who, prior to such change in control, had signed severance
agreements or other arrangements with the Company with respect to such change
in control.
6. Stock Options. As soon as practicable after the Effective Date, the
Company shall grant to Executive (i) an incentive stock option, in accordance
with Section 422 of the Internal Revenue Code of 1986, as amended, ("ISO") to
purchase 61,105 shares of Common Stock at an exercise price of $18.00 per
share, which shall be exercisable with respect to 5,555 shares on the date of
grant and on January 1st of each year thereafter until fully exercisable, and
(ii) a non-qualified stock option, with a term of ten years from the date of
grant, to purchase 238,895 shares of Common Stock at an exercise price of
$18.00 per share (collectively with the ISO, the "Initial Equity Grant"), and
such non-qualified option shall become exercisable on each anniversary of the
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Effective Date as to the number of shares set forth below:
Years of Number of Vested
Vesting Service Non-Qualified Option Shares
1 88,890
2 94,445
3 55,560
-------
238,895
In the event Executive's employment with the Company and its subsidiaries
terminates on or after the third anniversary of the Effective Date, the
unexercisable portion of the ISO shall become vested and non-forfeitable on
the date of such termination of employment and the Company shall accelerate
the exercisability of the unexercisable portion of the ISO no later than the
first day of the calendar year following such date of termination. For
purposes of the preceding Vesting Schedule, Executive shall be granted a Year
of Vesting Service for each consecutive twelve-month period following the
Effective Date that Executive remains continuously employed by the Company.
The incentive and non-qualified stock options described in this Section 6
shall also be fully vested, non-forfeitable and exercisable upon Executive's
termination without Cause or resignation for Good Reason, as provided in
Section 11(b).
The ISO and non-qualified stock options granted under the Initial Equity
Grant shall be made pursuant to a Grant Agreement in form and substance
reasonably acceptable to Executive and the Company. To enable Executive to
exercise all or any portion of his non-qualified option described in this
Section 6 at any time during the Term, the Company will make a loan to
Executive equal to the aggregate exercise price of the portion of such option
being exercised. The interest rate on the loan shall be minimum applicable
federal rate for purposes of Section 7872 of the Code, and the Company shall
increase Executive's compensation during the Term by the amount of interest
payable by Executive to the Company on such loan. The loan shall be due and
payable in full within 30 days following the expiration of the Term or
Executive's termination of employment for any reason.
7. Special Compensation. Executive represents and warrants to the
Company that the aggregate amount of all accrued and unpaid incentive
compensation, unvested options and restricted stock that was forfeited by
Executive solely as a result of his severance from Brunswick to accept
employment with the Company as contemplated by this Agreement ("Forfeited
Amount") as of the Effective Date was $2,573,879, after taking into account
the required levels of performance actually attained with respect to the
period prior to the Effective Date. The Company shall pay Executive
one-quarter of the Forfeited Amount in cash by March 31, 1998. The remaining
three-fourths of the Forfeited Amount shall be provided to Executive in the
form of an immediately exercisable non-qualified stock option, at a per share
exercise price equal to $18.00 and with a term of not less than the period of
deferral designated by Executive, and a deferred cash payment, both as
determined and upon terms set forth in Section 4 hereof with respect to a
deferred payment of Annual Bonus. The Forfeited Amount shall be
nonforfeitable as of the date hereof, except as to the portion of the
non-qualified option relating to 16,667 shares of Common Stock which shall be
fully vested on December 31, 1998 if Executive's employment with the Company
has not been terminated by the Company for Cause or by Executive without Good
Reason prior to such date.
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8. Relocation Expenses. In connection with Executive's employment
hereunder, Executive's principal place of employment shall be at the principal
executive offices of the Company, which, as of the date hereof, are located in
Waukegan, Illinois. Executive understands that he shall be required to
establish a permanent residence for himself and his wife in the geographical
vicinity of Chicago, Illinois. The Company shall reimburse Executive for his
reasonable travel and moving expenses incurred in connection with such
relocation in accordance with the Company's executive officer relocation
policy in effect as of the date hereof.
9. Purchase of Residence. To assist Executive to purchase a new
permanent residence in the Chicago, Illinois geographical vicinity, the
Company will make a loan to Executive or an equity investment in such
residence in an amount up to $300,000 and, during the Term, will make payments
to Executive equal to the interest payable on such loan (as and when such
interest is payable) or the fair rental value of the Company-owned portion of
such residence, as the case may be. Such loan, if any, shall be evidenced by
a promissory note in form and substance reasonably acceptable to the Company
and Executive and shall be secured by a second mortgage in favor of the
Company. In the event Executive's new residence is sold for an amount less
than its original cost, plus improvements, the Company shall bear the
"first-loss" position. In the event that Executive's employment with the
Company is terminated for any reason and such new residence has not been sold,
within 120 days after such termination, Executive shall repay such loan or
repurchase such equity investment, as the case may be, at the appraisal value
determined by an independent appraiser mutually acceptable to Executive and
the Company. The expenses of such appraiser shall be borne equally by
Executive and the Company. The Company shall also reimburse Executive for any
loss he incurs on the sale of his current residence located in Fond du Lac,
Wisconsin.
10. Benefits.
(a) Executive shall be entitled to participate in or receive benefits
under any employee benefit plan, program or arrangement made available
generally by the Company to similarly situated senior executives of the
Company, subject to and on a basis consistent with the terms, conditions
and overall administration of such plans, programs or arrangements.
Notwithstanding the foregoing sentence, the Company shall, at its expense
and in lieu of any life insurance benefits otherwise available under the
Company's welfare benefit plans, provide Executive during the term of his
employment hereunder with coverage under a term life insurance policy with
a death benefit of $1,500,000, provided Executive shall be eligible for
such insurance at standard rates upon initial issuance of such policy.
Except for salary deferrals elected by Executive, nothing paid to
Executive under any plan, program or arrangement now in effect or made
available in the future shall be deemed to be in lieu of the salary and
other compensation payable to Executive hereunder.
(b) Executive shall participate in the Company's Supplemental
Non-Qualified Retirement Plan for Elected Officers ("Supplemental Plan").
The Company shall not amend or terminate the Supplemental Plan with
respect to Executive without his prior written consent. Executive shall
be granted past service credit for his employment with Brunswick
Corporation for purposes of eligibility, vesting and calculating his
benefit under the Supplemental Plan, but the actuarial equivalent of all
retirement benefits of Executive under the Company's retirement plans and
all amounts accrued and vested under the Brunswick qualified and
non-qualified retirement plans (and other amounts recognized as reductions
or offsets thereunder), excluding amounts derived from employee
contributions and salary deferral contributions, in the aggregate shall be
an offset against any benefits under the Supplemental Plan. In the event
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Executive receives any payment on or after the Effective Date from any
Section 401(a) qualified retirement plan of any prior employer which may
be an offset pursuant to this paragraph, Executive shall either "rollover"
such amount to the Company's individual account plan or to an individual
retirement account which receives contributions solely as a result of
"rollover" of retirement benefits attributable to prior employers. The
supplemental pension benefit of Executive shall be computed as of the date
of his termination of employment with the Company and its subsidiaries and
shall be payable in the same form and with the same commencement date as
is applicable to the retirement benefit actually payable to Executive
under the Outboard Marine Corporation Employees Retirement Plan
("Retirement Plan"); provided, however, that if Executive is entitled for
purposes of calculating his supplemental pension benefit to be credited
pursuant to Section 11 hereof with any period following such date of
termination of employment, his date of termination of employment for
purposes of his supplemental pension benefit shall be the last day of such
period and such supplemental pension benefit shall not commence to be paid
prior to such date.
If Executive dies prior to commencement of payment to him of his
supplemental pension benefit, the Company shall pay a supplemental death
benefit to the same beneficiary or beneficiaries as were designated by
Executive for purposes of the Retirement Plan in an amount computed in the
same manner as is provided under the Retirement Plan.
Any actuarial adjustment made under the Retirement Plan with respect
to the calculation of the form or commencement of payment of a retirement
benefit or death benefit actually paid to Executive or his spouse or other
surviving beneficiary under the Retirement Plan shall also be applicable
with respect to the calculation of the form or commencement of payment of
the supplemental pension benefit or supplemental death benefit, and the
calculation of the amounts payable under the qualified and nonqualified
pension plans of Brunswick Corporation. Such actuarial adjustments shall
be made by the regularly employed enrolled actuary for the Retirement Plan
as of the date of termination of employment of Executive with the Company,
or as of the date of his death, and shall be based upon the actuarial
assumptions then specified in, and used by, the Retirement Plan in the
calculation of the retirement benefit or death benefit actually paid
thereunder to Executive or his spouse or other surviving beneficiary.
To the extent Executive is not fully vested in his accrued benefit or
account balance under any of the Company's qualified retirement plans upon
his termination of employment with the Company, the Company shall pay to
Executive, as soon as practicable after the date of termination, the
amount of any unvested retirement benefits that are forfeited upon such
termination of employment and that are not paid pursuant to the preceding
provisions of this paragraph (b).
(c) The Company shall cause Executive to be covered by the current
policy of directors' and officers' liability insurance covering directors
and officers of the Company (or any replacement thereof) to the maximum
extent of the coverage available for any director or officer of the
Company. The Company shall use its best efforts to cause Executive to be
covered by any such policy of directors' and officers' liability insurance
coverage for a period of six (6) years following the date of his
termination of employment with the Company (other than termination by the
Company for Cause or termination as a result of Executive's resignation
without Good Reason).
11. Termination of Employment.
(a) For Cause or Resignation without Good Reason. The Company may
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terminate the Executive's employment with the Company and its subsidiaries
upon the delivery to Executive of 30 days' prior written notice for Cause
(as defined below), or Executive may voluntarily resign from such
employment other than for Good Reason (as defined below) upon 30 days'
prior written notice by Executive to the Company. In either case, the
Company shall pay Executive his Base Salary through such date of
termination and have no further obligation to Executive hereunder;
provided, however, in the event that the Executive delivers a written
request to the Company to arbitrate the issue of whether Cause existed
pursuant to Section 25, the Company shall continue to provide Executive
with his compensation and benefits until the Arbitration is completed, the
Company may relieve the Executive of his duties and responsibilities
during such period without constituting Good Reason and, if the arbitrator
determines Cause existed, the Executive shall promptly reimburse the
Company for the costs of such compensation and benefits.
"Cause" means any act or any failure to act on the part of Executive
which constitutes:
i) fraud, embezzlement, misappropriation, or gross
insubordination on the part of Executive against the Company
or any of its subsidiaries or affiliates, or the Board of
Directors of the Company or any of its subsidiaries or
affiliates, or a material breach by Executive of his
obligations under Sections 18 and 19 hereof;
ii) a willful or grossly negligent violation of law in
connection
with or in the course of Executive's duties or employment with
the Company or any of its subsidiaries or affiliates;
iii) a felony for which Executive is convicted or pleads nolo
contendere;
iv) a material breach of, or the willful and continual failure or
refusal by Executive to perform and discharge, his duties,
responsibilities or obligations under this Agreement (other
than under Sections 18 and 19 hereof, which shall be governed
by clause (i) above, and other than by reason of his death or
Total Disability, or reasons beyond the control of Executive),
provided such breach, failure or refusal continues for a
period of five (5) business days after receipt of written
notice thereof from the Company specifying in reasonable
detail the nature of such breach, failure or refusal; or
v) any act of moral turpitude or willful misconduct by Executive
which (A) is intended to result in substantial personal
enrichment of Executive at the expense of the Company or any
of its subsidiaries or affiliates or (B) has a material
adverse impact on the business or reputation of the Company or
any of its subsidiaries or affiliates (such determination to
be made by the Board in its reasonable judgment).
No act or failure to act on the part of Executive shall be deemed to
be "willful" if it was due primarily to an error in judgment or
negligence. Without limiting the generality of the foregoing, the
following shall not constitute Cause for the termination of the employment
of Executive or the modification or diminution of any of his authority
hereunder: any personal or policy disagreement between the Company and
Executive, or Executive and any member of the Board of Directors of the
Company; or any action taken by Executive in connection with his duties
hereunder if Executive acted in good faith and in a manner he reasonably
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believed to be in, and not opposed to, the best interest of the Company
and had no reasonable cause to believe his conduct was unlawful. Further,
the Company shall be entitled to immediately relieve Executive of his
duties and responsibilities on or at any time after delivery of a written
notice of termination for Cause to Executive pending a final determination
as to whether Cause exists without such action constituting Good Reason,
except the Company shall not relieve Executive of his duties and
responsibilities prior to the end of regular business hours on the fifth
business day following a written notice of termination relying upon clause
(iv) of the definition of Cause.
(b) Without Cause or Resignation with Good Reason. The Company may
terminate Executive's employment with the Company and its subsidiaries
without Cause upon 30 days prior notice to the Executive, or Executive may
terminate such employment with Good Reason (as defined below) upon 30 days
prior notice to the Company. In either case, Executive shall be entitled
to the following payments:
(1) his Base Salary, prorated through the date of termination of
employment, plus any accrued vacation, payable on such date
of termination;
(2) within 60 days of the end of the fiscal year during which
Executive's termination occurs, his Annual Bonus for the
fiscal year in which such termination occurred (based upon
the Company's level of actual attainment of the Annual Target
for such fiscal year), prorated for the number of full months
Executive was employed during such fiscal year;
(3) an amount equal to the greater of his Base Salary for one
year or his Base Salary for the remainder of the Term of this
Agreement, payable in accordance with the standard payroll
practices of the Company;
(4) any remaining unvested stock options granted pursuant to
Sections 6 and 7 by the Company to Executive shall
automatically vest as of the date of termination, and other
stock options shall be exercisable in accordance with the
terms of the Bonus Plan or stock option grant agreement
pursuant to which they were issued;
(5) the Company will continue to permit Executive to participate
in its employee benefit plans, programs or arrangements
(excluding any severance plans or policies) in which he
participated prior to the termination of his employment (but
only to the extent that Executive is not receiving
substantially the same benefits from another employer or such
continued participation is legally permissible or, if such
employee benefit involves insurance coverage, permitted by
the insurer) until greater of one (1) year or the end of the
then remaining Term of this Agreement unless Executive
delivers written notice to the Company to the effect that he
elects not to accept all or any portion of benefits under
such plans, programs or arrangements.
"Good Reason" shall mean: (i) Executive no longer reports solely to
the Board; (ii) Executive no longer being the most senior executive
officer of the Company; it being understood that for the purposes of this
clause (ii) none of the Chairman and Vice-chairman of the Board shall be
considered a senior executive officer of the Company; or (iii) the
relocation of the executive offices of the Company from the geographical
vicinity of Chicago, Illinois without the Executive's consent, which
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consent shall not be unreasonably withheld.
(c) Death. Executive's employment with the Company and its
subsidiaries shall automatically terminate upon his death, and the
following payments shall be made by the Company:
(1) his Base Salary, prorated through the date of death, plus any
accrued vacation, payable as soon as practicable after the
date of death;
(2) within 60 days of the end of the fiscal year during which
Executive's death occurs, the Company shall pay to
Executive's estate his Annual Bonus for the fiscal year in
which his death occurs (based upon the Company's level of
actual attainment of the Annual Target for such fiscal year),
prorated for the number of full months Executive was employed
during such fiscal year;
(3) any vested stock options granted by the Company to Executive
shall be exercisable as and to the extent provided in the
Bonus Plan or stock option grant agreement pursuant to which
they were issued;
(4) in the event Executive dies during any twelve-month period
during the Term, any unvested stock options granted under
Sections 6 and 7 which would have become vested if Executive
continued his employment during such twelve-month vesting
period shall vest pro rata for the number of full months
Executive was employed during such twelve-month period in
which his death occurs; and
(5) Executive's surviving spouse shall be entitled to participate
in the Company's group medical and dental plans for the
remainder of the Term on the same basis as active employees
of the Company (but only to the extent that she is not
receiving substantially the same benefits from her employer
or such continued participation is legally permissible or, if
such employee benefit involves insurance coverage, permitted
by the insurer).
(d) Disability. In the event that Executive has a Total Disability
(as defined below) during the Term, the employment of Executive with the
Company and its subsidiaries shall be terminated by reason of Total
Disability upon written notice by Company to Executive, and such
termination shall not be treated as a termination without Cause. The
Company shall pay to Executive:
(1) his Base Salary prorated through the date on which Total
Disability is deemed to have occurred, plus any accrued
vacation, payable on such date;
(2) within 60 days of the end of the fiscal year during which
such termination occurs, the Company shall pay to Executive
his Annual Bonus for the fiscal year in which his Total
Disability occurs (based upon the Company's level of actual
attainment of the Annual Target for such fiscal year),
prorated for the number of full months Executive was employed
during such fiscal year; provided, however, that the Company
shall only be required to pay such amounts to Executive to
the extent such amounts do not reduce the amount of long-term
disability payments, if any, to be received by Executive
pursuant to any long-term disability insurance policy or
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benefit plan of the Company.
(3) any vested stock options granted by the Company to Executive
shall be exercisable as and to the extent provided in the
Bonus Plan or stock option grant agreement pursuant to which
they were issued;
(4) in the event Executive has Total Disability during any
twelve-month period during the Term, any unvested stock
options granted under Sections 6 and 7 which would have
become vested if Executive continued his employment during
such twelve-month vesting period shall vest pro rata for the
number of full months Executive was employed during such
twelve-month period in which his Total Disability occurs; and
(5) the Company will continue to permit Executive to participate
in its employee benefit plans, programs or arrangements in
which he participated prior to the termination of his
employment (but only to the extent that Executive is not
receiving substantially the same benefits from another
employer or such continued participation is legally
permissible or, if such employee benefit involves insurance
coverage, permitted by the insurer) until the end of the then
remaining Term of this Agreement unless Executive delivers
written notice to the Company to the effect that he elects
not to accept all or any portion of benefits under such
plans, programs or arrangements.
"Total Disability" shall mean any mental or physical condition that
(i) prevents Executive from reasonably discharging his services and
employment duties hereunder, (ii) is attested to in writing by a physician
mutually acceptable to Executive and the Company, and (iii) continues, for
any one or related condition, during any period of three (3) consecutive
months or for a period aggregating six (6) months in any twelve-month
period. Total Disability shall be deemed to have occurred on the last day
of such applicable three- or six-month period.
(e) Delivery of a Release. The Company may, in its sole discretion,
condition any payment due to Executive pursuant to this Section 11 on
Executive's delivery to the Company of a written release, in form and
substance reasonably satisfactory to the Company, pursuant to which he
would release the Company from any claims or liabilities other than
amounts then owed to him pursuant to this Section 11, any Bonus Plan or
other employee benefit plan or arrangement, or any vested amount under any
compensation plan or arrangement of the Company.
12. Sale on Termination of Employment.
(a) Upon Executive ceasing to be employed by the Company pursuant to
this Agreement for any reason (a "Termination Event"), the Company may
elect, by delivering the notice required under Section 12(c), to require
(the "Repurchase Right") Executive to sell to the Company or its designee
all, but not less than all, of the shares of Common Stock owned by
Executive and vested stock options granted to Executive, subject to the
expiration or termination or other terms of such Common Stock and stock
options upon the occurrence of a Termination Event in accordance with any
grant agreement or stock option plan pursuant to which such Common Stock
options were granted by the Company to Executive, in accordance with
Section 12(f) (such shares of Common Stock and stock options are
hereinafter referred to as the "Repurchase Securities"). In the event
that a Termination Event occurs as a result of Executive's death, the
rights and obligations of Executive under this Section 12 shall be deemed
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to be the rights and obligations of his estate, and, if such event occurs,
all references to Executive in this Section 12 shall be deemed references
to a representative of Executive's estate.
(b) The "Repurchase Price" for each Repurchased Security that
constitutes Common Stock shall be equal to the fair market value of the
Common Stock as of the date of the Repurchase Notice determined by an
independent appraiser selected by the Board and reasonably acceptable to
Executive, which determination shall be made by evaluating the Company on
the basis of it being a stand-alone enterprise and without any reduction
as a result of the lack of liquidity of the Common Stock or the fact that
the Repurchased Securities may represent a minority interest in the
Company, and the "Repurchase Price" for each Repurchased Security that
constitutes any vested stock option granted to Executive shall be the
amount by which such fair market value per share of Common Stock subject
to such option exceeds the exercise price therefor; provided, however,
that, in the event shares of Common Stock are traded on a national stock
exchange or a public market shall exist for the Common Stock on a national
quotation system, the fair market value for the Common Stock shall be
based upon the average closing price per share for the 20 trading days
immediately preceding the date on which the Termination Event occurred.
(c) Upon the occurrence of any Termination Event, the Company or its
designee, as the case may be, may deliver written notice (the "Repurchase
Notice") to Executive within one (1) year after such occurrence,
specifying that the Company or its designees, as the case may be, elects
to exercise its Repurchase Right pursuant to this Section 12; provided,
however, that, if a Termination Event occurs during the initial Term
(without giving effect to any Renewal Term) as a result of the Company
terminating the employment of Executive hereunder without Cause, Executive
may request in writing that the Company defer, and the Company shall
defer, the exercise of its Repurchase Right until the first anniversary of
the date on which such termination without Cause occurred and, in such
case, the Repurchase Notice shall be deemed to have been delivered as of
the date of such first anniversary. If the Company or its designee elects
to exercise its Repurchase Right, the Company or its designee, as the case
may be shall specify the Repurchase Price for each Repurchased Security in
the Repurchase Notice and consummate the purchase of such Repurchased
Securities in accordance with Section 12(f).
(d) Subject to Sections 6 and 11 hereof, it is hereby understood and
agreed that the termination, expiration or cancellation of stock options
(including shares of Common Stock underlying such stock options) that have
not been exercised, to the extent permissible, as of the occurrence of any
Termination Event, shall be determined pursuant to any option grant
agreement or stock option plan pursuant to which such stock options were
granted by the Company to Executive.
(e) The aggregate amount of the Repurchase Price paid to Executive
for the Repurchased Securities shall be reduced by an amount equal to the
unpaid principal amount (plus accrued and unpaid interest) of any loan
made by the Company to Executive, or any other indebtedness of Executive
to the Company, and the principal amount of any such loan or indebtedness
shall be reduced by the amount of the Repurchase Price or, if applicable,
cancelled.
(f) If the Company or its designee elects to exercise the Repurchase
Right, the Repurchased Securities shall be repurchased on a date (the
"Repurchase Date") not later than 90 days after the date of the Repurchase
Notice. On the Repurchase Date, Executive shall deliver to the Company or
its designee the certificate or certificates, or the instrument or
instruments, as the case may be, representing shares of Common Stock and
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stock options owned or held, as the case may be, by Executive on such date
against delivery by the Company or its designee to Executive of the
Repurchase Price. All certificates or other instruments evidencing
Repurchased Securities shall be accompanied by instruments of transfer in
form and substance reasonably acceptable to the Company or its designee
and a written certificate, in form and substance reasonably acceptable to
the Company or its designee, pursuant to which Executive represents and
warrants that he is the record and beneficial owner of the Repurchased
Securities and has good and valid title to the Repurchased Securities,
free and clear of any and all liens, claims, assessments, pledges, options
or other legal and equitable encumbrances of any kind whatsoever (other
than pursuant to this Agreement). If Executive shall fail to deliver such
certificate or certificates, or such instrument or instruments, as the
case may be, and such written certification to the Company or its designee
within the terms required, the Company shall cause its books and records
to show that Repurchased Securities are subject to the provisions of this
Section 12 and that the Repurchased Securities, until transferred to the
Company or its designee, shall not be entitled to any proxy, dividend or
other rights from the date on which such certificate or certificates, or
instrument or instruments, as the case may be, and such written
certification should have been delivered to the Company or its designee,
as the case may be.
(g) The giving of the Repurchase Notice by the Company and the
receipt by Executive of such notice shall constitute an irrevocable
commitment by the Company and Executive to purchase and sell, as the case
may be, the Repurchased Securities referred to in such Notice.
13. Put Option.
(a) Upon the occurrence during the Term of any of the events set
forth in clauses (i) through (vi) below (each, a "Put Event"), Executive
may elect, by delivering the notice required under Section 13(c), to
require (the "Put Right") the Company to purchase all, but not less than
all, of the shares of Common Stock owned by Executive and vested stock
options granted to Executive, subject to the expiration or termination or
other terms of such Common Stock and stock options upon the occurrence of
a Put Event in accordance with, subject to Sections 6 and 11 hereof, any
Common Stock or grant agreement or stock option plan pursuant to which
such Common Stock or options were granted by the Company to Executive, in
accordance with Section 13(f) (such shares of Common Stock and stock
options are hereinafter referred to as the "Put Securities"):
(i) the termination by the Company of Executive's employment
hereunder without Cause;
(ii) the termination by Executive of his employment hereunder for
Good Reason;
(iii) the voluntary termination by Executive of his employment
hereunder at or after the expiration of the Term as in effect
at such time;
(iv) the voluntary termination by Executive of his employment
hereunder at or after his attaining age 62;
(v) the termination by the Company of Executive's employment
hereunder for Total Disability; or
(vi) the termination of Executive's employment as a result of his
death.
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In the event that a Put Event occurs as a result of the event specified
in clause (vi) above, the rights and obligations of Executive under this
Section 13 shall be deemed to be the rights and obligations of his estate,
and, if such event occurs, all references to Executive in this Section 13
shall be deemed references to a representative of Executive's estate.
(b) The "Put Price" for each Put Security that constitutes Common
Stock shall be equal to the fair market value of the Common Stock as of
the date of the Put Notice determined by an independent appraiser selected
by the Board and reasonably acceptable to Executive, which determination
shall be made by evaluating the Company on the basis of it being a
stand-alone enterprise and without any reduction as a result of the lack
of liquidity of the Common Stock or the fact that the Put Securities may
represent a minority interest in the Company, and the "Put Price" for each
Put Security that constitutes any vested stock option granted to Executive
shall be the amount by which such fair market value per share of Common
Stock subject to such option exceeds the exercise price therefor;
provided, however, that in the event shares of Common Stock are traded on
a national stock exchange or a public market shall exist for the Common
Stock on a national quotation system, the fair market value for the Common
Stock shall be based upon the average closing price for the Common Stock
for the 20 trading days immediately preceding the date on which the Put
Event occurred.
(c) Upon the occurrence of any Put Event, the Executive shall deliver
written notice (the "Put Notice") to the Company within one (1) year after
such occurrence, specifying that it elects to exercise its Put Right
pursuant to this Section 13; provided, however, that, if a Put Event
occurs during the initial Term (without giving effect to any Renewal Term)
as a result of the event specified in Section 13(a)(i), Executive may
deliver the Put Notice within two (2) years after the occurrence of such
Put Event. If Executive elects to exercise its Put Right, the Company or
its designee, as the case may be shall, within 60 days of its receipt of
the Put Notice, deliver to Executive written notice specifying the Put
Price for each Put Security and consummate the purchase of such Put
Securities in accordance with Section 13(f).
(d) Subject to Section 6 and 11 hereof, it is hereby understood and
agreed that the termination, expiration or cancellation of stock options
(including shares of Common Stock underlying such stock options) that have
not been exercised, to the extent permissible, as of the occurrence of any
Put Event, shall be determined pursuant to any option grant agreement or
stock option plan pursuant to which such stock options were granted by the
Company to Executive.
(e) The aggregate amount of the Put Price paid to Executive for the
Put Securities shall be reduced by an amount equal to the unpaid principal
amount (plus accrued and unpaid interest) of any loan made by the Company
to Executive, or any other indebtedness of Executive to the Company, and
the principal amount of any such loan or indebtedness shall be reduced by
the amount of the Put Price or, if applicable, cancelled.
(f) If Executive elects to exercise the Put Right, the Put Securities
shall be repurchased on a date (the "Put Repurchase Date") not later than
90 days after the date of the date of the Put Notice. On the Put
Repurchase Date, Executive shall deliver to the Company the certificate or
certificates, or the instrument or instruments, as the case may be,
representing shares of Common Stock and stock options owned or held, as
the case may be, by Executive on such date against delivery by the Company
to Executive of the Put Price. All certificates or other instruments
evidencing Put Securities shall be accompanied by instruments of transfer
in form and substance reasonably acceptable to the Company and a written
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certificate, in form and substance reasonably acceptable to the Company,
pursuant to which Executive represents and warrants that he is the record
and beneficial owner of the Put Securities and has good and valid title to
the Put Securities, free and clear of any and all liens, claims,
assessments, pledges, options or other legal and equitable encumbrances of
any kind whatsoever (other than pursuant to this Agreement).
(g) Notwithstanding anything in this Section 13 to the contrary, the
Company shall not be required to purchase Put Securities pursuant to any
exercise by the Executive of the Put Right to the extent that (i) the
purchase of such Put Securities (including the incurrence of any
indebtedness required to enable it to purchase such Put Securities) would
cause or constitute a breach or default (immediately or with notice or
lapse of time or both) of any material agreement or instrument with
respect to borrowed money in existence prior to such exercise and as to
which a consent of waiver thereunder for such purchase (or incurrence of
indebtedness) has not been obtained after reasonable best efforts by the
Company, (ii) the Board determines in its reasonable business judgment
that the purchase of such Put Securities would cause or be reasonably
likely to cause a material adverse financial effect on the Company, or
(iii) the purchase of such Put Securities would violate any law, statute,
order, writ, injunction, decree or rule promulgated or judgment entered,
by any federal, state, local or foreign court or governmental authority
applicable to the Company or any of its subsidiaries, and (iv) the Company
gives written notice to Executive, within 30 business days after the date
of the Put Notice, that it is not required to purchase the number of Put
Securities set forth in such notice by reason of clause (i), (ii) or (iii)
above and setting forth the facts relating thereto.
(h) The giving of the Put Notice by Executive and the receipt by the
Company of such notice shall constitute an irrevocable commitment by
Executive and the Company to sell and purchase, as the case may be, the
Put Securities referred to in such notice unless a notice is given by the
Company as provided in Section 13(g). If the Company is permitted
pursuant to Section 13(g) to purchase some but not all of the Put
Securities as to which the Executive has exercised its Executive's rights
under Section 13(a), the Executive may, in his sole discretion, by written
notice (a "Put Withdrawal Notice") given to the Company within 10 business
days of its receipt of the notice from the Company (the "Put Withdrawal
Period") withdraw the exercise of such right, in which event it shall not
be required to sell any Put Securities to the Company. If Executive does
not give a Put Withdrawal Notice within the Put Withdrawal Period,
Executive shall be obligated to sell, and the Company shall be obligated
to purchase, all Put Securities that the Company is not prohibited from
purchasing pursuant to Section 13(g).
(i) The Put Right shall expire and be of not force or effect
following the consummation of a bona fide public distribution of shares of
Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended.
14. Tag-Along Rights.
(a) In the event of any proposed Transfer (as hereinafter defined) by
Greenmarine Holdings LLC (hereinafter for purposes of this Section and
Section 15, the "Seller") of its shares of Common Stock (or any portion
thereof) to any person or entity (such person or entity being hereinafter
referred to as the "Proposed Purchaser"), other than to a Permitted
Transferee (as hereinafter defined) or in a bona fide public distribution
of shares of Common Stock pursuant to an effective registration statement
under the Securities Act, Executive shall have the irrevocable right, but
not the obligation (the "Tag-Along Right"), to require the Proposed
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Purchaser to purchase from him a number of shares of Common Stock equal to
the number of shares of Common Stock beneficially owned by Executive
multiplied by a fraction the numerator of which is the number of shares of
Common Stock to be sold in such proposed Transfer by the Seller and the
denominator of which is the total number of shares of Common Stock
beneficially owned by the Seller (collectively, the "Tag-Along Shares").
The Seller shall give written notice (the "Initial Tag-Along Notice") to
Executive at least twenty (20) days prior to the date of the proposed
Transfer stating:
(i) the proposed amount of consideration and terms and conditions
of payment offered by the Proposed Purchaser (if the proposed
consideration is not cash, the Initial Tag-Along Notice shall
describe the terms of the proposed consideration) and any
other material terms and conditions of the Proposed
Purchaser's offer;
(ii) the number of shares of Common Stock proposed to be
Transferred by the Seller; and
(iii) that the Proposed Purchaser has been informed of the
Tag-Along Right and has agreed to purchase shares of Common
Stock in accordance with the terms hereof.
The Tag-Along Right shall be exercised by Executive by giving written
notice to the Company ("Tag-Along Notice") with a copy to the Seller
within five (5) days following receipt of the Initial Tag-Along Notice,
indicating its election to exercise the Tag-Along Right. The Tag-Along
Notice shall state the amount of shares of Common Stock that Executive
proposes to include in such transfer to the Proposed Purchaser. Failure
by Executive to deliver such Tag-Along Notice within such 5-day period
shall be deemed an election by Executive not to sell pursuant to the
Tag-Along Notice. The closing with respect to any sale to a Proposed
Purchaser pursuant to this Section 14 shall be held at the time and place
specified in the Tag-Along Notice but in any event within sixty (60) days
of the date the Tag-Along Notice is delivered to Executive.
(b) In the event that the Proposed Purchaser does not purchase the
Tag-Along Shares from Executive on the same terms and conditions as
purchased from the Seller, then the Seller making such Transfer shall
purchase on such terms and conditions such Tag-Along Shares if the
Transfer occurs.
(c) To the extent Executive is a party to the sale to the Proposed
Purchaser, Executive shall arrange for payment directly by the Proposed
Purchaser, upon delivery of an appropriate assignment in form and
substance reasonably satisfactory to the Proposed Purchaser, which
assignment shall be made free and clear of all liens, claims and
encumbrances except as provided by this Agreement or as otherwise agreed
to by the Proposed Purchaser.
(d) The provisions of this Section 14 shall automatically terminate
and be of no force and effect upon the consummation of a bona fide public
distribution of shares of Common Stock pursuant to an effective
registration statement under the Securities Act.
(e) "Transfer" means any sale, assignment, transfer, offer, pledge,
exchange, hypothecation or other disposition, and, when referring to
shares of Common Stock, means the Transfer of such shares of Common Stock
whether or record, beneficially, by participation or otherwise; provided,
however, that a pledge or hypothecation of shares of Common Stock by
Greenmarine Holdings LLC shall not be considered a Transfer.
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(f) "Permitted Transferee" means any member of Greenmarine Holdings
LLC or any "affiliate" (as such term is defined in the Securities Exchange
Act of 1934, as amended) of any such member.
15. Take-Along Rights.
(a) If Seller proposes to Transfer shares of Common Stock which
represent, in the aggregate, not less than 50% of the shares of Common
Stock owned by the Seller to any Proposed Purchaser other than a Permitted
Transferee, the Seller shall have the irrevocable and exclusive right, but
not the obligation (the "Take-Along Right"), to require Executive to sell
to the Proposed Purchaser a number of shares of Common Stock equal to the
number of shares of Common Stock beneficially owned by Executive
multiplied by a fraction (not greater than one) the numerator of which is
the number of shares of Common Stock to be sold in such proposed Transfer
by the Seller and the denominator of which is the total number of shares
beneficially owned by the Seller (collectively, the "Take-Along Shares").
The Seller shall give written notice (the "Initial Take-Along Notice") to
Executive at least twenty (20) days prior to the date of the proposed
Transfer, stating:
(i) the proposed amount of consideration and terms and conditions
of payment offered by such Proposed Purchaser (if the
proposed consideration is not cash, the Initial Take-Along
Notice shall describe the terms of the proposed
consideration) and any other material terms and conditions of
the Proposed Purchaser's offer;
(ii) the number of shares of Common Stock proposed to be
Transferred by the Seller; and
(iii) that the Seller is exercising the Take-Along Right in
connection with the proposed Transfer.
(b) Within ten (10) days following receipt of the Take-Along Notice,
Executive shall deliver to the Company and the Seller such assignments,
certificates and other documentation with respect to the as the Seller and
the Proposed Purchaser shall reasonably request. In the event Executive
shall fail to deliver such certificates or such other documents to the
Seller, subject to subsection (d) below, the Company shall cause the books
and records of the Company to show that such Take-Along Shares shall be
transferred only to such Proposed Purchaser upon surrender of such shares
for Transfer by Executive.
(c) The Seller shall arrange for payment directly by the Proposed
Purchaser to Executive, upon delivery of an appropriate assignment in form
and substance reasonably satisfactory to the Proposed Purchaser, which
assignment shall be made free and clear of all liens, claims and
encumbrances except as otherwise agreed to by such Proposed Purchaser.
(d) If at the end of 60 days following the date on which a Take-Along
Notice was given, the sale of shares of Common Stock by the Seller and the
sale of the Take-Along Shares have not been completed in accordance with
the proposed terms, then the Seller shall promptly return to Executive all
such assignments, certificates and other documentation previously
delivered to them with respect to the Take-Along Shares, and provisions
relating to the shares of Common Stock held by Executive shall again be in
effect.
16. Restrictions on Transfer. During the Term and the Non-Compete Period
(as defined in Section 19), Executive shall not Transfer any shares of Common
Stock without the prior written consent of the Company, except as provided for
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in and in accordance with this Agreement.
17. Attorney's Fees. The Company shall pay reasonable attorneys' fees
and expenses incurred by Executive in connection with the negotiation and
preparation of this Agreement up to a maximum of $10,000. If Executive
commences a cause of action in accordance with Section 25 hereof to enforce
any provision of or resolve any dispute arising under this Agreement, or if
the Company commences any such cause of action, the Company shall reimburse
Executive for reasonable costs (including reasonable attorney's fees) incurred
by Executive to the extent, but only to the extent, Executive prevails in any
such action.
18. Confidentiality; Ownership.
(a) Executive agrees that he shall forever keep secret and retain in
strictest confidence and not divulge, disclose, discuss, copy or otherwise
use or suffer to be used in any manner, except in connection with the
business of the Company and the businesses of any of its subsidiaries or
affiliates, any "Protected Information" in any "Unauthorized" manner or
for any Unauthorized purpose (as such terms are hereinafter defined).
(i) "Protected Information" means trade secrets, confidential or
proprietary information and all other knowledge, know-how,
information, documents or materials owned, developed or
possessed by the Company or any of its subsidiaries or
affiliates, whether in tangible or intangible form, pertaining
to the business of the Company or the businesses of any of its
subsidiaries or affiliates, including, but not limited to,
research and development operations, systems, data bases,
computer programs and software, designs, models, operating
procedures, knowledge of the organization, products (including
prices, costs, sales or content), processes, formulas,
techniques, machinery, contracts, financial information or
measures, business methods, business plans, details of
consultant contracts, new personnel acquisition plans,
business acquisition plans, customer lists, business
relationships and other information owned, developed or
possessed by the Company or its subsidiaries or affiliates,
except as required in the course of performing duties
hereunder; provided that Protected Information shall not
include information that becomes generally known to the public
or the trade without violation of this Section 18.
(ii) "Unauthorized" means: (A) in contravention of the policies
or procedures of the Company or any of its subsidiaries or
affiliates; (B) otherwise inconsistent with the measures taken
by the Company or any of its subsidiaries or affiliates to
protect their interests in any Protected Information; (C) in
contravention of any lawful instruction or directive, either
written or oral, of an employee of the Company or any of its
subsidiaries or affiliates empowered to issue such instruction
or directive; or (D) in contravention of any duty existing
under law or contract. Notwithstanding anything to the
contrary contained in this Section 18, Executive may disclose
any Protected Information to the extent required by court
order or decree or by the rules and regulations of a
governmental agency or as otherwise required by law; provided
that Executive shall provide the Company with prompt notice of
such required disclosure in advance thereof so that the
Company may seek an appropriate protective order in respect of
such required disclosure.
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(b) Executive acknowledges that all developments, including, without
limitation, inventions (patentable or otherwise), discoveries, formulas,
improvements, patents, trade secrets, designs, reports, computer software,
flow charts and diagrams, procedures, data, documentation, ideas and
writings and applications thereof relating to the business or planned
business of the Company or any of its subsidiaries or affiliates that,
alone or jointly with others, Executive may conceive, create, make,
develop, reduce to practice or acquire during the Term (collectively, the
"Developments") are works made for hire and shall remain the sole and
exclusive property of the Company and Executive hereby assigns to the
Company, in partial consideration of his Base Salary, all of his right,
title and interest in and to all such Developments. Executive shall
promptly and fully disclose all future material Developments to the Board
and, at any time upon request and at the expense of the Company, shall
execute, acknowledge and deliver to the Company all instruments that the
Company shall prepare, give evidence and take all other actions that are
necessary or desirable in the reasonable opinion of the Company to enable
the Company to file and prosecute applications for and to acquire,
maintain and enforce all letters, patent and trademark registrations or
copyrights covering the Developments in all countries in which the same
are deemed necessary by the Company. All memoranda, notes, lists,
drawings, records, files, computer tapes, programs, software, source and
programming narratives and other documentation (and all copies thereof)
made or compiled by Executive or made available to Executive concerning
the Developments or otherwise concerning the business or planned business
of the Company or any of its subsidiaries or affiliates shall be the
property of the Company or such subsidiaries or affiliates and shall be
delivered to the Company or such subsidiaries or affiliates promptly upon
the expiration or termination of the Term.
(c) The provisions of this Section 18 shall, without any limitation
as to time, survive the expiration or termination of Executive's
employment hereunder, irrespective of the reason for any termination.
19. Covenant Not to Compete. Executive agrees that during the Term and
for a period of one (1) year commencing upon the expiration or termination of
Executive's employment hereunder (the "Non-Compete Period"), Executive shall
not, directly or indirectly, without the prior written consent of the Company:
(a) solicit, entice, persuade or induce any employee, consultant,
agent or independent contractor of the Company or of any of its
subsidiaries or affiliates to terminate his or employment with the Company
or such subsidiary or affiliate, to become employed by any person, firm or
corporation other than the Company or such subsidiary or affiliate or
approach any such employee, consultant, agent or independent contractor
for any of the foregoing purposes, or authorize or assist in the taking of
any such actions by any third party (for purposes of this Section 19(a),
the terms "employee," "consultant," "agent" and "independent contractor"
shall include any persons with such status at any time during the six (6)
months preceding any solicitation in question); or
(b) directly or indirectly engage, participate, or make any financial
investment in, or become employed by or render consulting, advisory or
other services to or for any person, firm, corporation or other business
enterprise, wherever located, which is engaged, directly or indirectly, in
competition with the Company's business or the businesses of its
subsidiaries or affiliates as conducted or any business proposed to be
conducted at the time of the expiration or termination of Executive's
employment hereunder; provided, however, that nothing in this Section 19
shall be construed to preclude Executive from making any investments in
the securities of any business enterprise whether or not engaged in
competition with the Company or any of its subsidiaries or affiliates, to
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the extent that such securities are actively traded on a national
securities exchange or in the over-the-counter market in the United States
or on any foreign securities exchange and represent, at the time of
acquisition, not more than 3% of the aggregate voting power of such
business enterprise.
20. Specific Performance. Executive acknowledges that the services to be
rendered by Executive are of a special, unique and extraordinary character
and, in connection with such services, Executive will have access to
confidential information vital to the Company's business and the businesses of
its subsidiaries and affiliates. By reason of this, Executive consents and
agrees that if Executive violates any of the provisions of Sections 18 or 19
hereof, the Company and its subsidiaries and affiliates would sustain
irreparable injury and that monetary damages would not provide adequate remedy
to the Company and that the Company shall be entitled to have Section 18 or 19
hereof specifically enforced by any court having equity jurisdiction. Nothing
contained herein shall be construed as prohibiting the Company or any of its
subsidiaries or affiliates from pursuing any other remedies available to it
for such breach or threatened breach, including the recovery of damages from
Executive.
21. Resignation. Upon the termination of employment with the Company for
any reason, Executive shall be deemed, without the need to take further
action, to have resigned his position as an officer and a director of the
Company and any subsidiary thereof and as a member of any committee of any
such board of directors, effective on the date of termination.
22. Assignment. The obligations of Executive may not be delegated and,
except with respect to the designation of beneficiaries in connection with any
of the benefits payable to Executive hereunder, Executive may not, without the
Company's written consent thereto, assign, transfer, convey, pledge, encumber,
hypothecate or otherwise dispose of this Agreement or any interest herein.
Any such attempted delegation or disposition shall be null and void and
without effect. The Company and the Executive agree that this Agreement and
all of the Company's rights and obligations hereunder may be assigned or
transferred by the Company to and shall be assumed by and be binding upon any
successor to the Company. The term "successor" means, with respect to the
Company or any of its subsidiaries, any corporation or other business entity
which, by merger, consolidation, purchase of the assets or otherwise acquires
all or a material part of the assets of the Company.
23. Stockholder Approval. The Company shall use its best efforts to
obtain stockholder approval of this Agreement within 90 days hereafter for
purposes of Section 280G(5)(A)(ii) of the Internal Revenue Code of 1986, as
amended, and Executive acknowledges and agrees that this Agreement shall not
be effective unless and until such stockholder approval is obtained. However,
if such stockholder approval is obtained, this Agreement shall be effective as
of the Effective Date.
24. Amendment. This Agreement may not be altered, modified or amended
except by written instrument signed by each of the Company and Executive.
25. Governing Law; Arbitration.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
(b) In the event of disputes between the parties with respect to the
terms and conditions of this Agreement, such disputes shall be resolved by
and through an arbitration proceeding to be conducted under the auspices
of the American Arbitration Association (or any like organization
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successor thereto) in Chicago, Illinois. Such arbitration proceeding
shall be conducted pursuant to the commercial arbitration rules (formal or
informal) of the American Arbitration Association in as expedited a manner
as is then permitted by such rules (the "Arbitration"). Both the
foregoing agreement of the parties to arbitrate any and all such claims,
and the results, determination, finding, judgment and/or award rendered
through such Arbitration, shall be final and binding on the parties hereto
and may be specifically enforced by legal proceedings.
Such Arbitration may be initiated by written notice from either party
to the other which shall be a compulsory and binding proceeding on each
party. The Arbitration shall be conducted by an arbitrator selected in
accordance with the procedures of the American Arbitration Association.
Time is of the essence of this arbitration procedure, and the arbitrator
shall be instructed and required to render his or her decision within
thirty (30) days following completion of the Arbitration.
Any action to compel arbitration hereunder shall be brought in the
State Court of Illinois sitting in Cook County, Illinois.
26. Deductions. The Company shall deduct from any compensation payable
to Executive the sums which it is required by applicable law to deduct,
including, but not limited to, federal and, if applicable, state withholding
taxes, social security taxes and state disability insurance.
27. Expenses. The Company shall reimburse Executive for all reasonable
expenses properly incurred by him in connection with the performance of his
duties hereunder, provided that proper vouchers are submitted to the Company
by Executive evidencing such expenses and the purposes for which the same were
incurred.
28. Entire Agreement. This Agreement (together with the agreements and
instruments to be executed as contemplated hereby, the form of which are
attached hereto as exhibits) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, understandings and arrangements, both oral and written,
between the parties hereto with respect to such subject matter.
29. No Conflict. Executive represents and warrants that the execution,
delivery and performance of this Agreement by Executive will not violate any
agreement, undertaking or covenant to which Executive is party or is otherwise
bound. Executive represents and warrants that he does not possess any
confidential or proprietary documents or other written materials from
Brunswick Corporation.
30. Notices. Any notice to be given hereunder by either party to the
other shall be sufficiently given if in writing and delivered in person,
transmitted by telecopier or sent by registered or certified mail (postage
prepaid and return receipt requested) or recognized overnight delivery service
(postage prepaid) addressed as follows, or to such other address or telecopier
number as either party may notify to the other in accordance with this
paragraph:
(i) if to the Company:
Outboard Marine Corporation
100 Sea-Horse Drive
Waukegan, Illinois 60085
Telecopier No: (847) 689-6006
Attn: General Counsel
with a copy to:
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Greenmarine Holdings LLC
277 Park Avenue
27th Floor
New York, NY 10172
Telecopier No.: (212) 350-5253
Attn: Gary K. Duberstein
(ii) if to Employee:
David D. Jones, Jr.
29561 N. Waukegan, #210
Lake Bluff, IL 50044
with a copy to:
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606-6473
Telecopier No. (312) 258-5600
Attn: Lawrence Block, P.C.
A notice will be effective (i) if delivered in person or by overnight courier,
on the business day it is delivered, (ii) if transmitted by telecopier, on the
business day of actual confirmed receipt by the addressee thereof, and (iii)
if sent by registered or certified mail, three (3) business days after
dispatch.
31. Counterparts. This Agreement may be executed in counterparts, each
of which, when so executed, shall be deemed an original and all of which, when
taken together, shall constitute one and the same agreement.
32. Section Headings. The section headings contained in this Agreement
are for reference purpose only and shall not affect in any way the meaning or
interpretation of this Agreement.
33. Survival of Provisions. The provisions of Sections 11, 13, 14, 17,
18, 19, 20, 21 and 25 shall survive the termination or expiration of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement as of the day and year first above written.
OUTBOARD MARINE CORPORATION
By: ALFRED D. KINGSLEY
------------------
Name: Alfred D. Kingsley
Title: Chairman of the Board
DAVID D. JONES, JR.
-------------------
David D. Jones, Jr.
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EXHIBIT 10 (G)
OUTBOARD MARINE CORPORATION
PERSONAL REWARDS and OPPORTUNITIES PROGRAM
I. Purposes
The Personal Rewards and Opportunities Program ("PROP") is designed to
recognize and reward, through cash bonuses, stock options and other
equity-based awards, the personal contributions and achievement of key
employees, both individually and as members of the management and key employee
team, in building the value of OUTBOARD MARINE CORPORATION (the "Company").
PROP is the start of an exciting, new partnership between the Company's key
employees and shareholders to ambitiously and dramatically grow and develop
the value of the underlying businesses of the Company, and to mutually share
in the success of those efforts.
Prior Incentive Plans. PROP replaces the Executive Bonus Plan ("EBP") and
OMC 1994 Long Term Incentive Plan ("LTIP") for those key employees who are
entitled to participate in PROP, and such key employees shall not continue
their participation in the EBP and LTIP. In addition, awards of phantom
stock will be issued under PROP as a replacement for outstanding phantom
stock awards made under the LTIP.
II. Basic Structure of PROP
PROP is intended to recognize and reward key employees based on their
individual performance and the performance of the Company and/or business unit
for which they perform services by providing (i) annual bonuses and (ii)
grants from time to time of stock options ("Options"), shares of restricted
stock ("Restricted Shares"), phantom shares of stock ("Units") or stock
appreciation rights ("Rights").
The amount of annual bonus payable for any fiscal year to any key employee
participating in PROP shall be determined by the Committee (as defined in
accordance with Article XIV hereof) based on the achievement of the strategic
business objectives and performance targets established for such participant
at or shortly after the beginning of such fiscal year or, if later, when such
key employee becomes a participant. However, the Committee reserves the right
to designate all or a portion of any participant's opportunity to receive an
annual bonus to be determined at its sole discretion and without reference to
any business objectives or performance targets. Annual bonuses may be paid in
cash or a combination of cash and Options, Restricted Shares or Rights, as
determined by the Committee in its discretion at the time of payment. In
addition to the opportunity to earn an annual bonus, key employees may be
eligible to be separately awarded Options, Restricted Shares, Units and/or
Rights (collectively, "Equity Awards") based on their expected contributions
to the growth and success of the Company and its subsidiaries
("Subsidiaries"), as determined by the Committee in its sole discretion.
III. Eligibility
All employees of the Company and its Subsidiaries may become participants
in PROP. In addition, members of the Board of Directors of the Company (the
"Board") who are not employees of the Company or any of its Subsidiaries
("Nonemployee Directors") and independent contractors who render services to
the Company or any of its Subsidiaries may become participants in PROP.
However, the Committee, in its sole discretion, shall designate in writing
from time to time the employees, Nonemployee Directors, and independent
contractors who shall participate in PROP and be eligible to earn an annual
bonus under PROP or be granted an Equity Award under PROP for any fiscal year,
subject to any conditions of eligibility as the Committee may determine,
including, but not limited to, the employee's agreement to abide by the terms
of PROP. A person's eligibility to earn an annual bonus under PROP for any
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fiscal year does not guarantee such person's eligibility to be granted Equity
Awards under PROP for such fiscal year, nor does a person's eligibility to be
granted Equity Awards under PROP for any fiscal year guarantee such person's
eligibility to earn an annual bonus under PROP for such fiscal year. In
addition, a person's eligibility to (i) earn an annual bonus under PROP for
any fiscal year and/or (ii) be granted Equity Awards under PROP for any fiscal
year does not guarantee such person's eligibility to (x) earn an annual bonus
under PROP for any other fiscal year and/or (y) be granted Equity Awards under
PROP for any other fiscal year.
IV. Annual Bonuses
With respect to each fiscal year of the Company, key employees selected in
writing by the Committee, in its sole discretion, shall be eligible to receive
an annual bonus for such fiscal year payable by the Company or, if primarily
employed by a Subsidiary, by the Subsidiary. The target amount of annual
bonus which might be paid to any key employee with respect to any fiscal year
of the Company shall be established at or shortly after the beginning of such
year or, if later, when such key employee is selected as a participant. A
participant may receive an annual bonus greater than or less than his or her
target amount of an annual bonus depending upon the achievement of strategic
business objectives and performance targets, if any, established by the
Committee and applicable to the participant. The business objectives and
performance targets applicable to any participant may relate to the Company as
a whole, the business unit for which such participant performs services,
and/or such participant individually, and such objectives and targets shall be
communicated to the participant in writing. Annual bonuses may be paid in
cash or a combination of cash and Equity Awards, as determined by the
Committee in its sole discretion.
V. Equity Awards Generally
(a) Grants. The Committee shall determine, in its sole discretion, the
type, amount and other terms and conditions of any grant of an Equity Award
under PROP. All grants of an Equity Awards shall be made in writing pursuant
to an agreement ("Grant Agreement") signed by the Company and the participant
to whom the Equity Award is made, and no Equity Award shall be valid or
enforceable unless set forth in a Grant Agreement so signed.
Except as otherwise provided in and subject to the express provisions of
PROP, the Company may, from time to time during the period beginning on
December 1, 1997 (the "Effective Date") and ending on November 30, 2007 (the
"Termination Date"), grant Equity Awards under PROP.
(b) Vesting. The Committee shall set forth, in the Grant Agreement
pertaining to each Equity Award to any participant, the terms, conditions and
limitations upon satisfaction of which all or a portion of such Equity Award
shall become "vested" and thereby non-forfeitable except upon such
participant's termination for Cause (as defined in PROP or such Grant
Agreement) or, if provided in the Grant Agreement between the Company and the
participant, a breach of a written agreement between the Company and the
participant. The Committee may, in its sole discretion, accelerate vesting,
conditionally or unconditionally, of all or any portion of any Equity Award.
The unvested portion of any Equity Award shall be forfeited and cancelled in
accordance with the terms of the applicable Grant Agreement or, if not set
forth clearly in Grant Agreement, upon the participant's termination of
employment for any reason.
(c) Exercisability. The Committee shall set forth in the Grant Agreement
pertaining to any Equity Award any additional terms, conditions and
limitations pursuant to which the value of the vested portion of any Equity
Award may be realized at the election of the participant to whom the Equity
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Award was granted. A participant may realize value with respect to the vested
portion of an Equity Award:
(1) in the case of an Option, when the Option shall be exercisable;
(2) in the case of Restricted Shares, when the Restricted Shares shall
be redeemable by the Company or freely transferable (if at all) at
the participant's election;
(3) in the case of Units, when the participant credited with a Unit
terminates employment or when the Unit shall be redeemable by the
Company; or
(4) in the case of Rights, when the Rights shall be redeemable by the
Company.
The Committee may, in its sole discretion, waive terms, conditions and
limitations pertaining to any Equity Award so as to accelerate, conditionally
or unconditionally, the time at which the value of the vested portion of all
or any portion of such Equity Award may be realized. A participant shall not
be entitled to realize value on the unvested portion of an Equity Award, and
the unvested portion of an Equity Award shall be forfeited and cancelled upon
the participant's termination of employment for any reason.
VI. Options
(a) In General. Options granted under PROP are intended to be either
incentive stock options ("Incentive Options") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or options
that do not meet the requirements for Incentive Options ("Non-Qualified
Options"), but the Company makes no warranty as to the qualification of any
Option as an Incentive Option. As used in PROP, the term "parent corporation"
and "subsidiary corporation" shall mean a corporation coming within the
definition of such terms contained in Sections 424(e) and 424(f) of the Code,
respectively. In addition, no Incentive Option shall be issued to a
participant in tandem with a Non-Qualified Option issued to such participant
in accordance with U.S. Department of the Treasury regulation Section
14a.422A-1, Q/A-39.
(b) Exercise Price. The price of each share of common stock of the Company
("Stock") purchasable under any Non-Qualified Option granted hereunder shall
be such amount as the Committee shall, in its sole discretion, deem
appropriate. The price of each share of Stock purchasable under any Incentive
Option granted hereunder shall be such amount as the Committee shall, in its
good faith judgment, determine to be not less than one hundred percent (100%)
of the fair market value per share of Stock on the date the Option is granted.
The determination by the Committee of the fair market value per share of Stock
shall be final and binding on all participants and other persons.
Upon the exercise of an Option granted hereunder, the Company shall cause
the purchased shares of Stock to be issued only when it shall have received
the full purchase price for the shares in cash; provided, however, that in
lieu of cash, the holder of an Option may, if the terms of such Option so
provide and to the extent permitted by applicable law, exercise an Option (i)
in whole or in part, by delivering to the Company shares of Stock (in proper
form for transfer and accompanied by all requisite stock transfer tax stamps
or cash in lieu thereof) owned by such holder having a fair market value
equal to the cash exercise price applicable to that portion of the Option
being exercised by the delivery of such shares, the fair market value of the
Stock so delivered to be determined as of the date immediately preceding the
date on which the Option is exercised, or as may be required in order to
comply with or to conform to the requirements of any applicable laws or
regulations, or
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(ii) by delivering to the Company an executed promissory note for the
remainder of the exercise price on such terms and conditions as the Committee
shall determine, at the time of grant, in its sole discretion; provided,
however, that (A) the principal amount of such note shall not exceed ninety
percent (90%) (or such lesser percentage as would be permitted by applicable
margin regulations) of the aggregate purchase price of the shares of Stock
then being purchased pursuant to the exercise of such Option and (B) payment
for shares of Stock with a promissory note is permissible under applicable
law. In addition, the Committee may prescribe any other method of paying the
exercise price that it determines to be consistent with applicable law and the
purpose of PROP, including, without limitation, in lieu of the exercise of an
Option by delivery of shares of Stock then owned by the Option holder,
providing the Company with a notarized statement attesting to the number of
shares of Stock owned by such Option holder, where upon verification by the
Company, the Company would issue to such Option holder only the number of
incremental shares of Stock to which the Option holder is entitled upon
exercise of the Option. In determining which methods an Option holder may
utilize to pay the exercise price, the Committee may consider such factors as
it determines are appropriate; provided, however, that with respect to
Incentive Options, all such discretionary determinations by the Committee
shall be made at the time of grant and specified in the Grant Agreement.
(c) Exercisability. Any Option granted hereunder shall be exercisable at
such times, in such amounts and during such period or periods as the Committee
shall determine at the date of the grant of such Option; provided, however,
that an Incentive Option shall not be exercisable after the expiration of ten
(10) years from the date such Option is granted; provided, further, that in
the case of an Incentive Option granted to a person who, at the time such
Incentive Option is granted, owns stock of the Company or any subsidiary
corporation or parent corporation of the Company possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or of any subsidiary corporation or parent corporation of the
Company, such Incentive Option shall not be exercisable after the expiration
of five (5) years from the date such Incentive Option is granted. To the
extent that an Option is not exercised within the period of exercisability
specified therein, it shall expire as to the then unexercised part.
Subject to the limitations on exercise under PROP, Options granted under
PROP shall be exercised by the optionee as to all or part of the shares of
Stock covered thereby by the giving of written notice of the exercise thereof
to the Corporate Secretary of the Company at the principal business office of
the Company, specifying the number of shares of Stock to be purchased and
specifying a business day not more than ten (10) days from the date such
notice is given for the payment of the purchase price against delivery of the
shares of Stock being purchased. Subject to the terms of Articles XVIII and
XIX hereof, the Company shall cause certificates for the shares so purchased
to be delivered at the principal business office of the Company, against
payment of the full purchase price, on the date specified in the notice of
exercise.
Except to the extent otherwise provided under the Code (as defined below),
to the extent that the aggregate fair market value of the Stock for which
Incentive Options (under all stock option plans of the Company and of any
parent corporation or subsidiary corporation of the Company) are exercisable
for the first time by an employee during any calendar year exceeds one hundred
thousand dollars ($100,000), such Options shall be treated as Non-Qualified
Options. For purposes of this limitation, (a) the fair market value of the
Stock is determined as of the time the Option is granted, (b) the limitation
will be applied by taking into account Options in the order in which they were
granted, and (c) Incentive Options granted before 1987 shall not be taken into
account.
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In no event shall an Option granted hereunder be exercised for a fraction
of a Share or for less than one hundred (100) shares (unless the number
purchased is the total balance for which the Option is then exercisable).
A person entitled to receive shares of Stock upon the exercise of an Option
shall not have the rights of a stockholder with respect to such shares of
Stock until the date of issuance of a stock certificate to him or her for such
shares of Stock; provided, however, that until such stock certificate is
issued, any holder of an Option using previously acquired shares of Stock as
payment of an option exercise price shall continue to have the rights of a
stockholder with respect to such previously acquired shares.
V11. Restricted Shares
The Committee is authorized to grant awards of Restricted Shares subject to
such terms, conditions, restrictions and/or limitations, if any, as the
Committee deems appropriate, including, but not limited to, restrictions on
transferability and continued employment.
VIII. Units
The Committee may award to any participant one or more Units in such amount
and upon such terms, conditions and limitations as the Committee may, in its
sole discretion, determine.
Each Unit shall represent an unsecured obligation of the Company to pay an
amount having the equivalent value of one share of Stock.
A Unit shall entitle the holder upon exercise thereof to receive from the
Company, upon a written request filed with the Corporate Secretary of the
Company at its principal offices as of a date permitted under the Grant
Agreement pertaining to such Unit (the "Request"), a number of shares of Stock
(with or without restrictions as to substantial risk of forfeiture and
transferability, as determined by the Committee in its sole discretion at the
time of grant), an amount of cash, or any combination of shares of Stock and
cash, as specified in the Request (but subject to the approval of the
Committee, in its sole discretion, at any time up to and including the time of
payment, as to the making of any cash payment), having an aggregate fair
market value equal to the fair market value, on the day of such Request, of
one share of Stock.
For all purposes of this Article VIII, the fair market value of the Stock
shall be determined in accordance with the principles set forth in Article X
hereof.
IX. Stock Appreciation Rights
The Committee may award to any participant one or more Rights in such
amount and upon such terms, conditions and limitations as the Committee may,
in its sole discretion, determine.
The exercise price of a Right granted alone shall be determined by the
Committee but shall not be less than one hundred percent (100%) of the fair
market value of one share of Stock on the date of grant of such Right. A
Right granted simultaneously with or subsequent to the grant of an Option and
in conjunction therewith or in the alternative thereto shall have the same
exercise price as the related Option, shall be transferable only upon the same
terms and conditions as the related Option, and shall be exercisable only to
the same extent as the related Option; provided, however, that a Right, by its
terms, shall be exercisable only when the fair market value of the shares of
Stock subject to the Right and related Option exceeds the exercise price
thereof.
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Upon exercise of a Right granted simultaneously with or subsequent to an
Option and in the alternative thereto, the number of shares of Stock for which
the related Option shall be exercisable shall be reduced by the number of
shares of Stock for which the Right shall have been exercised. The number of
shares of Stock for which a Right shall be exercisable shall be reduced upon
any exercise of a related Option by the number of shares of Stock for which
such Option shall have been exercised.
A Right shall entitle the holder upon exercise thereof to receive from the
Company, upon a written request filed with the Secretary of the Company at its
principal offices (the "Request"), a number of shares of Stock (with or
without restrictions as to substantial risk of forfeiture and transferability,
as determined by the Committee in its sole discretion at the time of grant),
an amount of cash, or any combination of shares of Stock and cash, as
specified in the Request (but subject to the approval of the Committee, in its
sole discretion, at any time up to and including the time of payment, as to
the making of any cash payment), having an aggregate fair market value equal
to the product of (i) the excess of the fair market value, on the day of such
Request, of one share of Stock over the exercise price per share of Stock
specified in such Right or its related Option, multiplied by (b) the number of
shares of Stock for which such Right shall be exercised; provided, however,
that the Committee, in its discretion, may impose a maximum limitation on the
amount of cash, the fair market value of shares of Stock, or a combination
thereof, which may be received by a holder upon exercise of a Right.
For all purposes of this Article IX, the fair market value of the Stock
shall be determined in accordance with the principles set forth in Article X
hereof.
X. Fair Market Value of a Share of Stock
If the Stock is listed on a national securities exchange in the United
States on any date on which the fair market value per share of Stock is to be
determined, the fair market value per share of Stock shall be deemed to be the
closing quotation at which the Stock is sold on such exchange on such date or
if the Stock is not traded on such date or such exchange is not open for
business on such date, on the closest preceding date on which such exchange
shall have been open for business and the Stock was traded. If the Stock is
listed on more than one national securities exchange in the United States on
the date any on which the fair market value per share of Stock is to be
determined, the Committee shall determine which national securities exchange
shall be used for the purpose of determining the fair market value per share
of Stock.
If the Stock is traded on the NASDAQ National Market System, the fair
market value per share shall be determined in the same manner as if the Stock
were listed on a national securities exchange so long as quotations of closing
sales prices thereon are reported.
If a regular, active public market exists for the Stock in the United
States but the Stock is not listed on a national securities exchange in the
United States, the fair market value per share of Stock shall be deemed to be
the average of the closing bid and asked quotations in the over-the-counter
market for the Stock in the United States on such date or if there are no
such bid and asked quotations on such date, then on the closest date
preceding such date for which such quotations are available.
If the Committee determines that a regular, active public market in the
United States does not exist for the Stock, the Committee shall determine, in
its good faith and reasonable judgment, the fair market value per share of
Stock as of the end of each fiscal year of the Company, as of the date of a
Change in Control of the Company (as defined below) and at such other dates
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designated by the Committee in its sole discretion, ("Valuation Date") based
on the value of the Company as a whole, divided by the total number of shares
of Stock on a fully diluted basis. Accordingly, the fair market value per
share of Stock shall be determined without any liquidity, marketability or
minority or similar discount. Unless the Committee specifies otherwise in a
Grant Agreement pertaining to an Equity Award, a determination of the value of
any Equity Award shall be made as of the Valuation Date nearest to such
determination date.
XI. Amount of Stock Subject to PROP
The total number of shares of Stock which may be purchased pursuant to the
exercise of Options granted under PROP, acquired pursuant to the exercise of
Units or Rights granted under PROP, or granted as Restricted Shares shall not
exceed, in the aggregate, 1,500,000 of the currently authorized shares of
Stock, such number to be subject to adjustment in accordance with Article XVI
hereof. Shares of Stock that are the subject of Units, Rights and related
Options shall be counted only once in determining whether the maximum number
of shares of Stock that may be purchased or awarded under PROP has been
exceeded.
Shares of Stock which may be acquired under PROP may be either authorized
but unissued shares of Stock, shares of issued Stock held in the Company's
treasury, or both, at the discretion of the Company. If and to the extent
that Equity Awards granted under PROP expire or terminate without having been
exercised, the shares of Stock covered by such expired or terminated Equity
Awards may again be subject to another Equity Award under PROP.
The maximum aggregate number of shares of Stock underlying all Equity
Awards measured in shares of Stock (whether payable in Stock, cash or a
combination of both) that may be granted to any single participant during the
life of PROP shall be 1,500,000 shares of Stock, subject to adjustment as
provided in Article XVI hereof. For purposes of the preceding sentence, such
Equity Awards that are cancelled or repriced shall continue to be counted in
determining such maximum aggregate number of shares of Stock that may be
granted to any single participant during the life of PROP. In addition, the
maximum dollar amount that maybe paid to any single participant with respect
to an annual bonus (whether payable in Stock, cash or a combination of both)
during the life of the PROP shall be $3,000,000.
XII. Termination of Employment or Service
(a) Subject to any written agreement between the Company or Subsidiary and
a participant, if a participant's employment with or service for the Company
or any of its Subsidiaries is terminated due to death, disability or
retirement:
(1) all unvested portions of awards held by the participant on the
date of the participant's death or the date of the termination of
employment or service shall immediately be forfeited by such
participant as of such date; and
(2) all vested portions of Options and Rights held by the participant
on the date of the participant's death or the date of the
termination of employment or service shall remain exercisable
until the earlier of:
(x) the end of the 12-month period following the date of the
participant's death or the date of the termination of
employment or service; or
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(y) the date the Option or Right would otherwise expire.
(b) Subject to any written agreement between the Company or Subsidiary and
a participant, if a participant's employment with or service for the Company
or any Subsidiary is terminated by the Company or Subsidiary for cause, all
awards held by a participant on the date of the termination of employment or
service for cause, whether vested or unvested, shall immediately be forfeited
by such participant as of such date.
(c) Subject to any written agreement between the Company or Subsidiary and
a participant, if a participant's employment with or service for the Company
or any Subsidiary is terminated for any reason other than for cause or other
than due to death or disability:
(1) all unvested portions of awards held by the participant on the
date of the termination of employment or service shall immediately
be forfeited by such participant as of such date; and
(2) all vested portions of Options and/or Rights held by the
participant on the date of the termination of employment or
service shall remain exercisable until the earlier of:
(x) the end of the 90-day period following the date of the
termination of employment or service; or
(y) the date the Option or Right would otherwise expire.
(d) Notwithstanding anything contained in PROP to the contrary, the
Committee may, in its sole discretion and at anytime, provide that:
(1) any or all unvested portions of Options and/or Rights held by the
participant on the date of the participant's death and/or the date
of the termination of employment or service shall immediately
become exercisable as of such date and, except with respect to
Incentive Options, shall remain exercisable until a date that
occurs on or prior to the date the Option or Right is scheduled to
expire;
(2) any or all vested portions of Non-Qualified Options and/or Rights
held by the participant on the date of the participant's death
and/or the date of the termination of employment or service shall
remain exercisable until a date that occurs on or prior to the
date the Option or Right is scheduled to expire; and/or
(3) any or all unvested portions of other awards held by the
participant on the date of the participant's death and/or the date
of the termination of employment or service shall immediately vest
or shall become vested on a date that occurs on or prior to the
date the award is scheduled to vest.
(e) Notwithstanding anything contained in the PROP to the contrary, (i)
the provisions contained in this Article XII shall be applied to an Incentive
Option only if the application of such provision maintains the treatment of
such Incentive Option as an Incentive Option and (ii) the exercise period of
an Incentive Option in the event of a termination of the participant's
employment due to disability provided in this Article XII shall be applied
only if the participant is "permanently and totally disabled" (as such term
is defined in Section 22(e)(3) of the Code).
(f) If an Equity Award granted hereunder shall be exercised by the legal
representative of a deceased grantee or by a person who acquired an Equity
Award granted hereunder by bequest or inheritance or by reason of the death
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of any written notice of such exercise shall be accompanied by a certified
copy of letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Equity Award.
(g) For the purposes of PROP, the term "cause" shall mean (a) with respect
to participant who is a party to a written employment agreement with the
Company or a Subsidiary, which agreement contains a definition of "for cause"
or "cause" (or words of like import) for purposes of termination of
employment or service thereunder by the Company or such Subsidiary, "for
cause" or "cause" as defined therein; or (b) in all other cases, as
determined by the Committee in its sole discretion, (i) the willful
commission by a participant of an act that causes or may cause damage to the
Company or a Subsidiary; (ii) the commission by an participant of an act of
fraud in the performance of such participant's duties on behalf of the
Company or a Subsidiary; (iii) conviction of the participant for commission
of a felony in connection with the performance of his or her duties on behalf
of the Company or a Subsidiary, or (iv) the continuing failure of a
participant to perform the duties of the participant to the Company or a
Subsidiary after written notice thereof and a reasonable opportunity to be
heard and cure such failure are given to the participant by the Committee.
(h) A termination of employment or service shall not be deemed to occur by
reason of (i) the transfer of a participant from employment or retention by
the Company to employment or retention by a subsidiary of the Company or (ii)
the transfer of a participant from employment or retention by a subsidiary of
the Company to employment or retention by the Company or by another
subsidiary of the Company. Termination of an independent contractor's
services shall be considered to occur when he, she or it ceased to perform
services on a regular basis.
(i) In the event of the complete liquidation or dissolution of a
Subsidiary or if such corporation ceases to be a Subsidiary, any unexercised
(whether vested or unvested) Equity Awards theretofore granted to independent
contractor to such Subsidiary will be deemed cancelled unless such
independent contractor is employed by or renders continuing services to the
Company, any of its Subsidiaries or by any parent corporation after the
occurrence of such event. If an Option or Right is to be cancelled pursuant
to the provisions of the previous sentence, notice of such cancellation will
be given to each participant holding unexercised Options, and such holder
will have the right to exercise such Options or Rights in full (without
regard to any limitation set forth or imposed pursuant to Article VI hereof)
during the thirty (30) day period following notice of such cancellation.
XIII. Purchase of Equity Awards
Unless the shares of Stock covered by PROP have been listed, registered or
qualified upon any national securities exchange or the NASDAQ National Market
System, the Company may purchase any outstanding Equity Award at a price
which shall be the fair market value of the shares of Stock underlying such
Equity Award, less the amount of the exercise price in the case of Options or
the base value in the case of Rights, as of the immediately preceding
Valuation Date or, if a Valuation Date occurs within three (3) months
following such date of purchase, such Valuation Date.
XIV. Administration
The PROP shall be administered by the Board or a committee or subcommittee
of the Board appointed by the Board from among its members (the "Committee").
The Committee may be the Board's Compensation Committee. Unless the Board
determines otherwise, the Committee shall be comprised solely of not less
than two members who each shall qualify as (i) a "Non-Employee Director"
within the meaning of Rule 16b-3(b)(3) (or any successor rule) under the
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Securities Exchange Act of 1934, as amended, and (ii) an "outside director"
within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
A majority of the members of the Committee shall constitute a quorum, and
the act of a majority of the members of the Committee shall be the act of the
Committee. Any member of the Committee may be removed at any time either
with or without cause by resolution adopted by the Board, and any vacancy on
the Committee at any time may be filled by resolution adopted by the Board.
Any or all powers and functions of the Committee may be exercised at any
time and from time to time by the Board or an executive committee of the
Board (the "Executive Committee"); references below to the Committee shall be
deemed to include references to the Board and the Executive Committee, except
as the content otherwise requires.
Subject to the express provisions of PROP, the Committee shall have
authority, in its discretion, to determine the persons to whom Equity Awards
shall be granted, the time when such persons shall be granted Equity Awards,
the number of shares of Stock which shall be subject to each Option or Right,
the purchase price of each share of Stock which may be subject to each Equity
Award, the period(s) during which such Equity Awards shall be exercisable
(whether in whole or part), and the other terms and provisions thereof (which
need not be identical). In determining the persons to whom Equity Awards
shall be granted and the number of shares of Stock for which Equity Awards
are to be granted to each person, the Committee may give consideration to the
length of service, the amount of earnings and the responsibilities and duties
of such person.
Subject to the express provisions of PROP, the Committee shall have
authority to interpret and construe PROP and the Grant Agreements pursuant to
which Equity Awards are made thereunder, to amend PROP and the Equity Awards
granted thereunder, to prescribe, amend and rescind rules relating to PROP,
to determine the terms and provisions of the Equity Awards (which need not be
identical) and to make all other determinations necessary or advisable for
administering PROP.
The determination of the Committee on matters referred to in this Article
XIV and otherwise in PROP shall be conclusive, final and binding on all
participants and other persons, unless such determination was not made in
good faith.
The Committee may employ such legal or other counsel, consultants and
agents as it may deem desirable for the administration of PROP and may rely
upon any opinion or computation received from any such counsel, consultant or
agent. Expenses incurred by the Committee in the engagement of such counsel,
consultation or agent shall be paid by the Company. No member or former
member of the Board of Directors, the Executive Committee or the Committee
shall be liable for any action or determination made in good faith with
respect to PROP or any Equity Award granted hereunder.
XV. Non-Transferability of Equity Awards
Except as otherwise provided herein or in a Grant Agreement with respect
solely to Restricted Shares awarded under such Grant Agreement, no Equity
Award granted hereunder shall be transferable, whether by operation of law or
otherwise, other than by will or the laws of descent and distribution, and
any Equity Awards granted hereunder shall be exercisable, during the lifetime
of the holder, only by such holder. Except to the extent provided above,
Equity Awards may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment or similar process. Notwithstanding
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the foregoing, at the discretion of the Committee, and on a grant-by-grant
basis, a Non-Qualified Option granted to a key employee of the Company or any
Subsidiary may be transferred by such key employee solely to his or her
spouse, siblings, parents, children and/or grandchildren or trusts for the
benefit of such persons or partnerships, limited liability companies or other
entities owned solely by such persons, subject to any restrictions included
in the Grant Agreement with respect to such Non-Qualified Option.
XVI. Adjustment of Shares; Effect of Certain Transactions
Notwithstanding any other provision contained herein, in the event of any
change in the shares of Stock subject to PROP or to any Equity Award granted
under PROP (through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or other like change in capital structure of the
Company), an equitable adjustment shall be made to each outstanding Equity
Award such that each such Equity Award shall thereafter pertain to an
equivalent number of shares of Stock after such change as before such change
or, at the sole discretion of the Committee, provide for such securities,
cash and/or other property as would have been received in respect of the
shares of Stock subject to such Equity Award had such Equity Award been
exercised in full immediately prior to such change, and such an adjustment
shall be made successively each time any such change shall occur. In
addition, in the event of any such change, the Committee shall make any
further adjustment to the maximum number of shares of Stock which may be
acquired under PROP pursuant to the exercise of Equity Awards, the maximum
number of shares of Stock for which Equity Awards may be granted to any one
employee, and the number of shares of Stock and price per share of Stock
subject to outstanding Equity Awards as shall be equitable to prevent
dilution or enlargement of rights under such Equity Awards and the
determination of the Committee as to these matters shall be conclusive final
and binding on all participants and other persons; provided, however, that
(a) each such adjustment with respect to an Incentive Option shall comply
with the rules of Section 424(a) of the Code (or any successor provision),
and (b) in no event shall any adjustment be made which would render any
Incentive Option granted hereunder other than an "incentive stock option" as
defined in Section 422 of the Code.
In the event of a Change in Control of the Company, the Committee, in its
sole discretion, may determine that any Equity Awards outstanding hereunder
shall terminate within a specified number of days after notice to the holder,
and such holder shall receive, with respect to each share of Stock subject to
such Equity Awards, an amount equal to the excess of the fair market value of
such shares of Stock immediately prior to the occurrence of such transaction
over the exercise price per share of Stock of such Equity Awards (the "Call
Amount"); the Call Amount shall be payable in cash, in one or more of the
kinds of property payable in such transaction, or in a combination thereof,
as the Committee in its discretion shall determine; in addition, such holder
may elect and shall have the right to receive from the Company for a period
of ninety (90) days from such notice an amount equal to the excess of the
fair market value of such Shares on the day of election over the Call Amount.
For purposes of PROP, a "Change in Control of the Company" occurs if:
(1) more than fifty percent (50%) of the total combined voting power
of all classes of stock of the Company normally entitled to vote
for the election of directors of the Company is acquired by
another person, firm or corporation or by a cooperating group of
such individuals or entities, excluding any shareholders of
Greenmarine Holdings, Inc. as of the Effective Date;
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(2) the majority of the Board of Directors consists of individuals
other than members of the Board of Directors as of the Effective
Date (the "Incumbent Directors"); provided, however, that any
person becoming a director subsequent to such date whose election
or nomination for election was supported by a 2/3rds of the
directors who then comprised the Incumbent Directors shall be
considered to be an Incumbent Director;
(3) the Board of Directors approves the sale of all or substantially
all of the property or assets of the Company; or
(4) the Board of Directors approves a consolidation or merger of the
Company with another corporation, the consummation of which would
result in the occurrence of an event described in clause (1)
above;
provided, however, that (i) a Change in Control of the Company shall not
include an initial public offering of the Company and (ii) the occurrence of
any specific event as described in this paragraph shall not constitute a
Change in Control of the Company if during the 30-day period immediately
preceding the date of the Change in Control of the Company the Board of
Directors, by a majority vote, deems that the occurrence of such specific
event does not constitute a Change in Control of the Company.
XVII. Right to Terminate Employment
PROP shall not impose any obligation on the Company or on any Subsidiary
or parent corporation of the Company to continue the employment, services or
directorship of any holder of an Equity Award and it shall not impose any
obligation on the part of any holder of an Equity Award to remain in the
employ or service of the Company or of any Subsidiary or parent corporation
thereof.
XVIII. Securities Matters
(a) Purchase For Investment. Except as hereinafter provided, the
Committee may require the holder of an Equity Award granted hereunder, as a
condition of exercise of such Equity Award, to execute and deliver to the
Company a written statement, in form satisfactory to the Committee, in which
such holder represents and warrants that such holder is purchasing or
acquiring the shares of Stock acquired thereunder for such holder's own
account, for investment only and not with a view to the resale or
distribution thereof, and agrees that any subsequent resale or distribution
of any of such shares of Stock shall be made only pursuant to either (i) a
Registration Statement on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), which Registration Statement has
become effective and is current with regard to the shares of Stock being
sold, or (ii) a specific exemption from the registration requirements of the
Securities Act and any rules or regulations thereunder and state securities
laws and regulations, but in claiming such exemption the holder shall, prior
to any offer of sale or sale of such shares of Stock, obtain a prior
favorable written opinion of counsel, in form and substance satisfactory to
counsel for the Company, as to the application of such exemption thereto.
The foregoing restriction shall not apply to (x) issuances by the Company so
long as the shares of Stock being issued are registered under the Securities
Act and a prospectus in respect thereof is current or (y) re offerings of
shares of Stock by affiliates of the Company (as defined in Rule 405 or any
successor rule or regulation promulgated under the Securities Act) if the
shares of Stock being reoffered are registered under the Securities Act and a
prospectus in respect thereof is current.
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Nothing herein shall be construed as requiring the Company to register
shares of Stock subject to any Equity Award under the Securities Act. In
addition, if at any time the Committee shall determine that the listing or
qualification of the shares of Stock subject to such Equity Award on any
securities exchange or under any applicable law, or the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the granting of an Equity Award, or the issuance
of shares of Stock thereunder, such Equity Award may not be exercised in
whole or in part unless such listing, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
(b) Listing of Shares and Related Matters. The Board of Directors may
delay any issuance or delivery of shares of Stock if it determines that
listing, registration or qualification of shares of Stock covered by PROP
upon any national securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares of Stock under PROP, until such listing, registration, qualification,
consent or approval shall have been effected or obtained, or otherwise
provided for, free of any conditions not acceptable to the Board of
Directors.
XIX. Issuance of Stock Certificates; Legends; Payment of Expenses
Upon any exercise of an Equity Award which may be granted hereunder and,
in the case of an Option, payment of the purchase price, a certificate or
certificates for the shares of Stock shall be issued by the Company in the
name of the person exercising the Equity Award and shall be delivered to or
upon the order of such person.
The Company may endorse such legend or legends upon the certificates for
Shares issued pursuant to PROP and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares of Stock as the
Committee, in its sole discretion, determines to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the
registration requirements of the Securities Act, (b) implement the provisions
of PROP and any agreement between the Company and the optionee or grantee
with respect to such shares of Stock, or (c) permit the Company to determine
the occurrence of a disqualifying disposition, as described in Section 421(b)
of the Code, of shares of Stock transferred upon exercise of an Incentive
Option granted under PROP.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of shares of Stock, as well as all fees and expenses
necessarily incurred by the Company in connection with such issuance or
transfer, except fees and expenses which may be necessitated by the filing or
amending of a Registration Statement under the Securities Act, which fees and
expenses shall be borne by the recipient of the shares of Stock unless such
Registration Statement has been filed by the Company for its own corporate
purposes (and the Company so states) in which event the recipient of the
shares of Stock shall bear only such fees and expenses as are attributable
solely to the inclusion of the shares of Stock he or she receives in the
Registration Statement.
All shares of Stock issued as provided herein shall be fully paid and
nonassessable to the extent permitted by law.
XX. Taxes
(a) Withholding Taxes. The Company may require an employee receiving
Restricted Shares, exercising a Right or a Non-Qualified Option or disposing
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of shares of Stock acquired pursuant to the exercise of an Incentive Option
in a disqualifying disposition (within the meaning of Section 421(b) of the
Code), to reimburse the corporation that employs such employee for any taxes
required by any government to be withheld or otherwise deducted and paid by
such corporation in respect of the issuance or disposition of such shares of
Stock. In lieu thereof, the corporation that employs such employee shall
have the right to withhold the amount of such taxes from any other sums due
or to become due from such corporation to the employee upon such terms and
conditions as the Committee shall prescribe. The corporation that employs
such employee may, in its discretion, hold the stock certificate to which
such employee is entitled with respect to Restricted Shares or upon the
exercise of an Option as security for the payment of such withholding tax
liability, until cash sufficient to pay that liability has been accumulated.
In addition, at any time that the Company becomes subject to a withholding
obligation under applicable law with respect to the exercise of a Right or
Non-Qualified Option (the "Tax Date"), except as set forth below, a holder of
a Right or Non-Qualified Option may elect to satisfy, in whole or in part,
the holder's related personal tax liabilities (an "Election") by (a)
directing the Company to withhold from shares of Stock issuable in the
related exercise either a specified number of shares of Stock or shares of
Stock having a specified value (in each case not in excess of the related
personal tax liabilities), (b) tendering shares of Stock previously issued
pursuant to the exercise of an Equity Award or other shares of Stock owned by
the holder or (c) combining any or all of the foregoing options in any
fashion. An Election shall be irrevocable. The withheld shares of Stock and
other shares of Stock tendered in payment shall be valued at their fair
market value (determined in accordance with the principles set forth in
Article X hereof) on the Tax Date. The Committee may disapprove of any
Election, suspend or terminate the right to make Elections or provide that
the right to make Elections shall not apply to particular shares of Stock or
exercises. The Committee may impose any additional conditions or
restrictions on the right to make an Election as it shall deem appropriate.
In addition, the Company shall be authorized to effect any such withholding
upon exercise of a Non-Qualified Option or Right by retention of shares
issuable upon such exercise having a fair market value at the date of
exercise (as determined under Article X hereof) which is equal to the amount
to be withheld. The Committee may determine that an independent contractor
shall be deemed an "employee" subject to the provisions of this Article XX
hereof.
(b) No Guarantee of Tax Consequences. No person connected with PROP in
any capacity, including, but not limited to, the Company and any Subsidiary
and their directors, officers, agents and employees makes any representation,
commitment, or guarantee that any tax treatment, including, but not limited
to, federal, state and local income, estate and gift tax treatment, will be
applicable with respect to amounts deferred under PROP, or paid to or for the
benefit of a participant under PROP, or that such tax treatment will apply to
or be available to a participant on account of participation in PROP.
(c) Section 162(m) of the Code. The Committee, in its sole discretion,
may designate and design awards granted under PROP as Performance-Based
Awards (as defined below) if it determines that compensation attributable to
such awards might not otherwise be tax deductible by the Company due to the
deduction limitation imposed by Section 162(m) of the Code. Accordingly, an
award granted under PROP may be granted in such a manner that the
compensation attributable to such award is intended by the Committee to
qualify as "performance-based compensation" (as such term is used in Section
162(m) of the Code and the regulations thereunder) and thus be exempt from
the deduction limitation imposed by Section 162(m) of the Code
("Performance-Based Awards"). Awards shall qualify as Performance-Based
Awards under PROP only if:
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(1) at the time of grant the Committee is comprised solely of two or
more "outside directors" (as such term is used in Section 162(m)
of the Code and the regulations thereunder);
(2) with respect to either the granting or vesting of an award (other
than (i) a Non-Qualified Option or (ii) a Right, which are granted
with an exercise price at or above the fair market value of the
Stock on the date of grant), such award is subject to the
achievement of a performance goal or goals based on one or more of
the performance measures specified in this paragraph (c);
(3) the Committee establishes in writing (i) the objective
performance-based goals applicable to a given performance period
and (ii) the individual employees or class of employees to which
such performance-based goals apply no later than 90 days after the
commencement of such performance period (but in no event after 25
percent of such performance period has elapsed);
(4) no compensation attributable to a Performance-Based Award will be
paid to or otherwise received by a participant until the Committee
certifies in writing that the performance goal or goals (and any
other material terms) applicable to such performance period have
been satisfied; and
(5) after the establishment of a performance goal, the Committee shall
not revise such performance goal or increase the amount of
compensation payable with respect to such award (as determined in
accordance with Section 162(m)) of the Code upon the attainment of
such performance goal.
The Committee may use the following performance measures (either
individually or in any combination) to set performance goals with respect to
awards intended to qualify as Performance-Based Awards: net sales; pretax
income before allocation of corporate overhead and bonus; budget; cash flow;
earnings per share; net income; division, group or corporate financial goals;
return on stockholders' equity; return on assets; attainment of strategic and
operational initiatives; appreciation in and/or maintenance of the price of
the Stock or any other publicly-traded securities of the Company; market
share; gross profits; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; economic value-added models;
comparisons with various stock market indices; increase in number of
customers; and/or reductions in costs. In addition, as required by
regulations promulgated by the Department of the Treasury under Section
162(m) of the Code, the material terms of performance goals as described in
this Article XX shall be disclosed to and reapproved by the Company's
stockholders no later than the first stockholder meeting that occurs in the
5th year following the year in which the Company stockholders previously
approved such performance goals.
XXI. Amendment of PROP
The Board of Directors may, from time to time, amend PROP, provided that
no amendment shall be made, without the approval of the stockholders of the
Company, that will (a) increase the total number of shares of Stock reserved
for Equity Awards under PROP (other than an increase resulting from an
adjustment provided for in Article XVI hereof), (b) reduce the exercise price
of any Incentive Option granted hereunder, (c) modify the provisions of PROP
relating to eligibility, (d) increase the maximum number of shares of Stock
with respect to all Equity Awards measured in Stock that may be granted to
any individual under PROP, or (e) increase the maximum dollar amount that may
be paid with respect to any single Award measured in cash. In addition, PROP
shall not be amended without the approval of such amendment by the Company's
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stockholders if such amendment (i) is required under the rules and
regulations of the stock exchange or national market system on which the
Common Stock is listed or (ii) will disqualify any Incentive Option granted
hereunder. The Committee shall be authorized to amend PROP and the Options
granted hereunder to permit Incentive Options granted hereunder to qualify as
"incentive stock options" within the meaning of Section 422 of the Code and
the Treasury regulations promulgated thereunder. The rights and obligations
under any Equity Award granted before amendment of PROP or any unvested and
unexercised portion of such Equity Award shall not be adversely affected by
amendment of PROP or the Equity Award without the consent of the holder of
such Equity Award unless such discretion to amend is reserved to the
Committee in the applicable Grant Agreement.
XXII. Termination or Suspension of PROP
The Board of Directors may at any time suspend or terminate PROP. PROP,
unless sooner terminated hereunder by action of the Board of Directors, shall
terminate at the close of business on the Termination Date. Equity Awards
may not be granted while PROP is suspended or after it is terminated. Rights
and obligations under any Equity Awards granted while PROP is in effect shall
not be altered or impaired by suspension or termination of PROP, except upon
the consent of the person to whom such Equity Award was granted. The power
under Article XIV hereof of the Committee to construe PROP and administer any
Equity Awards granted prior to the termination or suspension of PROP
nevertheless shall continue after such termination or during such suspension.
XXIII. Governing Law
PROP, such Equity Awards as may be granted hereunder and all related
matters shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware from time to time obtaining.
XXIV. Partial Invalidity
The invalidity or illegality of any provision herein shall not be deemed
to affect the validity of any other provision.
XXV. Effective Date
PROP shall become effective at 9:00 a.m., New York City time, on the
Effective Date, provided PROP is approved by the stockholders of the Company
at a meeting of stockholders of the Company or by unanimous written consent
of such stockholders in lieu of a meeting within 12 months of the Effective
Date, and such approval of stockholders shall be a condition to the right of
each eligible key employee or independent contractor to receive any Equity
Awards under PROP. Any Equity Awards granted under PROP prior to such
approval of stockholders shall be effective as of the date of the grant
(unless, with respect to any Equity Awards, the Committee specifies otherwise
at the time of the grant), but no such Equity Awards may be exercised prior
to such stockholder approval, and if stockholders fail to approve PROP as
specified hereunder, any such Equity Awards shall terminate.
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EXHIBIT 11
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Post-Merger Pre-Merger Post-Merger Pre-Merger
Company Company Company Company
----------- ---------- ----------- ----------
Three Months Ended Six Months Ended
March 31 March 31
(In millions except amounts per share) 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Net Earnings (Loss) $ (3.3) $ (7.3) $ (16.2) $ (21.6)
====== ====== ====== ======
Weighted Average Number of Shares 20.4 20.2 20.4 20.2
====== ====== ====== ======
Basic Earnings (Loss) Per Share $ (0.16) $ (0.36) $ (0.79) $ (1.07)
====== ====== ====== ======
Diluted Earnings Per Share:
Net Earnings (Loss) $ (3.3) $ (7.3) $ (16.2) $ (21.6)
Add: After-Tax Interest and
Related Expense Amortization
on 7% Convertible
Subordinated Debentures -- 0.8 -- 1.6
------ ------ ------ ------
Net Earnings (Loss) Adjusted $ (3.3) $ (6.5) $ (16.2) $ (20.0)
====== ====== ====== ======
Weighted Average Number of Shares 20.4 20.2 20.4 20.2
Weighted Average Common Shares
Assuming Conversion of 7%
Convertible Subordinated
Debentures -- 3.4 -- 3.4
------ ------ ------ ------
Average Shares Outstanding 20.4 23.6 20.4 23.6
====== ====== ====== ======
Diluted Earnings (Loss) Per Share $ (0.16) $ * $ (0.79) $ *
====== ====== ====== ======
</TABLE>
* The computation of diluted earnings per share of common stock is
antidilutive; therefore, the amount reported for basic and diluted
earnings per share is the same.
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