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<PAGE> 1
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended September 30, 1997.
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
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
7% Convertible Subordinated New York Stock Exchange &
Debentures Due 2002 Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of
this Form 10-K. ( X )
The aggregate market value of voting stock held by non-affiliates at December
31, 1997 was $0.
Number of shares of Common Stock of $0.01 par value outstanding at December 31,
1997 were 20,425,998 shares.
-1-
<PAGE> 2
TABLE OF CONTENTS
ITEM NO. PART I
-------- ------
1 Business
2 Properties
3 Legal Proceedings
4 Submission of Matters to a Vote of Security Holders
PART II
-------
5 Market for Registrant's Common Equity and Related
Shareholder Matters
6 Selected Financial Data
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations
8 Financial Statements and Supplementary Data
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
--------
10 Directors and Executive Officers of the Registrant
11 Executive Compensation
12 Security Ownership of Certain Beneficial Owners and
Management
13 Certain Relationships and Related Transactions
PART IV
-------
14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Signatures
Exhibit Index
-2-
<PAGE> 3
PART I
------
ITEM 1. BUSINESS
------------------
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 sole
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 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
Holding L.L.C. (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 Company , which was incorporated in 1936, is engaged principally in the
manufacturing and marketing of marine engines, boats and marine parts and
accessories principally for recreational use. Its major products are as
follows:
Evinrude outboards
Johnson outboards
Johnson/Evinrude parts & accessories
OMC Turbojet drive systems
Chris-Craft boats
Four Winns boats
Grumman boats
Haines Hunter boats
Hydra-Sports boats
Javelin boats
Lowe boats
Nautic Pro parts & accessories
Princecraft boats
Quest boats
Roughneck All-Welded boats
Sea Nymph boats
Seaswirl boats
Springbok boats
Stacer boats
Stratos boats
Sunbird boats
Suncruiser Pontoon boats
The Company operates in a single industry segment. Sales to unaffiliated
customers include the following principal products:
Years Ended September 30
1997 1996 1995
---- ---- ----
(In Millions)
Engine Products $ 570.8 $ 637.5 $ 690.8
Boats and Boat Packages 408.7 484.0 538.4
------ -------- --------
$ 979.5 $ 1,121.5 $ 1,229.2
====== ======== ========
Information by geographic area for the three years ended September 30, 1997 is
presented under the heading "Geographic Business Data" which is Note 16 in
Item 8, Part II of this Form 10-K.
-3-
<PAGE> 4
Most of OMC's principal products are sold throughout the world. Outboard
motors and parts and accessories are distributed in the United States and
Canada through separate Evinrude and Johnson dealer organizations, the
majority of which operate under direct-from-factory dealerships. Boats are
sold primarily to direct-from-factory dealerships.
Distribution of OMC products outside the United States and Canada is handled
by various divisions and subsidiaries of the Company, which sell to dealers
and wholesale distributors throughout the world.
All the fields in which OMC is engaged are highly competitive. OMC believes
it is the world's second largest producer of outboard motors and the second
largest recreational powerboat manufacturer.
OMC's principal competition in the United States outboard industry is from
Brunswick Corporation and Yamaha Motor Co., Ltd. The outboard motors produced
by these companies together with several other Japanese producers are also the
principal competing outboards in the international market. There are many
manufacturers of boats which compete with OMC, the largest of which in the
United States are Brunswick Corporation, Genmar Industries, Inc., and Tracker
Marine, L.P.
OMC, AB Volvo Penta and Volvo Penta of the Americas, Inc., are partners in a
joint venture which produces gasoline stern drive and gasoline inboard marine
power systems. Additional information is presented under the heading "Joint
Venture and Investments" which is Note 3 in Item 8, Part II of this Form 10-K.
In 1995, the Company and FICHT GmbH of Kirchseeon, Germany announced the
formation of a strategic alliance for the development and worldwide
manufacturing and marketing of high pressure fuel injection systems and other
technologies. Under the terms of the strategic alliance, the Company acquired
a 51% interest in FICHT GmbH. The Ficht family retained a 49% interest and
will continue to operate the business.
Due to the seasonal nature of OMC's business, receivables, inventory and
accompanying short-term borrowing to satisfy working capital requirements are
usually at their highest levels during the second fiscal quarter and typically
decline thereafter as the Company's products enter the peak consumer selling
seasons. To reduce the impact of this seasonality, OMC offers various types
of extended credit terms or financed floor planning to qualified customers who
buy the Company's products. Working capital requirements during the
off-season are in part financed by short-term borrowing. See information
presented under the heading "Short-Term Borrowings and Accounts Receivable
Sales Agreements" which is Note 8 in Item 8, Part II of this Form 10-K.
OMC considers its patent portfolio, including those acquired in the FICHT
transaction with FICHT GmbH, to be of considerable value even though no single
patent or license is deemed to be material. In OMC's opinion, Chris-Craft,
Evinrude, FFI, FICHT, Four Winns, Grumman, Haines Hunter, Hydra-Sports,
Javelin, Johnson, Lowe, OMC, OMC Cobra, OMC King Cobra, Princecraft, Quest,
Roughneck, Sea Horse, Sea Nymph, Seaswirl, Springbok, Stacer, Stratos and
Suncruiser trademarks are of considerable value and are important to the
conduct of its business. Chris-Craft is a registered trademark owned by
Chris-Craft Industries, Inc. and is licensed to OMC. Grumman is a registered
trademark owned by Grumman Corporation and is licensed to OMC.
The Company purchases many different raw materials from various sources. The
Company believes its sources of supply are adequate.
-4-
<PAGE> 5
In the fiscal years ended September 30, 1997, 1996, and 1995, OMC spent $38.2
million, $41.8 million, and $41.6 million, respectively, on research and
development activities relating to the development of new products and
improvement of existing products. All of this work was OMC sponsored.
The U.S. Environmental Protection Agency (EPA) has adopted regulations
governing emissions from marine engines. As adopted, the regulations will
phase in over nine years, beginning in model year 1998 and concluding in model
year 2006. Marine engine manufacturers will be required to reduce hydrocarbon
emissions from outboard engines, on average, by 8.3 percent per year beginning
with the 1998 model year. In 1994, the Company announced Project LEAP, a $100
million project to develop new low emission technologies and to convert its
entire outboard product line to low emission products within the next decade.
These technologies will add cost to the product in the short-term. However,
this situation is not seen as a major deterrent to sales since value will be
added to the product at the same time and the entire industry is faced with
developing solutions to the same regulatory requirements. The Company
believes this situation will not have a material impact on future results of
operations or the financial condition of the Company.
In 1996, the Company introduced the new Johnson and Evinrude 150-horsepower
engines with FICHT fuel injection technology. With the FFI system, these
engines meet the EPA emissions standards set for 2006. These engines offer
boaters smooth, quiet operation, 35 percent better fuel economy, reduced
hydrocarbon emissions by up to 80 percent, and virtually no smoke on start-up,
without sacrificing the performance, lighter weight and smaller size of a
two-stroke engine.
The Company estimates that it will spend approximately $4 million and $3
million, respectively, during the 1998 and 1999 fiscal years for environmental
control facilities. Litigation involving the Company and the EPA and other
agencies is covered under the heading "Commitments and Contingent Liabilities"
which is Note 18 in Item 8, Part II of this Form 10-K.
As of September 30, 1997, approximately 7,442 people were employed by OMC and
its subsidiaries.
ITEM 2. PROPERTIES
--------------------
Plants located in Waukegan, Illinois; Delavan and Milwaukee, Wisconsin; and
Burnsville, Spruce Pine and Andrews, North Carolina, assemble and/or
manufacture parts for outboard motors, each plant specializing in selected
manufacturing processes. Outboard motors are assembled in Calhoun, Georgia.
The Beloit, Wisconsin facility is engaged in the worldwide distribution of
service parts and accessories. Boats are manufactured in Cadillac, Michigan;
Lebanon, Missouri; Murfreesboro and Old Hickory, Tennessee; Columbia, South
Carolina; Culver, Oregon; Syracuse, Indiana; and Sarasota, Florida.
The Company's plants in Juarez, Chihuahua, Mexico; Dongguan, China; Hong Kong;
and Manaus, Brazil all assemble outboard motors or components or engage in
fabrication. Boats are also manufactured or assembled in Altona, Victoria,
Australia; Yatala, Queensland, Australia; and Princeville, Quebec, Canada.
All of the Company's manufacturing facilities are Company owned, except the
Company's, Delavan, Wisconsin, Dongguan; Hong Kong; and Manaus, Brazil plants.
The Delavan facility lease expires in 2006. The Hong Kong facility is located
on property leased until 2047. The Dongguan facility lease expires in 1999.
The Manaus facility lease expires in 1999. OMC believes that all of its
manufacturing facilities are in a sound and modern operating condition and are
suitable and adequate for their purposes. The Company also leases various
warehouse and office space.
-5-
<PAGE> 6
ITEM 3. LEGAL PROCEEDINGS
---------------------------
A description of certain legal proceedings is presented under the heading
"Commitments and Contingent Liabilities" which is Note 18 in Item 8, Part II
of this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------
During the fourth quarter of the 1997 fiscal year, there were no matters
submitted to a vote of security holders.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
-----------------------------------------------------------
There was one record holder of common stock of OMC at September 30, 1997.
Other material required by this item is presented under the heading "Quarterly
Information (Unaudited)" which is Note 17 in Item 8, Part II of this form
10-K.
ITEM 6. SELECTED FINANCIAL DATA
---------------------------------
The following summary represents the results of operations (without including
changes in accounting principles in 1993) for the five years ended September
30, 1997.
Years Ended September 30 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In millions except amounts per share)
Net sales $979.5 $1,121.5 $1,229.2 $1,078.4 $1,034.6
Net earnings (loss) (79.1) (7.3) 51.4 48.5 (165.0)
Average number of shares of
common stock outstanding and
common stock equivalents,
if applicable 20.2 20.1 20.1 20.0 19.6
Per average share of common
stock--
Net earnings (loss)
Primary (3.91) (0.36) 2.56 2.42 (8.42)
Fully diluted (3.91) (0.36) 2.33 2.22 (8.42)
Dividends declared 0.20 0.40 0.40 0.40 0.40
Total Assets *1,179.0 873.7 907.0 817.1 791.8
Long-Term Debt 103.8 177.6 177.4 178.2 183.0
* Total assets is not comparable with 1996 due to the application of
purchase accounting.
-6-
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------
Merger with Greenmarine Acquisition Corp.
-----------------------------------------
On September 12, 1997, Greenmarine acquired control of 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 sole surviving entity of the merger with Greenmarine. 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 the Parent.
Greenmarine's total purchase price of common stock and related acquisition
costs amounted to $373.0 million.
Results of Operations 1997
--------------------------
The Pre-Merger Company had a net loss of $79.1 million or $3.91 per share
in 1997 compared to a net loss of $7.3 million or $.36 per share in 1996. The
pretax loss was $76.3 million in 1997 compared with $10.4 million of pretax
loss in 1996. The 1997 loss includes $26.9 million of change of control
expenses associated with the acquisition and merger.
Sales were $979.5 million in 1997 compared to $1,121.5 million in 1996, a
decrease of $142.0 million or 12.7 percent. U.S. revenues, which accounted
for 74 percent of total sales, declined 11.3 percent in 1997 while
international sales decreased 16.1 percent. Industry unit volume in the
United States declined for outboard motors and boats in 1997 compared to the
previous year. The Pre-Merger Company's sales decrease was due to reduced
market demand for its products, primarily in the North American markets, as a
result of assisting dealers in reducing field inventories and market restraint
resulting from the Company's announced intention in April, 1997 to sell the
Pre-Merger Company.
Cost of goods sold was 84.4 percent of sales in 1997 as compared with 79.6
percent of sales in 1996. Cost of sales in 1997 included charges for the
introduction of the FICHT technology, manufacturing consulting services and
write-down of underperforming assets.
Selling, general and administrative expenditures increased to $215.4
million in 1997 from $210.3 million in 1996. The 1997 expenses reflected the
reduction of costs resulting from the restructuring programs initiated last
year but were more than offset by changes in accounting estimate of $9.7
million of increased warranty accruals and $7.0 million additional
environmental accrual from the early adoption of a new accounting standard
(see Note 18 to the Consolidated Financial Statements).
The 1996 fiscal year includes restructuring charges of $25.6 million
primarily related to the closing of distribution operations and write-down of
manufacturing facilities outside the United States.
Interest expense in 1997 increased by $3.9 million over the prior year, as
1996 results included a $5.0 million favorable interest adjustment for past
tax liabilities.
-7-
<PAGE> 8
Included in non-operating expense in 1997 was $26.9 million of change of
control expenses associated with the acquisition of the Company by
Greenmarine. Other non-operating income was $29.2 million in 1997 and $8.5
million in 1996. The 1997 amount included insurance recovery and a lawsuit
settlement as well as higher gains on disposition of fixed assets (see Note 14
to the Consolidated Financial Statements).
Provision (credit) for income taxes was $2.8 million in 1997 and $(3.1)
million in 1996, and is explained in Note 15 to the Consolidated Financial
Statements. The provision for income taxes for 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 deemed realizable, at this time, under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The resolution of open tax
issues from prior years resulted in a tax credit in 1996.
Results of Operations 1996
--------------------------
The Pre-Merger Company had a net loss of $7.3 million or $.36 per share in
1996 compared to net earnings of $51.4 million or $2.56 per share in 1995.
The pretax loss was $10.4 million in 1996 compared with $60.8 million of
pretax earnings in 1995.
Net sales were $1,121.5 million in 1996 compared to $1,229.2 million in
1995, a decrease of $107.7 million or 8.8 percent. U.S. revenues, which
accounted for 73 percent of total sales, declined 10.3 percent in 1996 while
international sales decreased 4.4 percent. Sales of the Pre-Merger Company's
outboard engines and boats declined due to weak market conditions. The marine
industry experienced unexpected declines in winter and spring retail demand in
1996 in the segments in which the Pre-Merger Company is strongest.
While sales declined 8.8 percent, cost of goods sold only declined 4.2
percent. This resulted from the inability to adjust operations to reflect
lower sales. The Pre-Merger Company restructured operations considering its
core competencies and adjusted the business to react to these market
realities. Operating decisions were made in the 3rd and 4th quarters of 1996
which resulted in restructuring charges of $25.6 million. Included in these
charges was $20.1 million for closings of distribution operations and
write-down of manufacturing facilities outside the United States. The North
American and European sales, marketing and manufacturing operations were
re-aligned to more effectively meet market needs.
Selling, general and administrative expenditures decreased to $210.3
million in 1996 from $230.2 million in 1995, an 8.6 percent decrease, due
primarily to efforts to reduce these expenses because of decreased sales. As
a percent to sales, selling, general and administrative costs remained at 19
percent of revenues.
Interest expense decreased to $12.3 million in 1996 compared to $23.1
million in 1995. Significant causes for the reduction included $5.0 million
as a result of a favorable adjustment of interest on past tax liabilities,
lower levels of working capital required in 1996 and accounts receivable sales
that lowered interest expense (see Note 8 to the Consolidated Financial
Statements).
Other non-operating income was $8.5 million in 1996 and $16.7 million in
1995. The decrease was primarily the result of the absence of gain recognized
on the sale of the Company's investment in I.J. Holdings, Inc. in 1995, a
reduction in realization from fixed assets sales and discount charges on
accounts receivable sales in 1996.
-8-
<PAGE> 9
The resolution of open tax issues from prior years resulted in a tax credit
in 1996. Provision (credit) for income taxes was $(3.1) million in 1996 and
$9.4 million in 1995, and is explained in Note 15 to the Consolidated
Financial Statements.
Financial Condition
-------------------
Upon merger with Greenmarine Acquisition Corp., 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 is initially estimated at $250.2 million. The
financial statements reflect the preliminary allocation of purchase price as
the purchase price allocation has not been finalized. The initial fair value
adjustments to the historical balance sheet were as follows:
Historical book value of net assets acquired:
Working capital $ 78.1
Property, plant and equipment 242.8
Noncurrent assets 149.1
Noncurrent liabilities (319.3)
-------
150.7
Adjustments to carrying value of assets
acquired and liabilities assumed (27.9)
Excess of purchase price over fair value
of assets acquired 250.2
-------
Total $ 373.0
=======
The statement of consolidated financial position is not comparable to the
prior year because of the purchase accounting adjustments. Current assets
increased $3.5 million. Cash and cash equivalents decreased $41.1 million
primarily due to lower earnings and change of control payments. Receivables
decreased $14.4 million due primarily to lower sales in the fourth quarter of
fiscal 1997. Inventories increased $11.8 million due primarily to an increase
of $39.1 million due to purchase accounting offset by a decrease of $27.3
million due primarily to efforts to reduce warehoused outboard engines and
parts at the boat companies. Deferred income tax benefits increased $3.4
million as explained in Note 15 to the Consolidated Financial Statements.
Other current assets increased $43.8 million due primarily to $37.0 million in
restricted cash held in a trust depository to fund the remaining untendered
outstanding shares of the Pre-Merger Company's old stock.
Expenditures for capital and tooling were $36.3 million in 1997, down $16.4
million from the 1996 level of $52.7 million as a result of deferred capital
expenditures due to the pending sale of the Company. Other assets increased
$7.8 million due primarily to funding of a non-qualified pension trust and to
collateralization of letters of credit.
-9-
<PAGE> 10
Loan payable was $96.0 million at September 30, 1997. Accounts payable
increased $50.0 million due primarily to a payable to Pre-Merger Company
shareholders for untendered outstanding stock and also due to change of
control payments. Accrued liabilities increased $30.1 million due primarily
to the accruals of business reorganizations offset by a reduced restructuring
accrual balance from prior years (see Note 7 to the Consolidated Financial
Statements). Current maturities and sinking fund requirements of long-term
debt increased $72.7 million due primarily to anticipated long-term debt
redemptions upon change of control of the Company. Other non-current
liabilities increased $98.2 million due primarily to the accruals of business
reorganizations (see Note 7 to the Consolidated Financial Statements).
Long-term debt decreased to $103.8 million in 1997 from $177.6 million in
1996 due to reclassification to short-term of anticipated redemption of the
Company's convertible subordinated debentures due 2002. Shareholders'
investment was $277.0 million at September 30, 1997.
The Post-Merger Company's ratio of current assets to current liabilities
decreased to 0.9. Loan payable short-term debt increased $96.0 million (see
Note 8 to the Consolidated Financial Statements).
Liquidity and Capital Resources
-------------------------------
Due to the seasonal nature of the Company's business, receivables,
inventory and accompanying short-term borrowing to satisfy working capital
requirements are usually at their highest levels in the 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 February 1996, respectively.
Cash provided by (used by) operations was $(9.2) million in 1997 compared
with $91.1 million in 1996 and $51.4 million in 1995. Expenditures for plant
and equipment and tooling were $36.3 million in 1997, $52.7 million in 1996
and $66.5 million in 1995.
The Post-Merger Company has a $150 million loan and security agreement
which expires December 31, 2000.
In connection with the merger, the Post-Merger Company assumed the
obligations under a credit agreement for up to $150 million (the "Acquisition
Debt") borrowed for the purposes of acquiring shares of the Pre-Merger Company
and the purchase of some $67.7 million principal amount of 7% convertible
subordinated debentures due 2002 (the "Convertible Debentures"), which the
Company had an obligation to offer to purchase because of the change of
control at a price of 100% of the outstanding principal amount plus accrued
interest. At September 30, 1997, $96 million principal amount of the
Acquisition Debt was outstanding. The remaining $54 million principal amount
of Acquisition Debt was borrowed on November 12, 1997 in connection with the
purchase of the Convertible Debentures.
The full amount of the Acquisition Debt matures on June 16, 1998. Although
the Company does not currently have the funds to refinance such debt, the
Company and its Parent believe the Company will be able to raise such funds
through the sale of debt or equity in the public or private markets by the
maturity date of the Acquisition Debt.
-10-
<PAGE> 11
Based on the Company's current expectations of financial performance, the
revolving credit agreement, and other available sources of capital, the
Company believes it has available sufficient internal and external financial
resources to continue making long term investments for future growth through
the next few years.
Trends and Forward-Looking Factors
----------------------------------
With new ownership and new management in place, the Company is in the
process of implementing and executing business reorganizations.
The U.S. Environmental Protection Agency has adopted regulations governing
emissions from marine engines. As proposed, the rule would phase in over nine
years, beginning in model year 1998 and concluding in model year 2006. Marine
engine manufacturers will be required to reduce hydrocarbon emissions from
outboard motors and personal watercraft, on average, by 8.3 percent per year
beginning with the 1998 model year. In 1994, the Company announced Project
LEAP, a $100 million project to convert its entire outboard product line to
low emission products within the next decade. The Company is focusing its
efforts on a number of technologies to accomplish this objective. The Company
believes these technologies will provide reduced emissions, better fuel
economy and improved performance, and will meet the proposed regulation on or
before the required dates for compliance. These technologies will add cost to
the product. However, this situation is not seen as a major deterrent to
sales since value will be added to the product at the same time and the entire
industry is faced with developing solutions to the same regulatory
requirements. The Company does not believe that this situation will have a
material negative impact on future results of operations or the financial
condition of the Company.
In 1996, the Pre-Merger Company introduced FICHTTM Fuel Injection
technology. FFITM is performing far better than the U.S. Environmental
Protection Agency emissions standards. The engine offers boaters smooth,
quiet operation, 35% better fuel economy, reduced hydrocarbon emissions by up
to 80%, and virtually no smoke on start-up, without sacrificing the
performance, lighter weight and smaller size of a two-stroke engine.
Under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109), the Company has not recognized a tax benefit for its
deferred tax assets but has instead provided a valuation allowance. Several
factors would generally enable the Company to realize the deferred tax assets
which have not otherwise been recognized. Historical profitability,
forecasted earnings, and management's determination "it is more likely than
not" the deferred tax assets will be benefitted against forecasted earnings,
all affect whether the unrecognized U.S. deferred tax assets may be realized
through a reversal of the valuation allowance. Because the deferred tax asset
realization factors of SFAS 109 were adversely affected by the 1997 and 1996
fiscal year results, it is unlikely this reversal of the valuation allowance
will occur in 1998.
The Company assessed what steps it needed 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, which 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 it will spend approximately $6.0 million to $10.0 million to
modify existing systems.
-11-
<PAGE> 12
A collective bargaining agreement at OMC-Calhoun (Georgia) is effective
through September 30, 1998. The Company and employees of the OMC-Waukegan
(Illinois) facility have a four-year collective bargaining agreement effective
through October 30, 1999. The OMC-Milwaukee (Wisconsin) contract expires
March 31, 1998. While the Company cannot fully predict the outcome of future
labor negotiations, the Company believes it can maintain competitive labor
costs while providing employees with favorable wages and benefits.
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("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 ("USEPA") and other agencies. The Company has been notified that it is
a potentially responsible party ("PRP") for study and clean-up costs at a
number of sites. 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 that
vary from site to site. Costs are typically allocated based upon the volume
and nature of the materials sent to the site and/or the amount of time the
site was owned or operated. However, under Superfund and certain other laws,
as a PRP, the Company can be held jointly and severally liable for all
environmental costs associated with the site. Although unable to determine
its liability for clean-up and remediation costs in connection with all of
these sites, management believes that appropriate accruals have been recorded.
While the results of the proceedings discussed above cannot be predicted with
any certainty, based upon the information presently available, management is
of the opinion that the final outcome of such proceedings, in the aggregate,
after giving consideration to the amounts accrued, should not have a material
impact on the Company's Financial Position or the Consolidated Earnings. For
further information see Note 18 to the Consolidated Financial 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, and general economic conditions including interest
rates and consumer confidence. 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.
-12-
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
Outboard Marine Corporation
Statements of Consolidated Earnings
<TABLE>
<CAPTION>
(Dollars in millions except amounts per share)
Pre-Merger Company
----------------------------------------------
Years ended September 30 1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Net Sales $ 979.5 $ 1,121.5 $ 1,229.2
Cost of Goods Sold 826.5 892.2 931.8
-------- --------- ---------
Gross earnings 153.0 229.3 297.4
Selling, General and Administrative
Expense 215.4 210.3 230.2
Restructuring Charges -- 25.6 --
-------- --------- ---------
Earnings (Loss) from operations (62.4) (6.6) 67.2
Non-Operating Expense (Income):
Interest expense 16.2 12.3 23.1
Change in control expenses 26.9 -- --
Other, net (29.2) (8.5) (16.7)
-------- --------- ---------
13.9 3.8 6.4
-------- --------- ---------
Earnings (Loss) before provision
for income taxes (76.3) (10.4) 60.8
Provision (Credit) for Income Taxes 2.8 (3.1) 9.4
-------- --------- ---------
Net earnings (loss) $ (79.1) $ (7.3) $ 51.4
======== ========= =========
Net Earnings (Loss) Per Share of
Common Stock
Primary $ (3.91) $ (0.36) $ 2.56
======== ========= =========
Fully diluted $ (3.91) $ (0.36) $ 2.33
======== ========= =========
The accompanying notes are an integral part of these statements.
-13-
</TABLE>
<PAGE> 14
Outboard Marine Corporation
Statements of Consolidated Financial Position
<TABLE>
<CAPTION>
(Dollars in millions)
--------------------------------------
Post-Merger | Pre-Merger
Company | Company
----------- | ----------
September 30 1997 | 1996
--------- | --------
<S> <C> <C>
Assets |
Current Assets: |
Cash and cash equivalents $ 54.4 | $ 95.5
Receivables (less reserve for doubtful receivables of |
$ 6.7 million in 1997 and $11.6 million in 1996) 153.2 | 167.6
Inventories 176.9 | 165.1
Deferred income tax benefits 19.0 | 15.6
Other current assets 67.5 | 23.7
-------- | -------
Total Current Assets 471.0 | 467.5
|
Product Tooling, net 34.2 | 51.6
Plant and Equipment, net 210.2 | 218.9
Goodwill 250.2 | 29.1
Trademarks, Patents and Other Intangibles 83.9 | 9.2
Pension Asset 74.4 | 50.1
Other Assets 55.1 | 47.3
-------- | -------
Total Assets $ 1,179.0 | $ 873.7
|
Liabilities and Shareholders' Investment |
Current Liabilities: |
Loan payable $ 96.0 | $ --
Accounts payable 142.0 | 90.0
Accrued liabilities 182.0 | 151.9
Accrued income taxes 6.6 | 11.2
Current maturities and sinking fund requirements of |
long-term debt 72.9 | 0.2
-------- | -------
Total Current Liabilities 499.5 | 253.3
|
Long-Term Debt 103.8 | 177.6
Postretirement Benefits Other than Pensions 96.0 | 100.7
Other Non-Current Liabilities 202.7 | 104.5
|
Shareholders' Investment: |
Common stock - 25 million shares authorized at $.01 |
par value with 20.4 million shares outstanding in |
1997; 90 million shares authorized at $.15 par |
value with 20.1 million shares outstanding in 1996 0.2 | 3.0
Capital in excess of par value of common stock 276.8 | 114.1
Accumulated earnings employed in the business -- | 134.4
Minimum pension liability adjustment -- | (3.1)
Cumulative translation adjustments -- | (8.5)
Treasury stock at cost, .1 million shares in 1996 -- | (2.3)
-------- | -------
Total shareholders' investment 277.0 | 237.6
-------- | -------
Total Liabilities and Shareholders' Investment $ 1,179.0 | $ 873.7
======== | =======
The accompanying notes are an integral part of these statements.
-14-
</TABLE>
<PAGE> 15
Outboard Marine Corporation
Statements of Consolidated Cash Flows
<TABLE>
<CAPTION>
(Dollars in millions)
---------------------------------------------
Pre-Merger Company
and
Post-Merger Company Pre-Merger Company
---------- -------------------------
Years ended September 30 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) $ (79.1) $ (7.3) $ 51.4
Adjustments to reconcile net earnings (loss) to net cash provided by
operations:
Depreciation and amortization 57.0 54.7 47.6
Restructuring charges -- 21.6 --
Changes in current accounts excluding the effects of acquisitions
and noncash transactions:
Decrease (increase) in receivables 9.6 32.4 (32.4)
Decrease (increase) in inventories 26.5 27.3 (29.5)
Decrease (increase) in other current assets (0.4) (3.6) (13.2)
Increase (decrease) in accounts payable, accrued liabilities
and income taxes (5.3) (15.1) 14.1
Increase (decrease) in deferred items (15.8) (20.6) 13.7
Other, net (1.7) 1.7 (0.3)
------- -------- --------
Net cash provided by (used for) operating activities (9.2) 91.1 51.4
Cash Flows from Investing Activities:
Investments -- -- (9.9)
Expenditures for plant and equipment, and tooling (36.3) (52.7) (66.5)
Proceeds from sale of plant and equipment 13.0 2.7 11.8
Other, net (2.8) (0.5) (1.2)
------- -------- --------
Net cash used for investing activities (26.1) (50.5) (65.8)
Cash Flows from Financing Activities:
Payments of long-term debt, including current maturities -- (0.2) (1.1)
Cash dividends paid (6.0) (6.1) (8.0)
Other, net 2.3 3.4 1.0
------- -------- --------
Net cash used for financing activities (3.7) (2.9) (8.1)
Exchange Rate Effect on Cash (2.1) (0.5) 0.5
------- -------- --------
Net increase (decrease) in Cash and Cash Equivalent (41.1) 37.2 (22.0)
Cash and Cash Equivalents at Beginning of Year 95.5 58.3 80.3
------- -------- --------
Pre-Merger Company Cash and Cash Equivalents at End of Year $ 54.4 $ 95.5 $ 58.3
======= ======== ========
- -------------------------------------------------------------------------------------- --------------------------
Post-Merger Company Cash and Cash Equivalents prior to merger -
September 30, 1997 $ 54.4
Cash Flows from Financing Activities (Post-Merger Company):
Proceeds from short-term borrowings 96.0
Issuance of Post-Merger Company common stock 277.0
Purchase of Pre-Merger Company common stock (373.0)
-------
Post-Merger Company Cash and Cash Equivalents - September 30, 1997 $ 54.4
=======
Supplemental Cash Flow Disclosures (Pre-Merger Company):
Interest paid $ 21.0 $ 15.4 $ 19.7
Income taxes paid $ 3.4 $ 3.5 $ 3.4
======= ========= =========
The accompanying notes are an integral part of these statements
-15-
</TABLE>
<PAGE> 16
Outboard Marine Corporation
Statements of Changes in Consolidated Stockholders' Investment
<TABLE>
<CAPTION>
(In millions)
----------------------------------------------------------------------------------
Cumula-
Capital in Accumulated tive
Issued Excess of Earnings Minimum Trans-
Common Stock Par Value Employed Pension lation
---------------- of Common in the Liability Adjust- Treasury
Shares Amount Stock Business Adjustment ments Stock
------- ------- ---------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-September 30, 1994 20.2* $ 3.0 $ 110.7 $ 106.3 $ -- $ (6.6) $ (4.4)
Net earnings -- -- -- 51.4 -- -- --
Dividends declared-40 cents per share -- -- -- (8.0) -- -- --
Shares issued under stock plans -- -- 1.5 -- -- -- 0.8
Translation adjustments -- -- -- -- -- 1.1 --
------- ------ -------- -------- ------- ------- -------
Balance-September 30, 1995 20.2* $ 3.0 $ 112.2 $ 149.7 $ -- $ (5.5) $ (3.6)
Net loss -- -- -- (7.3) -- -- --
Dividends declared-40 cents per share -- -- -- (8.0) -- -- --
Minimum pension liability adjustment -- -- -- -- (3.1) -- --
Shares issued under stock plans -- -- 1.9 -- -- -- 1.3
Translation adjustments -- -- -- -- -- (3.0) --
------- ------ -------- -------- ------- ------- -------
Balance-September 30, 1996 20.2* $ 3.0 $ 114.1 $ 134.4 $ (3.1) $ (8.5) $ (2.3)
Net loss -- -- -- (79.1) -- -- --
Dividends declared-20 cents per share -- -- -- (4.0) -- -- --
Minimum pension liability adjustment -- -- -- -- (.4) -- --
Shares issued under stock plans 0.3 0.1 3.8 -- -- -- --
Translation adjustments -- -- -- -- -- (7.3) --
------- ------ -------- -------- ------- ------- -------
Balance-September 30, 1997 -
Pre-Merger Company 20.5* $ 3.1 $ 117.9 $ 51.3 $ (3.5) $ (15.8) $ (2.3)
======= ====== ======== ======== ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------------
Balance-September 30, 1997 - Post-
Merger Company prior to merger 20.5* $ 3.1 $ 117.9 $ 51.3 $ (3.5) $ (15.8) $ (2.3)
Cancellation of Pre-Merger Company
shares upon merger (20.5)* (3.1) (117.9) (51.3) 3.5 15.8 2.3
Issuance of Post-Merger Company
shares upon merger 20.4 0.2 276.8 -- -- -- --
------- ------ -------- -------- ------- ------- -------
Balance-September 30, 1997 -
Post-Merger Company 20.4 $ 0.2 $ 276.8 $ -- $ -- $ -- $ --
======= ====== ======== ======== ======= ======= =======
<FN>
* Includes shares of treasury stock
The accompanying notes are an integral part of these statements.
</TABLE>
-16-
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 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 sole
surviving entity of the merger with Greenmarine (the "Post-Merger Company" 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 Statement of Consolidated Financial Position at September 30, 1997 is
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 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. The goodwill related to the acquisition will
be amortized using the straight-line method over a period of 40 years.
The acquisition and the merger have been accounted for as if the
acquisition and merger had taken place simultaneously on September 30, 1997.
In the opinion of management, accounting for the acquisition and the merger as
of September 30, 1997 as opposed to accounting for the acquisition and the
merger on September 12, 1997 did not materially impact the Statement of
Consolidated Earnings. Unaudited pro forma combined results of operations of
the Company and Greenmarine on the basis that the acquisition had taken place
at the beginning of fiscal 1997 and 1996 are presented in Note 19.
Note 2 Nature of Business and Significant Accounting Policies
-------------------------------------------------------------
Nature of Business. The Company, and its subsidiaries, is a multinational
company which operates in the marine recreation business. The Company
manufactures and markets marine engines, boats and marine parts and
accessories.
Basis of Presentation. The Statement of Consolidated Financial Position at
September 30, 1997 for the Post-Merger Company was prepared using a new basis
of purchase accounting. The Pre-Merger Company's historical basis of
accounting was used prior to September 30, 1997. The Statement of
Consolidated Financial Position as of September 30, 1997, which was prepared
under the new basis of accounting, reflected the preliminary fair values of
assets acquired and liabilities assumed, and the related debt incurred in
connection with the merger with Greenmarine on September 30, 1997.
-17-
<PAGE> 18
Principles of Consolidation. The accounts of all significant subsidiaries
were included in the Consolidated Financial Statements. Intercompany
accounts, all material transactions and earnings have been eliminated in
consolidation. At September 30, 1997, all subsidiaries were wholly owned
except those referred to in Note 3 to the Consolidated Financial Statements.
Accounting Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions which affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents. For purposes of the Statements of Consolidated
Cash Flows, marketable securities with an original maturity of three months or
less are considered cash equivalents.
The Company's domestic banking system provides for the daily replenishment
of major bank accounts for check clearing requirements. Accordingly,
outstanding checks of $18.3 million and $21.1 million which had not yet been
paid by the banks at September 30, 1997 and 1996, respectively, were reflected
in trade accounts payable in the Statements of Consolidated Financial
Position.
Restricted Cash. At September 30, 1997, the Post-Merger Company has $37.0
million in restricted cash held in a trust depository to fund the redemption
of remaining untendered old outstanding shares of stock. This asset is
classified as other current assets and substantially funds the corresponding
liability classified as accrued liabilities.
Inventories. The Company's domestic inventory is carried at the lower of
cost or market using principally the last-in, first-out (LIFO) cost method.
All other inventory (19% in 1997 and 23% in 1996) is carried at the lower of
first-in, first-out (FIFO) cost or market. The book basis for inventories at
September 30, 1997 exceeds the tax basis by $39.1 million as a result of
applying purchase accounting in connection with the merger.
During 1997 and 1996, the liquidation of LIFO inventory quantities acquired
at lower costs prevailing in prior years as compared with the costs of 1997
and 1996 purchases, increased earnings before tax by $1.0 million and $1.3
million, respectively. There were no material liquidations of LIFO inventory
quantities in 1995.
Product Tooling, Plant and Equipment and Depreciation. Product tooling
costs are amortized over a period not exceeding five years, beginning the
first year the related product is sold. Plant and equipment are recorded at
cost and depreciated substantially on a straight-line basis over their
estimated useful lives as follows: buildings, 10 to 40 years; machinery and
equipment, 3 to 12 1/2 years. Depreciation is not provided on construction in
progress until the related assets are placed into service.
Amortization of tooling and depreciation of plant and equipment was $52.7
million, $52.1 million and $45.4 million for the years ended September 30,
1997, 1996 and 1995, respectively.
When plant and equipment is retired or sold, its cost and related
accumulated depreciation are written-off and the resulting gain or loss is
included in net earnings.
-18-
<PAGE> 19
Maintenance and repair costs are charged directly to earnings as incurred
and were $26.5 million, $29.4 million and $32.4 million for 1997, 1996 and
1995, respectively. Major rebuilding costs which substantially extend the
useful life of an asset are capitalized and depreciated.
Intangibles. The Statements of Consolidated Financial Position
(Post-Merger Company) included preliminary purchase accounting goodwill of
$250.2 million and trademarks, patents and other intangibles of $83.9 million
on September 30, 1997. Intangibles are amortized over 15 to 40 years. The
carrying value of the intangible assets is periodically reviewed by the
Company based on the expected future operating earnings of the related units.
Amortization of intangibles on the Pre-Merger Company was $1.6 million,
$1.8 million and $1.2 million for 1997, 1996 and 1995, respectively.
Revenue Recognition. The Company recognizes sales and related expenses
including estimated warranty costs upon shipment of products to unaffiliated
customers.
Advertising Costs. Advertising costs are charged to expense as incurred
and were $33.7 million, $31.8 million and $35.9 million for 1997, 1996 and
1995, respectively.
Warranty. The Company generally provides the ultimate consumer a warranty
with each product and accrues warranty expense at time of sale based upon
actual claims history. Actual warranty costs incurred are charged against the
accrual when paid. In the year ended September 30, 1997, warranty accruals
were increased $9.7 million due to a change in accounting estimate.
Research and Development Costs. Expenditures relating to the development
of new products and processes, including significant improvements and
refinements to existing products, are expensed as incurred. Such expenditures
were $38.2 million, $41.8 million and $41.6 million for 1997, 1996 and 1995,
respectively.
Translation of Non-U.S. Subsidiary Financial Statements. The financial
statements of non-U.S. subsidiaries are translated to U.S. dollars
substantially as follows: all assets and liabilities at year-end exchange
rates; sales and expenses at average exchange rates; shareholders' investment
at historical exchange rates. Gains and losses from translating non-U.S.
subsidiaries' financial statements are recorded directly in shareholders'
investment. The Statements of Consolidated Earnings for 1997 and 1995 include
foreign exchange losses (gains) of $1.0 million and $(0.6) million,
respectively, which resulted primarily from commercial transactions and
forward exchange contracts. In 1996, there was no net foreign exchange gain
or loss.
Impairment of Long-Lived Assets. Effective October 1, 1996, the Pre-Merger
Company adopted the Financial Accounting Standards Board's Statement of
Accounting Standards No. 121 (SFAS 121), "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS 121
requires that long-lived assets and certain identifiable intangibles held and
used by a company be reviewed for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. SFAS 121 also requires that long-lived assets and certain
identifiable intangibles held for sale, other than those related to
discontinued operations, be reported at the lower of carrying amount or fair
value less cost to sell. The Company evaluates the long-lived assets and
certain identifiable intangibles for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment charge of $2.0 million was recognized in the
year ended September 30, 1997.
-19-
<PAGE> 20
Earnings Per Share of Common Stock. Primary earnings (loss) per share of
common stock is computed based on the weighted average number of shares of
common stock and common stock equivalents outstanding of 20.2 million, 20.1
million and 20.1 million for the years ended September 30, 1997, 1996 and
1995, respectively. The computation of fully diluted earnings (loss) per
share of common stock assumed conversion of the 7% convertible subordinated
debentures due 2002; accordingly, net earnings (loss) were increased by
after-tax interest and related expense amortization on the debentures. For
the fully diluted earnings (loss) per share computations for 1997, 1996 and
1995, shares were computed to be 23.6 million, 23.6 million and 23.5 million,
respectively. For 1997 and 1996, the computation of fully diluted earnings
(loss) per share was antidilutive; therefore, the amounts reported for primary
and fully diluted earnings (loss) per share are identical.
On September 30, 1997, all of the old outstanding common stock was
cancelled and 20.4 million shares of new common stock were issued. See Note 9
concerning the redemption of the 7% convertible subordinated debentures due
2002.
The Financial Accounting Standards Board's Statement No. 128 (SFAS 128),
"Earnings per Share" was issued in February, 1997. The new standard
simplifies the computation of earnings per share (EPS) and provides improved
comparability with international standards. SFAS 128 replaces primary EPS
with "Basic" EPS, which excludes dilution and is computed by dividing net
earnings or (loss) by the weighted-average number of common shares outstanding
for the period. "Diluted" EPS (which replaces fully diluted EPS) is computed
similarly to fully diluted EPS by reflecting the potential dilution that
occurs if securities or other contracts to issue common stock were exercised
or converted to common stock or resulted in the issuance of common stock that
then shared in the earnings.
Effective October 1, 1997, the Company will report EPS as required by SFAS
128. SFAS 128 will require restatement of earnings per share for previous
periods; however, such restatement will not be material for the Company.
Note 3 Joint Venture and Investments
------------------------------------
In July 1995, the Pre-Merger Company and FICHT GmbH of Kirchseeon, Germany
announced the formation of a strategic alliance for the development and
worldwide manufacturing and marketing of high pressure fuel injection systems
and other technologies. Under the terms of the strategic alliance, the
Pre-Merger Company acquired a 51% interest in FICHT GmbH. The Ficht family
retained a 49% interest and continues to operate the business. FICHT GmbH and
Co. KG (FICHT) is the name of the resulting business. The Company has an
exclusive license for the marine industry for the FICHT fuel injection system.
In addition, the Company has an exclusive worldwide license agreement for all
non-automotive applications. Royalty income, if any, resulting from other
licensing of the technology will be distributed through FICHT.
In July 1993, the Pre-Merger Company and AB Volvo Penta and Volvo Penta of
the Americas, Inc. formed a joint venture company to produce gasoline stern
drive and gasoline inboard marine power systems. The joint venture is 60%
owned by Volvo Penta of the Americas, Inc. (Volvo Penta) and 40% owned by the
Company. The jointly produced marine power systems are marketed by Volvo
Penta to independent boat builders worldwide and are used in boats
manufactured by subsidiaries of the Company. The units carry the Volvo Penta
and SX Cobra brand names.
-20-
<PAGE> 21
The equity method of accounting is used for the joint venture. At
September 30, 1997 and 1996, the Company's investment including current net
accounts receivable was $19.7 and $13.6 million, respectively. The joint
venture is a manufacturing and after-market joint venture. The Company
recognizes gross profit relating to certain parts sales and incurs expenses
for product development that are part of the joint venture. The Pre-Merger
Company's share of the joint venture's earnings was $7.2 million, $4.4 million
and $4.9 million in 1997, 1996 and 1995, respectively, which were included in
other expense (income) in the Statements of Consolidated Earnings.
Note 4 Restructuring Charges
----------------------------
During fiscal year 1996, the Pre-Merger Company recorded $25.6 million in
restructuring charges. Included was $20.1 million for closings of
distribution operations and write-down of manufacturing facilities outside the
United States. The North American and European sales and marketing operations
were realigned to more effectively meet market needs.
Accrued liabilities included restructuring charges of $6.0 million and
$18.5 million at September 30, 1997 and 1996, respectively. The remaining
accrual at September 30, 1997, represents amounts primarily for severance
payments and other closure costs of overseas manufacturing companies. The
remaining restructuring reserves are expected to be utilized during the 1998
fiscal year.
Note 5 Inventories
------------------
The various components of inventory were as follows:
(Dollars in millions)
-------------------------
Post-Merger Pre-Merger
Company Company
September 30 1997 1996
----------------------------- ------- -------
Finished product $ 62.1 $ 75.6
Raw material, work in process
and service parts 114.8 131.2
------- -------
Inventory at current cost
which is less than market 176.9 206.8
Excess of current cost over
LIFO cost -- 41.7
------- -------
Net inventory $ 176.9 $ 165.1
======= =======
-21-
<PAGE> 22
Note 6 Plant and Equipment
--------------------------
Plant and equipment components were as follows:
(Dollars in millions)
-------------------------
Post-Merger Pre-Merger
Company Company
September 30 1997 1996
------------------------ -------- --------
Land and improvements $ 13.2 $ 21.0
Buildings 65.0 149.5
Machinery and equipment 126.1 379.7
Construction in progress 5.9 14.9
------- -------
210.2 565.1
Accumulated depreciation -- 346.2
------- -------
Plant and equipment, net $ 210.2 $ 218.9
======= =======
Note 7 Accrued Liabilities and Other Non-Current Liabilities
------------------------------------------------------------
Accrued liabilities were as follows:
(Dollars in millions)
-------------------------
Post-Merger Pre-Merger
Company Company
September 30 1997 1996
--------------------------------- -------- --------
Compensation, pension programs and
current postretirement medical $ 24.2 $ 25.1
Warranty 24.6 23.3
Marketing program 32.8 35.3
Restructuring 6.0 18.5
Accruals for business reorganizations 50.9 --
Other 43.5 49.7
------- -------
Accrued liabilities $ 182.0 $ 151.9
======= =======
Other non-current liabilities were as follows:
Accruals for business reorganizations $ 86.0 $ --
Pension programs 17.3 16.8
Environmental remediation 18.4 11.1
Other 81.0 76.6
------- -------
Accrued non-current liabilities $ 202.7 $ 104.5
======= =======
For both accrued liabilities and other non-current liabilities, accruals
for business reorganizations represent adjustments made in purchase accounting
at September 30, 1997. These adjustments include accruals for rationalization
of the product range, terminations, plant consolidations and closures.
-22-
<PAGE> 23
Note 8 Short-Term Borrowings and Accounts Receivable Sales Agreements
---------------------------------------------------------------------
A summary of short-term borrowing activity was as follows (the balance
outstanding at September 30, 1997 was Post-Merger Company):
(Dollars in millions)
--------------------------------
1997 1996 1995
------- ------- --------
Outstanding at September 30-
Credit agreement $ 96.0 $ -- $ --
Bank borrowing $ -- $ -- $ --
Average bank borrowing for the
year-
Borrowing $ 2.9 $ 5.7 $ 55.3
Interest rate 7.1% 6.6% 7.2%
Maximum month end borrowing $ 29.0 $ 15.0 $ 100.0
====== ====== =======
The Company became obligated under a credit agreement, as amended, with AFG
which provides for loans of up to $150 million (The Acquisition Debt").
Amounts outstanding under this credit agreement are secured by 20.4 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 (see Note 9 to the
Consolidated Financial Statements). Under the Acquisition Debt agreement, the
Company is required to meet certain covenants. The Company is in compliance
with these covenants.
The full amount of the Acquisition Debt matures on June 16, 1998. Although
the Company does not currently have the funds to refinance such debt, the
Company and its Parent believe the Company will be able to raise such funds
through the sale of debt or equity in the public or private markets by the
maturity date of the Acquisition Debt.
In addition to the credit agreement, the Company's non-U.S. subsidiaries
had additional uncommitted lines of credit of approximately $0.9 million on
September 30, 1997.
The Company entered into a Financing and Security Agreement effective
November 12, 1997, which provided for loans of up to $50 million. Effective
January 6, 1998, the Company entered into a $150 million Amended and Restated
Loan and Security Agreement which expires December 31, 2000 which replaced the
November 12, 1997 agreement. Under this agreement the Company is required to
meet certain covenants. Any loans outstanding under the January 6, 1998
agreement will be secured by the Company's inventory, receivables and
intellectual property and are guaranteed by certain of the Company's operating
subsidiaries.
In connection with the change of control, the Pre-Merger Company terminated
a previous revolving credit agreement which had provided for loans up to $150
million.
The Pre-Merger Company had a $55 million receivable sales agreement whereby
it agreed to sell an ownership interest in a designated pool of domestic trade
accounts receivable ("Receivables"). These receivable sales agreements were
terminated as of April 30, 1997. During the course of fiscal year 1997,
monthly sales of receivables averaged $7.4 million with maximum sales of $29.0
million in February 1997. The Pre-Merger Company retained substantially the
-23-
<PAGE> 24
same credit risk as if the Receivables had not been sold. The costs
associated with the receivable sales agreements were included in non-operating
expense - other, net in the Statements of Consolidated Earnings for the years
ended September 30, 1997 and 1996.
Note 9 Long-Term Debt
---------------------
Long-term debt on September 30, 1997 and 1996, net of sinking fund
requirements included in current liabilities, consisted of the following:
(Dollars in millions)
------------------------
Post-Merger Pre-Merger
Company Company
September 30 1997 1996
-------- --------
7% convertible subordinated debentures due 2002 $ 74.8 $ 74.8
9-1/8% sinking fund debentures due through 2017 62.6 64.8
Medium-term notes due 1998 through 2001 with rates
ranging from 8.16% to 8.625% 26.2 24.8
Industrial revenue bonds and other debt with rates
ranging from 6.0% to 12.037% 13.1 13.4
------- -------
$ 176.7 $ 177.8
Less current maturities (72.9) (0.2)
------- -------
$ 103.8 $ 177.6
======= =======
On September 30, 1997, the Company held $34.8 million of its 9 1/8% sinking
fund debentures, which will be used to meet sinking fund requirements of $5.0
million per year in the years 1998 through 2004. Amounts are recorded as a
reduction of outstanding debt.
Due to the change of control and the merger with Greenmarine, the Company
was required to offer to purchase its 7% convertible subordinated debentures
due 2002. Debentures tendered and repurchased on November 12, 1997 totaled
$67.7 million leaving $7.1 million outstanding and a continuing obligation of
the Company. Accordingly, $67.7 million was reflected in current maturities.
The agreements covering both long and short-term debt instruments have
restrictive financial covenants. At September 30, 1997, the Company was in
compliance with these financial covenants.
Maturities and sinking fund requirements of long-term debt for each of the
next five years are as follows:
(Dollars in millions)
----------------------
1998 $ 72.9
-----
1999 $ 11.2
-----
2000 $ 7.0
-----
2001 $ 6.3
-----
2002 $ 8.4
-----
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<PAGE> 25
Note 10 Financial Instruments
-----------------------------
The carrying values of cash and cash equivalents, receivables, accounts
payable, and current maturities of long-term debt approximate fair values due
to the short term nature of these instruments. The fair value of the
long-term debt was $103.8 million and $171.7 million at September 30, 1997 and
1996, respectively, versus carrying amounts of $103.8 and $177.6 million at
September 30, 1997 and 1996, respectively. The fair value of long-term debt
was based on quoted market prices where available or discounted cash flows
using market rates available for similar debt of the same remaining
maturities.
The Company uses various financial instruments to manage interest rate,
foreign currency, and commodity pricing exposures. The agreements are with
major financial institutions which are expected to fully perform under the
terms of the instruments, thereby mitigating the credit risk from the
transactions. The Company does not hold or issue financial instruments for
trading purposes. The notional amounts of these contracts do not represent
amounts exchanged by the parties and, thus, are not a measure of the Company's
risk. The net amounts exchanged are calculated on the basis of the notional
amounts and other terms of the contracts, such as interest rates or exchange
rates, and only represent a small portion of the notional amounts.
The Pre-Merger Company had entered into several interest rate swap
agreements as a means of managing its proportion of fixed to variable interest
rate exposure. The differential to be paid or received is accrued consistent
with the terms of the agreements and market interest rates and is recognized
in net earnings as an adjustment to interest expense. At September 30, 1996,
the Pre-Merger Company had outstanding fixed to floating interest rate swap
agreements having a total notional principal amount of $100 million expiring
November 25, 1996. Also at September 30, 1997 and 1996, the Company had an
outstanding floating to fixed interest rate swap agreement having a total
notional principal amount of $5 million expiring February 15, 1999. The fair
value of the interest rate swap agreements at September 30, 1997 and 1996 was
an estimated termination liability of $0.3 and $0.5 million, respectively.
This potential expense at each fiscal year end had not yet been reflected in
net earnings as it represents the hedging of long-term activities to be
amortized in future reporting periods. The fair value was the estimated
amount the Company would have paid to terminate the swap agreements.
The Company purchases currency options to hedge particular anticipated but
not yet committed sales expected to be denominated in such currencies. The
Company amortizes the cost of the options over the term of the instruments
which is generally six to eighteen months. The recognition of gains or losses
on these instruments is accrued as foreign exchange rates change and is
recognized in net earnings as an adjustment to cost of goods sold. At
September 30, 1997, the Company had Belgian franc put options for $32.1
million with a market value of $4.3 million and a French franc put option for
$10 million with a market value of $1.0 million, both of which settled October
2, 1997. This potential income had been reflected in net earnings as cost of
goods sold at September 30, 1997, as it represented a hedge of fiscal 1997
activities. The fair values were obtained from major financial institutions
based upon the market values as of September 30, 1997.
The Company purchases commodity options to hedge anticipated purchases of
aluminum. The Company amortizes the cost of the options over the term of the
instruments. Gains and losses on open hedging transactions are deferred until
the options are exercised. Upon exercise, gains and losses are included in
inventories as a cost of the commodities and reflected in net earnings when
the product is sold. At September 30, 1997, the Company had options covering
approximately 25% of annual forecasted aluminum purchases. The fair market
value of these options was $0.3 million at September 30, 1997. The fair
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<PAGE> 26
market value was obtained from a major financial institution based upon the
market value of those options at September 30, 1997.
Note 11 Preferred Stock and Shareholder Rights Plan
---------------------------------------------------
Due to the change of control and the merger with Greenmarine, all rights
existing under the shareholder rights plan adopted by the Pre-Merger Company
on April 24, 1996 expired on September 30, 1997.
In addition, as a result of the merger, all of the Pre-Merger Company's
preferred stock, including those reserved for issuance under the shareholder
rights plan, were cancelled.
Note 12 Common Stock
--------------------
On September 30, 1997, all of the old outstanding common stock was
cancelled and 20.4 million shares of new common stock were issued.
In 1992, the Pre-Merger Company issued $74.75 million, principal amount, of
7% subordinated convertible debentures. The debentures were convertible into
3,359,550 shares of the Pre-Merger Company's common stock (which were
reserved) at a conversion price of $22.25 per share. Due to the change of
control and the merger with Greenmarine, each holder of debentures had the
right, at such holder's option, to require the Company to repurchase all or a
portion of such holder's debentures at the purchase price by November 12,
1997. As a result of the offer to purchase, all but $7.1 million of the
principal amount was tendered to, and purchased by, the Company.
Due to the merger with Greenmarine, all stock options, stock appreciation
rights and restricted stock granted under the OMC Executive Equity Incentive
Plan and the OMC 1994 Long-Term Incentive Plan were fully vested and payable
in accordance with the terms of the Plans or as provided in the terms of the
grants, as amended. In the case of stock options, participants in the plans
were entitled to receive in cash the difference, if any, between the purchase
price of $18.00 per share (or limited stock appreciation rights at $19.50 per
share as computed for officers) and the stock option purchase price. All
amounts with respect to the above plans have been expensed and included in
change of control expenses.
With regard to restricted stock granted under either of the plans,
participants were entitled to receive the cash value of the grants based on
$18.00 per share or as may have otherwise been agreed to between the
participant and the Pre-Merger Company.
The Pre-Merger Company adopted the disclosure-only provision under
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting
for Stock-Based Compensation," as of September 30, 1997, while continuing to
measure compensation cost under APB Opinion No. 25, "Accounting for Stock
Issued to Employees." If the accounting provisions of SFAS 123 had been
adopted as of the beginning of 1996, the effect on net earnings for 1997 and
1996 would have been immaterial.
-26-
<PAGE> 27
A summary of option data for all plans was as follows:
Number of Option Exercise
Option Shares Price Per Share
------------- -----------------
Options outstanding and unexercised
at September 30, 1994 1,112,220 $ 10.00 - 24.625
Options granted 153,200 $ 20.875- 29.225
Options exercised (41,715) $ 10.00 - 21.375
Options cancelled (40,460) $ 18.50 - 24.625
-----------
Options outstanding and unexercised
at September 30, 1995 1,183,245 $ 10.00 - 29.225
Options granted 233,500 $ 16.00 - 20.00
Options exercised (36,730) $ 10.00 - 19.375
Options cancelled (102,415) $ 10.00 - 24.625
-----------
Options outstanding and unexercised
at September 30, 1996 1,277,600 $ 10.00 - 29.225
Options granted 223,700 $ 16.375
Options exercised (526,620) $ 10.00 - 19.375
Options cancelled (974,680) $ 16.375- 29.225
-----------
Options outstanding and unexercised
at September 30, 1997* --
===========
Exercisable at September 30, 1997 --
===========
* Due to the merger with Greenmarine, all options outstanding were paid out
in cash and cancelled at September 30, 1997.
Note 13 Retirement Benefit and Incentive Compensation Programs
--------------------------------------------------------------
The Company and its subsidiaries have retirement benefit plans covering a
majority of its employees. Worldwide pension calculations resulted in expense
(income) of $2.4 million, $0.3 million and $(0.5) million in 1997, 1996 and
1995, respectively.
The following schedule of pension expense (income) presents amounts
relating to the Company's material pension plans, United States and Canada
(all years presented were Pre-Merger Company):
(Dollars in millions)
Years ended September 30 1997 1996 1995
---------------------------------- ------- ------- -------
Benefits earned during the period $ 6.6 $ 6.2 $ 5.4
Interest cost on projected benefit
obligation 28.5 25.4 24.2
Return on pension assets (88.5) (46.5) (66.0)
Net amortization and deferral 54.3 15.7 34.3
------ ------ ------
Net periodic pension expense
(income) $ .9 $ .8 $ (2.1)
====== ====== ======
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<PAGE> 28
Actuarial assumptions used for the Company's principal defined benefit
plans (1997 was Post-Merger Company):
September 30 1997 1996 1995
--------------------------------------- ------ ------ ------
Discount rates 7-1/2% 8% 7-3/4%
Rate of increase in compensation levels
(salaried employee plans) 5% 5% 5%
Expected long-term rate of return on
assets 9-1/2% 9-1/2% 9-1/2%
The funded status and pension liability were as follows (1997 was Post-
Merger Company):
(Dollars in millions)
------------------------------------------
Plans Whose Plans Whose Accumu-
Assets Exceed lated Benefits
Accumulated Benefits Exceed Assets
September 30 1997 1996 1997 1996
-------------------------- -------- -------- ------- -------
Actuarial present value
of benefit obligation
Vested $ 331.0 $ 298.5 $ 15.2 $ 14.0
Nonvested 27.7 32.8 1.0 1.2
------- ------- ------ ------
Accumulated benefit
obligation 358.7 331.3 16.2 15.2
Effect of projected future
compensation increases 22.1 21.3 1.2 1.3
------- ------- ------ ------
Projected benefit
obligation 380.8 352.6 17.4 16.5
Plan assets at fair market
value 455.2 387.2 -- --
------- ------- ------ ------
Plan assets (in excess of)
less than projected
benefit obligation (74.4) (34.6) 17.4 16.5
Unrecognized net loss -- (16.8) -- (4.4)
Prior service cost not yet
recognized in net
periodic pension expense -- (15.7) -- (.7)
Remaining unrecognized net
asset (obligation)
arising from the initial
application of SFAS No. 87 -- 17.0 -- (.5)
Adjustment required to
recognize minimum liability -- -- -- 4.3
------- ------- ------ ------
Pension liability (asset)
recognized $ (74.4) $ (50.1) $ 17.4 $ 15.2
======= ======= ====== ======
The provisions of SFAS No. 87, "Employers' Accounting for Pensions",
require the recognition of an additional minimum liability for each defined
benefit plan for which the accumulated benefit obligation exceeds plan assets.
This amount has been recorded as a long-term liability with an offsetting
intangible asset. Because the asset recognized may not exceed the amount of
unrecognized prior service cost and transition obligation on an individual
plan basis, the balance of $3.5 million is reported as a separate reduction of
shareholders' investment at September 30, 1997 prior to the merger with
-28-
<PAGE> 29
Greenmarine. At September 30, 1997 in accordance with purchase accounting,
plan assets in excess of or less than the projected benefit obligation have
been recorded.
The Company's major defined benefit plans had provided that upon a change
of control of the Company and upon certain other actions by the acquirer, all
participants of these plans would become vested in any excess of plan assets
over total accumulated benefit obligations. Pursuant to the terms of the
plan, this provision was deleted to avoid being triggered by the change of
control which took place September 12, 1997.
The Company provides certain health care and life insurance benefits for
eligible retired employees, primarily employees of the Milwaukee, Wisconsin;
Waukegan, Illinois; and former Galesburg, Illinois plants as well as Marine
Power Products and the Corporate office. Employees at these locations become
eligible if they have fulfilled specific age and service requirements. These
benefits are subject to deductible, co-payment provisions and other
limitations, which are amended periodically. The Company reserves the right
to make additional changes or terminate these benefits in the future.
On January 1, 1994, and to be effective in 1998, the Pre-Merger Company
introduced a cap for the employer-paid portion of medical costs for non-union
active employees. The cap is tied to the Consumer Price Index.
The net cost of providing postretirement health care and life insurance
benefits included the following components (all years presented were
Pre-Merger Company):
(Dollars in millions)
Years ended September 30 1997 1996 1995
-------------------------------- ------- ------- -------
Service cost-benefits attributed
to service during the period $ 1.1 $ 1.0 $ 1.0
Interest cost on accumulated
postretirement benefit
obligation 7.3 6.4 6.9
Amortization of prior service
cost and actuarial gain (1.8) (1.9) (1.8)
------ ------ ------
Net periodic postretirement
benefit cost $ 6.6 $ 5.5 $ 6.1
====== ====== ======
The amounts recognized in the Statements of Consolidated Financial Position
included (1997 was Post-Merger Company):
(Dollars in millions)
September 30 1997 1996
------------------------------ -------- --------
Accumulated postretirement
benefit obligation
Retirees $ 65.3 $ 64.5
Fully eligible active plan
participants 13.3 11.5
Other active plan
participants 24.2 19.3
Prior service credit -- 10.7
Unrecognized net gain -- 0.7
------- -------
Net obligation $ 102.8 $ 106.7
======= =======
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<PAGE> 30
The accumulated postretirement benefit obligation was determined using a
7-1/2% and 8% weighted average discount rate at September 30, 1997 and 1996,
respectively. The health care cost trend rate was assumed to be 8% in fiscal
year 1997, declining to 7% next year and remaining constant thereafter. In
fiscal year 1996, the health care cost trend rate was assumed to be 9%,
gradually declining to 7% over two years and remaining constant thereafter. A
one percentage point increase of this annual trend rate would increase the
accumulated postretirement benefit obligation at September 30, 1997 by
approximately $7.0 million and the net periodic cost by $0.6 million for the
year.
Under the OMC Executive Bonus Plan, the compensation committee of the board
of directors, which administers the plan and whose members are not
participants in the plan, had authority to determine the extent to which the
Pre-Merger Company meets, for any fiscal year, the performance targets for
that fiscal year which are set by the committee no later than the third month
of the fiscal year. In fiscal 1997, no incentive compensation was paid or
provided under this plan. In fiscal years 1996 and 1995, $0.8 million and
$5.1 million, respectively, was charged to earnings under this plan.
The 1994 OMC Long-Term Incentive Plan and its predecessor plan authorized
the awarding of performance units or performance shares, each with a value
equal to the value of a share of common stock at the time of award.
Performance shares for the three year cycle ended September 30, 1997 will be
earned and paid based upon the judgment of the compensation committee of the
Company's board of directors whose members are not participants in the plan,
as to the achievement of various goals over multi-year award cycles. In 1997,
1996 and 1995, respectively, $(0.2) million, $(0.4) million and $1.1 million
were charged (credited) to earnings for the estimated cost of performance
units earned under the plan.
Note 14 Other Expense (Income), Net
-----------------------------------
Other non-operating expense (income) in the Statements of Consolidated
Earnings consisted of the following items (all years presented were Pre-Merger
Company):
(Dollars in millions)
Years ended September 30 1997 1996 1995
----------------------------- -------- -------- --------
Expense (Income)--
Interest earned $ (4.5) $ (4.1) $ (7.0)
Insurance recovery and
lawsuit settlement (10.7) -- --
Foreign exchange losses (gains) 1.0 -- (.6)
(Gain) loss on disposition
of plant and equipment (5.8) .9 (1.8)
Joint venture earnings (7.2) (4.4) (4.9)
Discount charges--
Accounts Receivable Sales 0.6 1.7 --
Miscellaneous, net (2.6) (2.6) (2.4)
------- ------- -------
$ (29.2) $ (8.5) $ (16.7)
======= ======= =======
Note 15 Income Taxes
--------------------
The provision for income taxes consisted of the following components (all
years presented were Pre-Merger Company):
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<PAGE> 31
(Dollars in millions)
Years ended September 30 1997 1996 1995
------------------------------------ ------- ------ ------
Provision for current income taxes
Federal $ (36.7) $ (5.6) $ 19.8
State (2.3) -- 3.7
Non-U.S. 2.8 2.5 10.6
------- ------ ------
Total current (36.2) (3.1) 34.1
Changes to valuation allowance 39.0 -- (24.7)
------- ------ ------
Total provision $ 2.8 $ (3.1) $ 9.4
======= ====== ======
The significant short-term and long-term deferred tax assets and
liabilities were as follows (1997 was Post-Merger Company):
(Dollars in millions)
September 30 1997 1996
----------------------------------- -------- --------
Deferred tax assets
Litigation and claims $ 18.4 $ 16.9
Product warranty 14.6 10.7
Marketing programs 13.7 15.3
Postretirement medical benefits 41.2 42.7
Restructuring 7.3 7.6
Loss carryforwards 55.0 29.6
Accruals for business reorganizations 13.6 --
Other 50.5 46.5
Valuation allowance (131.8) (92.8)
------- -------
Total deferred tax assets $ 82.5 $ 76.5
======= =======
Deferred tax liabilities
Depreciation and amortization $ (13.9) $ (12.4)
Employee benefits (12.8) (14.0)
Other (15.7) (12.3)
------- -------
Total deferred tax liabilities (42.4) (38.7)
------- -------
Net deferred tax assets $ 40.1 $ 37.8
======= =======
The Company believes the recorded net deferred tax assets of $40.1 million,
of which $21.1 million is reflected as a net long-term asset, will be
realized. A valuation allowance of $131.8 million has been 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.
-31-
<PAGE> 32
These carryforwards are entirely offset by the valuation allowance. No
benefit has been recognized 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 1997 fiscal year results, it is unlikely the reversal of the valuation
allowance will occur in 1998.
The following summarizes the major differences between the actual provision
for income taxes on earnings (losses) and the provision (credit) based on the
statutory United States Federal income tax rate (all years presented were
Pre-Merger Company):
% to pretax earnings
Years ended September 30 1997 1996 1995
---------------------------------- ------- ------- -------
At statutory rate (35.0)% (35.0)% 35.0%
State income taxes, net of
Federal tax deduction (3.0) (.2) 4.0
Tax effect of non-U.S.
subsidiary earnings (loss) taxed
at other than the U.S. rate 0.1 11.4 9.6
Tax benefit not provided on domestic
and foreign operating losses 41.8 20.6 1.2
Tax effect of goodwill
amortization and write-offs 0.4 3.3 8.7
Reversal of valuation allowance -- -- (44.8)
Federal tax effect prior year's
state income taxes paid (0.2) 13.6 --
Tax effects of audit settlements -- (50.5) --
Other (0.5) 7.0 1.7
------- ------- -------
Actual provision N.M.% N.M.% 15.4%
======= ======= =======
Domestic and non-U.S. earnings before provision (credit) for income taxes
consisted of the following (all years presented were Pre-Merger Company):
(Dollars in millions)
Years ended September 30 1997 1996 1995
---------------------------------- -------- -------- -------
Earnings (Loss) before provision
for income taxes
United States $ (68.7) $ (8.1) $ 46.8
Non-U.S. (7.6) (2.3) 14.0
------- ------- ------
Total $ (76.3) $ (10.4) $ 60.8
======= ======= ======
The above non-U.S. loss of $(7.6) million is a net amount that includes
both earnings and losses. Due to the integrated nature of the Company's
operations, any attempt to interpret the above pretax earnings (loss) as
resulting from stand-alone operations could be misleading.
No U.S. deferred taxes have been provided on $84.0 million of
undistributed non-U.S. subsidiary earnings. The Company has no plans to
repatriate these earnings and, as such, they are considered to be permanently
-32-
<PAGE> 33
invested. While no detailed calculations have been made of the potential U.S.
income tax liability should such repatriation occur, the Company believes that
it would not be material in relation to the Company's Consolidated Financial
Position or Consolidated Earnings.
Note 16 Geographic Business Data
--------------------------------
The Company, which operates in a single business segment, manufactures and
distributes marine engines, boats, parts and accessories. The Company markets
its products primarily through dealers in the United States, Europe and
Canada, and through distributors in the rest of the world.
Information by geographic area was as follows (all years presented were
Pre-Merger Company, except total assets in 1997 were Post-Merger Company):
(Dollars in millions)
---------------------------------------
Years ended September 30 1997 1996 1995
-------------------------- --------- --------- ---------
Net sales
United States $ 721.0 $ 813.3 $ 906.8
Europe 90.9 114.8 117.1
Other 167.6 193.4 205.3
--------- --------- ---------
Total $ 979.5 $ 1,121.5 $ 1,229.2
========= ========= =========
Sales between geographic
areas from
United States $ 152.2 $ 144.4 $ 179.7
Europe 2.1 7.4 7.9
Other 47.0 45.6 58.0
--------- --------- ---------
Total $ 201.3 $ 197.4 $ 245.6
========= ========= =========
Total revenue
United States $ 873.2 $ 957.7 $ 1,086.5
Europe 93.0 122.2 125.0
Other 214.6 239.0 263.3
Eliminations (201.3) (197.4) (245.6)
--------- --------- ---------
Total $ 979.5 $ 1,121.5 $ 1,229.2
========= ========= =========
Earnings (Loss)
from operations
United States $ (36.3) $ 5.1 $ 55.1
Europe (9.1) (8.2) (3.2)
Other (7.4) 6.0 30.1
Corporate expenses (9.6) (9.5) (14.8)
--------- --------- ---------
Total $ (62.4) $ (6.6) $ 67.2
========= ========= =========
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<PAGE> 34
Total assets at
September 30 1997 1996 1995
-------------------------- --------- --------- ---------
United States $ 969.6 $ 593.6 $ 612.2
Europe 53.2 76.8 102.9
Other 124.5 134.8 145.6
Corporate assets 31.7 68.5 46.3
--------- --------- ---------
Total $ 1,179.0 $ 873.7 $ 907.0
========= ========= =========
Corporate assets consist of cash, securities and property. Due to the
integrated nature of the Company's operations, any attempt to interpret the
above geographic area data as resulting from unique or stand-alone types of
operations could be misleading.
Note 17 Quarterly Information (Unaudited)
----------------------------------------
A summary of pertinent quarterly data for the 1997 and 1996 fiscal years
was as follows:
A summary of pertinent quarterly data for the 1997 and 1996 fiscal years
follows:
(Dollars in millions except amounts per share)
Quarter ended Dec. 31 Mar. 31 June 30 Sept. 30
------------------------ -------- -------- -------- --------
Fiscal 1997-
Net sales $ 197.1 $ 237.0 $ 275.8 $ 269.6
Gross earnings 22.7 36.5 54.8 39.0
Net earnings (loss) (14.3) (7.3) (5.1) (52.4)
======= ======= ======= =======
Net earnings (loss) per share:
Primary $ (0.71) $ (0.36) $ (0.25) $ (2.58)
======= ======= ======= =======
Fully diluted $ (0.71) $ (0.36) $ (0.25) $ (2.58)
======= ======= ======= =======
Quarter ended Dec. 31 Mar. 31 June 30 Sept. 30
------------------------ -------- -------- -------- --------
Fiscal 1996*
Net sales $ 232.1 $ 285.5 $ 291.0 $ 312.9
Gross earnings 39.4 61.3 59.6 69.0
Net earnings (loss) (12.4) 1.1 (3.6) 7.6
======= ======= ======= =======
Net earnings (loss) per share:
Primary $ (0.62) $ 0.05 $ (0.18) $ 0.38
======= ======= ======= =======
Fully diluted $ (.62) $ .05 $ (.18) $ .36
======= ======= ======= =======
* Includes restructuring charges of $11.9 million in the 3rd
quarter and $13.7 million in the 4th quarter.
Earnings per share amounts for each quarter are required to be computed
independently and, therefore, may not equal the amount computed for the total
year.
-34-
<PAGE> 35
Due to the seasonal nature of the Company's business, it is not appropriate
to compare the results of operations of different fiscal quarters.
The price range at which the Pre-Merger Company's common stock traded on
the New York Stock Exchange and the dividends declared per share during the
last eight fiscal quarters were as follows:
Market Price Dividend
Quarter ended High Low Close Declared
------------------ ----- ------- ------- --------
September 30, 1997 $ 18.00 $ 16.50 $ 18.00 $ --
June 30, 1997 18.13 14.00 17.75 --
March 31, 1997 17.88 12.00 12.63 .10
December 31, 1996 17.50 14.88 16.50 .10
September 30, 1996 18.50 14.38 15.38 .10
June 30, 1996 20.25 18.13 18.13 .10
March 31, 1996 21.88 18.88 19.13 .10
December 31, 1995 22.38 19.75 20.38 .10
Old shares of common stock were cancelled September 30, 1997 and new shares
were issued which are not publicly traded.
Note 18 Commitments and 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.
Minimum commitments under operating leases having initial or remaining
terms greater than one year are $8.2 million, $6.2 million, $4.3 million, $2.2
million, $1.4 million and $4.0 million for the years ending September 30,
1998, 1999, 2000, 2001, 2002 and after 2002, respectively.
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,
as a PRP the Company can be held jointly and severally liable for all
environmental costs associated with a site.
-35-
<PAGE> 36
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.
In October 1996, the AICPA 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 has elected early adoption of 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.
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 September 30, 1997, 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.
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.
Note 19 Pro Forma Consolidated Condensed Financial Statements-(Unaudited)
-------------------------------------------------------------------------
The following unaudited pro forma Condensed Statements of Consolidated
Earnings (the "Pro Forma Statements") were prepared to illustrate the
estimated effects of the merger with Greenmarine Acquisition Corp. as if the
transaction had occurred for statements of consolidated earnings purposes as
of the beginning of the period presented.
The pro forma adjustments are based upon available information and upon
certain assumptions that the Company believes are reasonable. The Pro Forma
Statements do 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.
-36-
<PAGE> 37
The Pro Forma Statements include adjustments, with respect to the merger,
to reflect additional interest expense and depreciation expense, amortization
of goodwill, and elimination of non-recurring fees and expenses incurred by
the Pre-Merger Company in 1997 in connection with the merger.
For the Years Ended
September 30
1997 1996
(In millions, except per share data) (Unaudited)
---------------------
Net sales $ 979.5 $ 1,121.5
Cost of goods sold 825.1 890.8
------- ---------
Gross earnings 154.4 230.7
Selling, general and administrative expense 222.8 217.5
Restructuring charges -- 25.6
------- ---------
Earnings (Loss) from operations (68.4) (12.4)
Interest expense 28.4 24.3
Other (income) expense, net (29.2) (8.5)
------- ---------
Loss before provision for income taxes (67.6) (28.2)
Provision (credit) for income taxes 2.8 (3.1)
------- ---------
Net loss $ (70.4) $ (25.1)
======= =========
Net loss per share of common stock
(primary and fully diluted) $ (3.45) $ (1.23)
======= =========
Shares outstanding 20.4 20.4
======= =========
-37-
<PAGE> 38
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders of Outboard Marine Corporation:
We have audited the accompanying Statement of Consolidated Financial Position
of Outboard Marine Corporation (a Delaware corporation) and subsidiaries
("Post-Merger Company" or "Company") as of September 30, 1997 and the related
Statements of Cash Flows and Changes in Consolidated Shareholders' Investment
from inception (see Note 1) to September 30, 1997. We have also audited the
accompanying Statements of Consolidated Financial Position of Outboard Marine
Corporation (a Delaware corporation) and subsidiaries ("Pre-Merger Company")
as of September 30, 1996 and the related Statements of Consolidated Earnings,
Cash Flows and Changes in Consolidated Shareholders' Investment for each of
the three years in the period ended September 30, 1997. These financial
statements are the responsibility of the Post-Merger and Pre-Merger Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Post-Merger Company as of
September 30, 1997 and their cash flows from inception to September 30, 1997,
and the financial position of the Pre-Merger Company as of September 30, 1996
and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1997, in conformity with generally
accepted accounting principles.
BY: ARTHUR ANDERSEN LLP
-------------------
Arthur Andersen LLP
Chicago, Illinois
January 12, 1998
-38-
<PAGE> 39
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------------------------------
No disclosure is required pursuant to this item.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
Directors
Alfred D. Kingsley - Chairman of the Board of the Company since September,
1997. Mr. Kingsley is also Senior Managing Director of Greenway Partners, L.
P. (New York, NY), an investment partnership. Mr. Kingsley has been Senior
Managing Director since 1993. Prior to that, Mr. Kingsley held various
positions at Icahn & Co., including senior adviser until 1992. Mr. Kingsley
is also a Director of ACF Industries, Incorporated (St. Charles, Missouri), a
rail car leasing and manufacturing firm and a Director of the general partner
of American Real Estate Partners, L. P. (Mt. Kisco, New York), a real
estate investment partnership. Mr. Kingsley is Chairman of the Compensation
and Benefits Committee and a member of the Audit Committee. A Director since
September, 1997. Age 55.
Gary K. Duberstein - Vice Chairman of the Board and Assistant Secretary of
the Company since September, 1997. Mr. Duberstein is also Managing Director
of Greenway Partners, L. P. (New York, NY), an investment partnership. Mr.
Duberstein has been Managing Director since 1993. Prior to that, Mr.
Duberstein served as general counsel to Carl Icahn and as vice president of
certain companies operated by Mr. Icahn from 1985 to 1993.
Mr. Duberstein is a member of the Compensation and Benefits Committee and
Chairman of the Audit Committee. A Director since September, 1997. Age 43 .
Richard Katz - Vice Chairman of the Board of the Company since September,
1997. From 1977 to 1993, Mr. Katz was a director of NM Rothschild & Sons
Limited, London, England. Since 1986, he has served as a Supervisory Director
for a number of entities affiliated with Quantum Industrial Partners LDC.
Mr. Katz is a member of the Compensation and Benefits Committee. A Director
since September, 1997. Age 56.
Ron Hiram - Managing Director, Soros Fund Management (New York, NY), a fund
investment company. Mr. Hiram has been Managing Director since 1995. Prior
to that, Mr. Hiram was Managing Director, Lehman Brothers Incorporated from
1992 to 1995.
Mr. Hiram is a member of the Compensation and Benefits Committee and Audit
Committee. A Director since September, 1997. Age 44.
David D. Jones, Jr. - President and Chief Executive Officer of the Company
since September, 1997. Mr. Jones held numerous positions with the Mercury
Marine Division of Brunswick Corporation, a manufacturer of boats, outboard
motors, stern drives and other recreational products, from 1990 to 1997, most
recently as President of Mercury Marine from 1990 to 1997. Mr. Jones is also
a Director of National Exchange Bank, Fond du Lac, WI. A Director since
September, 1997. Age 54.
-39-
<PAGE> 40
Andrew P. Hines - Executive Vice President and Chief Financial Officer of the
Company since October, 1997. Prior to that, Mr. Hines held the position of
Senior Vice President and Chief Financial Officer for F.W. Woolworth
Corporation, a retailer of consumer goods. He held that position from 1994
through 1997. During 1993, Mr. Hines was a consultant to Pentland PLC,
England. Prior to that, Mr. Hines held the position of Executive Vice
President and Chief Financial Officer with adidas USA from 1989 to 1992.
Prior to that, Mr. Hines held various senior financial positions with RJR
Nabisco, Inc. from 1976 to 1989. A Director since October, 1997. Age 58.
Executive Officers
In addition to Messrs. Jones and Hines, the following are the Executive
Officers of the Company:
Kimberly K. Bors - Vice President, Human Resources since October, 1997.
Prior to that, Ms. Bors held the position of Director, Compensation and
Organizational Development since 1995. Prior to that, Ms. Bors held the
position of Director of Compensation and Human Resources Services with
Browning-Ferris Industries, Inc. from 1990 to 1995. Age 37.
Paul R. Rabe - Vice President, Marine Power Products Group (MPPG) North
American Sales and Marketing since October, 1997. Prior to that, Mr. Rabe
held the position of Division Vice President, MPPG since joining the Company
in 1996. Prior to that, Mr. Rabe held the position of Vice President and
General Manager of Cummins Marine Division of Cummins Engine Company from 1992
to 1996. Age 49.
Robert S. Romano - Vice President, General Counsel and Secretary since
October, 1997. Prior to that, Mr. Romano was appointed Assistant Secretary
in 1996 and Assistant General Counsel in 1994. Mr. Romano has held various
positions within the Company's law department since joining the Company in
1980. Age 42.
To the knowledge of the Company, there are no family relationships between any
Director or Executive Officer and any other Director or Executive Officer.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
Summary Compensation Table
The following table sets forth information concerning the annual and long-term
compensation paid or to be paid to those persons who were, at September 30,
1997, (i) the Chief Executive Officer or served in such capacity during fiscal
1997, (ii) the other four most highly compensated Executive Officers of the
Company, who were serving in such capacity as of September 30, 1997 and (iii)
individuals who would have been one of the four most highly paid Executive
Officers but for the fact that they were not serving as an Executive Officer
on September 30, 1997 (collectively the "Named Executives") for services
rendered in all capacities to the Company for the 1997, 1996 and 1995 fiscal
years.
-40-
<PAGE> 41
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------- --------------------------------------------
Other All
Annual Restrict- Securities Other
Compen- ed Stock Underlying LTIP Compen-
Name and Principal Salary Bonus sation Awards Options/ Payouts sation
Position Year ($) ($) ($)(1) ($)(2) SARS # ($) ($)(3)
- -------------------- ---- ------ ----- ------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D.D. Jones, Jr. (4) 1997 7,692 0 0 0 0 0 0
President and Chief
Executive Officer 1996 -- -- -- -- -- -- --
1995 -- -- -- -- -- -- --
H.W. Bowman (5) 1997 466,059 0 0 0 25,500 0 112,929
Former Chairman of
the Board, 1996 428,341 0 0 0 38,200 0 16,856
President and
Chief 1995 246,928 240,000 0 0 150,000 0 12,812
Executive Officer
G.L. Schueppert (6) 1997 298,076 120,000 0 0 11,000 0 90,834
Executive Vice
President 1996 225,000 0 0 810,000 10,000 0 80,031
and Chief
Financial Officer 1995 -- -- -- -- -- -- --
C.J. Vitulli (7) 1997 306,076 0 0 0 12,000 0 95,851
Senior Vice
President and 1996 93,269 0 0 385,000 0 0 0
President, OMC
Boat Group 1995 -- -- -- -- -- -- --
R. H. Medland, 1997 230,670 0 30,331 0 6,500 0 65,105
Senior Vice
President and 1996 193,083 0 0 303,750 6,000 45,056 13,939
Chief
Administrative 1995 183,000 96,716 0 0 0 52,024 16,316
Officer
D.J. Baddeley, 1997 228,951 0 28,032 0 6,000 0 75,084
Vice President,
Secretary 1996 199,170 0 0 303,750 7,500 52,096 15,374
and General
Counsel 1995 190,000 100,415 0 0 0 39,366 15,269
-41-
</TABLE>
<PAGE> 42
Notes to Summary Compensation Table
(1) For Mr. Medland, $17,230 for a company car and $13,101 for accounting and
legal fees and for Mr. Baddeley, $16,772 for a company car and $11,260 for
accounting and legal fees. No other Named Executive's Other Annual
Compensation reached the level required for disclosure.
(2) In fiscal 1996 the Named Executives, except Mr. Bowman, and certain other
employees of the Company received grants of Restricted Stock at prices of
$16.00-$20.25 per share based on the closing price of a share of Common Stock
on the date of grant. The number of shares granted were 255,000 having an
aggregate value on the date of grant of $5,037,500. Based on the value of a
share of Common Stock as of September 30, 1997, the aggregate value of all
outstanding restricted stock was $4,590,000. The restricted stock granted in
fiscal year 1996, like prior grants of restricted stock, was not to vest for a
period of five years, except for one grant of 5,000 shares which was not to
vest for a period of three years. However, as a result of the change of
control which occurred on September 11, 1997 pursuant to the acquisition by
Greenmarine of in excess of 90% of the outstanding shares of the Company's
common stock, all restricted stock fully vested and was either paid-out in
cash in an amount per share equal to the $18.00 per share merger consideration
or held by the Company pending negotiations on employment or severance
agreements, as may be applicable to the respective Executive Officers or
former Executive Officers.
(3) For fiscal 1997 includes matching contributions to the OMC Employees Taxed
Deferred Savings Plan in the amount of $1,640, $93, $25, $1,712 and $1,667;
the dollar value of insurance premiums paid by the Company of $31,604,
$44,161, $2,289, $19,000 and $21,363 for the benefit of Messrs. Bowman,
Schueppert, Vitulli, Medland and Baddeley, respectively; restricted stock
dividends in the amount of $12,205, $6,037, $5,576 and $7,066 for the benefit
Messrs. Schueppert, Vitulli, Medland and Baddeley, respectively; and stock
option cash-outs in the amount of $79,687, $37,500, $34,375, $37,387 and
$44,987 for the benefit of Messrs. Bowman, Schueppert, Vitulli, Medland and
Baddeley, respectively. In addition, Mr. Vitulli received a sign-on bonus in
the amount of $50,000.
(4) Mr. Jones was hired by the Company September 25, 1997 and therefore
information prior to that date does not exist.
(5) Mr. Bowman was hired by the Company February 19, 1995 and therefore
information prior to that date does not exist. Mr. Bowman ceased serving in
the capacity noted on September 25, 1997.
(6) Mr. Schueppert was hired by the Company January 2, 1996 and therefore
information prior to that date does not exist. Mr. Schueppert ceased serving
in the capacity noted on October 6, 1997.
(7) Mr. Vitulli was hired by the Company June 10, 1996 and therefore
information prior to that date does not exist. Mr. Vitulli ceased serving in
the capacity noted on October 15, 1997.
-42-
<PAGE> 43
Option Grants in the 1997 Fiscal Year
The following table provides information on the grants of options to purchase
Common Stock given to the Named Executives on February 3, 1997. As a result
of the cancellation of all outstanding options resulting from the merger, no
information is provided regarding the potential realizable value of the
options granted in fiscal 1997. Any value received by the Named Executives
during fiscal 1997 as a result of the cancellation is reflected in the
"Summary Compensation Table" above and the table below titled "Option
Exercises in the 1997 Fiscal Year and Fiscal Year End Option Values".
% of
Total
Options
# of Granted Exercise
securities to all Price
underlying Employees Per
Grant options/SARs in Share $ Expired
Name Date Granted (#) 1997 (1) (2) (3)
--------------- ------ ------------ --------- -------- -------
H.W. Bowman 2/3/97 25,500 11.40 16.375 9/30/97
G.L. Schueppert 2/3/97 11,000 4.94 16.375 9/30/97
C.J. Vitulli 2/3/97 12,000 5.36 16.375 9/30/97
R.H. Medland 2/3/97 6,500 2.91 16.375 9/30/97
D.J. Baddeley 2/3/97 6,000 2.68 16.375 9/30/97
(1) In the 1997 fiscal year 139 employees received stock options.
(2) The exercise price of $16.375 was the closing price of a share of Common
Stock on the New York Stock Exchange on February 3, 1997.
(3) Pursuant to the change of control resulting from Greenmarine's acquisition
of in excess of 90% of the Company's outstanding common stock, all
outstanding options were fully vested and then cancelled effective
September 30, 1997 pursuant to the merger.
Option Exercises in the 1997 Fiscal Year and Fiscal Year End Option Values
The following table shows information on the exercise in the 1997 fiscal year
of options to purchase Common Stock by the Named Executives or the payout of
limited stock appreciation rights associated therewith. As a result of the
cancellation of all outstanding options resulting from the September 30, 1997
merger, no information is provided regarding unexercised options to purchase
Common Stock as of September 30, 1997 or the value of in-the-money options as
of such date.
Shares
Acquired
or Value
Exercised Realized
Name (#) ($)
--------------- --------- --------
H.W. Bowman 25,500 79,687
G.L. Schueppert 11,000 37,500
C.J. Vitulli 12,000 34,375
R.H. Medland 22,700 37,387
D.J. Baddeley 20,200 44,987
-43-
<PAGE> 44
Long-Term Incentive Plan Awards in Fiscal Year 1997
The following table describes the performance shares granted to the Named
Executive Officers during the Company's 1997 fiscal year under the 1994 OMC
Long-Term Incentive Plan (the "LTIP"). The grants cover the three year award
cycle October 1, 1996 through September 30, 1999. No distribution of
performance shares, whether in cash or stock, will be made until after the end
of the three year award cycle and the Compensation and Benefits Committee has
determined the extent to which the Company has achieved the performance goals
set at the beginning of each award cycle. The initial value of each
performance share granted under the LTIP was $16.00. The initial value was
the average of the closing price for a share of Common Stock on the New York
Stock Exchange for the month of September 1996. The performance goals set for
these performance shares are (1) the average of the absolute return on net
assets for the three year award cycle, (2) return on net assets improvement
for the three year award cycle over the prior three year award cycle and (3)
total shareholder return on the Common Stock as compared to the return on the
S&P 400 for grants prior to October 1, 1996 and the S&P 500 for grants
thereafter measured over the three year award cycle.
Number Estimated Future Payouts
of Perfor- (1) (Potential Shares)
Perfor- mance ------------------------------
mance Period Thres- Maxi-
Shares Unit hold Tar- mum
Granted (2) Payout (#) get(#) (#)
------- ------- ----- ------ -------
H.W. Bowman 15,300 3 Years 7,650 15,300 30,600
G.L. Schueppert 7,100 3 Years 3,550 7,100 14,200
C.J. Vitulli 6,400 3 Years 3,200 6,400 12,800
R.H. Medland 3,900 3 Years 1,950 3,500 7,800
D.J. Baddeley 3,800 3 Years 1,900 3,800 7,600
(1) The number of shares to be paid upon the completion of an award cycle will
depend entirely on the extent to which the Company achieves the
performance goals set at the beginning of the award cycle. The payout at
the Threshold level will be 50%, the payout at the Target level will be
100% and the payout at the Maximum level will be 200% of the number of
performance shares originally granted.
(2) As a condition of the agreements governing the resignation or termination,
as the case maybe, of the named executives officers listed above, all
outstanding grants of performance shares, including the above, were
cancelled or forfeited.
Retirement Plans
Annual Benefit for Named Executive Participants
-----------------------------------------------
for Selected Years of Service
-----------------------------
The approximate annual benefits shown in the table below are for the Named
Executive participants and are not subject to social security offset but are
subject to offset for any benefits payable from retirement programs of the
Company's foreign subsidiaries. The total annual benefit payable from the
Outboard Marine Corporation Employees Retirement Plan (the ''Retirement
Plan'') and the supplemental non-qualified retirement plan is shown in the
table below for selected average base earnings levels and years of service
based upon certain assumptions including all years of credited service as an
Executive Officer, retirement at age 65 and election of a single life annuity
for the benefit payment.
-44-
<PAGE> 45
Average Annual 20 or
Base Earnings 5 Years 10 Years 15 Years More Years
-------------- --------- ---------- ---------- -----------
$150,000 $19,125 $38,250 $57,375 $76,500
$250,000 $31,875 $63,750 $95,625 $127,500
$300,000 $38,250 $76,500 $114,750 $153,000
$500,000 $63,750 $127,500 $191,250 $255,000
$900,000 $114,750 $229,500 $344,250 $459,000
$1,300,000 $165,750 $331,500 $497,250 $663,000
The Retirement Plan provides a fixed benefit determined on the basis of
years of service and final average base earnings. In addition to the benefits
from the Retirement Plan, certain participants in the Company's annual
incentive compensation plan(s) are eligible for retirement benefits from a
supplemental non-qualified retirement plan. The retirement benefits under the
non-qualified plan are based upon amounts paid under the annual bonus plan as
well as salary, and the total retirement benefits payable under the plans may
exceed the maximum benefits payable under the Employee Retirement Income
Security Act of 1974, as amended. The basis for benefits under both plans can
be those amounts contained in the Summary Compensation Table above if the
years disclosed are one or more of the three highest annual earnings in the
last ten years as discussed below.
Participants in the plans who are not Executive Officers receive an
aggregate benefit equal to 1.2% of total pay and .5% above social security
covered compensation for each year of credited service times the average of
the five highest consecutive annual earnings (base annual salary rate plus
incentive compensation earned in the same year under an annual incentive
compensation plan) during such participant's last ten years of employment. An
Executive Officer who participates in the plans will receive the 1.2% of total
pay and .5% above social security covered compensation for each year of
credited service as a non-Executive Officer and 2.55% for each year of
credited service as an Executive Officer times the average of the three
highest annual earnings during such participant's last ten years of
employment.
As of December 31, 1997, Messrs. Bowman, Schueppert, Vitulli, Medland and
Baddeley will have 2.67, 1.76, 1.34, 6.50 and 7.75, respectively, credited
years of service under the Company's retirement plans. The total estimated
vested annual benefit payable from these two plans for Messrs. Bowman,
Schueppert, Vitulli, Medland and Baddeley based upon certain assumptions
including actual years of credited service as a non-Executive Officer and
Executive Officer, as the case may be, current age and base earning levels,
and election of a single life annuity for the benefit payment is $120,500, $0,
$0, $47,704 and $55,707, respectively, which payments are not subject to
social security offset but are subject to offset for any benefits payable from
retirement programs of the Company's foreign subsidiaries.
Compensation of Directors
Directors of the Company do not receive any compensation, as such, for
services provided to the Company as a Director, including participation on any
committees. Directors may be entitled to reimbursement for travel expenses
associates with Board activities.
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<PAGE> 46
Employment Contracts and Severance Agreements
The Company and David D. Jones, Jr. are in the process finalizing an
employment agreement between Mr. Jones and the Company. Details of the
agreement, and a copy thereof, will be disclosed in accordance with rules and
regulations of the Securities and Exchange Commission in the filing made by
the Company following the effective date of the agreement.
As of October 6, 1997, the Company and Andrew P. Hines entered into an
agreement pursuant to his employment which (1) employs Mr. Hines as Executive
Vice President and Chief Financial Officer of the Company and provided for the
election of Mr. Hines as a member of the Board of Directors of the Company,
(2) provides for a term of three years from the date of execution with
automatic annual renewals, (3) provides for a base salary in the amount of
$325,000, (4) provided Mr. Hines with the opportunity to purchase up to
20,000 shares of common stock of the Company, which included a loan from the
Company in the amount of $210,000 for the sole purpose of purchasing 11,666.66
shares, evidenced by a secured promissory note secured by a pledge and
security agreement utilizing the purchased stock as collateral, (5) provided
for the grant of the option to purchase 180,000 shares of common stock of the
Company at an exercise price of $18.00 per share with annual vesting in equal
proportions over a three year period, (6) provides for, in the event Mr.
Hines' employment is terminated by the Company without cause or by Mr. Hines
for good reason, the vesting of all unvested stock options plus payment of an
amount equal to the greater of his base salary for one year or his base salary
for the remainder of the term of the agreement as well as certain benefits
under various of the Company's benefit plans, (7) entitles the Company to
require Mr. Hines to sell all of his stock and options back to the Company at
a price equal to the fair market value of the common stock as of the date of
the notice from the Company requiring Mr. Hines to resell his stock, offset
by the unpaid principal amount of any loan made by the Company to Mr. Hines
upon the termination of Mr. Hines' employment with the Company, (8) provides
for the right of Mr. Hines to require the Company, under certain
circumstances, to repurchase all of his stock and stock options based on the
fair market value of the common stock as of the date of the notice from Mr.
Hines, offset by the unpaid principal amount of any loan made by the Company
to Mr. Hines and (9) provides for the inclusion of the stock owned by Mr.
Hines, under certain circumstances, in the sale or disposition of stock held
by Greenmarine Holdings, LLC. In addition, pursuant to his employment
agreement, Mr. Hines agreed to a one year non-compete commencing on the
expiration or termination of his employment under the agreement.
In March, 1997 the Company entered into severance agreements with the Named
Executives other than Mr. Jones and Mr. Hines. Each of these agreements had
a one year term which was automatically extended from year to year. These
severance agreements, which applied only upon a change of control of the
Company, provided that if such Executive Officer (1) elected to resign his
employment for certain specified reasons, or (2) is terminated by the Company
other than for cause, the Company will pay such Executive Officer an amount,
in cash, equal to (a) a fraction, the numerator of which is equal to the
lesser of twenty-four and the number of full and partial months existing
between the date such Executive Officer's employment terminates and his 65th
birthday and the denominator of which is twelve, multiplied by (b) such
Executive Officer's then current annual base salary plus the highest amount of
incentive compensation received by such Executive Officer in the five years
preceding the change-in-control. In addition, the Company will pay such
Executive Officer, in cash, amounts accelerated, earned, allocated or deferred
under the Company's pension, retirement, compensation or annual and long-term
incentive plans. As a result of the change of control on September 11, 1997
resulting from the acquisition by Greenmarine Acquisition Corp. of in excess
of 90% of the Company's outstanding common stock, the severance agreements
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<PAGE> 47
have or will be paid in accordance with their terms for those Executive
Officers who have satisfied one of the conditions discussed above. For those
Executive Officers who remain in the employ of the Company, the terms of the
severance agreements will remain in force for a period of three years from the
date of the change of control or as may otherwise be negotiated by the
Executive Officer and the Company.
As of September 24, 1997, the Company and Harry W. Bowman entered into a
Consulting Agreement whereby Mr. Bowman agreed to resign from his positions
as President, Chief Executive Officer and Chairman of the Board. Pursuant to
the agreement, Mr. Bowman was to receive certain benefits from the Company,
including (1) a cash payment in the amount of $940,000, (2) from the date of
the agreement through March 31, 1998, an employment fee in the amount of
$230,000, (3) from April 1, 1998 through September 30, 1998, a consulting fee
in the amount of $230,000, (4) in exchange for his agreement not to engage in
any competitive activity or make any disparaging statements about the Company
or any of its employees, officers, or directors, Mr. Bowman received a cash
payment in the amount of $700,000, (5) the retirement benefits to which Mr.
Bowman was entitled to under the Employment Agreement entered into between the
Company and Mr. Bowman dated February 14, 1995, (6) coverage under the
Company's welfare and benefit plans through September 30, 1998, (7)
compensation for outplacement services and reimbursement for certain financial
advisory services, (8) gross-up payments for any excise tax resulting from the
application imposed by Section 4999 of the Internal Revenue Code of 1986 as
amended resulting from the change of control provisions of Section 280G of the
Code and (9) reimbursement for certain legal fees associated with the
interpretation or enforcement of the Consulting Agreement. In consideration
of these benefits, Mr. Bowman agreed that the Employment Agreement dated
February 14, 1995, except those provisions which survive through the
Consulting Agreement, and the Severance Agreement dated March 31, 1997 between
the Company and Mr. Bowman would be terminated.
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<PAGE> 48
REPORT OF THE COMPENSATION COMMITTEE
The philosophies and compensation policies discussed below are primarily those
of the Pre-Merger Compensation Committee and do not necessarily reflect those
of the Post-Merger Compensation Committee (in either case, unless specifically
references, the "Committee"), which consists of entirely different membership.
However, because the change in the Committee took place immediately prior to
the end of the Company's 1997 fiscal year, it is necessary for the Post-Merger
Committee to place their names on the report. The Post-Merger Committee
intends to review the philosophies and policies of the Company and may adopt
new or amended ones as it deems appropriate.
The Committee is pleased to present its annual report on executive
compensation. This report describes the components of the company's executive
officer compensation program and explains the basis for fiscal 1997
compensation determinations made by the Committee. During fiscal 1997, the
Committee, made up of four non-employee Directors, met two times. Its charter
is to:
1. Review and approve a competitive, fair and equitable compensation
and benefits policy designed to retain key executives, to
stimulate their useful and profitable efforts on behalf of the
Company and to attract necessary additions to the staff with
appropriate qualifications;
2. Review, approve and administer the Company's executive
compensation plans and determine the salaries and incentive
compensation of the Executive Officers of the Company and its
foreign and domestic subsidiaries; and
3. Review annually the performance of the Company's Chief Executive
Officer vis-a-vis the Company's performance and, based upon such
review, recommend to the Board appropriate compensation
adjustments and bonus awards, if any.
To carry out this charter, the Committee's objective was to rely more heavily
on incentive or variable compensation to support the Company's strategies and
provide ownership opportunities to management for the successful execution of
those strategies, thereby aligning management with the Shareholders.
The Committee's compensation philosophy is based on several criteria,
including, but not limited to, the financial and operational goals recommended
by the Company's senior management and approved by the Board for the company,
as a whole, as well as for significant business units; performance by the
personnel in achieving these goals; the need to attract, retain, and motivate
personnel to execute and exceed the Company's plans and programs; the need to
reward sustained corporate, functional, and/or individual performance with an
appropriate base salary and incentive opportunity; the need to increase
management ownership in the Corporation to more closely align management with
the shareholders; the need to link rewards with shareholder value and
profitability,; and the need to communicate the Company's goals through
performance measures linked to pay that focus management on achievement of
business objectives.
In addition to reports and recommendations from senior management, the
Committee has relied on the services of various nationally known executive
compensation and benefits consulting firms for information regarding
appropriate compensation levels and programs, including KPMG Peat Marwick and
Hewitt Associates.
For the Company's 1997 fiscal year, the primary criteria used in evaluating
Company performance were return on net assets (RONA), both in absolute terms
and as compared to prior years, total shareholder return of the Company's
stock relative to the total return of the S&P 500 Index, and business unit
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<PAGE> 49
profitability for evaluating business unit performance. The Company's
performance for fiscal year 1997 failed to achieve the goals set at the
beginning of the year.
There are three components of executive compensation reviewed by the
Committee: base salary, annual incentive compensation, and long-term
incentive compensation. The combination of these components produces total
direct compensation.
Base Salary
-----------
The committee has elected to target base annual salary at the 50th percentile
of executives with comparable levels of responsibility at other manufacturing
companies, including competitors. The actual base salaries are established
based upon a review of individual performance, evaluated each year by the
Committee with recommendations for salary adjustments for all Executive
Officers made by the Committee to the Board each November. For fiscal 1997,
merit salary increases for all exempt employees averaged approximately 2%,
except for the Named Executives who received no merit increase and one Named
Executive who received a promotional increase to reflect new responsibilities.
Annual Incentive Compensation
-----------------------------
The Executive Bonus Plan was designed to create an incentive for participants
to execute and exceed the Company's plans and their individual or team goals
and receive annual rewards for that performance. Under the Executive Bonus
Plan the reward is based on corporate, business unit, and individual or team
goals. The corporate goal was based on return on net assets ("RONA") for the
fiscal year. Business unit goals, where applicable, were developed in
accordance with Company guidelines and are the same for all participants in
the unit. Individual or team goals were developed jointly by the participant
and their manager. The target amount of annual incentive compensation is
determined by the participant's salary grade. The Executive Officers' target
bonus amounts ranged from 25% to 60% of base annual salary. The Chief
Executive Officer's target bonus amount equaled 60% of base salary and was
based entirely on corporate goals. The target award, when added to base
annual salary, is intended to result in total annual compensation at
approximately the 50th percentile of competitive annual compensation, as
described under the heading "Base Salary" above. Each executive could earn up
to 200% of the target amount depending on the extent to which the Company, and
the business unit where applicable, achieves its annual performance targets
and the individual performs vis-a-vis their pre-determined individual annual
goals. The threshold performance for any bonus award to be paid in fiscal
1997 required RONA to exceed 1.4% and earning before tax ("EBT") to exceed $15
million. Maximum awards would be earned if RONA and EBT equaled or exceeded
3.8% and $41 million, respectively. Based on actual 1997 performance, no
awards were earned.
Long-Term Incentive Compensation
--------------------------------
The OMC 1994 Long Term Incentive Plan ("LTIP") provided for the grant of stock
options, restricted stock, performance units and performance shares. The
purpose of the plan was to create an opportunity for participants to share in
the enhancement of shareholder value through equity based awards. The overall
goal is to create a link between the Company's management and its shareholders
through stock ownership and incentive compensation based on the achievement of
specific financial measures.
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<PAGE> 50
Each Executive Officer has a target amount of performance shares, ranging from
15% to 70% of annual salary, and a maximum amount that can be earned equal to
200% of the target amount depending on the extent performance targets are
achieved over a three year award cycle; The Chief Executive Officer's target
award equals 70% of salary. In addition, stock options are granted to
Executive Officers in the amounts ranging between 30% and 140% of salary,
depending solely on such Executive Officer's salary grade. The Chief
Executive Officer's option grant equals 140% of salary. The stock option and
performance share grants, when added to base annual salary (when the
performance share is paid at the target level), are intended to result in
total long-term incentive compensation at approximately the 50th percentile of
executives with comparable levels of responsibility and individual performance
at other manufacturing companies, including competitors.
It is intended that payment for the achievement of the performance goals set
with respect to performance shares be paid in shares of Common Stock or cash,
at the discretion of the Compensation Committee. The performance goals for
the outstanding award cycles are: (1) three year average of Absolute RONA,
(2) three year average of RONA Improvement as compared to the prior three year
period and (3) the monthly average of total shareholder return on the Common
Stock versus the total return of the S&P 400 Index for the three year award
cycle ("TSR"). Under the LTIP, 50% of the award will be based upon the TSR
goal, 25% of the Absolute RONA goal and 25% on the RONA Improvement goals.
The Absolute RONA thresholds for payment and the maximum award are the same as
those for Annual Incentive Compensation above, determined, however, on a
cumulative basis for the three year award cycle. For award cycles beginning
in fiscal 1997 or later, the TSR component has been revised to be measured
relative to the S&P 500 Index. For the three year performance share cycle
completed at the end of fiscal 1997, 37.5% of target was achieved.
Executive Officer Benefits
--------------------------
In addition to base salary and annual and long-term incentive compensation,
the Company also provides Named Executives with a broad range of benefits
available to all employees as well as specific, supplemental benefits,
designed to be comparable to those offered to executives with similar levels
of responsibility and individual performance. These supplemental benefits
include a Company-leased automobile, financial and estate planning, tax
preparation and advice, supplemental life insurance coverage, and
non-qualified retirement benefits.
Deductibility of Compensation
-----------------------------
Section 162(m) of the Code denies a tax deduction to any publicly held
corporation, such as the Company, for compensation in excess of $1 million
paid to any Named Executive. Certain performance-based compensation, however,
is specifically exempt from the deduction limit. The determination of whether
compensation is performance-based depends on several factors including:
whether the compensation is payable solely on account of the attainment of one
or more nondiscretionary objective performance goals established by an
independent compensation committee of the board of directors; whether there
has been disclosure to and approval by the shareholders of performance
standards to be used in determining awards under the plan; whether the
company's compensation committee is composed solely of "outside" directors;
and whether prior to the payment of such compensation, the compensation
committee has certified that applicable performance standards have been
satisfied. The Committee will, in order to satisfy Section 162(m) of the
Code, certify the attainment of those standards.
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<PAGE> 51
Chief Executive Officer's Compensation
--------------------------------------
The salary, annual and long-term incentive compensation and executive benefits
for the Chief Executive Officer ("CEO") are determined by the Committee
substantially in conformance with the policies described above for all other
Executive Officers of the Company. In addition, the Committee evaluates the
CEO's contribution to the Company's achievement of its long-term financial and
non-financial objectives on an on-going basis. The Committee also evaluates
the CEO's performance at least annually based upon a variety of factors
including the extent to which strategic and business plan goals are met and
targets for earnings per share, return on net assets, growth in sales and
earnings, market share and total return to shareholders are achieved.
Mr. Bowman was elected Chairman of the Board, President and Chief Executive
Officer of the Company on February 19, 1995. For more detail on Mr. Bowman's
compensation see "Executive Compensation" and "Employment Contracts and
Severance Agreements" above. For the 1997 fiscal year, Mr. Bowman received
no merit salary increase. Mr. Bowman resigned as Chairman, President and CEO
effective September 25, 1997, and will continue in an consultative role until
his retirement on March 31, 1998.
Mr. Jones was elected President and CEO of the Company on September 25, 1997.
He is paid a base salary of $500,000 and eligible for substantially similar
compensation and benefit programs as all other Executive Officers. For more
detail on Mr. Jones' compensation, see "Executive Compensation" and
"Employment Contracts and Severance Agreements" above.
Conclusion - After completing its assessment of all components of executive
compensation, the Committee believes that the total compensation opportunity
offered to Executive Officers of the Company is competitive with the
compensation programs provided by other comparable corporations. The
Committee also believes that the actual awards made, based on these plans, are
aligned with the Company's overall performance, thereby linking management's
interests with those of shareholders.
Submitted by the Compensation Committee of the Company's Board of Directors:
Alfred D. Kingsley, Chairman
Gary K. Duberstein
Richard Katz
Ron Hiram
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock with the cumulative returns of the Standard & Poor's 500 Stock Index and
Standard & Poor's Leisure Time Index weighted by the year-end market value of
each company for the Company's last five fiscal years. "Cumulative total
return" is defined as stock price appreciation plus dividends paid, assuming
reinvestment of all such dividends.
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<PAGE> 52
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG OUTBOARD MARINE CORPORATION, THE S&P 500 INDEX
AND THE S&P LEISURE TIME (PRODUCTS) INDEX
9/92 9/93 9/94 9/95 9/96 9/97
---- ---- ---- ---- ---- ----
Outboard Marine
Corp 100 121 151 146 106 126
S&P 100 113 117 152 183 257
S&P Leisure Time
(Products) 100 116 115 145 171 222
* $100 Invested on 9/30/92 in stock or index - including reinvestment of
dividends. Years ending September 30.
The Company is using the same published industry indexes it has in previous
years. As of September 30, 1997, as a result of the merger of Greenmarine
with and into the Company with the Company as the surviving entity, all shares
of the Company's common stock previously registered under Section 12 of the
Securities Exchange Act of 1934 were canceled. As a result, as of that date
there is no longer a public market for the Company's common stock.
ITEM 12. SECURITY OWNERSHIP
----------------------------
The following table sets forth information with respect to (i) persons or
groups who are known to the Company to be beneficial owners, as of December
31, 1997, of more than 5% of the outstanding Common Stock and (ii) beneficial
ownership of Common Stock held, as of November 19, 1997, by each of the
Company's Directors, Named Executives and all the Company's Directors and the
Company's Executive Officers as a group. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of Common Stock subject to options currently exercisable, or
exercisable within 60 days of the date hereof, are deemed outstanding for
computing the percentage of the person holding such options but are not deemed
outstanding for computing the percentage of any other person. Except as
otherwise indicated, beneficial ownership in the following tables includes
sole voting and dispositive power.
Shares
Beneficially Percent
Name and Address Owned of Class
------------------------------------ ------------ --------
Greenmarine Holdings LLC (1)(7)..... 20,400,000 99.7%
277 Park Avenue
27th Floor
New York, New York 10172
Alfred D. Kingsley (2) ........... 20,400,000 99.7%
277 Park Avenue
27th Floor
New York, New York 10172
Gary K. Duberstein (2) ........... 20,400,000 99.7%
277 Park Avenue
27th Floor
New York, New York 10172
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<PAGE> 53
Richard Katz (3) ................ 20,400,000 99.7%
Villa La Sirena
Vico dell'Olivetta 12
18039 Martola Inferiore
Ventimiglia, Italy
Shares
Beneficially Percent
Name and Address Owned of Class
------------------------------------ ------------ --------
Ron Hiram (4) .................... 20,400,000 99.7%
888 Seventh Avenue
33rd Floor
New York, New York 10106
David D. Jones, Jr. (5) .......... 11,110 *
c/o Outboard Marine Corporation
100 Sea Horse Drive
Waukegan, Illinois 60085
Andrew P. Hines (6) .............. 14,444 *
c/o Outboard Marine Corporation
100 Sea Horse Drive
Waukegan, Illinois 60085
Harry W. Bowman 0
George L. Schueppert 0
Clark J. Vitulli 0
Richard H. Medland 0
D. Jeffrey Baddeley 0
Directors and Executive .......... 25,554 *
Officers as a group
(14) person
* Less than 1%
(1) The members of Greenmarine Holdings LLC ("Greenmarine") are Greenlake
Holdings LLC, a Delaware limited liability company ("Greenlake"), Quasar
Strategic Partners LDC, a Cayman Islands limited duration company ("QSP"),
and Quantum Industrial Partners LDC, a Cayman Islands limited duration
company ("QIP"). Each of Greenlake, QSP and QIP has approximately a
30.5%, 34.75% and 34.75% interest in Greenmarine, respectively. Greenlake
is controlled by Mr. Alfred D. Kingsley and Mr. Gary K. Duberstein.
QSP is an indirect subsidiary of Quasar International Fund N.V., a
Netherlands Antilles limited liability company ("Quasar"). QIP is the
principal operating subsidiary of Quantum Industrial Holdings Ltd., a
British Virgin Islands corporation ("QIH"). Quasar and QIH are investment
funds which have as their principal investment advisors Soros Fund
Management LLC, of which Mr. George Soros serves as Chairman.
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<PAGE> 54
Greenmarine is controlled by a Management Committee comprised of up to a
total of four Managers. Pursuant to the Operating Agreement of
Greenmarine, Greenlake has the right to appoint two designees to
Greenmarine's Management Committee and the holders of a majority of
Greenmarine's interest held by QSP and QIP have the right to appoint two
members of Greenmarine's Management Committee. Greenmarine's Management
Committee is currently comprised of Messrs. Alfred D. Kingsley, Gary K.
Duberstein and Richard Katz. From and after September 12, 1998, the
holders of a majority of Greenmarine's interests held by QSP and QIP may
elect to increase the size of Greenmarine's Management Committee to five
members, three of whom will be designated by the holders a majority of
Greenmarine's interests held by QSP and QIP and two of whom will be
designated by Greenlake. The vote of three of the members of
Greenmarine's Management Committee is required for action by the
Management Committee.
(2) Each of Alfred D. Kingsley and Gary K. Duberstein is a director of the
Company. In addition, each of Messrs. Kingsley and Duberstein are
members of Greenmarine's Management Committee and they control Greenlake.
All of the shares indicated as owned by each of Messrs. Kingsley and
Duberstein are owned directly by Greenmarine and are included because of
their affiliation with Greenmarine. As such, Messrs. Kingsley and
Duberstein may be deemed to have beneficial ownership of these shares
within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934
(the "Exchange Act").
(3) Richard Katz is a director of the Company. In addition, Mr. Katz is a
member of Greenmarine's Management Committee. All of the shares indicated
as owned by Mr. Katz are owned directly by Greenmarine and are included
because of his affiliation with Greenmarine. The reference to such shares
shall not be deemed admission that Mr. Katz may be deemed to have
beneficial ownership of these shares within the meaning of Rule 13d-3
under the Exchange Act.
(4) Ron Hiram is a director of the Company. All of the shares indicated as
owned by Mr. Hiram are owned directly by Greenmarine and are included
because of his affiliation with Greenmarine. The reference to such shares
shall not be deemed admission that Mr. Hiram may be deemed to have
beneficial ownership of these shares within the meaning of Rule 13d-3
under the Exchange Act.
(5) David D. Jones, Jr. is a Director and the President and Chief Executive
Officer of the Company. Of the shares indicated as owned by Mr. Jones,
11,110 shares are subject to options exercisable within 60 days of the
date hereof that the Company granted to Mr. Jones prior to December 31,
1997. In addition, the Company intends to issue a 43,385 restricted share
award to Mr. Jones prior to December 31, 1997. The Company intends to
grant to Mr. Jones the economic equivalent of an option to acquire
238,895 shares of common stock of the Company and 105,000 shares of
restricted common stock, all in a form and manner mutually acceptable to
the Company and Mr. Jones.
(6) Andrew P. Hines is a Director and the Chief Financial Officer of the
Company. Of the 14,444 shares indicated as owned by Mr. Hines, 2,777
were paid for with $50,000 cash and 11,667 were purchased in consideration
of Mr. Hines issuing a promissory note in favor of the Company in the
principal amount of $210,000. Mr. Hines has pledged his 14,444 shares to
the Company to secure his obligations under such promissory notes.
Pursuant to Mr. Hines' employment agreement with the Company, Mr. Hines
will purchase an additional 5,556 shares at a purchase price of $18.00 per
share.
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<PAGE> 55
(7) All of the 20,400,000 owned of record and beneficially by Greenmarine have
been pledged to American Annuity Group, Inc. and Great American Insurance
Company pursuant to the terms of that certain Credit Agreement dated
August 13, 1997, as amended, by and among the Company (as successor to
Greenmarine Acquisition Corp.), as Borrower, and American Annuity Group,
Inc. and Great American Insurance Company, as Lenders. The 20,400,000
shares have been pledged to secure the Company's obligations under such
Credit Agreement.
ITEM 13. RELATED TRANSACTIONS
------------------------------
Pursuant to the terms of the Employment Agreement entered into between the
Company and Mr. Hines, the Company loaned to Mr. Hines the amount of
$210,000 for the sole purpose of purchasing 11,666.66 shares of common stock
of the Company. The loan is evidenced by a secured promissory note and
secured by a pledge and security agreement using the stock as collateral. As
of the date hereof the amount outstanding remained at $210,000.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of the Annual Report on Form 10-K:
1. Report of Independent Public Accountants
2. Financial statement schedules required to be filed by Item 8 of
this Annual Report on Form 10-K:
All other schedules are omitted as the information is not
required, is inapplicable or is included in the
Consolidated Financial Statements or Notes thereto.
Individual financial statements for the Company's
subsidiaries and partnerships have been omitted because
consolidated statements have been prepared for all of the
Company's wholly-owned subsidiaries and limited
partnerships.
3. An exhibit index is included herein.
(b) During the fourth quarter of the year ended September 30, 1997, the
Company filed one report on Form 8-K on July 8, 1997 announcing the
execution of a merger agreement with Detroit Diesel Corporation which was
not consummated.
(c) Exhibits are attached hereto.
(d) Not applicable.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
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<PAGE> 56
OUTBOARD MARINE CORPORATION
Date January 12, 1998 By DAVID D. JONES, JR. President, Chief
---------------- ------------------- Executive Officer and
David D. Jones, Jr. Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
registrant and in the capacities and on the dates indicated.
Date January 12, 1998 By ALFRED D. KINGSLEY Chairman of the Board
---------------- -------------------
Alfred D. Kingsley
Date January 12, 1998 By GARY K. DUBERSTEIN Vice Chairman and
---------------- ------------------- Assistant Secretary
Gary K. Duberstein of the Board
Date January 12, 1998 By RICHARD KATZ Vice Chairman of the
---------------- ------------ Board
Richard Katz
Date January 12, 1998 By RON HIRAM Director
---------------- ---------
Ron Hiram
Date January 12, 1998 By DAVID D. JONES, JR. President, Chief
---------------- ------------------- Executive Officer and
David D. Jones, Jr. Director
Date January 12, 1998 By ANDREW P. HINES Executive Vice President,
---------------- --------------- Chief Financial Officer,
Andrew P. Hines Director and principal
accounting officer
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<PAGE> 57
OUTBOARD MARINE CORPORATION
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) attached hereto.
(B) With respect to the Registrant's By-Laws, as amended and restated
October 1, 1997, reference is made to Exhibit 3(B) attached
hereto.
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 to the
Supplemental Indenture dated September 30, 1997 attached hereto as
Exhibit 4(C).
(D) With respect to the Rights Agreement dated April 24, 1996, to be
effective June 23, 1996, reference is made to Exhibit 4(E) of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, which is incorporated herein by reference.
(E) With respect to Amendment No. 1 to the Rights Agreement dated
July 8, 1997, reference is made to the Form 8-A/A filed by the
Registrant on July 11, 1997, which is incorporated herein by
reference.
(F) With respect to Amendment No. 2 to the Rights Agreement dated
September 9, 1997, reference is made to the Form 8-A/A filed by
the Registrant on September 10, 1997, which is incorporated herein
by reference.
Exhibit 10: Material contracts:
(A) With respect to Registrant's 1987 Stock Option and Performance
Unit Plan, reference is made to Exhibit 10(D) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 30,
1987, which is incorporated herein by reference.
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<PAGE> 58
(B) With respect to the OMC Executive Bonus Plan, reference is made to
Exhibit 10(C) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 30, 1990, which is incorporated
herein by reference and with respect to the First Amendment to the
OMC Executive Bonus Plan, reference is made to Exhibit 10(B)
attached hereto.
(C) With respect to the OMC Executive Equity Incentive Plan, reference
is made to Exhibit 10(D) to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1990, which is
incorporated herein by reference.
(D) With respect to the OMC 1994 Long-Term Incentive Plan, reference
is made to Exhibit C to Outboard Marine Corporation's Notice of
Annual Meeting and Proxy Statement prepared in connection with the
January 20, 1994 Annual Meeting of Shareholders, which is
incorporated herein by reference, and with respect to the First
Amendment to the OMC 1994 Long Term Incentive Plan, reference is
made to Exhibit 10(D) attached hereto.
(E) With respect to the Employment Agreement for Mr. Bowman,
reference is made to Exhibit 10(F) of the Registrant's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995,
which is incorporated herein by reference.
(F) With respect to the Third Amended and Restated Revolving Credit
Agreement dated as April 30, 1997, reference is made to Exhibit
10(H) of the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, which is incorporated herein by
reference.
(G) With respect to the Registrant's Receivables Purchase Agreement
dated as of December 22, 1995, reference is made to Exhibit 10(I)
of the Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995, which is incorporated herein by
reference. With respect to the Amendment No. 1 and Waiver and
the Amendment No. 2 and Waiver to the Registrant's Receivables
Purchase Agreement dated as of December 22, 1995, reference is
made to Exhibit 10(I) of the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995, which is incorporated
herein by reference.
(H) With respect to Severance Agreements between the Registrant and
Mr. Bowman, certain elected and appointed officers and certain
other executives of the Registrant, reference is made to Exhibits
99.2, 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.
(I) With respect to the Consulting Agreement for Mr. Bowman dated
September 24, 1997, reference is made to Exhibit 10(I) attached
hereto.
(J) With respect to the Employment Agreement of Mr. Hines dated
October 6, 1997, reference is made to Exhibit 10(J) attached
hereto.
(K) With respect to the Financing and Security Agreement between the
Registrant and NationsBank of Texas, N.A. dated November 12,
1997, reference is made to Exhibit 10(K) attached hereto.
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(L) 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 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) 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 12: Statements regarding computation of ratios:
A statement regarding the computation of the ratio of earnings to
fixed charges is attached hereto as Exhibit 12.
Exhibit 13: Annual report to security holders:
Not applicable.
Exhibit 21: Subsidiaries of the registrant:
A list of the Company's subsidiaries and limited partnerships is
attached hereto as Exhibit 21.
Exhibit 23: Consents of expert:
A copy of the consent of the Company's independent public
accountants is attached hereto as Exhibit 23.
Exhibit 27: Financial data schedule:
This information is filed only in the electronic filing.
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EXHIBIT 3 (A)
CERTIFICATE OF OWNERSHIP AND MERGER
OF
GREENMARINE ACQUISITION CORP.
(a Delaware Corporation)
WITH AND INTO
OUTBOARD MARINE CORPORATION
(a Delaware Corporation)
(UNDER SECTION 253 OF THE DELAWARE GENERAL CORPORATION LAW)
* * * * * * * * * *
Greenmarine Acquisition Corp. (the "Corporation"), a corporation
organized and existing under the laws of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Corporation was incorporated on August 4, 1997 pursuant to
the General Corporation Law of the State of Delaware.
SECOND: That the Corporation is the owner of more than ninety percent
(90%) of the outstanding shares of common stock of Outboard Marine Corporation,
a corporation organized and existing under the laws of the State of Delaware
("OMC"), and OMC has no class of capital stock outstanding other than the
common stock.
THIRD: That the Corporation hereby merges with and into OMC (the
"Merger"), to be effective as of the date and time of filing of this
Certificate of Ownership and Merger with the Secretary of State of the State of
Delaware.
FOURTH: That the name of the surviving corporation of the Merger which
will continue its existence upon the effective time of the Merger (the
"Surviving Corporation") is:
Outboard Marine Corporation
FIFTH: That the Certificate of Incorporation of the Surviving Corporation
shall be the Restated Certificate of Incorporation annexed hereto as Exhibit A,
until duly amended in accordance with applicable law and the terms thereof.
SIXTH: The following is a copy of resolutions duly adopted as of September
30, 1997 by the Unanimous Written Consent of the Board of Directors of the
Corporation in connection with the Merger:
RESOLVED, that it is desirable and in the best interests of the Corporation
that it be merged with and into Outboard Marine Corporation ("OMC", and the
"Merger"), as contemplated in the Corporation's Offer to Purchase, dated August
8, 1997, a copy of which was filed with the Securities and Exchange Commission
as Exhibit (a)(1) to the Corporation's Tender Offer Statement on Schedule 14D-1
relating to the Corporation's offer to purchase all outstanding shares of
common stock of OMC at a price of $18.00 per share, net to the seller in cash,
without interest thereon; and further
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RESOLVED, that OMC shall be the surviving corporation in the Merger (the
"Surviving Corporation") under the name "Outboard Marine Corporation" and shall
continue its existence under the law of Delaware, and at the time the Merger
becomes effective in accordance with applicable law (the "Effective Time"), the
separate corporate existence of the Corporation shall cease to exist; and
further
RESOLVED, that at the Effective Time each share of common stock of OMC that
is held in the treasury of OMC, as well as all shares of common stock of OMC
owned by the Corporation shall, by virtue of the Merger, be canceled and
retired and shall cease to exist and no consideration shall be delivered or
deliverable in exchange therefor; and further
RESOLVED, that at the Effective Time each share of common stock of OMC
issued and outstanding immediately prior thereto shall cease to be outstanding
and shall be canceled and retired and cease to exist, and each holder of shares
of common stock of OMC (other than OMC, the Corporation or Greenmarine Holdings
LLC, and stockholders who perfect their appraisal rights under Section 262 of
the Delaware General Corporation Law) shall thereafter cease to have any rights
with respect to such shares of common stock of OMC except the right to receive
$18.00 per share in cash, without any interest thereon and less any required
withholding taxes (the "Merger Consideration") (which shall be paid upon
surrender of certificates formerly representing each such share of OMC pursuant
to a duly executed Letter of Transmittal (defined below)); and further
RESOLVED, that at the Effective Time, each share of capital stock of the
Corporation issued and outstanding immediately prior to the Effective Time
shall be converted into and become 204,000 fully paid and non-assessable share
of common stock of the Surviving Corporation; and further
RESOLVED, that the Certificate of Incorporation of the Surviving
Corporation shall be the Restated Certificate of Incorporation annexed hereto
as Exhibit A, until duly amended in accordance with applicable law and the
terms thereof; and further
RESOLVED, that the By-laws of the Corporation, in effect immediately prior
to the effective time of the Merger, shall be the By-laws of the Surviving
Corporation until duly amended in accordance with the terms thereof, the terms
of the Restated Certificate of Incorporation, and the General Corporation Law
of the State of Delaware; and further
RESOLVED, that the prior resignations of each of Frank Borman, William C.
France, Ilene G. Gordon, Richard T. Lindgren, J. Willard Marriott, Jr.,
Donald L. Runkle, Richard F. Teerlink, Harry W. Bowman and Richard J.
Stegemeier as directors of OMC are hereby ratified in all respects; and further
RESOLVED, that the resignation of Harry W. Bowman as Chairman of the
Board, President, and Chief Executive Officer is hereby accepted and ratified
in all respects; and further
RESOLVED, that the number of directors constituting the entire Board of
Directors of the Surviving Corporation shall be five (5); and further
RESOLVED, that the appointment of each of Alfred D. Kingsley, Gary K.
Duberstein, Richard Katz, Ron Hiram and David D. Jones, Jr. as directors of
the Surviving Corporation until their respective successors are duly elected
and qualified or until their respective earlier resignation or removal, be, and
hereby is, approved and ratified in all respects; and further
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<PAGE> 62
RESOLVED, that the following persons be, and each of them hereby is,
elected to the office or offices of the Surviving Corporation set forth
opposite each of their respective names, to serve until their respective
successors are duly elected and qualified or until their earlier resignation or
removal:
Name Office
------------------- ---------------------------
Alfred D. Kingsley Chairman of the Board
Richard Katz Vice-Chairman of the Board
Gary K. Duberstein Vice-Chairman of the Board;
and Assistant Secretary
David D. Jones, Jr. President and Chief Executive
Officer
; and further
RESOLVED, that each outstanding stock option (collectively, the "Options")
that is outstanding immediately prior to the Effective Time shall be acquired
by the Surviving Corporation promptly after Effective Time and upon the
delivery by such option holder to the Surviving Corporation of a written
release letter, in form and substance satisfactory to the Surviving
Corporation, for a cash payment by the Surviving Corporation in an amount equal
to (A) the excess, if any, of (i) $18.00 over (ii) the exercise price per share
of common stock of OMC subject to the Option, multiplied by (B) the number of
shares of common stock for which the Option shall not have theretofore been
exercised; provided, however, that with respect to any person subject to
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), any such amount shall be paid as soon as practicable after the first
date payment can be made to any such person without liability to such person
under Section 16(b) of the Exchange Act; and further
RESOLVED, that promptly after the Effective Time, the Paying Agent is
authorized to mail to each holder of record of former shares of common stock of
OMC a letter of transmittal (a "Letter of Transmittal"), which shall specify
that delivery shall be effected, and risk of loss and title to certificates
evidencing such former shares shall pass, only upon delivery of such
certificates to the Paying Agent, and the instructions for effecting the
surrender of such certificates in exchange for the Merger Consideration; and
further
RESOLVED, that, upon the surrender of a certificate evidencing former
shares of common stock of OMC to the Paying Agent, together with a Letter of
Transmittal duly executed and completed in accordance with the instructions
thereto and such other documents as may be reasonably required by the Paying
Agent, the Paying Agent is authorized in all respects to promptly pay to the
holder of such certificates in exchange therefor the Merger Consideration
payable with respect to the shares of common stock of OMC represented by such
certificates and, immediately upon the surrender of such certificates, the
shares represented thereby shall forthwith be canceled; and further
RESOLVED, that, at or after the Effective Time, there shall be no transfers
on the stock transfer books of OMC of the shares of common stock of OMC which
were outstanding immediately prior to the Effective Time; and further
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RESOLVED, that the proper officers of the Surviving Corporation be, and
hereby are, authorized in all respects to cause to be returned to the Surviving
Corporation any portion of the cash funds deposited with the Paying Agent for
the purpose of paying the Merger Consideration (including the proceeds of any
interest and other income received by the Paying Agent in respect of such
funds) that remains unclaimed by the former stockholders of OMC one (1) year
after the Effective Time; and further
RESOLVED, that any former stockholder of OMC who has not surrender his, her
or its certificates evidencing former shares of common stock of OMC in exchange
for Merger Consideration before one (1) year after the Effective Time shall
thereafter be entitled to look only to the Surviving Corporation for payment of
any Merger Consideration that may be payable in respect of former shares of
common stock of OMC held by such former stockholder, without any interest
thereon; and further
RESOLVED, that if any certificate evidencing former shares of common stock
of OMC is claimed to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact and the provision of an indemnity against any claim that
may be made against the Surviving Corporation with respect to such certificate
by the person claiming such certificate to be lost, stolen or destroyed, the
Paying Agent be, and hereby is, authorized to issue in exchange for such lost,
stolen or destroyed certificate the Merger Consideration payable in respect
thereof; and further
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed, in the name and on behalf
of the Corporation, to prepare and execute the Certificate of Ownership and
Merger setting forth a copy of the resolutions to merge the Corporation with
and into OMC, and to cause the same to be filed with the Secretary of State of
the State of Delaware and a certified copy thereof to be recorded in the Office
of the Recorder of Deeds of New Castle County, and to do all acts and things
whatsoever, whether within or without the State of Delaware, which may be
necessary or appropriate to effect the Merger; and further
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed, in the name and on behalf
of the Corporation, to notify each stockholder of record of OMC entitled to
notice within 10 days after the effective date of the Merger that the
Certificate of Ownership and Merger has been filed with the Secretary of State
of the State of Delaware and that the Merger has become effective, and of the
rights of appraisal available to stockholders of OMC pursuant to Section 262 of
the Delaware General Corporation Law; and further
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed, in the name and on behalf
of the Corporation, to take such additional lawful action and to execute and
deliver such additional agreements, documents and instruments as any of them
may deem necessary or appropriate to implement the provisions of the foregoing
resolutions, the authority for the taking of such action and the execution and
delivery of such agreements, documents and instruments to be conclusively
evidenced thereby.
SEVENTH: That the proposed Merger has been approved by Greenmarine
Holdings LLC, the sole stockholder of the Corporation, by written consent in
lieu of a meeting pursuant to Section 228 of the Delaware General Corporation
Law.
IN WITNESS WHEREOF, Greenmarine Acquisition Corp. has caused this
certificate to be signed by Alfred D. Kingsley, its President and Chief
Executive Officer, and attested to by Gary K. Duberstein, its Vice President
and Secretary, this 30th day of September, 1997.
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GREENMARINE ACQUISITION CORP.
By: ALFRED D. KINGSLEY
------------------
Name: Alfred D. Kingsley
Title: President and CEO
ATTEST BY:
GARY K. DUBERSTEIN
------------------
Name: Gary K. Duberstein
Title: Vice President and Secretary
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<PAGE> 65
EXHIBIT A
---------
RESTATED
CERTIFICATE OF INCORPORATION
OF
OUTBOARD MARINE CORPORATION
FIRST: The name of the Corporation is "Outboard Marine Corporation".
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, State of Delaware. The name of the registered agent of the Corporation
in the State of Delaware at such address is the Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 26,000,000 shares, consisting of:
(a) 1,000,000 shares of Preferred Stock, par value $0.01 per share; and
(b) 25,000,000 shares of Common Stock, par value $.01 per share.
Except as otherwise provided by law, the shares of stock of the
Corporation, regardless of class, may be issued by the Corporation from time to
time in such amounts, for such consideration and for such corporate purposes as
the Board of Directors may from time to time determine.
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized, by resolution adopted and filed
in accordance with law, to provide for the issue of such series of shares of
Preferred Stock. Each series of shares of Preferred Stock, to the full extent
now or hereafter permitted by this Certificate of Incorporation and the laws of
the State of Delaware, (a) may have such voting powers, full or limited, or may
be without voting powers; (b) may be subject to redemption at such time or
times and at such prices; (c) may be entitled to receive dividends (which may
be cumulative or non-cumulative) at such rate or rates, on such conditions and
at such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of stock; (d) may
have such rights upon the dissolution of, or upon any distribution of the
assets of, the corporation; (e) may be made convertible into, or exchangeable
for, shares of any other class or classes or of any other series of the same or
any other class or classes of stock of the corporation or such other
corporation or other entity at such price or prices or at such rates of
exchange and with such adjustments; (f) may be entitled to the benefit of a
sinking fund to be applied to the purchase or redemption of shares of such
series in such amount or amounts; (g) may be entitled to the benefit of
conditions and restrictions upon the creation of indebtedness of the
corporation or any subsidiary, upon the issue of any additional shares
(including additional shares of such series or of any other series) and upon
the payment of dividends or the making of other distributions on, and the
purchase, redemption or other acquisition by the corporation or any subsidiary
of, any outstanding shares of the corporation; and (h) may have such other
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, all as shall be stated in said resolution
or resolutions providing for the issue of such shares of Preferred Stock.
Shares of Preferred Stock of any series that have been redeemed or repurchased
by the corporation (whether through the operation of a sinking fund or
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otherwise) or that, if convertible or exchangeable, have been converted or
exchanged in accordance with their terms shall be retired and have the status
of authorized and unissued shares of Preferred Stock of the same series and may
be reissued as a part of the series of which they were originally a part or
may, upon the filing of an appropriate certificate with the Secretary of State
of Delaware, be reissued as part of a new series of shares of Preferred Stock
to be created by resolution or resolutions of the Board of Directors or as part
of any other series of shares of Preferred Stock, all subject to the conditions
or restrictions on issuance set forth in the resolution of resolutions adopted
by the Board of Directors providing for the issue of any series of shares of
Preferred Stock.
Subject to the provisions of applicable law or of the By-laws with respect
to the closing of the transfer books or the fixing of a record date for the
determination of stockholders entitled to vote, and except as otherwise
provided by law or by the resolution or resolutions providing for the issue of
any series of Preferred Stock, the holders of outstanding shares of Common
Stock shall exclusively possess the voting power for the election of directors
and for all other purposes, each holder of record of shares of Common Stock
being entitled to one vote for each share of Common Stock standing in his name
on the books of the Corporation.
FIFTH: In furtherance and not in limitation of the powers conferred by
law, subject to any limitations contained elsewhere in these articles of
incorporation, by-laws of the Corporation may be adopted, amended or repealed
by a majority of the board of directors of the Corporation, but any by-laws
adopted by the board of directors may be amended or repealed by the
stockholders entitled to vote thereon. Election of directors need not be by
written ballot.
SIXTH: The Corporation shall indemnify, to the full extent permitted by
Section 145 of the General Corporation Law of Delaware, as amended from time to
time, all persons whom it may indemnify pursuant thereto. No director shall be
personally liable to the Corporation or any stockholder for monetary damages
for breach of fiduciary duty as a director, except for any matter in respect of
which such director shall be liable under Section 174 of Title 8 of the General
Corporation Law of Delaware or any amendment thereto or successor provision
thereto or shall be liable by reason that, in addition to any and all other
requirements for such liability, such director (i) shall have breached his or
her duty of loyalty to the Corporation or its stockholders, (ii) shall not have
acted in good faith or, in failing to act, shall not have acted in good faith,
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a manner
involving intentional misconduct or a knowing violation of law or (iv) shall
have derived an improper personal benefit. Neither the amendment nor repeal of
this Article Seventh nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this Article Seventh, shall eliminate or reduce
the effect of this Article Seventh in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article Seventh, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
SEVENTH: A director of the Corporation shall not in the absence of fraud
be disqualified by the holding of such office from dealing or contracting with
the Corporation either as a vendor, as a purchaser or otherwise, nor in the
absence of fraud shall a director of the Corporation be liable to account to
the Corporation for any profit realized by said director, from or through any
transaction or contract of the Corporation by reason of the fact that said
director, or any firm of which said director is a member, or any corporation of
which said director is an officer, director or stockholder, was interested in
such transaction or contract if such transaction or contract has been
authorized, approved or ratified in the manner provided in the Business
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Corporation Law of the State of Delaware for authorization, approval or
ratification of transactions or contracts between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or
more of its directors or officers are directors or officers or have a financial
interest.
* * *
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EXHIBIT 3 (B)
Amended and Restated
BY-LAWS
OF
Outboard Marine Corporation
(a Delaware corporation)
ARTICLE I
Stockholders
------------
SECTION 1. Annual Meetings. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year at such date and time,
within or without the State of Delaware, as the Board of Directors shall
determine.
SECTION 2. Special Meetings. Special meetings of stockholders for the
transaction of such business as may properly come before the meeting may be
called by order of the Board of Directors or by stockholders holding together
at least a majority of all the shares of the Corporation entitled to vote at
the meeting, and shall be held at such date and time, within or without the
State of Delaware, as may be specified by such order.
SECTION 3. Notice of Meetings. Written notice of all meetings of the
stockholders shall be mailed or delivered to each stockholder not less than 10
nor more than 60 days prior to the meeting. Notice of any special meeting
shall state in general terms the purpose or purposes for which the meeting is
to be held.
SECTION 4. Stockholder Lists. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by this section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 5. Quorum. Except as otherwise provided by law or the
Corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting of stockholders shall consist of the holders of record
of a majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at the meeting, present in person or by proxy. At
all meetings of the stockholders at which a quorum is present, all matters,
except as otherwise provided by law or the Certificate of Incorporation, shall
be decided by the vote of the holders of a majority of the shares entitled to
vote thereat present in person or by proxy. If there be no such quorum, the
holders of a majority of such shares so present or represented may adjourn the
meeting from time to time, without further notice, until a quorum shall have
been obtained. When a quorum is once present it is not broken by the
subsequent withdrawal of any stockholder.
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SECTION 6. Organization. Meetings of stockholders shall be presided over
by the Chairman, if any, or if none or in the Chairman's absence the
Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the
President, if any, or if none or in the President's absence a Vice-President,
or, if none of the foregoing is present, by a chairman to be chosen by the
stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither
the Secretary nor an Assistant Secretary is present, the presiding officer of
the meeting shall appoint any person present to act as secretary of the
meeting.
SECTION 7. Voting; Proxies; Required Vote. (a) At each meeting of
stockholders, every stockholder shall be entitled to vote in person or by proxy
appointed by instrument in writing, subscribed by such stockholder or by such
stockholder's duly authorized attorney-in-fact (but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period), and, unless the Certificate of Incorporation provides
otherwise, shall have one vote for each share of stock entitled to vote
registered in the name of such stockholder on the books of the Corporation on
the applicable record date fixed pursuant to these By-laws. At all elections
of directors the voting may but need not be by ballot and a plurality of the
votes cast there shall elect. Except as otherwise required by law or the
Certificate of Incorporation, any other action shall be authorized by a
majority of the votes cast.
(b) Any action required or permitted to be taken at any meeting of
stockholders may, except as otherwise required by law or the Certificate of
Incorporation, be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of record of the issued and outstanding capital stock of
the Corporation having a majority of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted, and the writing or writings are filed with the
permanent records of the Corporation. Prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
(c) Where a separate vote by a class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to vote on that
matter, the affirmative vote of the majority of shares of such class or classes
present in person or represented by proxy at the meeting shall be the act of
such class, unless otherwise provided in the Corporation's Certificate of
Incorporation.
SECTION 8. Inspectors. The Board of Directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not so
appointed, the person presiding at the meeting may, but need not, appoint one
or more inspectors. In case any person who may be appointed as an inspector
fails to appear or act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting by the person presiding
thereat. Each inspector, if any, before entering upon the discharge of his or
her duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. The inspectors, if any, shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock represented
at the meeting, the existence of a quorum, and the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes, ballots or consents, determine the result, and do such
acts as are proper to conduct the election or vote with fairness to all
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stockholders. On request of the person presiding at the meeting, the inspector
or inspectors, if any, shall make a report in writing of any challenge,
question or matter determined by such inspector or inspectors and execute a
certificate of any fact found by such inspector or inspectors.
ARTICLE II
Board of Directors
------------------
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each director
shall be at least 18 years of age. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
number of directors constituting the entire Board shall be 6, or such larger or
smaller number as may be fixed from time to time by action of the stockholders
or Board of Directors. The use of the phrase "entire Board" herein refers to
the total number of directors which the Corporation would have if there were no
vacancies.
(b) Directors who are elected at an annual meeting of stockholders, and
directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
(c) Directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise provided by
law, a majority of the entire Board shall constitute a quorum. A majority of
the directors present, whether or not a quorum is present, may adjourn a
meeting from time to time to another time and place without notice. The vote
of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 4. Places of Meetings. Meetings of the Board of Directors may be
held at any place within or without the State of Delaware, as may from time to
time be fixed by resolution of the Board of Directors, or as may be specified
in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of stockholders,
the newly elected Board of Directors shall meet for the purpose of the election
of officers and the transaction of such other business as may properly come
before the meeting. Such meeting may be held without notice immediately after
the annual meeting of stockholders at the same place at which such
stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board of Directors shall from
time to time by resolution determine.
SECTION 7. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, President, or by a
majority of the directors then in office.
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SECTION 8. Notice of Meetings. A notice of the place, date and time and
the purpose or purposes of each meeting of the Board of Directors shall be
given to each director by mailing the same at least two days before the
meeting, or by telegraphing or telephoning the same or by delivering the same
personally not later than the day before the day of the meeting.
SECTION 9. Organization. At all meetings of the Board of Directors, the
Chairman, or Chairmen, if any, or if none or in the Chairman's or Chairmen's
absence or inability to act the Vice-Chairman, or Vice-Chairmen, if any, or in
the Vice-Chairman's or Vice-Chairmen's absence or inability to act the
President, or in the President's absence or inability to act any Vice-President
who is a member of the Board of Directors, or in such Vice-President's absence
or inability to act a chairman chosen by the directors, shall preside. The
Secretary of the Corporation shall act as secretary at all meetings of the
Board of Directors when present, and, in the Secretary's absence, the presiding
officer may appoint any person to act as secretary.
SECTION 10. Resignation; Removal. Any director may resign at any time
upon written notice to the Corporation and such resignation shall take effect
upon receipt thereof by the President, unless otherwise specified in the
resignation. Any or all of the directors may be removed, with or without
cause, by the holders of 75% of the shares of stock outstanding and entitled to
vote for the election of directors.
SECTION 11. Vacancies. Unless otherwise provided in these By-laws,
vacancies on the Board of Directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number of directors or
otherwise, may be filled by the affirmative vote of a majority of the remaining
directors, although less than a quorum, or by a sole remaining director, or at
a special meeting of the stockholders, by the holders of shares entitled to
vote for the election of directors.
SECTION 12. Action by Written Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all the directors consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
ARTICLE III
Committees
----------
SECTION 1. Appointment. From time to time the Board of Directors by a
resolution adopted by a majority of the entire Board may appoint any committee
or committees for any purpose or purposes, to the extent lawful, which shall
have powers as shall be determined and specified by the Board of Directors in
the resolution of appointment.
SECTION 2. Procedures, Quorum and Manner of Acting. Each committee shall
fix its own rules of procedure, and shall meet where and as provided by such
rules or by resolution of the Board of Directors. Except as otherwise provided
by law, the presence of a majority of the then appointed members of a committee
shall constitute a quorum for the transaction of business by that committee,
and in every case where a quorum is present the affirmative vote of a majority
of the members of the committee present shall be the act of the committee.
Each committee shall keep minutes of its proceedings, and actions taken by a
committee shall be reported to the Board of Directors.
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SECTION 3. Action by Written Consent. Any action required or permitted to
be taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if all the members of the committee consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the committee.
SECTION 4. Term; Termination. In the event any person shall cease to be a
director of the Corporation, such person shall simultaneously therewith cease
to be a member of any committee appointed by the Board of Directors.
ARTICLE IV
Officers
--------
SECTION 1. Election and Qualifications. The Board of Directors shall
elect the officers of the Corporation, which shall include a Chairman of the
Board, one (or more) Vice-Chairman of the Board, a President and a Secretary,
and may include, by election or appointment, one or more Vice-Presidents (any
one or more of whom may be given an additional designation of rank or
function), a Treasurer and such assistant secretaries, such Assistant
Treasurers and such other officers as the Board may from time to time deem
proper. Each officer shall have such powers and duties as may be prescribed by
these By-laws and as may be assigned by the Board of Directors or the
President. Any two or more offices may be held by the same person except the
offices of President and Secretary. A director's tenure on the Board of
Directors does not disqualify such director from jointly holding a position as
an officer, provided that a majority of the remaining members of the Board of
Directors approve such appointment.
SECTION 2. Term of Office and Remuneration. The term of office of all
officers shall be one year and until their respective successors have been
elected and qualified, but any officer may be removed from office, either with
or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration of all officers of the
Corporation may be fixed by the Board of Directors or in such manner as the
Board of Directors shall provide.
SECTION 3. Resignation; Removal. Any officer may resign at any time upon
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President, unless otherwise specified in the
resignation. Any officer shall be subject to removal, with or without cause,
at any time by vote of a majority of the entire Board.
SECTION 4. Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the Board of Directors and shall have such
other powers and duties as may from time to time be assigned by the Board of
Directors. Any document or contract may be signed by the Chairman of the Board
on behalf of the Corporation.
SECTION 5. Vice-Chairman of the Board. At the request of the Chairman of
the Board, a Vice-Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors in the absence of the Chairman of the Board
and shall have such other powers and duties as may from time to time be
assigned by either the Board of Directors or the Chairman of the Board,
including, without limitation, the power to execute and deliver in the name of
the Corporation contracts and other documents.
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SECTION 6. President and Chief Executive Officer. The President shall be
the chief executive officer of the Corporation, and shall have such duties as
customarily pertain to that office. The President shall have general
management and supervision of the property, business and affairs of the
Corporation and over its other officers; may appoint and remove assistant
officers and other agents and employees, other than officers referred to in
Section 1 of this Article IV; and may execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations and
instruments.
SECTION 7. Vice-President. A Vice-President may execute and deliver in
the name of the Corporation contracts and other obligations and instruments
pertaining to the regular course of the duties of said office, and shall have
such other authority as from time to time may be assigned by the Board of
Directors or the President.
SECTION 8. Chief Financial Officer. The Chief Financial Officer shall be
responsible for maintaining the financial integrity of the Corporation, shall
prepare the financial plans for the Corporation, and shall monitor the
financial performance of the Corporation and its subsidiaries, as well as
performing such other duties as may be assigned by the Chairman of the Board or
the Board of Directors or the President.
SECTION 9. Treasurer. The Treasurer shall have care and custody of the
funds and securities of the Corporation, shall deposit such funds in the name
and to the credit of the Corporation with such depositories as the Treasurer
shall approve, shall disburse the funds of the Corporation for proper expenses
and dividends, and as may be ordered by the Board, taking proper vouchers for
such disbursements. The Treasurer shall perform all of the duties incident to
the office of Treasurer, as well as such other duties as may be assigned by the
Chairman of the Board or the Board of Directors or the President or the Chief
Financial Officer.
SECTION 10. Secretary and Assistant Secretary. The Secretary shall attend
all meetings of the stockholders and the Board of Directors and shall keep the
minutes for such meetings in one or more books provided for that purpose. The
Secretary shall be custodian of the corporate records, except those required to
be in the custody of the Treasurer or the Controller, shall keep the seal of
the Corporation, and shall execute and affix the seal of the Corporation to all
documents duly authorized for execution under seal on behalf of the
Corporation, and shall perform all of the duties incident to the office of
Secretary, as well as such other duties as may be assigned by the Chairman of
the Board or the Board of Directors.
The Assistant Secretaries shall perform such of the Secretary's duties as
the Secretary shall from time to time direct. In case of the absence or
disability of the Secretary or a vacancy in the office, an Assistant Secretary
designated by the Chairman of the Board or by the Secretary, if the office is
not vacant, shall perform the duties of the Secretary.
SECTION 11. General Counsel. The General Counsel shall be a licensed
attorney at law and shall be the chief legal officer of the Corporation. The
General Counsel shall have such power and exercise such authority and provide
such counsel to the Corporation as deemed necessary or desirable to enforce the
rights and protect the property and integrity of the Corporation, shall also
have the power, authority, and responsibility for securing for the Corporation
all legal advice, service, and counseling, and shall perform all of the duties
incident to the office of General Counsel, as well as such other duties as may
be assigned by the Chairman of the Board or the Board of Directors or the
President.
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SECTION 12. Controller and Assistant Controllers. The Controller shall be
the chief accounting officer of the Corporation and shall keep and maintain in
good and lawful order all accounts required by law and shall have sole control
over, and ultimate responsibility for, the accounts and accounting methods of
the Corporation and the compliance of the Corporation with all systems of
accounts and accounting regulations prescribed by law. The Controller shall
audit, to such extent and at such times as may be required by law or as the
Controller may think necessary, all accounts and records of corporate funds or
property, by whomsoever kept, and for such purposes shall have access to all
such accounts and records. The Controller shall make and sign all necessary
and proper accounting statements and financial reports of the Corporation, and
shall perform all of the duties incident to the office of Controller, as well
as such other duties as may be assigned by the Chairman of the Board or the
Board of Directors or the President or the Chief Financial Officer.
The Assistant Controllers shall perform such of the Controller's duties as
the Controller shall from time to time direct. In case of the absence or
disability of the Controller or a vacancy in the office, an Assistant
Controller designated by the Chairman of the Board or the Controller, if the
office is not vacant, shall perform the duties of the Controller.
SECTION 13. Assistant Officers. Any assistant officer shall have such
powers and duties of the officer such assistant officer assists as such officer
or the Board of Directors shall from time to time prescribe.
ARTICLE V
Books and Records
-----------------
SECTION 1. Location. The books and records of the Corporation may be kept
at such place or places within or outside the State of Delaware as the Board of
Directors or the respective officers in charge thereof may from time to time
determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the
dates when they respectively became the owners of record thereof shall be kept
by the Secretary as prescribed in the By-laws and by such officer or agent as
shall be designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and all other
corporate notices may be delivered personally or mailed to each stockholder at
the stockholder's address as it appears on the records of the Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of Record. (a)
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, the
Board of Directors may fix a record date. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required, shall be the first date on which a signed
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written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in this
State, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by this chapter, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date. If no record date is
fixed, the record date for determining stockholders for any such purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
ARTICLE VI
Certificates Representing Stock
-------------------------------
SECTION 1. Certificates; Signatures. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by or in the name of the Corporation by
the Chairman or Vice-Chairman of the Board of Directors, or the President or
Vice-President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, representing the number
of shares registered in certificate form. Any and all signatures on any such
certificate may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue. The name of the holder of record of the shares represented thereby,
with the number of such shares and the date of issue, shall be entered on the
books of the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if
any, shares of capital stock shall be transferable on the books of the
Corporation only by the holder of record thereof in person, or by duly
authorized attorney, upon surrender and cancellation of certificates for a like
number of shares, properly endorsed, and the payment of all taxes due thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall not be
required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive
such fractions are determined, or it may issue scrip in registered or bearer
form over the manual or facsimile signature of an officer of the Corporation or
of its agent, exchangeable as therein provided for full shares, but such scrip
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shall not entitle the holder to any rights of a stockholder except as therein
provided.
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates representing shares of the Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new certificate of stock in place of any certificate, theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the Board of
Directors may require the owner of any lost, stolen or destroyed certificate,
or his legal representative, to give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate.
ARTICLE VII
Dividends
---------
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine
whether any, and, if any, what part of any, funds legally available for the
payment of dividends shall be declared as dividends and paid to stockholders;
the division of the whole or any part of such funds of the Corporation shall
rest wholly within the lawful discretion of the Board of Directors, and it
shall not be required at any time, against such discretion, to divide or pay
any part of such funds among or to the stockholders as dividends or otherwise;
and before payment of any dividend, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.
ARTICLE VIII
Ratification
------------
Any transaction, questioned in any law suit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or stockholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting, may be ratified before or after
judgment, by the Board of Directors or by the stockholders, and if so ratified
shall have the same force and effect as if the questioned transaction had been
originally duly authorized. Such ratification shall be binding upon the
Corporation and its stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
ARTICLE IX
Corporate Seal
--------------
The corporate seal shall have inscribed thereon the name of the Corporation
and the year of its incorporation, and shall be in such form and contain such
other words and/or figures as the Board of Directors shall determine. The
corporate seal may be used by printing, engraving, lithographing, stamping or
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otherwise making, placing or affixing, or causing to be printed, engraved,
lithographed, stamped or otherwise made, placed or affixed, upon any paper or
document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X
Fiscal Year
-----------
Unless otherwise fixed by the Board of Directors, the fiscal year of the
Corporation shall be the twelve-month period beginning October 1 and ending
September 30.
ARTICLE XI
Waiver of Notice
----------------
Whenever notice is required to be given by these By-laws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
--------------------------------------
SECTION 1. Bank Accounts and Drafts. In addition to such bank accounts as
may be authorized by the Board of Directors, the primary financial officer or
any person designated by said primary financial officer, whether or not an
employee of the Corporation, may authorize such bank accounts to be opened or
maintained in the name and on behalf of the Corporation as he may deem
necessary or appropriate, payments from such bank accounts to be made upon and
according to the check of the Corporation in accordance with the written
instructions of said primary financial officer, or other person so designated
by the Treasurer.
SECTION 2. Contracts. The Board of Directors may authorize any person or
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The Chairman,
the President or any other person designated by either of them shall have the
power and authority to execute and deliver proxies, powers of attorney and
other instruments on behalf of the Corporation in connection with the rights
and powers incident to the ownership of stock by the Corporation. The
Chairman, the President or any other person authorized by proxy or power of
attorney executed and delivered by either of them on behalf of the Corporation
may attend and vote at any meeting of stockholders of any company in which the
Corporation may hold stock, and may exercise on behalf of the Corporation any
and all of the rights and powers incident to the ownership of such stock at any
such meeting, or otherwise as specified in the proxy or power of attorney so
authorizing any such person. The Board of Directors, from time to time, may
confer like powers upon any other person.
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SECTION 4. Financial Reports. The Board of Directors may appoint the
primary financial officer or other fiscal officer and/or the Secretary or any
other officer to cause to be prepared and furnished to stockholders entitled
thereto any special financial notice and/or financial statement, as the case
may be, which may be required by any provision of law.
ARTICLE XIII
Amendments
----------
The Board of Directors shall have power to adopt, amend or repeal By-laws.
By-laws adopted by the Board of Directors may be repealed or changed, and new
By-laws made, by the stockholders, and the stockholders may prescribe that any
By-law made by them shall not be altered, amended or repealed by the Board of
Directors.
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EXHIBIT 4(C)
NOTICE OF SUPPLEMENTAL INDENTURE
To all Holders of 7% Convertible Subordinated Debentures Due 2002 of Outboard
Marine Corporation:
Please be advised that, in accordance with Section 1209 of the Indenture
(the "Indenture") for the 7% Convertible Subordinated Debentures Due 2002 (the
"Debentures"), dated June 22, 1992, between Outboard Marine Corporation, a
Delaware corporation (the "Company") and LaSalle National Bank, as Trustee
(the "Trustee"), the Company and the Trustee have executed a Supplemental
Indenture (the "Supplemental Indenture"), dated as of October 1, 1997, to
reflect the merger on September 30, 1997 of Greenmarine Acquisition Corp., a
Delaware corporation ("Greenmarine"), into the Company (the "Merger") pursuant
to which each share of Company common stock issued and outstanding immediately
prior thereto (other than shares of Company common stock in the treasury of the
Company, shares held by the Company or the parent of Greenmarine, or shares
held by stockholders of the Company who properly exercised their appraisal
rights under Delaware corporate law) was converted into the right to receive
$18.00 in cash, without any interest and less any required withholding taxes.
As a result of the merger each outstanding Debenture is now convertible, during
the period that such Debenture is convertible, and subject to the other
conditions, as specified in Article Twelve of the Indenture, into the right to
receive a cash payment equal to $809 for each $1,000 principal amount of
Debentures so converted only. A copy of the Supplemental Indenture is attached
hereto in its entirety as Exhibit A.
October 30, 1997
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, dated as of September 30, 1997 (this "Supplemental
Indenture"), between Outboard Marine Corporation, a Delaware corporation (the
"Company"), and LaSalle National Bank, as Trustee (the "Trustee").
WITNESSETH:
WHEREAS, the Company and the Trustee executed and delivered an Indenture,
dated as of June 22, 1992 (the "indenture"), to provide for the issuance of 7%
Convertible Subordinated Debentures Due 2002 of the Company (the "Debentures");
WHEREAS, pursuant to an Offer to Purchase, dated August 8, 1997 (the "Offer
to Purchase"), by Greenmarine Acquisition Corp., a Delaware corporation
("Greenmarine") and wholly-owned subsidiary of Greenmarine Holdings LLC, a
Delaware limited liability company ("holdings"), Greenmarine acquired more than
90% of the outstanding shares of common stock, par value $0.15 per share
("Common Stock"), of the Company at a price of $18.00 per share, net to the
seller in cash, without interest thereon (the "Offer");
WHEREAS, on the date hereof and as contemplated by the Offer to Purchase,
Greenmarine has effected the merger of Greenmarine with and into the Company
(the "Merger") as a "short-form" merger pursuant to the provisions of Section
253 of the Delaware General Corporation Law (the "DGCL") in accordance with the
terms of the Certificate of Ownership and Merger, dated September 30, 1997 (the
"Certificate of Ownership and Merger");
WHEREAS, as a result of the Merger, each share of Common Stock that was
outstanding immediately prior to the time when the Certificate of Ownership and
Merger was filed with the Secretary of State of the State of Delaware on
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September 30, 1997 (the "Effective Time") (other than shares of Common Stock
(a) held in the treasure of the Company, (b) owned by Greenmarine or Holdings
or (c) held by stockholders who properly perfect their appraisal rights under
Section 262 of the DGCL) has been converted into the right to receive a cash
payment equal to $18.00 per share, without any interest thereon and less an
required withholding taxes;
WHEREAS, Section 901 of the Indenture permits the Company, when authorized
by a resolution of the Board of directors of the Company, and the Trustee, at
any time and from time to time, to enter into one or more indentures
supplemental to the Indenture, in form satisfactory to the Trustee, to make
provisions with respect to the conversion rights of holders of Debentures
(each, a "Holder") pursuant to Section 1209 of the Indenture;
WHEREAS, the Company has requested that the Trustee execute and deliver
this Supplemental Indenture pursuant to Section 901 of the Indenture; and
WHEREAS, all requirements necessary to make this Supplemental Indenture a
valid instrument in accordance with the terms of the Indenture have been
performed and the execution and delivery of this Supplemental Indenture have
been duly authorized in all respects by the Company;
NOW, THEREFORE, the Company covenants and agrees with the Trustee as
follows:
ARTICLE I.
CONVERSION
Section 1.01. Conversation of Securities. In accordance with the
provisions of Section 1209 of the Indenture, immediately following the
Effective Time, the holder of each Debenture then outstanding shall have the
right, during the period and subject to the other conditions that such
Debenture is convertible as specified in Article Twelve of the Indenture, to
convert each such Debenture into the right to receive a cash payment equal to
$809 for each $1,000 principal amount of Debentures so converted (i.e., (1,000
divided by 22.25) x 18).
ARTICLE II.
MISCELLANEOUS
Section 2.01. Definitions. Capitalized terms used but not defined in this
Supplemental Indenture shall have the meanings ascribed thereto in the
Indenture.
Section 2.02. Confirmation of Indenture. The Indenture, as supplemented
and amended by this Supplemental Indenture, is in all respects ratified and
confirmed, and the Indenture, this Supplemental Indenture and all indentures
supplemental thereto shall be reach, taken and construed as one and the same
instrument.
Section 2.03. Not Responsible for Recitals or Validity of Documents. The
recitals contained herein and in the Debentures shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Supplemental Indenture, the Indenture or the Debentures.
Section 2.04. Governing Law. This Supplemental Indenture, the Indenture
and the Debentures shall be governed by and construed in accordance with the
laws of the State of Illinois.
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Section 2.05. Separability. In case any one or more of the provisions
contained in this Supplemental Indenture shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Supplemental
Indenture, but this Supplemental Indenture shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
Section 2.06. Counterparts. This Supplemental Indenture may be executed
any number of counterparts each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 2.07. Effectiveness. This Supplemental Indenture shall become
effective at the Effective Time.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, as of the day and year first above written.
OUTBOARD MARINE CORPORATION
By: /s/ DAVID D. JONES, JR.
-------------------
Name: David D. Jones, Jr.
Title: President and Chief
Executive Officer
LASALLE NATIONAL BANK
By: /s/ LAURA H. MACKEY
---------------
Name: Laura H. Mackey
Title: Assistant Vice President
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EXHIBIT 10 (B)
FIRST AMENDMENT TO THE
OMC EXECUTIVE BONUS PLAN
The OMC Executive Bonus Plan (the "Plan"), as established by the Board of
Directors of Outboard Marine Corporation, effective January 18, 1989, is hereby
amended, effective September 8, 1997, as follows:
I.
Article VI of the Plan is hereby amended by deleting the phrase "prior to
any Change in Control".
II.
Article IX of the Plan is hereby deleted.
III.
Exhibit I of the Plan is hereby deleted.
IV.
Except as specifically provided herein, the Plan shall remain in full force
and effect.
EXECUTED this 12th day of September, 1997.
OUTBOARD MARINE CORPORATION
By: /s/ HARRY W. BOWMAN
---------------
Harry W. Bowman
Chairman of the Board,
President and Chief Executive
Officer
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EXHIBIT 10 (D)
FIRST AMENDMENT TO
THE OMC 1994 LONG-TERM INCENTIVE PLAN
The OMC 1994 Long-Term Incentive Plan (the "Plan":), effective as of
September 8, 1993, is hereby amended, effective September 11, 1997, as follows:
I.
The second paragraph of Article 10 of the Plan is hereby deleted, and the
first paragraph of Article 10 of the Plan is hereby amended to read as follows:
10. Accelerated Exercise and Accelerated Nonforfeitability.
Notwithstanding any other provisions of the LTIP Plan except Article 9(d)
and 9(e) and as otherwise provided in this article, all options and SARS
(other than awards of performance shares or performance units) granted
under the LTIP Plan shall be exercisable an all shares of restricted stock
(other than awards of performance shares) shall be nonforfeitable and
freely transferable commencing on the date of a Change of Control, as
defined in Article 15. A Change of Control (as defined in Article 15),
however, shall not cause any acceleration of the vesting or payment of any
performance share or performance unit awarded under the LTIP Plan.
II.
Except as provided herein, the Plan shall remain in full force and effect.
Executed this 12th day of September, 1997.
OUTBOARD MARINE CORPORATION
By: /s/ HARRY W. BOWMAN
---------------
Harry W. Bowman
Chairman of the Board,
President and Chief Executive
Officer
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EXHIBIT 10 (I)
CONSULTING AGREEMENT
AGREEMENT, made and effective as of September 24, 1997 ("Effective Date"),
by and between OUTBOARD MARINE CORPORATION, a Delaware corporation (the
"Company"), and HARRY W. BOWMAN (the "Consultant").
WITNESSETH:
-----------
WHEREAS, Consultant is currently employed as the President and Chief
Executive Officer of the Company pursuant to an Employment Agreement dated
February 14, 1995 ("Employment Agreement") and an Amended and Restated
Severance Agreement dated March 31, 1997 (the "Severance Agreement");
WHEREAS, the Company has not provided assurances to Consultant that he will
remain as President and Chief Executive Officer and, as a result, Consultant
desires flexibility to pursue other opportunities and interests;
WHEREAS, Consultant and the Company desire to provide for an orderly
transition in the management of the Company and to preserve the Company's
access to the knowledge, experience and expertise of Consultant by retaining
him as a part-time, casual employee and consultant upon the terms and
conditions of this Agreement;
WHEREAS, the Company and Consultant desire to terminate the Employment
Agreement and Severance Agreement except for certain provisions which are
expressly incorporated herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
agreements and understandings contained herein, the Company and the Consultant
(individually a "Party" and together the "Parties") agree as follows:
1. Resignation and Retirement.
- -------------------------------
Company and Consultant hereby agree that Consultant has voluntarily resigned as
of the Effective Date from his positions as President and Chief Executive
Officer and as Chairman of the Board and a director of the Company, and all
other positions with the Company and its subsidiaries, but shall continue to be
treated as a part-time, casual employee of the Company until March 31, 1998.
Consultant shall be deemed to voluntarily retire from the Company on March 31,
1998. Company shall pay Consultant on October 3, 1997, in cash, an amount
equal to $940,000.
2. Consulting Services.
- -----------------------
(a) At the reasonable request of the Chairman and/or Chief Executive
Officer of the Company, Consultant shall provide consulting services to the
Company during the period commencing on the Effective Date and ending on
September 30, 1998 ("Consulting Term"). Such consulting services shall include
advice on transitional issues, key employee retention, customer and/or dealer
relations, and other mutually agreeable projects. Consultant shall endeavor to
render his services to the Company at a time and in a manner reasonably
convenient to the Company and Consultant; it being mutually understood that
Consultant does not intend to and shall not be required to maintain office
hours or to engage in business travel and that Consultant might obtain
full-time employment (and any provision of consulting services may be after
normal business hours and on weekends so as not to interfere with any such
full-time employment). Consultant is specifically permitted to render his
consulting services by telephone at reasonable times. Consultant shall be
entitled to reasonable vacation and leisure time during which he shall have no
obligation to provide any consulting services. Consultant shall have no
liability or obligation for any consulting services he performs or any action
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or omission on the part of the Company or any of its subsidiaries based
thereon.
(b) The Parties acknowledge and agree that the Consultant shall be a
part-time, casual employee of the Company until March 31, 1998; thereafter for
the remainder of the Consulting Term, he shall be an independent contractor.
Nothing in the Agreement shall be construed to grant either Party the authority
to enter into a contract in the name of the other Party, or to bind the other
Party in any manner.
(c) Company shall pay Consultant on October 3, 1997, in cash, an amount
equal to $230,000 as salary for the portion of the Consulting Term that he is a
part-time, casual employee and an amount equal to $230,000 as a consulting fee
for the portion of the Consulting Term that he is an independent contractor.
(d) The Consulting Term shall terminate upon the earlier of September 30,
1998, or the date of the death or total and permanent disability of the
Consultant.
3. Non-Competition; Non-Disparagement.
- --------------------------------------
Consultant hereby acknowledges and agrees that, for a period of one year
following the date he retires from the Company, he shall not (i) engage in
Competitive Activity (as defined below) against the Company or its
subsidiaries, or (ii) make any statement about the Company or any of its
managers, officers or directors that the Consultant knows to be disparaging in
any significant respect other than in the course of discussing management
assessments or evaluations with any director of the Company. Company shall pay
Consultant on October 3, 1997, in cash, an amount equal to $700,000 for his
covenants contained in this Section 3. Neither the Company nor any of its
directors, elected officers, or principal stockholders shall make any statement
about Consultant that is known to be disparaging in any significant respect.
"Competitive Activity" means Consultant's participation, without the
written consent of the Board of Directors of the Company, in the management of
any business enterprise if such enterprise engages in substantial and direct
competition with the Company and such enterprise's sales of any product or
service competitive with any product or service of the Company amounted to 10%
of such enterprise's net sales for its most recently completely fiscal year and
if the Company's net sales of said product or service amounted to 10% of the
Company's net sales for its most recently completed fiscal year. "Competitive
Activity" will not include (i) the mere ownership of securities in any such
enterprise and the exercise of rights appurtenant thereto or (ii) participation
in the management of any such enterprise other than in connection with the
competitive operations of such enterprise, or (iii) participation and/or
ownership of securities in any entity engaged in the sale, marketing or
manufacture of boats and having revenues from such activity of $100 million or
less for its most recently completed fiscal year.
4. Retirement Benefits.
- -----------------------
Company hereby acknowledges and agrees that, as a result of Consultant's
retirement as of March 31, 1998, pursuant to Section 1 above, Consultant is
entitled to receive the supplemental retirement benefit provided for in Section
4 of the Employment Agreement (and such section is incorporated herein), and,
if Consultant should die before March 31, 1998, such supplemental retirement
benefit shall be paid to his spouse if she should survive him, or if she does
not survive him, to his estate. Company and Consultant agree that the monthly
supplemental retirement benefit, after all age-based reductions but prior to
any reductions as provided in section 4 of the Employment Agreement for the
"deemed Whirlpool monthly plan benefit", is $13,348.00, and an actuarially
equivalent lump sum (as calculated in the manner provided in section 4 of the
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PAGE> 86
Employment Agreement) shall be paid, in cash, by the Company on March 31, 1998.
The Company and Consultant agree that the only Whirlpool retirement plan for
which a reduction shall be made to the foregoing supplemental retirement
benefit is the Whirlpool Salaried Employees Retirement Plan (or any successor
tax-qualified retirement plan thereto) and not any supplemental, non-qualified
arrangement maintained by Whirlpool. Consultant shall certify prior to March
31, 1998 to the Company the correct amount of his retirement benefit as of
March 31, 1998, under the Whirlpool Salaried Employees Retirement Plan.
5. Employee Benefit Programs.
- -----------------------------
During the Consulting Term, Consultant shall be entitled to participate in and
receive the same benefits under the Company's group life (including the
Executive Life Insurance program), health, dental, medical/hospital and other
welfare benefit plans in effect from time to time as if he were an employee and
elected officer of the Company. Nothing contained in this Section 5 shall
require Company to provide Consultant with disability insurance coverage beyond
March 31, 1998, unless permitted by the terms of its group disability insurance
policy or required by law. The continuation period for purposes of Part 6,
Subtitle B, Title I of ERISA shall commence as of the end of the Consulting
Term.
6. Outplacement and Financial Advisor Services.
- -----------------------------------------------
Company agrees to promptly pay for the reasonable costs of executive
outplacement services for Consultant up to an aggregate cost of $92,000.
Company also agrees to continue to pay the reasonable costs for financial
advisory services up to an aggregate cost of $12,000 for 1998 and $12,000 for
1997 (including any amounts already paid in respect of 1997), in each case with
full "tax gross-up" in accordance with past practice.
7. Car.
- -------
The Company agrees that it shall cause unencumbered title and ownership of the
car currently being leased by the Company for Consultant's use to be
transferred to Consultant on March 31, 1998, free and clear of any lease
obligation. Until March 31, 1998, car operating expenses (including insurance,
license and registration fees, gas, lease payments and maintenance) will be
reimbursed or paid by Company to Consultant in accordance with past practice,
and any income imputed to Consultant as a result of the use of the car until
March 31, 1998 and such reimbursements or payments will be "grossed up" by the
Company for tax purposes in accordance with past practice.
8. Life Insurance.
- ------------------
Company and Consultant acknowledge and agree that Consultant is the sole owner
of the $500,000 whole life insurance policy provided to Consultant under the
Company's Executive Life Insurance Program. During the Consulting Term,
Company will pay all premiums on such life insurance policy, with full "tax
gross-up" in accordance with past practice.
9. Annual Physical.
- -------------------
Company will reimburse Consultant the reasonable and customary costs of an
annual physical examination in 1997 and 1998 at the Mayo Clinic.
10. Reimbursement of Business and Other Expenses.
- -------------------------------------------------
The Company shall promptly reimburse Consultant for reasonable expenses
incurred in carrying out his duties and responsibilities under this Agreement
in accordance with the Company's business expense policy in effect from time to
time; provided, however, that all payments hereunder are subject to
documentation in accordance with the Company's policy.
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PAGE> 87
11. Parachute Payments.
- -----------------------
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined (as hereafter provided) that any payment or
distribution by the Company or any of its affiliates to or for the benefit of
Consultant, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation
any stock appreciation right or similar right, or the lapse or termination of
any restriction on, or the vesting or exercisability of, any of the foregoing
(a "Payment"), would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") or any successor
provision thereto by reason of being considered "contingent on a change in
ownership or control" of the Company within the meaning of Section 280G of the
Code or any successor provision thereto or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such tax (such tax
or taxes, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then Consultant shall be
entitled to receive an additional payment or payments (collectively, a
"Gross-up Payment"); provided, however, that no Gross-up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted prior to the
execution of the Severance Agreement, or (ii) any stock appreciation or similar
right, whether or not limited, granted in tandem with any ISO described in
clause (i). The Gross-up Payment shall be in an amount such that, after
payment by Consultant of all taxes (including any interest or penalties imposed
with respect to such taxes), including any Excise Tax imposed upon the Gross-up
Payment, Consultant retains an amount of the Gross-up Payment equal to the
Excise Tax imposed on the Payment.
(b) Subject to Section 11(f) hereof, all determinations required to be made
under this Section 11, including whether a Gross-up Payment is required to be
paid by the Company to Consultant and the amount of such Gross-up Payment, if
any, shall be made by the Company's auditors which shall be a nationally
recognized accounting firm ("Accounting Firm") selected by the Company. The
Accounting Firm shall submit its determination and detailed supporting
calculations to both the Company and Consultant within 30 calendar days after
March 31, 1998, and any other times as may be requested by the Company or
Consultant. If the Accounting Firm determines that any Excise Tax is payable
by Consultant, the Company shall pay the required Gross-up Payment to
Consultant within five business days after receipt of such determination and
calculations with respect to any Payment to Consultant. If the Accounting Firm
determines that no Excise Tax is payable by Consultant, it shall, at the same
time as it makes such determination, furnish the Company and Consultant an
opinion that Consultant has substantial authority not to report any Excise Tax
on his federal, state or local income or other tax return. As a result of the
uncertainty in the application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the
Accounting Firm hereunder, it is possible that Gross-up Payments which will not
have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
11(f) and Consultant thereafter is required to make a payment of any Excise
Tax, Consultant shall direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and Consultant as promptly as
possible. Any such Underpayment shall be promptly paid by the Company to, or
for the benefit of, Consultant within five business days after receipt of such
determination and calculations.
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PAGE> 88
(c) Company and Consultant shall each provide the Accounting Firm access to
and copies of any books, records and documents in the possession of the Company
or Consultant, as the case may be, reasonably requested by the Accounting Firm,
and otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations contemplated by
Section 11(b). Any determination by the Accounting Firm as to the amount of
the Gross-up Payment shall be binding upon the Company and Consultant.
(d) The federal, state and local income or other tax returns filed by
consultant shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
Consultant. Consultant shall make proper payment of the amount of any Excise
Payment, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of Consultant's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-up Payment should be reduced,
Consultant shall within five business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determination and calculations contemplated by Section
11(b) shall be borne by the Company. If such fees and expenses are initially
paid by Consultant, the Company shall reimburse Consultant the full amount of
such fees and expenses within five business days after receipt from Consultant
of a statement therefor and reasonable evidence of his payment thereof.
(f) Consultant shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after Consultant actually received notice of such claim and
Consultant shall further apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid (in each case, to the
extent known by Consultant). Consultant shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar day period following the date
on which he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such clam is due. If the Company notifies Consultant
in writing prior to the expiration of such period that it desires to contest
such claim, Consultant shall:
(i) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the
Company;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order to effectively
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties incurred in connection with such
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PAGE> 89
contest) and shall indemnify and hold harmless Consultant, on an after-tax
basis, for and against any excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 11(f), the Company shall control all proceedings taken in
connection with the contest of any claim contemplated by this Section 11(f)
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim (provided, however, that Consultant may participate
therein at his own cost and expense) and may, at its option, either direct
Consultant to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Consultant agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Consultant to pay the
tax claimed and sue for a refund, the Company shall advance the amount of such
payment to Consultant on an interest-free basis and shall indemnify and hold
Consultant harmless, on an after-tax basis, from an Excise Tax or income or
other tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
Consultant with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
any such contested claim shall be limited to issues and respect to which a
Gross-up Payment would be payable hereunder and Consultant shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(g) If, after the receipt by Consultant of an amount advanced by the
Company pursuant to Section 11(f), Consultant receives any refund with respect
to such claim, Consultant shall (subject to the Company's complying with the
requirements of Section 11(f)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by Consultant of an amount advanced
by the Company pursuant to Section 11(f), a determination is made that
Consultant shall not be entitled to any refund with respect to such claim and
the Company does not notify Consultant in writing of its intent to contest such
denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of any such advance shall offset to the extent
thereof, the amount of Gross-up Payment required to be paid by the Company to
Consultant pursuant to this Section 11.
12. Legal Expenses.
- -------------------
(a) It is the intent of the Company that the Consultant not be required to
incur legal fees and the related expenses associated with the negotiation,
interpretation, enforcement or defense of Consultant's rights under this
Agreement by litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Consultant hereunder. Accordingly, if it should appear to the Consultant that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny, or
to recover from, Consultant the benefits provided or intended to be provided to
the Consultant hereunder, the Company irrevocably authorizes the Consultant
from time to time to retain counsel of Consultant's choice, at the expense of
the Company as hereafter provided, to advise and represent the Consultant in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer, stockholder
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or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Consultant's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and Consultant agree that a confidential relationship
shall exist between the executive and such counsel. Without respect to whether
Consultant prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Consultant in
connection with any of the foregoing. The Company and Consultant agree that
all amounts payable under this Section 12(a) may be paid by the trust fund
described in Section 12(b) below.
(b) The performance of the Company's obligations under Section 7 of the
Severance Agreement (and, as a consequence of the termination of the Severance
Agreement, Section 11(a) of this Agreement) shall be secured by amounts
deposited or to be deposited in trust pursuant to a trust agreement to which
the Company shall be a party, which amounts deposited shall, in the aggregate
for all employees covered by a severance agreement with the Company entered
into prior to September 12, 1997, be not less than $1,000,000, providing that
the fees and expenses of counsel selected from time to time by Consultant
pursuant to Section 12 shall be paid, or reimbursed to Consultant if paid by
Consultant, either in accordance with the terms of such trust agreements, or,
if not so provided, on a regular, periodic basis upon presentation by
Consultant to the trustee of a statement or statements prepared by such counsel
in accordance with its customary practices. Any failure by the Company to
satisfy any of its obligations under this Section 12 shall not limit the rights
of Consultant hereunder. Subject to the foregoing, Consultant shall have the
status of a general unsecured creditor of the Company and shall have no right
to, or security interest in, any assets of the Company or any Subsidiary.
(c) Without limiting the rights of the Consultant at law or in equity, if
the Company fails to make any payment or provide any benefit required to be
made or provided hereunder on a timely basis, the Company will pay interest on
the amount or value thereof at an annualized rate of interest equal to the
so-called composite "prime rate" as quoted from time to time during the
relevant period in the Midwest Edition of The Wall Street Journal. Such
interest will be payable as it accrues on demand. Any change in such prime
rate will be effective on and as of the date of such change.
13. Tax Withholding.
- --------------------
Company shall withhold as required by law all applicable taxes from any and all
payments under this Agreement. Consultant agrees to report on his personal tax
returns all amounts paid under this Agreement in a manner consistent with the
manner reported by the Company and consistent with this Agreement.
14. Assignability; Binding Nature.
- ----------------------------------
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or other wise) to all or
substantially all of the business or assets of the Company, by agreement in
form and substance satisfactory to the Consultant, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
This Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be deemed the
"Company" for the purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company. No obligations of the
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Consultant under this Agreement may be assigned or transferred by the
Consultant. This Agreement will inure to the benefit of and be enforceable by
Consultant's personal and legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
15. Representations.
- --------------------
(a) The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. The Consultant represents that he
knows of no agreement between him and any other person, firm or organization
that would be violated by the performance of his obligations under this
Agreement.
(b) Company represents and warrants that Consultant is and will be covered
under its directors and officers liability insurance for all periods during
which he was a director and/or officer.
16. No Other Payments or Claims.
- --------------------------------
Consultant acknowledges and agrees that there are no severance, compensation or
other payments owing to Consultant except as provided in this Agreement, his
retirement benefit under the Company retirement plan, his accrued but unpaid
salary, his unreimbursed business-related expenses, and his claims incurred but
unpaid as of the Effective Date under the Company's welfare benefit plans.
17. Termination of Severance and Employment Agreements.
- -------------------------------------------------------
Company and Consultant hereby acknowledge and agree that, except for Section 4
of the Employment Agreement (which provisions are incorporated herein and made
as part of this Agreement and shall continue in full force and effect following
the execution and delivery of this Agreement), the Employment Agreement and
Severance Agreement are terminated and shall be null and void as of the
Effective Date.
18. Entire Agreement.
- ---------------------
This Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the Parties with respect thereto.
19. Amendment or Waiver.
- ------------------------
No provision in this Agreement may be amended unless such amendment is agreed
to in writing and signed by the Consultant and an authorized officer of the
Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such
other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Consultant or an authorized officer of the Company,
as the case may be.
20. Severability.
- -----------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
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21. Survivorship.
- -----------------
The respective rights and obligations of the Parties hereunder shall survive
any termination of the Consultant's employment to the extent necessary to the
intended preservation of such rights and obligations.
22. Beneficiaries/References.
- -----------------------------
The Consultant shall be entitled, to the extent permitted under any applicable
law, to select and change a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following the Consultant's death by
giving the Company written notice thereof. In the event of the Consultant's
death or a judicial determination of his incompetence, reference in this
Agreement to the Consultant shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
23. Governing Law/Jurisdiction.
- -------------------------------
This Agreement shall be governed by and construed and interpreted in accordance
with the laws of the State of Illinois without reference to principles of
conflict of laws.
24. Resolution of Disputes.
- ---------------------------
Any disputes arising under or in connection with this Agreement shall, at the
election of the Consultant or the Company, be resolved by binding arbitration,
to be held in Chicago, Illinois in accordance with the rules and procedures of
the American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company.
25. Notices.
- ------------
Any notice given to a Party shall be in writing and shall be deemed to have
been given when delivered personally or delivered to the concerned Party at the
address indicated below or to such changed address as such Party may
subsequently give such notice of:
If to the Company: Outboard Marine Corporation
100 Sea Horse Drive
Waukegan, Illinois 60085
Attention:
with a copy to: Gary K. Duberstein
Greenway Partners
277 Park Avenue, 27th Floor
New York, New York 10172
If to the Consultant: Mr. Harry W. Bowman
155 Honeysuckle Road
Lake Forest, IL 60045
With a Copy to: Craig T. Boyd
Butler, Rubin, Saltarelli & Boyd
1800 Three First National Plaza
Chicago, IL 60602
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26. Headings.
- -------------
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. Counterparts.
- -----------------
This Agreement may be executed in two or more counterparts.
28. Absolute Company Obligation.
- --------------------------------
The obligation of the Company to make the payments provided for in this
Agreement and to provide the benefits provided for in this Agreement is
absolute and unconditional, and no event or circumstance, including, but not
limited to, the death or disability of Consultant and the actual or alleged
breach of this Agreement by Consultant, shall excuse or relieve Company from
making any such payment or providing any such benefit when due or give Company
the right to recover from Consultant any amount paid to him or benefits
provided to him.
29. Conditional Consultant Obligation.
- --------------------------------------
The obligations of Consultant under this Agreement are subject to and
conditioned upon Company making all payments provided for in this Agreement and
providing all benefits provided for in this Agreement, in each case when due,
and failure to make any such payment or provide any such benefit when due shall
excuse Consultant from performance of his obligations hereunder (without
relieving Company of any obligation hereunder), unless promptly remedied upon
demand.
30. Limit on Consultant Liability.
- ----------------------------------
Consultant's liability for damages in respect of any and all breaches of this
Agreement shall not exceed $25,000 in the aggregate for all such breaches.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
OUTBOARD MARINE CORPORATION
By: ALFRED D. KINGSLEY
------------------
Name: Alfred D. Kingsley
Title: Chairman of the Board
HARRY W. BOWMAN
---------------
Harry W. Bowman
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EXHIBIT 10 (J)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of the 6th day of October, 1997, is
made and entered into by Outboard Marine Corporation, a Delaware
corporation (the "Company"), and Andrew Hines (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 October 6, 1997 (the "Effective Date"), the Company shall employ
Executive as Executive Vice President and Chief Financial 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 by the first regularly
scheduled meeting of the Board of Directors of the Company (the "Board")
after the Effective Date. 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 Financial 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 or the Chief Executive Officer of the Company
(the "CEO"). Executive shall report directly to the Chief Executive
Officer of the Company. 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.
Executive shall be entitled to no more than 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); provided, that no more than ten (10) business days may be
taken at any one time and any vacation days that are not used by Executive
in any year shall not be added to the number of vacation days Executive is
entitled to in the succeeding calendar year. Executive shall also be
entitled to all paid holidays given by the Company to is executive
employees and shall be entitled to reasonable periods of absence, subject
to Section 9 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 through the third
anniversary of the Effective Date. The Term shall automatically renew for
an additional year on each date as of which the Term would expire unless
the Executive's employment is terminated sooner pursuant to the terms of
this Agreement or unless the Company gives notice of an intention not to
renew Executive's employment no later than three (3) months prior to the
expiration of the current Term.
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3. Base Salary.
- ----------------
The Company will pay Executive an annual salary in the amount of $325,000
("Base Salary"), payable according to the standard salary payment schedule
for executive level employees of the Company. Within six (6) months of the
Effective Date and as of each anniversary of the Effective Date thereafter,
the Base Salary shall be reviewed by the Board with a view to determining,
without being obligated to take any action, whether an increase thereof
would be appropriate, but in no event shall the Base Salary be subject to
downward adjustment; it being understood that any increase in the Base
Salary shall be in the sole discretion of the Board or any Compensation
Committee of the Board.
4. Incentive and Equity-based Compensation.
- --------------------------------------------
The Company shall permit Executive to participate in any and all of the
short-term and long-term incentive and 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 "Bonus") in which similarly situated senior
executives are permitted to participate and at a level comparable to the
level at which similarly situated senior executives are permitted to
participate; provided, however, that Executive shall only be entitled to
participate in a stock option or other equity or quasi-equity based Bonus
Plan (an "Equity Bonus Plan") if, and only if, the Chief Executive Officer
is participating in such Equity Bonus Plan, and, if so entitled to
participate in any such Equity Bonus Plan, the amount of grants, awards or
other items that Executive would be entitled to receive thereunder shall be
determined in good faith by the Board or the Compensation Committee (if
any) of the Board, provided that in no event will Executive's level of
participation in any such Equity Bonus Plan that he is entitled to
participate in exceed the level of participation therein of the Company's
Chief Executive Officer or be equal to or less than the level of
participation therein of any other officer of the Company. Executive's
participation in any Bonus Plan 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
participation of the Chief Executive Officer, including, without
limitation, established pursuant to or in accordance with the employment
agreement between the Company and the Chief Executive Officer, nor shall he
be entitled to participate in any plans, programs or arrangements
specifically 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 a change in control.
Executive shall have the option to receive stock options or restricted
stock awards in lieu of any cash Bonus that Executive is to be paid under
any Bonus Plan if, and only if, any other officer of the Company (other
than the Chief Executive Officer) has been offered the same option with
respect to any cash bonus such officer is to receive under such Bonus Plan.
5. Stock Purchase.
- -------------------
On the Effective Date, the Company shall provide Executive with an
opportunity to purchase up to 20,000 shares of common stock of the Company
("Shares") as follows:
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(a) On the Effective Date, Executive shall purchase 2,777.78 Shares for
an aggregate purchase price of $50,000, which amount shall be paid by wire
transfer of immediately available funds for a bank account designated in
writing by the Company.
(b) On or before the date that is six months after the Effective Date,
Executive shall purchase 5,555.56 Shares at a purchase price of $18.00 per
Share, which purchase price shall be paid by wire transfer or immediately
available funds to a bank account designate by the Company.
(c) The Company shall provide Executive with a loan of $210,000.00 for
the sole purpose of purchasing 11,666.66 Shares (the "Loan"). The Loan
shall be evidenced by a secured promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and shall be secured by a pledge
and security agreement ("Pledge Agreement") substantially in the form
attached hereto as Exhibit B.
6. Additional Stock Options.
- -----------------------------
The Company shall grant Executive a stock option to purchase 180,000 shares
of common stock of the Company at an exercise price of $18.00 per share.
Such option shall be granted to Executive pursuant to an Option Grant
Agreement substantially in the form attached hereto as Exhibit C. The
stock option shall vest as follows:
YEARS OF VESTING SERVICE % OF VESTED OPTION SHARES
------------------------ -------------------------
1 33 1/3 %
2 66 2/3 %
3 100 %
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. To the extent Executive dies during any such twelve-month
period, any unvested stock options granted under this Section 6 shall vest
prorata for the number of full months Executive was employed during such
twelve-month period in which his death occurs.
7. Relocation Expenses.
- ------------------------
The Company shall reimburse Executive until the earlier of the date he and
his wife permanently relocate to the metropolitan Chicago or the date which
is twelve (12) months following the Effective Date for (i) reasonable
rental fees for a temporary residence in the Chicago area, (ii) for all
utilities associated with a temporary residence in Chicago and (iii) for
round trip coach airfares between the New Jersey area and the Chicago area
for reasonable travel between such locations by Executive and his wife.
8. Sale of Residence.
- ----------------------
In the event Executive is unable to sell, after reasonable efforts, his
current New Jersey residence on or before the earlier of two (2) years
after the Effective Date or the date on which he purchases a residence in
the Chicago area, the Company shall obtain an appraisal (the "Appraisal")
of such New Jersey residence from a nationally recognized real estate firm
selected by the Company and shall advance to Executive the equity value of
his New Jersey residence, which equity value shall be the greater of the
Appraisal or $850,000 minus any outstanding mortgage balance (in either
case, the "Equity Value") and which will be secured by a second mortgage.
Executive represents and warrants to the Company that his cost-basis in
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such New Jersey residence is $850,000. Upon the advancement of the equity
value of the New Jersey residence to Executive, he shall grant the right to
sell the New Jersey residence to the Company which shall include the right
to advertise, contract with a broker, real estate agent or executive
relocation service, and negotiate the selling prices and terms of the New
Jersey residence. The Company shall assume all mortgage payment
obligations for the New Jersey residence and the Company shall be entitled
to any profits or gains and suffer any losses that result from a difference
between the Equity Value and the sale price of the New Jersey residence.
Executive shall execute any agreements, contracts or closing documents
associated with the sale of the New Jersey residence. In the event the
Company acquires the right to the New Jersey residence set forth in the
third Section of this Section 8, the Company shall pay for all closing
costs related to the sale of the New Jersey residence normally paid by a
seller in such a sale.
9. Termination of Employment.
- ------------------------------
Executive's employment with the Company hereunder may be terminated as
follows:
(a) by mutual agreement between Executive and Company;
(b) by the Company, upon the delivery to Executive of written notice;
for Cause (as defined below);
(c) by Executive for Good Reason (as defined below);
(d) by the Company, upon 30-days' prior written notice, without Cause;
or
(e) by the Company, upon the delivery to Executive of written notice,
Company by reason Total Disability (as defined below) of Executive.
This Agreement shall terminate automatically upon the death of Executive.
"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 death or Total
Disability) that is not connected (other than for reasons
beyond the control of Executive) for a period of five (5) business
days after receipt of written notice thereof from the Company;
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(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); or
(vi) willful or grossly negligent breach of any stated material
employment policy of the Company that is not corrected for a
period of five (5) business days after receipt written notice
thereof from the Company. 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.
"GOOD REASON" shall mean:
(i) Executive no longer reports to the Chief Executive Officer of
the Company;
(ii) Executive is not appointed or reappointed as a Director of the
Board of Directors of the Company for any reason other than
Cause; or
(iii) Executive's title or position or the scope of his duties is
modified with the result that his role as the Chief Financial
Officer of the Company is materially reduced without
Executive's written consent and that modification is not
corrected within 30 days after notice to the Company by
Executive of such fact; provided, however, that any additional
administrative duties added to Executive's responsibilities after
the Effective Date with Executive's consent shall not be taken
into account when referring to or applying this clause (iii).
"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.
10. Payments upon Termination.
- ------------------------------
(a) In the event the employment of Executive hereunder shall be
terminated by the Company for Cause, upon written notice by the Company to
Executive, or Executive shall voluntarily resign from employment other than
for Good Reason, upon written notice by Executive to the Company, the
Company shall pay Executive his Base Salary through such date of
termination and have no further obligation to Executive hereunder.
(b) In the event Executive's employment is terminated by the Company
without Cause, or Executive terminates his employment for Good Reason, upon
written notice by Executive to the Company, any remaining unvested stock
options granted by the Company to Executive shall automatically vest as of
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the date of termination and shall be exercisable for 90 days thereafter in
accordance with the terms of the stock option grant agreement pursuant to
which they were issued, and the Company shall pay to Executive on the date
of termination (i) his Base Salary prorated through the date of termination
of employment, plus any accrued vacation; and (ii) 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. In addition, the Company will
continue to permit Executive to participate in employee benefit plans,
programs or arrangements as set forth in Section 11 of this Agreement 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 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.
(c) In the event of the death of the Executive, the Company shall pay
to Executive's estate the Base Salary owed through the date of death and
any Bonus for the fiscal year in which his death occurs, prorated for the
number of full months Executive was employed during such fiscal year to the
extent the Board in good faith determines that the performance criteria, if
any, for any Bonus were satisfied as of the date of Executive's death. In
addition, Executive's estate shall have one (1) year from the date of
Executive's death to exercise all vested and unexercised stock options
granted to Executive in accordance with the stock option grant agreement
pursuant to which they were issued.
(d) In the event that the employment of Executive is terminated by
reason of Total Disability, upon written notice by Company to Executive,
the Company shall pay to Executive his Base Salary through the last day
upon which Total Disability will have been deemed to have occurred and any
such Bonus for the fiscal year in which his Total Disability occurs,
prorated for the number of full months Executive was employed during such
fiscal year to the extent the Board in good faith determines that the
performance criteria, if any, for any Bonus were satisfied as of the date
upon which Executive's Total Disability shall have been determined to have
occurred; provided, however, that the Company shall only be required to pay
such amounts to Executive that are not covered by long-term disability
payments if any, to Executive pursuant to any long-term disability
insurance policy or benefit plan of the Company. Any stock options that
have vested as of the date of such termination for Total Disability shall
be exercisable for 90 days after the date of such termination in accordance
with the stock option grant agreement pursuant to which such options were
issued. In addition, the Company will continue to permit Executive to
participate in employee benefit plans, programs or arrangements as set
forth in Section 11 of this Agreement 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.
(e) The Company shall use its best efforts to obtain stockholder
approval of the acceleration of vesting of any stock options upon Executive
termination of employment without Cause or for Good Reason within 90 days
after the Effective Date, and Executive acknowledges and agrees that such
acceleration 90 days after the Effective Date shall not be effective unless
such stockholder approval is obtained.
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11. Benefits.
- --------------
Executive shall be entitled to participate in or receive benefits under any
employee benefit plan, program or arrangement made available by the Company
to similarly situated senior executives generally of the Company, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans, programs or arrangements. Except for any
salary deferral elected by Executive in his sole discretion, 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. 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 thereto) to the maximum extent of the coverage available for
any director or officer 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").
(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, 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
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Repurchased 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 5 and 10 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 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
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 stock options granted to
Executive, subject to the expiration or termination or other terms of such
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Common Stock and stock options upon the occurrence of a Put Event in
accordance with, subject to Sections 5 and 10 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 hereunder as a result
of his death.
In the event that a Put Event occurs as a result of the specified in clause
(vi) above, the rights and obligations of Executive under this Section 13 shall
be deemed to 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, 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).
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(d) Subject to Section 5 and 10 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
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
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<PAGE> 104
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 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 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.
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<PAGE> 105
(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 by the Seller or the
Section 15 Seller under Section 14 or Section 15 hereof, as the case may
be.
(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 Greenmarine Holdings LLC (hereinafter for purposes of this
Section 15, the "Section 15 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 Section 15 Seller to any person or entity (such
person or entity being hereinafter referred to as, the "Section 15
Purchaser"), other than to a Permitted Transferee, the Section 15 Seller
shall have the irrevocable and exclusive right, but not the obligation (the
"Take-Along Right"), to require Executive to sell to the Section 15
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
the numerator of which is the number of shares of Common Stock to be sold
in such proposed Transfer by the Section 15 Seller and the denominator of
which is the total number of shares beneficially owned by the Section 15
Seller (collectively, the "Take-Along Shares"). The Section 15 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 Section 16 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 Section 15 Purchaser's
offer;
(ii) the number of shares of Common Stock proposed to be Transferred
by the Section 15 Seller; and
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<PAGE> 106
(iii) that the Section 15 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 Section 15 Seller such
assignments, certificates and other documentation with respect to the as
the Section 15 Seller and the Section 15 Purchaser shall reasonably
request. In the event Executive shall fail to deliver such certificates or
such other documents to the Section 15 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 Section 15
Purchaser upon surrender of such shares for Transfer by Executive.
(c) The Section 15 Seller shall arrange for payment directly by the
Section 15 Purchaser to Executive, upon delivery of an appropriate
assignment in form and substance reasonably satisfactory to the Section 15
Purchaser, which assignment shall be made free and clear of all liens,
claims and encumbrances except as otherwise agreed to by such Section 15
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 Section 15
Seller and the sale of the Take-Along Shares have not been completed in
accordance with the proposed terms, then the Section 15 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 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 $12,000. If Executive commences a cause of
action in accordance with Section 24 hereof to enforce any provision of or
resolve any dispute arising under this Agreement, Company shall reimburse
Executive for reasonable costs incurred (including reasonable attorney's
fees) 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,
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<PAGE> 107
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.
(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
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<PAGE> 108
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 19 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(b)
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 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
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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. Amendment.
- ---------------
This Agreement may not be altered, modified or amended except by
written instrument signed by each of the Company and Executive.
24. 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) (i) 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 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.
(ii) 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.
(iii) Any action to compel arbitration hereunder shall be brought in
the State Court of Illinois sitting in Cook County, Illinois.
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25. 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.
26. 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.
27. 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.
28. 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 his
current or any former employer.
29. 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: Chief Executive Officer
With a copy to:
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: Andrew Hines
20 Saddle River Road
Far Hills, NJ 07931
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<PAGE> 111
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.
30. 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.
31. 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.
32. Survival of Provisions.
- ---------------------------
The provisions of Sections 10, 12, 13, 16, 18, 19, 20 and 24 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
ANDREW HINES
------------
Andrew Hines
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<PAGE> 112
EXHIBIT 10 (K)
NationsBank
NationsBank of Texas, N.A.
_______________________________________________________________________________
FINANCING AND SECURITY AGREEMENT
among
NATIONSBANK OF TEXAS, N.A.
and
OUTBOARD MARINE CORPORATION
as "Borrower"
and
OMC ALUMINUM BOAT GROUP, INC.
OMC FISHING BOAT GROUP, INC.
OMC LATIN AMERICA/CARIBBEAN, INC.
and
RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP,
as "Affiliate Guarantors"
Dated effective as of November 12, 1997
NationsBank
NationsBank of Texas, N.A.
- -------------------------------------------------------------------------------
FINANCING AND SECURITY AGREEMENT
This Financing and Security Agreement dated effective as of November 12,
1997 is entered into among OUTBOARD MARINE CORPORATION, a corporation organized
under the laws of the State of Delaware ("Borrower"), OMC ALUMINUM BOAT GROUP,
INC., a corporation organized under the laws of the State of Delaware ("ABG"),
OMC FISHING BOAT GROUP, INC., a corporation organized under the laws of the
State of Delaware ("FBG"), OMC LATIN AMERICA/CARIBBEAN, INC., a corporation
organized under the laws of the State of Delaware ("LAC"), and RECREATIONAL
BOAT GROUP LIMITED PARTNERSHIP, a limited partnership organized under the laws
of the State of Delaware ("RBG"), and NATIONSBANK OF TEXAS, N.A., a national
banking association ("Lender"), as follows: Borrower and Lender desire to
enter into certain financing arrangements according to the terms and provisions
set forth hereinbelow. Therefore, for and in consideration of Ten Dollars
($10.00) and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, together with the mutual benefits provided herein,
Borrower and Lender hereby agree as follows:
ARTICLE I. DEFINITIONS
The following definitions shall apply throughout this Agreement:
1.1 "ABG" means ALUMINUM BOAT GROUP, INC., a corporation organized under
the laws of the State of Delaware, with its chief executive office located
at 100 Sea-Horse Drive, Waukegan, Illinois 60085, and whose tax
identification number is 36-3695740.
1.2 "Account Debtor" means a Person who is obligated on a Receivable.
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<PAGE> 113
1.3 "Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by Lender to be equal to
the quotient obtained by dividing (a) the Eurodollar Rate for such
Eurodollar Loan for such Interest Period by (b) one (1) minus the
Eurodollar Reserve Requirement for such Eurodollar Loan for such Interest
Period. Determination of the Adjusted Eurodollar Rate shall be made by
Lender in its discretion and shall be binding and conclusive in the absence
of manifest error.
1.4 "Affiliate" means, with respect to any Person, (a) any partner,
officer, shareholder (if holding more than ten percent (10.0%) of the
outstanding Capital Stock of such Person), director, employee or managing
agent of such Person, (b) any other Person (other than a Subsidiary) that,
(i) directly or indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with, such Person, (ii)
directly or indirectly beneficially owns or holds ten percent (10.0%) or
more of any class of Voting Stock of such Person or any Subsidiary of such
Person, or (iii) ten percent (10.0%) or more of the Voting Stock of which
is directly or indirectly beneficially owned or held by such Person or a
Subsidiary of such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
Voting Stock, by contract or otherwise.
1.5 "Affiliate Guarantor" means each of ABG, FBG, LAC and RBG.
1.6 "Affiliate Subordination Agreements" means the subordination agreements
respecting officers, directors, shareholders or Affiliates of Borrower as
prescribed by paragraph 7.16.
1.7 "Agreement" means and includes this Financing and Security Agreement
and all exhibits, schedules, addenda and other attachments hereto, and any
renewal, extension, amendment, modification, restatement or supplement
hereof.
1.8 "Borrower" means OUTBOARD MARINE CORPORATION, a corporation organized
under the laws of the State of Delaware, with its chief executive office
located at 100 Sea-Horse Drive, Waukegan, Illinois 60085, and whose tax
identification number is 36-1589715.
1.9 "Borrowing Base" at any time means an amount equal to the sum of (a) up
to a maximum of eighty-five percent (85.0%) of the net amount of Eligible
Accounts, plus (b) up to a maximum of sixty percent (60.0%) of the net
amount of Eligible Inventory, minus (c) the Reserve.
1.10 "Business Day" means (a) any calendar day other than Saturday, Sunday
or other day on which banks in Dallas, Texas are authorized to close, and
(b) with respect to any Eurodollar Loan, any day which is a Business Day
described in clause (a) above and which is also a day on which dealings in
Dollar deposits are carried out in the London interbank Eurodollar market.
1.11 "Capital Stock" means corporate stock and any and all shares,
partnership interests, membership interests, equity interests, rights,
securities or other equivalent evidences of ownership (however designated)
issued by any entity (whether a corporation, partnership, limited liability
company, limited partnership or other type of entity).
1.12 "Capitalized Lease" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
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<PAGE> 114
1.13 "Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in
accordance with GAAP.
1.14 "Code" means the Uniform Commercial Code in effect in the State of
Texas.
1.15 "Collateral" means and includes all of Borrower's or any Affiliate
Guarantor's right, title and interest in and to each of the following,
wherever located and whether now or hereafter existing or now owned or
hereafter acquired or arising: (a) all Receivables; (b) all Inventory; (c)
all Contract Rights; (d) all General Intangibles; (e) all mortgages, deeds
to secure debt and deeds of trust on real or personal property, guaranties,
leases, security agreements and other agreements and property which secure
or relate to any Receivable or other Collateral, or are acquired for the
purpose of securing and enforcing any item thereof; (f) all documents of
title, policies and certificates of insurance, securities, chattel paper
and other documents and instruments evidencing or pertaining to any and all
items of Collateral; (g) all files, correspondence, computer programs,
tapes, discs and related data processing software which contain information
identifying or pertaining to any of the Receivables or any Account Debtor,
or showing the amounts thereof or payments thereon or otherwise necessary
or helpful in the realization thereon or the collection thereof; (h) all
cash deposited with Lender or any Affiliate of Lender, or which Lender or
any such Affiliate, is entitled to retain or otherwise possess as
collateral pursuant to the provisions of this Agreement or any of the
Security Documents; and (i) any and all products and proceeds of the
foregoing (including, but not limited to, any claim to any item referred to
in this definition, and any claim against any third party for loss of,
damage to or destruction of any or all of, the Collateral or for proceeds
payable under, or unearned premiums with respect to, policies of insurance)
in whatever form, including, but not limited to, cash, negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements and other documents.
1.16 "Collateral Report" means a Collateral Report prescribed by paragraph
4.6.
1.17 "Contract Rate" means, on any day, a floating annual rate of interest
calculated on the basis of actual days elapsed but computed as if each year
consists of 360 days, equal to the sum of the Prime Rate effective as of
the first day of the calendar month in which such day falls plus one and
one-half per cent (1.50%) per annum. Upon written notification to Borrower
at any time when any Event of Default exists, the Contract Rate otherwise
applicable hereunder shall automatically increase by an additional five
percent (5.0%) per annum, beginning on the effective date specified in such
written notice (which shall be on or after the date on which any such Event
of Default shall have first occurred) and continuing thereafter for so long
as any such Event of Default remains uncured or until Lender may agree
otherwise.
1.18 "Contract Rights" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper, whether
now existing or hereafter arising, to the extent that such rights may be
lawfully assigned.
1.19 "Contract Term" means the period beginning on the effective date
specified in the introductory paragraph of this Agreement and continuing
through February 12, 1998.
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1.20 "Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of Borrower's or any Affiliate Guarantor's right,
title and interest in and to the following: (a) all copyrights, rights and
interests in copyrights, works protectable by copyright, copyright
registrations and copyright applications; (b) all renewals of any of the
foregoing; (c) all income, royalties, damages and payments now or hereafter
due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of
the foregoing; (d) the right to sue for past, present and future
infringements of any of the foregoing; and (e) all rights corresponding to
any of the foregoing throughout the world.
1.21 "Credit Limit" means the amount of Fifty Million Dollars
($50,000,000).
1.22 "Dollar" and "$" each means freely transferable United States dollars.
1.23 "ERISA" means the Employee Retirement Income Security Act of 1974 (as
amended), as in effect from time to time, any regulation promulgated
thereunder and any successor statute.
1.24 "Eligible Accounts" means the net amount of the Borrower's gross
domestic Receivables which are reasonably acceptable to Lender for purposes
of determining the Borrowing Base and meet all criteria for inclusion in
the Borrowing Base as determined and established by Lender from time to
time in its reasonable discretion. Lender at all times reserves the right
in its reasonable discretion to exclude Receivables from the Borrowing Base
or establish additional or different criteria for determining Eligible
Accounts, without prior notice.
1.25 "Eligible Inventory" means all of Borrower's Inventory located within
the United States, determined according to GAAP on a first-in-first-out
basis, that is reasonably acceptable to Lender in its discretion for
purposes of determining the Borrowing Base and meets all criteria for
inclusion in the Borrowing Base as determined and established by Lender
from time to time in its reasonable discretion. Lender at all times
reserves the right in its sole discretion to exclude Inventory from the
Borrowing Base or establish additional or different criteria for
determining Eligible Inventory, without prior notice.
1.26 "Eurodollar Fixed Rate" means the Adjusted Eurodollar Rate plus three
percent (3.0%) per annum. Upon written notification to Borrower at any
time when any Event of Default exists, the Eurodollar Fixed Rate otherwise
applicable hereunder shall automatically increase by an additional five
percent (5.0%) per annum, beginning on the effective date specified in such
written notice (which shall be on or after the date on which any such Event
of Default shall have first occurred) and continuing thereafter for so long
as any such Event of Default remains uncured or until Lender may agree
otherwise.
1.27 "Eurodollar Loan" means any portion of the Revolving Facility the
principal amount of which is subject to a Eurodollar Rate Option designated
as provided by paragraph 2.2.2, provided that no Eurodollar Loan may exist
for any principal amount less than $1,000,000 or an integral multiple of
$250,000 in excess thereof.
1.28 "Eurodollar Business Day" means a Business Day on which dealings in
Dollars are carried out in the London interbank Eurodollar market.
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1.29 "Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the
term "Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two (2) Eurodollar Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
1.30 "Eurodollar Rate Option" means any election by Borrower, in accordance
with paragraph 2.2.2, to have any Eurodollar Loan bear interest at the
Eurodollar Fixed Rate.
1.31 "Eurodollar Reserve Requirement" means, at any time, the maximum rate
at which reserves (including, without limitation, any marginal, special,
supplemental or emergency reserves) are required to be maintained under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) by member banks of the Federal
Reserve System against, in the case of Eurodollar Loans, "Eurocurrency
liabilities" (as such term is used in Regulation D as promulgated by such
Board of Governors). Without limiting the effect of the foregoing, the
Eurodollar Reserve Requirement shall reflect any other reserves required to
be maintained by such member banks with respect to (i) any category of
liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Loans. The Adjusted
Eurodollar Rate shall be adjusted automatically on and as of the effective
date of any change in the Eurodollar Reserve Requirement.
1.32 "Event of Default" shall have the meaning set forth in paragraph 8.1.
1.33 "FBG" means FISHING BOAT GROUP, INC., a corporation organized under
the laws of the State of Delaware, with its chief executive office located
at 100 Sea-Horse Drive, Waukegan, Illinois 60085, and whose tax
identification number is 36-3516449.
1.34 "GAAP" means generally accepted accounting principles (existing as of
the effective date of this Agreement as promulgated by opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements of the Financial Accounting Standards Board)
consistently applied and maintained throughout the period indicated and,
when used with reference to Borrower or any Subsidiary of Borrower,
consistent with the prior financial practice of Borrower or such
Subsidiary, as reflected on the financial statements referred to in
paragraph 6.8.
1.35 "GP" means OMC Recreational Boat Group, Inc., a corporation organized
under the laws of the State of Delaware, the general partner of RBG, with
its chief executive office located at 100 Sea-Horse Drive, Waukegan,
Illinois 60085, and whose tax identification number is 36-3918531.
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1.36 "General Intangibles" means all of Borrower's or any Affiliate
Guarantors' now owned or hereafter acquired general intangibles, choses in
action and causes of action and all other intangible personal property of
Borrower or any Affiliate Guarantor of every kind and nature (other than
Receivables), including, without limitation, all Proprietary Rights,
corporate or other business records, inventions, designs, blueprints,
plans, specifications, goodwill, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, rights and claims
against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any
similar type of insurance and any proceeds thereof relating to the
Collateral, and any letter of credit, guarantee, claim, security interest
or other security held by or granted to Borrower or any Affiliate Guarantor
to secure payment by an Account Debtor of any of the Receivables.
1.37 "Governmental Authority" means any nation or government, any federal,
state, county, municipal, parish, provincial or other political subdivision
thereof and any department, commission, board, court, agency or other
instrumentality or entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
1.38 "Guaranty", "Guaranteed" or to "Guarantee" as applied to any
obligation of another Person shall mean and include: (a) any guaranty
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), directly or indirectly, in any manner, of any
part or all of such obligation of such other Person; and (b) any agreement,
direct or indirect, contingent or otherwise, and whether or not
constituting a guaranty, the practical effect of which is to assure the
payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation of such other Person
whether by (i) the purchase of securities or obligations, (ii) the
purchase, sale or lease (as lessee or lessor) of property or the purchase
or sale of services primarily for the purpose of enabling the obligor with
respect to such obligation to make any payment or performance (or payment
of damages in the event of nonperformance) of or on account of any part or
all of such obligation, or to assure the owner of such obligation against
loss, (iii) the supplying of funds to or in any other manner investing in
the obligor with respect to such obligation, (iv) repayment of amounts
drawn down by beneficiaries of letters of credit, or (v) the supplying of
funds to or investing in a Person on account of all or any part of such
Person's obligation under a Guaranty of any obligation or indemnifying or
holding harmless, in any way, such Person against any part or all of such
obligation.
1.39 "Guaranty Agreement" means a guaranty agreement executed and delivered
by an Affiliate Guarantor for the benefit of Lender, as referenced in
paragraph 4.7.
1.40 "Indebtedness" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following: (a) all obligations for Money Borrowed or for
the deferred purchase price of property or services; (b) all obligations
(including, during the noncancellable term of any lease in the nature of a
title retention agreement, all future payment obligations under such lease
discounted to their present value in accordance with GAAP) secured by any
Lien to which any property or asset owned or held by such Person is
subject, whether or not the obligation secured thereby shall have been
assumed by such Person; (c) all obligations of other Persons which such
Person has Guaranteed, including, but not limited to, all obligations of
such Person consisting of recourse liability with respect to accounts
receivable sold or otherwise disposed of by such Person; (d) all
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obligations of such Person in respect of Interest Rate Protection
Agreements; and (e) in the case of Borrower (without duplication) all
obligations under the Revolving Note.
1.41 "Indemnified Claims" means any and all claims, demands, actions,
causes of action, judgments, obligations, liabilities, losses, damages and
consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including, without limitation, fees and expenses of
attorneys and other professional consultants and experts in connection with
investigation or defense) of every kind, known or unknown, existing or
hereafter arising, foreseeable or unforeseeable, which may be imposed upon,
threatened or asserted against, or incurred or paid by, any Indemnified
Person at any time and from time to time, because of, resulting from, in
connection with, or arising out of any transaction, act, omission, event or
circumstance in any way connected with the Collateral or the Loan Documents
(including enforcement of Lender's rights thereunder or defense of Lender's
actions thereunder), including, but not limited to, economic loss, property
damage, personal injury or death in connection with, or occurring on or in
the vicinity of, any Collateral through any cause whatsoever, any act
performed or omitted to be performed under any Loan Documents, any breach
by Borrower or any Affiliate Guarantor of any representation, warranty,
covenant, agreement or condition contained in any Loan Documents or any
Event of Default as defined in this Agreement. "Indemnified Claims" does
not include any claims arising from the gross negligence or intentional
misconduct of Lender.
1.42 "Indemnified Persons" collectively means Lender and its officers,
directors, shareholders, employees, agents, attorneys and representatives,
and any Person owned or controlled by, or which owns or controls or is
under common control or is otherwise affiliated with, Lender, and any other
Person, if any, who acquires a portion of the Collateral in any manner
through Lender's exercise of rights and remedies under the Loan Documents.
1.43 "Interest Period" means the period beginning on the day any Eurodollar
Loan is made and ending one (1) or two (2) months thereafter (as Borrower
may select); provided, however: (a) if any Interest Period would otherwise
end on a day which is not a Eurodollar Business Day, such Interest Period
shall be extended to the next succeeding Eurodollar Business Day, unless
the result of such extension would be to extend such Interest Period into
another calendar month, in which event such Interest Period shall end on
the immediately preceding Eurodollar Business Day; and (b) any Interest
Period with respect to a Eurodollar Loan that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and (c) no Interest Period may end on a day which is after
the expiration of the Contract Term.
1.44 "Interest Rate Protection Agreement" means an interest rate swap, cap
or collar agreement or similar arrangement between a Person and a financial
institution providing for the transfer or mitigation of interest risks
either generally or under specific contingencies.
1.45 "Inventory" means all inventory of Borrower or any Affiliate Guarantor
and shall include, without limitation: (a) all goods held or intended for
sale or lease, or for display or demonstration, including, without
limitation, all engines, motors, boats, marine products and accessories and
other products intended for sale by Borrower or any Affiliate Guarantor to
its customers; (b) all work-in-process; (c) all raw materials and other
materials and supplies of every nature and description used or which might
be used in connection with the manufacture, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed
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in Borrower's or any Affiliate Guarantor's business; and (d) all documents
evidencing and general intangibles relating to any of the foregoing.
1.46 "LAC" means OMC LATIN AMERICA/CARIBBEAN, INC., a corporation organized
under the laws of the State of Delaware, with its chief executive office
located at 100 Sea-Horse Drive, Waukegan, Illinois 60085, and whose tax
identification number is 36-24366154.
1.47 "Landlords Waiver" means an agreement in form and substance
satisfactory to Lender pursuant to which the landlord of any leased
location where any Collateral is located (if any) shall waive its rights,
if any, to the Collateral and allow Lender to enter upon the premises to
inspect, remove or dispose of the Collateral.
1.48 "Lender" means NATIONSBANK OF TEXAS, N.A., a national bank, whose
principal place of business is located at NationsBank Plaza, 901 Main
Street, Dallas, Texas 75202. When used throughout this Agreement, the term
"Lender" shall also include Lender's successors and assigns, including
specifically any party to whom Lender, or its successors or assigns, may
assign its rights and interests under this Agreement.
1.49 "Liabilities" means, with respect to any Person, all items (excluding
Capital Stock, additional paid-in capital, retained earnings and general
contingency items and deferred tax reserves) which in accordance with GAAP
would be included in determining total liabilities as shown on a balance
sheet of such Person as at the date for which Liabilities are to be
determined.
1.50 "Lien" as applied to the property of any Person means: (a) any
security interest, mortgage, deed to secure debt, deed of trust, lien,
pledge, charge, lease constituting a Capitalized Lease Obligation,
conditional sale or other title retention agreement, or other security
interest, security title or encumbrance of any kind in respect of any
property of such Person, or upon the income or profits therefrom; (b) any
arrangement, express or implied, under which any property of such Person is
transferred, sequestered or otherwise identified for the purpose of
subjecting the same to the payment of Indebtedness or performance of any
other obligation in priority to the payment of the general, unsecured
creditors of such Person; (c) any Indebtedness which is unpaid more than
thirty (30) days after the same shall have become due and payable and which
if unpaid shall by law (including, but not limited to, bankruptcy and
insolvency laws), or otherwise, be given any priority whatsoever over the
claims of general unsecured creditors of such Person; and (d) the filing
of, or any agreement to give, any financing statement under the Code, or
its equivalent, in any jurisdiction, excluding informational financing
statements relating to property leased by Borrower or an Affiliate
Guarantor, or related to any refinancing thereof.
1.51 "Loan Documents" means this Agreement, the Revolving Note, each
Guaranty Agreement and any other documents or agreements executed in
connection therewith, and also includes any and all renewals, extensions,
modifications or amendments of any of the foregoing executed by Borrower or
any Affiliate Guarantor in connection herewith.
1.52 "Material Adverse Effect" means (i) a materially adverse effect on the
business, assets, operations, prospects or condition, financial or
otherwise, of Borrower, or Borrower and any Affiliate Guarantor (taken as a
whole), or (ii) material impairment of the ability of Borrower, or Borrower
and any Affiliate Guarantor (taken as a whole), to perform any obligations
under the Loan Documents.
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1.53 "Maximum Rate" means the greater of (i) the "weekly ceiling" as
referred to and in effect from time to time under the provisions of Tex.
Rev. Civ. Stat. Ann. art. 5069, as amended, or (ii) the maximum rate
of interest permitted from day to day by any other applicable state or
federal law.
1.54 "Money Borrowed" means, as applied to Indebtedness: (a) Indebtedness
for money borrowed; (b) Indebtedness, whether or not in any such case the
same was for money borrowed, (i) represented by notes payable, and drafts
accepted, that represent extensions of credit, (ii) constituting
obligations evidenced by bonds, debentures, notes or similar instruments,
or (iii) upon which interest charges are customarily paid or that was
issued or assumed as full or partial payment for property (other than trade
credit that is incurred in the ordinary course of business); (c)
Indebtedness that constitutes a Capitalized Lease Obligation, and (d)
Indebtedness that is such by virtue of clause (c) of the definition
thereof, but only to the extent that the obligations Guaranteed are
obligations that would constitute Indebtedness for money borrowed.
1.55 "Obligations" means: (i) all obligations and indebtedness now or
hereafter owing by Borrower under this Agreement, or otherwise arising in
connection with this Agreement or any of the other Loan Documents,
including, without limitation, all loan repayment obligations, accrued
interest and fees, costs and expenses as provided by this Agreement or any
of the other Loan Documents, and any other amounts from time to time owing
by Borrower or an Affiliate Guarantor to Lender in connection therewith;
(ii) any and all other indebtedness and obligations of every kind and
character now or hereafter owing by Borrower or an Affiliate Guarantor to
Lender, whether direct or indirect, primary or secondary, joint, several,
or joint and several, fixed or contingent, including indebtedness and
obligations, if any, which may be assigned to or acquired by Lender; and
(iii) any and all renewals and extensions of the foregoing, or any part
thereof.
1.56 "Patents" means and includes, in each case whether now existing or
hereafter arising, all of Borrower's or any Affiliate Guarantor's right,
title and interest in and to: (a) any and all patents and patent
applications; (b) all inventions and improvements described and claimed
therein; (c) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part thereof; (d) all income, royalties, damages,
claims and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past and future infringements thereof; (e) all rights to sue for past,
present and future infringements thereof; and (f) all rights corresponding
to any of the foregoing throughout the world.
1.57 "Person" means any individual, corporation, limited liability company,
joint venture, general or limited partnership, association, trust,
unincorporated organization or Governmental Authority, or other similar
entity.
1.58 "Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which Borrower or any Related Company is, or within the
immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
1.59 "Prime Rate" means the per annum rate of interest established from
time to time by Lender as its "prime rate," which rate may not be the
lowest or most favorable interest rate at any time charged by Lender to its
customers.
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1.60 "Proprietary Rights" means all of Borrower's or any Affiliate
Guarantor's now owned and hereafter arising or acquired: Patents,
Copyrights, Trademarks, including, without limitation, those Proprietary
Rights set forth on Schedule 1.60 hereto, and all other rights under any of
the foregoing, all extensions, renewals, reissues, divisions, continuations
and continuations-in-part of any of the foregoing, and all rights to sue
for past, present and future infringement of any of the foregoing.
1.61 "RBG" means RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP, a limited
partnership formed under the laws of the State of Delaware, with its chief
executive office located at 100 Sea-Horse Drive, Waukegan, Illinois 60085,
and whose tax identification number is 36-3925608.
1.62 "Receivables" means and includes: (a) any and all rights to the
payment of money or other forms of consideration of any kind (whether
classified under the Code as accounts, contract rights, chattel paper,
general intangibles or otherwise) including, but not limited to, accounts
receivable, letters of credit and the right to receive payment thereunder,
chattel paper, tax refunds, insurance proceeds, Contract Rights, notes,
drafts, instruments, documents, acceptances and all other debts,
obligations and liabilities in whatever form from any Person; (b) all
guarantees, security and Liens for payment of any Receivables listed in
clause (a); (c) all goods, whether now owned or hereafter acquired, and
whether sold, delivered, undelivered, in transit or returned, which may be
represented by, or the sale or lease of which may have given rise to, any
such right to payment or other debt, obligation or liability; and (d) all
proceeds of any of the foregoing.
1.63 "Related Company" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b)
of the Internal Revenue Code) as Borrower or any of its Subsidiaries, (ii)
partnership or other trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the Internal
Revenue Code) with Borrower or any of its Subsidiaries, or (iii) member of
the same affiliated service group (within the meaning of Section 414(m) of
the Internal Revenue Code) as Borrower or any of its Subsidiaries, any
corporation described in clause (i) above or any partnership, trade or
business described in clause (ii) above.
1.64 "Reserve" at any time means an amount from time to time established by
Lender in its discretion, pursuant to paragraph 2.6, as a reserve in
reduction of the Borrowing Base in respect of costs, expenses, liens,
claims, contingencies or other potential factors which, in the event they
should occur, could adversely affect or otherwise reduce the anticipated
amount of timely collections in payment of Eligible Accounts or the
anticipated amount of proceeds which could be realized upon liquidation of
Eligible Inventory or any other Collateral. The "Reserve," if any from
time to time, does not represent cash funds.
1.65 "Revolving Facility" means the revolving credit facility established
by this Agreement pursuant to Article II.
1.66 "Revolving Note" means the Master Revolving Promissory Note executed
by Borrower payable to the order of Lender evidencing loans under the
Revolving Facility, as provided in paragraph 2.1 and in form satisfactory
to Lender, and includes any and all renewals, extensions, amendments or
modifications thereof.
1.67 "Security Documents" means each of the following: (a) the financing
statements executed by Borrower or an Affiliate Guarantor in favor of
Lender pursuant to the terms of this Agreement; (b) the Patent Security
Agreement and the Trademark Security Agreement executed by Borrower and
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delivered to Lender pursuant to paragraph 5.1(m) hereof; (c) each Guaranty
Agreement; and (d) each other writing executed and delivered by Borrower or
any other Person securing or Guaranteeing the Obligations.
1.68 "Subordinated Debt" means all Indebtedness which by its terms is
subordinate in right of payment and claim in favor of Lender pursuant to an
Affiliate Subordination Agreement or any other written subordination
agreement satisfactory to Lender, provided that the purpose, terms
(including, without limitation, the amount, applicable interest rate,
payment provisions and term) and subordination arrangements pertaining to
any such Indebtedness shall be satisfactory to Lender in its discretion.
1.69 "Subsidiary" shall (a) when used to determine the relationship of a
Person to another Person, mean a Person of which an aggregate of fifty
percent (50%) or more of the Capital Stock is owned of record or
beneficially by such other Person, or by one or more Subsidiaries of such
other Person, or by such other Person and one or more Subsidiaries of such
Person, (i) if the holders of such Capital Stock (A) are ordinarily, in the
absence of contingencies, entitled to vote for the election of a majority
of the directors (or other individuals performing similar functions) of
such Person, even though the right so to vote has been suspended by the
happening of such a contingency, or (B) are entitled, as such holders, to
vote for the election of a majority of the directors (or individuals
performing similar functions) of such Person, whether or not the right so
to vote exists by reason of the happening of a contingency, or (ii) in the
case of Capital Stock which is not issued by a corporation, if such
ownership interests constitute a majority voting interest, and (b) when
used with respect to a Plan, ERISA or a provision of the Internal Revenue
Code pertaining to employee benefit plans, also means any corporation,
trade or business (whether or not incorporated) which is under common
control with Borrower or any of its Subsidiaries determined pursuant to
clause (a) preceding and is treated as a single employer with Borrower or
such Subsidiary under Section 414(b) or (c) of the Internal Revenue Code
and the regulations thereunder.
1.70 "Trademarks" means and includes in each case whether now existing or
hereafter arising, all of Borrower's or any Affiliate Guarantor's right,
title and interest in and to the following: (a) all trademarks (including
service marks), trade names and trade styles and the registrations and
applications for registration thereof and the goodwill of the business
symbolized by such trademarks; (b) all licenses of the foregoing, whether
as licensee or licensor; (c) all renewals of the foregoing; (d) all income,
royalties, damages and payments now or hereafter due and/or payable with
respect thereto, including, without limitation, damages, claims and
payments for past and future infringements thereof; (e) all rights to sue
for past, present and future infringements of the foregoing, including the
right to settle suits involving claims and demands for royalties owing; and
(f) all rights corresponding to any of the foregoing throughout the world.
1.71 "Voting Stock" means sufficient shares of Capital Stock of a Person
(however designated) having ordinary voting power for the election of a
majority of the members of its board of directors or other individuals
performing similar functions (not including shares having such power only
in the event of a contingency).
General terms. Unless expressly provided otherwise, any term which is
defined by the Code shall have the same meaning, wherever used in this
Agreement, as is prescribed by the Code.
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ARTICLE II. REVOLVING CREDIT FACILITY
2.1 Loans. Subject to and on the terms and conditions provided in this
Agreement, Lender hereby approves a revolving credit facility for loans to
Borrower, secured by the Collateral, in an amount up to (i) the lesser of
the Borrowing Base or the Credit Limit, less (ii) the aggregate principal
balance owing by Borrower under the Revolving Facility. All requests for
loans shall be evaluated by Lender and the determination of funding such
requests, or declining same, shall at all times remain in Lender's sole
discretion. Loans from time to time made by Lender to Borrower under the
Revolving Facility, and all accrued interest thereon, shall be payable as
provided in this Agreement and additionally evidenced by the Revolving
Note.
2.2 Interest. The unpaid principal from day to day outstanding under the
Revolving Facility shall bear interest as follows:
2.2.1 Applicable Rate.
(a) Subject to any election by Borrower in respect of the Eurodollar
Fixed Rate under paragraph 2.2.1(b), the unpaid principal from day
to day outstanding under the Revolving Facility shall bear
interest at the lesser of (i) the Contract Rate or (ii) the
Maximum Rate, provided, however that, subject to the provisions of
paragraph 10.9, in the event that the Contract Rate shall exceed
the Maximum Rate at any time and thereafter the Contract Rate
shall be less than the Maximum Rate, the rate of interest
applicable hereunder shall remain at the Maximum Rate until the
aggregate accrued interest to date under the Revolving Facility
equals the amount that would have accrued had the Contract Rate at
all times remained in effect.
(b) Subject to limitation by the Maximum Rate and the terms and
provisions of this Agreement, and in lieu of the rate otherwise
applicable under paragraph 2.2.1(a), Borrower shall have the
option to elect the Eurodollar Fixed Rate as being applicable
during any Interest Period to any Eurodollar Loan under the
Revolving Facility, provided, that any such Eurodollar Loan shall
be in the minimum amount of $1,000,000, and no more than two (2)
separate Eurodollar Loans may exist in the aggregate at any one
time.
(c) All past due principal and all past due accrued interest under the
Revolving Facility shall accrue interest at the Maximum Rate.
2.2.2 Election of Eurodollar Rate Option. Borrower may elect a Eurodollar
Rate Option at any time by written notice of election, in form satisfactory
to Lender, delivered to Lender no later than four (4) Eurodollar Business
Days prior to the beginning of the Interest Period to which such Eurodollar
Rate Option shall be applicable, therein stating (i) the Eurodollar Rate
Option elected, (ii) the Interest Period selected, and the date such
Interest Period is to begin, and (iii) the principal amount of the
Eurodollar Loan to be subject to such Eurodollar Rate Option (which shall
be at least $1,000,000). Any such written notice of election shall be
irrevocable by Borrower. Any unpaid principal under the Revolving Facility
with respect to which no election of a Eurodollar Rate Option is made, as
provided herein, shall automatically be deemed to be subject to, and shall
accrue interest at, the applicable rate provided by paragraph 2.2.1(a).
2.2.3 Interest Payment Dates. Accrued interest under the Revolving
Facility shall be payable as follows: (a) accrued interest on any portion
of the Revolving Facility accruing interest according to the Contract Rate
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shall be payable monthly on the last day of each calendar month, and (b)
accrued interest on any Eurodollar Loan shall be payable on the last day of
the Interest Period applicable to such Eurodollar Loan.
2.3 Repayment and Line Termination. All unpaid principal and accrued
interest under the Revolving Facility shall be payable ON DEMAND (subject
to the notification requirements of paragraph 8.2 to the extent
applicable), or if no demand is made or for so long as no demand is made,
then as follows: Accrued interest shall be payable as provided in
paragraph 2.2.3, and all unpaid principal borrowed under the Revolving
Facility and all unpaid accrued interest thereon, and all other amounts
payable hereunder relative to the Revolving Facility, shall be due and
payable to Lender in full, and the Revolving Facility shall terminate, on
the last day of the Contract Term. To the extent that any accrued interest
is not paid prior to the fifth day following its due date as specified
above, Lender may at its option (but with no obligation to do so), add the
amount of such accrued interest to the unpaid principal due by Borrower
under the Revolving Facility, in which event such amount will be deemed
paid and the aggregate amount thereof shall be treated as a loan under the
Revolving Facility. Borrower acknowledges and agrees that Lender shall
have no obligation to renew the Revolving Facility.
2.4 Mandatory Interim Principal Payments. If at any time, from time to
time, the aggregate unpaid principal amount outstanding under the Revolving
Facility exceeds the (i) the lesser of the Borrowing Base or the Credit
Limit, less (ii) the aggregate principal balance owing by Borrower under
the Revolving Facility, Borrower shall make an immediate payment of
principal under the Revolving Facility in an amount not less than the
amount of such excess. All such amounts, if any, payable by Borrower shall
be deemed to be payable on demand, and may be offset by Lender against any
amount owing by Lender to Borrower, without prior notice to Borrower.
2.5 Purpose and Use of Funds. All amounts borrowed under the Revolving
Facility shall be used by Borrower for the purpose of (i) refinancing
existing indebtedness of Borrower under its 7% Convertible Subordinated
Debentures due 2002, (ii) for working capital purposes in the ordinary
course of Borrower's business and (iii) for loans by Borrower to any
Affiliate Guarantor in the ordinary course of Borrower's and such Affiliate
Guarantor's business.
2.6 Borrowing Base. The advance rates specified in paragraph 1.9 may be
decreased from time to time based upon such considerations as Lender may
deem appropriate in its reasonable discretion. Advance rates from time to
time used by Lender in calculating the Borrowing Base hereunder are for the
sole purpose of determining the maximum amount of principal that may be
outstanding from time to time under the Revolving Facility, and shall not
be evidentiary of or binding upon Lender with respect to the market value
or liquidation value of any Collateral. Lender may at any time, from time
to time, establish or adjust any Reserve. Funding of loans hereunder shall
at all times remain subject to confirmation of existence and acceptability
of Eligible Accounts, and the Borrowing Base, in Lender's sole discretion.
2.7 Origination Fee. Subject in all respects to the provisions of
paragraph 10.9, Borrower shall pay to Lender a facility fee in respect of
the Revolving Facility and this Agreement which shall be in an amount equal
to one and one-half percent (1.50%) of the amount of the Credit Limit,
$250,000.00 of such fee being payable the date hereof, with the remainder
due on such date as Lender may request is its sole discretion.
2.8 Unused Line Fee. Subject in all respects to the provisions of
paragraph 10.9, in order to compensate Lender for costs and expenses
associated with administration of the Revolving Facility, Borrower agrees
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to pay to Lender a fee in an amount equal to three-eighths of one percent
(0.375%) per annum of the average daily unused portion of the Revolving
Facility, which shall be calculated on the basis of actual days elapsed but
computed as if each year consists of 360 days and shall be payable monthly
in arrears on the last day of each calendar month during the Contract Term.
2.9 Continuing Representations. Except as may have been otherwise
disclosed to Lender in writing, each request for a loan under the Revolving
Facility shall constitute a continuing representation that no event or
condition that would be the subject of a required notice under paragraph
7.9 or paragraph 7.10 is in existence as of such time.
ARTICLE III. CHANGE OF CIRCUMSTANCES
3.1 Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable law or
any change in any applicable law or any change in the
interpretation or administration thereof by any Governmental
Authority (including, without limitation, any central bank or
comparable agency) charged with the interpretation or
administration thereof, or compliance by Lender with any request
or directive (whether or not having the force of law) of any such
Governmental Authority:
(i) shall subject Lender to any tax, duty or other charge with
respect to any Eurodollar Loan, the Revolving Note or its
obligation to make Eurodollar Loans, or change the basis of
taxation of any amounts payable to Lender under this Agreement
or the Revolving Note in respect of any Eurodollar Loans
(other than taxes imposed on the overall net income of Lender
by the jurisdiction in which Lender has its principal office);
(ii) shall impose, modify or deem applicable any reserve, special
deposit, assessment or similar requirement (other than the
Eurodollar Reserve Requirement utilized in the determination
of the Adjusted Eurodollar Rate) relating to any extensions of
credit or other assets of, or any deposits with or other
liabilities or commitments of, Lender, including its
commitment hereunder; or
(iii) shall impose on Lender or on the London interbank market any
other condition affecting this Agreement or the Revolving Note
or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to
Lender of making, converting into, continuing or maintaining any
Eurodollar Loans or to reduce any sum received or receivable by
Lender under this Agreement or the Revolving Note with respect to
any Eurodollar Loans, then Borrower shall pay to Lender on demand
such amount or amounts as will compensate Lender for such increased
cost or reduction. If Lender requests compensation by Borrower
under this paragraph 3.1(a), Borrower may, by notice to Lender,
suspend the obligation of Lender to make Eurodollar Loans until the
event or condition giving rise to such request ceases to be in
effect; provided that such suspension shall not affect the right of
Lender to receive the compensation so requested.
(b) If, after the date hereof, Lender shall have determined that the
adoption of any applicable law, rule or regulation regarding
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capital adequacy or any change therein or in the interpretation or
administration thereof by any Governmental Authority (including,
without limitation, any central bank or comparable agency) charged
with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the
force of law) of any such Governmental Authority has or would have
the effect of reducing the rate of return on the capital of Lender
or any corporation controlling Lender as a consequence of Lender's
obligations hereunder to a level below that which Lender or such
corporation could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with
respect to capital adequacy), then, from time to time upon demand,
Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such reduction.
(c) Lender shall promptly notify Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle
Lender to compensation pursuant to this paragraph. If Lender
claims compensation under this paragraph, Lender shall furnish to
Borrower a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in
the absence of manifest error. In determining such amount, Lender
may use any reasonable averaging and attribution methods.
3.2 Limitation on Types of Loans. If on or prior to the first day of any
Interest Period for any Eurodollar Loan:
(a) Lender determines (which determination shall be conclusive) that
by reason of circumstances affecting the London interbank
Eurodollar market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period; or
(b) Lender determines (which determination shall be conclusive) that
the Adjusted Eurodollar Rate will not adequately and fairly
reflect the cost to Lender of funding Eurodollar Loans for such
Interest Period;
then Lender shall give Borrower prompt notice thereof, and so long
as such condition remains in effect, Lender shall be under no
obligation to make additional Eurodollar Loans, and Borrower shall,
on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Eurodollar Loans or
convert such Eurodollar Loans into loans accruing interest based on
the Prime Rate in accordance with the terms of this Agreement.
3.3 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for Lender to make, maintain or fund
Eurodollar Loans hereunder, then Lender shall promptly notify Borrower
thereof and Lender's obligation to make Eurodollar Loans shall be suspended
until such time as Lender may again make, maintain and fund Eurodollar
Loans.
3.4 Compensation. Upon the request of Lender, Borrower shall pay to Lender
such amount or amounts as shall be sufficient (in the reasonable opinion of
Lender) to compensate it for any loss, cost or expense (including loss of
anticipated profits) incurred by it as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the
Obligations pursuant to paragraph 9.2) on a date other than the
last day of the Interest Period for such Eurodollar Loan; or
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(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in
paragraph 5.1 to be satisfied) to borrow or prepay a Eurodollar
Loan on the date for such borrowing or prepayment under this
Agreement.
3.5 Taxes.
(a) Any and all payments by Borrower to or for the account of Lender
hereunder or under any other Loan Document shall be made free and
clear of, and without deduction for, any and all present or future
taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding,
in the case of Lender, taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction under the laws of which
Lender is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable under this Agreement
or any other Loan Document to Lender, (i) the sum payable shall be
increased as necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this paragraph 3.5(a)) Lender receives an amount
equal to the sum it would have received had no such deductions
been made, (ii) Borrower shall make such deductions, (iii)
Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with
applicable law, and (iv) Borrower shall furnish to Lender the
original or a certified copy of a receipt evidencing payment
thereof
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes
or charges or similar levies which arise from any payment made
under this Agreement or any other Loan Document or from the
execution or delivery of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as
"Other Taxes").
(c) BORROWER AGREES TO INDEMNIFY LENDER FOR THE FULL AMOUNT OF TAXES
AND OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY TAXES OR OTHER
TAXES IMPOSED OR ASSERTED BY ANY JURISDICTION ON AMOUNTS PAYABLE
UNDER THIS PARAGRAPH 3.5(c)) PAID BY LENDER AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR
WITH RESPECT THERETO.
(d) Within thirty (30) days after the date of any payment of Taxes or
Other Taxes, Borrower shall furnish to Lender the original or a
certified copy of a receipt evidencing such payment.
(e) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower
contained in this paragraph 3.5(e) shall survive the termination
of the Revolving Facility and the payment in full of the Revolving
Note.
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ARTICLE IV. COLLATERAL
4.1 Security Interest. Each of Borrower and the Affiliate Guarantors
hereby grants to Lender a continuing security interest and lien in and to
the Collateral to secure full payment and performance of the Obligations.
4.2 Perfection and Protection of Lender's Security Interest. Each of
Borrower and the Affiliate Guarantors shall perform, at its expense, all
action requested by Lender at any time to perfect, maintain, protect, and
enforce Lender's security interests in the Collateral, including, without
limitation, executing and filing financing statements and amendments
thereof, in form and substance satisfactory to Lender; delivering to Lender
the originals of all Collateral the possession of which is required for
perfection of Lender's security interests, duly endorsed or assigned to
Lender without restriction, placing notations on books of account to
disclose Lender's security interests and such other steps as are deemed
necessary by Lender to maintain its security interests. In the event any
of the Receivables at any time is evidenced by a promissory note or other
instrument, Borrower will immediately notify Lender and deliver such
instrument to Lender, duly endorsed payable to the order of Lender. So
long as this Agreement is in effect and until all Obligations have been
fully satisfied, Lender's security interest and lien hereunder shall
continue in full force and effect in all Collateral.
4.3 Priority. Lender's security interests in the Collateral granted herein
at all times shall be and remain first, prior and senior to any other
interests in the Collateral, except as may be expressly agreed otherwise by
Lender in writing. Each of Borrower and the Affiliate Guarantors
represents to Lender that no other security interests, liens or other
encumbrances exist with respect to any of the Collateral, except as
disclosed in Schedule 4.3.
4.4 Location of Collateral. Each of Borrower and the Affiliate Guarantors
represents and warrants to Lender that all of its books and records
relating to the Collateral are located at its chief executive office
designated in Article I, and at such other locations, if any, as are
specified in Schedule 4.4. Each of Borrower and the Affiliate Guarantors
agrees that it will not maintain any such books and records at any location
other than its chief executive office designated in Article I and those
listed in Schedule 4.4 unless it gives Lender at least thirty (30) days
prior written notice and executes such financing statements and other
documents as Lender may request in connection therewith.
4.5 Field Examinations; Inspections. Lender shall have the right without
hindrance or delay to conduct field examinations during Borrower's or any
Affiliate Guarantor's customary business hours to inspect the Collateral
and to inspect, audit and copy each of Borrower's and each Affiliate
Guarantor's books, records, journals, correspondence and other records and
data relating to the Collateral or such Person's business. Lender is
authorized to discuss Borrower's and each Affiliate Guarantor's affairs
with any Person, including, without limitation, employees of such Person,
as Lender may deem necessary in relation to the Collateral, such Person's
financial condition or Lender's rights under the Loan Documents. Borrower
agrees to pay Lender's customary fees and disbursements relating to such
field examinations. Lender shall have full access to all records available
to each of Borrower and the Affiliate Guarantors from any credit reporting
service, bureau or similar service and shall have the right to examine and
make copies of any such records. Lender may exhibit a copy of this
Agreement to such service and such service shall be entitled to rely on the
provisions hereof in providing access to Lender as provided herein.
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4.6 Collateral Reports. Contemporaneously with each request for a loan
under the Revolving Facility and in any event at least monthly, and at such
other times as Lender may request, Borrower shall execute and deliver to
Lender, in form satisfactory to Lender, a collateral report setting forth a
certification of Eligible Accounts, Eligible Inventory and calculation of
the Borrowing Base ("Collateral Report"). Each Collateral Report shall
include a reconciliation of the calculation of the Borrowing Base as
certified in the most recent Collateral Report delivered to Lender, and be
accompanied by such documents and supporting information relating to
Eligible Accounts and Eligible Inventory as Lender may request. Borrower
shall maintain, and shall furnish to Lender at Lender's request, such
supporting documents or copies as Lender may require including, but not
limited to: a schedule of Eligible Accounts created since the previous
Collateral Report delivered to Lender; copies of invoices and supporting
delivery or service records in connection therewith; a schedule of
collections received; copies of credit memos or other advices of credit or
reductions against amounts previously billed; and such other reports as
Lender may request from time to time. If any of such records or reports
are prepared by an accounting service or other agent, each of Borrower and
the Affiliate Guarantors hereby authorizes such service or agent to deliver
such records, reports and related documents to Lender. Lender may exhibit
a copy of this Agreement to any such service or agent and such service or
agent shall be entitled to rely on the provisions hereof in providing such
documentation to Lender. Each Collateral Report shall bear a signed
statement by an authorized officer of Borrower certifying the accuracy and
completeness of all information included therein and shall incorporate
therein by reference, as if fully set forth therein, all the terms and
provisions hereof. The execution and delivery of a Collateral Report shall
in each instance constitute an agreement, representation and warranty by
Borrower to Lender that, except for the security interest of Lender
therein: each of Borrower and the Affiliate Guarantors is the sole owner
of and has full unrestricted power to grant to Lender a continuing security
interest and lien in and to its respective Collateral included therein free
from any lien, security interest or encumbrance; each account included
therein is in existence, unconditional and valid, and arose from a bona
fide performance of services rendered, in the ordinary course of business,
for liquidated amounts as set forth in the Collateral Report; no account
included therein arose in connection with a contract or assignment which
purports to make an assignment or security interest therein void or
conditions such assignment or security interest on consent of the account
debtor; no account is subject to any sale, assignment, claim or security
interest of any character and Borrower will not make any sale or other
assignment thereof or create any other security interest therein; no
account is subject to any claim for credit, deduction, allowance, extension
or adjustment, defense, dispute, setoff or counterclaim, except for
discounts for early payment allowed by such Person in the ordinary course
of business as previously disclosed to Lender and as reflected on the face
of the invoice evidencing such account.
4.7 Guaranty Agreement. Each Affiliate Guarantor shall execute and deliver
to Lender a Guaranty Agreement, in form and substance satisfactory to
Lender, pursuant to which such Affiliate shall guarantee prompt payment and
performance when due of the Obligations.
4.8 Insurance. Each of Borrower and the Affiliate Guarantors shall keep
and maintain adequate insurance with respect to its business and all
Collateral, written by its existing insurers or other insurers acceptable
to Lender. Such insurance shall be with respect to loss, damages, and
liability of amounts not less than reasonably requested by Lender, and
shall include, at minimum, extended coverage insurance, insurance against
business interruption, insurance for workers compensation, and insurance
for general premises liability, fire, theft, burglary, pilferage, loss in
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transit, casualty and all risk. Each of Borrower and the Affiliate
Guarantors will make timely payment of all premiums required to maintain
such insurance in force. Each of Borrower and the Affiliate Guarantors
shall cause Lender to be an additional insured and loss payee under all
policies of insurance covering any of the Collateral, to the extent of
Lender's interest, in form satisfactory to Lender. Each of Borrower and
the Affiliate Guarantors will cause each policy of insurance to contain a
clause or endorsement requiring the insurer to give not less than thirty
(30) days prior written notice to Lender in the event of cancellation of
the policy for any reason whatsoever. Each of Borrower and the Affiliate
Guarantors shall deliver copies of each insurance policy to Lender upon
request. If either Borrower or any Affiliate Guarantor fails to procure
such insurance or to pay the premiums therefor when due, Lender shall have
the right (but with no obligation) to make such payment, which amount
Borrower shall pay to Lender on demand or, at Lender's option (but with no
obligation to do so) Lender may add such amount to the unpaid principal due
under the Revolving Facility, in which event such amount will be deemed
paid and the aggregate amount thereof shall be treated as a loan under the
Revolving Facility. Each of Borrower and the Affiliate Guarantors shall
promptly notify Lender of any loss, damage, or destruction to the
Collateral or arising from its use, whether or not covered by insurance.
Lender is hereby authorized to collect all insurance proceeds directly.
After deducting from such proceeds the expenses, if any, incurred by Lender
in the collection or handling thereof, Lender may apply such proceeds to
the reduction of the Obligations, in such order as Lender determines, or at
Lender's option may permit or require Borrower or the Affiliate Guarantor,
as applicable, to use such money, or any part thereof, to replace, repair
or restore the Collateral in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed
before the loss, damage or destruction.
4.9 Right to Cure. Lender in its sole discretion may pay any amount or
take any action in order to preserve, protect and maintain the Collateral
and Lender's security interest therein, including, without limitation,
payment of any insurance premium, any repair, maintenance or storage
charge, any landlord's claim and any other encumbrance or claim asserted
against the Collateral. All such payments and all out-of-pocket costs and
expenses made or incurred by Lender shall be payable by Borrower to Lender
on demand or, at Lender's discretion, deemed as a loan under the Revolving
Facility as of the date or dates of Lender's disbursement thereof. Any
payment made or other action taken by Lender under this paragraph shall be
without prejudice to any right to assert an Event of Default or exercise
any other remedy hereunder.
4.10 Preservation of Lender's Rights. To the extent allowed by law,
neither Lender nor any of its officers, directors, employees and agents
shall be liable or responsible in any way for the safekeeping of any
Collateral or for any act or failure to act with respect to the Collateral,
or for any loss or damage thereto or any diminution in the value thereof,
or for any act by any other Person. In the case of any instruments and
chattel paper included within the Collateral, Lender shall have no duty or
obligation to preserve rights against prior parties. The Obligations shall
not be affected by any failure of Lender to take any steps to perfect its
security interests or to collect or realize upon the Collateral, nor shall
loss of or damage to the Collateral release Borrower or any Affiliate
Guarantor from any of the Obligations. Lender may extend the time for
payment of the Obligations or modify or amend the terms of any of the Loan
Documents, or compromise or grant other indulgences, renewals, extensions
or releases, and take or omit to take any other action with respect to the
Obligations or the Collateral, or any Person directly or indirectly
obligated in connection therewith, without impairing Lender's security
interests in the Collateral or any of Lender's rights under the Loan
Documents.
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4.11 Receivables Collections. All collections and proceeds of Receivables
shall be subject to an express trust for the benefit of Lender. Upon
Lender's written request, all collections and proceeds of Receivables shall
be directed daily to Lender for deposit to a Blocked Collection Account (as
defined below). All collected funds from collections and proceeds of
Receivables from time to time deposited to such account shall be applied
directly to the Obligations. All checks processed for collection and
application to the Obligations shall be subject to one (1) Business Day
collection time and shall remain provisional until collected, provided that
for the sole purpose of calculating the amount available for borrowing
hereunder, such checks shall be assumed to be collected and applied in
reduction of the Obligations as of the Business Day of receipt by Lender.
Collections received via wire transfer or in other form of immediately
available collected funds shall be credited on the Business Day of actual
receipt. Neither Borrower nor any Affiliate Guarantor will use, dispose,
withhold or otherwise exercise dominion over any proceeds of Receivables.
In the event Borrower at any time receives any collections or proceeds of
Receivables, Borrower or such Affiliate Guarantor shall promptly deliver
same to Lender in the form received, with any necessary endorsement to the
order of Lender. Each of Borrower and the Affiliate Guarantors agrees that
it will not commingle proceeds of Receivables with any other funds, and
that no deposits will be made to the Blocked Collection Account other than
collections and proceeds of Receivables. Neither Borrower nor any
Affiliate Guarantor shall have any right to withdrawal, transfer or access
to the Blocked Collection Account, and all amounts from time to time
deposited to the Blocked Collection Account shall remain subject to
Lender's security interests under this Agreement. As used herein, "Blocked
Collection Account" shall mean an account of each of Borrower and the
Affiliate Guarantors, maintained by Lender for the deposit and collection
of checks and other items received by such Person as proceeds of
Receivables.
4.12 Special Rights of Lender; Power of Attorney. Borrower hereby
irrevocably appoints Lender as Borrower's agent and attorney-in-fact to
take any action necessary to preserve and protect the Collateral and
Lender's interests under the Loan Documents. Borrower hereby authorizes
and appoints Lender as attorney in fact to sign and file any financing
statement or other document necessary to perfect Lender's security interest
in the Collateral. Lender shall have the right at any time to take any of
the following action, in its own name or in the name of Borrower, whether
or not an Event of Default is in existence: (i) make written or verbal
requests for verification of amounts owing on Receivables from any or all
Persons which Lender believes may be account debtors or obligors on
Receivables; (ii) notify any or all Persons which Lender believes may be
account debtors or obligors on Receivables to make payments directly to
Lender; (iii) take possession and control of proceeds of Receivables; (iv)
redirect the deposit and disposition of collections and proceeds of
Receivables; (v) endorse the name of Borrower or any Affiliate Guarantor
(as applicable) on checks, instruments or other evidences of payment on
Receivables; (vi) settle, adjust, compromise or discharge Receivables or
extend time of payment upon such terms as Lender may determine; (vii) take
action in Lender's name, Borrower's name or any Affiliate Guarantor's name
(as applicable) to enforce collection of Receivables; (viii) prepare, sign
and file, on behalf of Borrower or any Affiliate Guarantor (as applicable)
in Borrower's name, in any Affiliate Guarantor's name or in Lender's name
as assignee (as applicable), any proof of claim or other document in any
bankruptcy proceedings of any account debtor or obligor on Receivables;
(ix) prepare, sign and file, in the name of Borrower or any Affiliate
Guarantor (as applicable), any notice of lien or similar document necessary
to create or perfect any materialman's lien, laborer's lien or similar lien
in enforcement of any Receivables; (x) access, copy or utilize any
information recorded or contained in any computer or data processing
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equipment or system in respect of the Receivables maintained by Borrower or
any Affiliate Guarantor, or to which Borrower or such Affiliate Guarantor
has access; (xi) enter onto Borrower's or any Affiliate Guarantor's
premises and discuss such Person's affairs with such Person's personnel as
may be reasonably necessary in connection with maintaining or enforcing
Lender's rights under the Loan Documents, (xii) open mail addressed to
Borrower or any Affiliate Guarantor and dispose of checks or other proceeds
of Receivables in accordance with this Agreement; (xiii) and take all other
action allowed by law as may be necessary to carry out the Loan Documents
and give effect to Lender's rights thereunder. Should Lender at any time
elect to exercise its right of verification or notification with respect to
the Receivables as provided in clause (i) or clause (ii) above,
respectively, Lender shall have the right in its sole discretion to direct
such request for verification, or notification, as the case may be, to all
Persons which Lender believes may have transacted business with Borrower or
any Affiliate Guarantor at any time, whether or not such Persons are then
indebted to Borrower or any Affiliate Guarantor, and Lender is hereby
released and discharged from any liability by reason of any such request
for verification or notification. Costs and expenses incurred by Lender in
connection with any of such actions by Lender, including attorneys' fees
and out-of-pocket expenses, shall be reimbursed to Lender on demand.
4.13 Cross Collateralization; Cross Guaranties. Lender has determined that
loans to Borrower are conditioned upon additional credit support from the
Affiliate Guarantors. Because of the inter-relationships among Borrower
and the Affiliate Guarantors, and their respective operations, each of the
Affiliate Guarantors has determined that providing such additional credit
support is within its corporate purpose, will be to its direct and indirect
benefit and is in its best interest. Accordingly: (i) each Affiliate
Guarantor shall execute and deliver for the benefit of Lender a Guaranty
Agreement pursuant to which it shall Guarantee to Lender the prompt payment
and performance of all Obligations from time to time owing by Borrower
(such Guaranty Agreement to be in form and substance satisfactory to
Lender), and (ii) each Affiliate Guarantor hereby grants to Lender a
continuing security interest and lien in and to all of its right, title and
interest in the Collateral to secure its Guaranty and all Obligations from
time to time owing by Borrower (such grants to be governed by, and entitled
to all of the benefits of, this Agreement). Each Affiliate Guarantor
hereby acknowledges that its agreement to the provisions of this paragraph
is in consideration of the availability of loans to Borrower under this
Agreement and is not required by Lender as a condition to the availability
of any loans to such Affiliate Guarantor under this Agreement.
V. ITEMS TO BE DELIVERED BY BORROWER
5.1 Items to be Delivered by Borrower. Prior to or simultaneously with
execution and delivery hereof, Borrower shall deliver, or cause to be
delivered, to Lender the following:
(a) Articles of Incorporation and Certificate of Existence. A copy of
the articles of incorporation, and all amendments thereto, of each
of Borrower, ABG, FBG, LAC and GP, accompanied by the certificate
of the Secretary of State of the jurisdiction of each such
Person's incorporation bearing a date no more than thirty (30)
days prior to the date hereof, to the effect that such copy is
correct and complete and that such Person is a corporation duly
incorporated and validly existing in such state, and certified by
the corporate secretary of such Person dated the date hereof, as
being correct and complete as of the date hereof.
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(b) Partnership Documents. A copy of the certificate of limited
partnership of RBG bearing a date no more than thirty (30) days
prior to the date hereof, to the effect that such copy is correct
and complete and that such Person is a limited partnership duly
formed and validly existing in such state, and certified by the
corporate secretary of GP dated the date hereof, as being correct
and complete as of the date hereof. A copy of the agreement of
limited partnership of RBG, and all amendments thereto,
accompanied by a certificate of the corporate secretary of GP that
such copy is correct and complete as of the date hereof.
(c) Good Standing. Certification by the appropriate official of the
state of incorporation of Borrower and each Affiliate Guarantor
bearing a date no more than thirty (30) days prior to the date
hereof, to the effect that such Person is in good standing with
respect to payment of franchise and similar taxes. Each of
Borrower and the Affiliate Guarantors represents that to the
extent required by applicable law, it is qualified or licensed to
transact business in all jurisdictions in which any of the
Collateral is located.
(d) By-Laws. A copy of the bylaws, and all amendments thereto, of
Borrower, ABG, FBG, LAC and GP, accompanied by certificates from
its corporate secretary, dated the date hereof, to the effect that
such copy is correct and complete as of the date hereof.
(e) Incumbency. Certification of incumbency of all officers of
Borrower ABG, FBG, LAC and GP, executed by the president or vice
president and by the corporate secretary, as of the effective date
hereof, certifying the name and signature of each such officer.
(f) Resolutions. A copy of corporate resolutions of Borrower ABG,
FBG, LAC and GP, approving this Agreement, authorizing the
transactions contemplated hereby, and authorizing and directing a
named officer or officers of Borrower, ABG, FBG, LAC and GP to
sign and deliver all Loan Documents to be executed by such Person,
duly adopted by such Person's board of directors and accompanied
by the certificate of the corporate secretary, dated the date
hereof, that such copy is a true and complete copy of resolutions
duly adopted by the board of directors, and that such resolutions
have not been amended, modified or revoked in any respect and are
in full force and effect as of the date hereof. Such resolutions
shall be in form and substance satisfactory to Lender.
(g) Financing and Security Agreement. This Agreement, duly executed.
(h) Revolving Note. The Revolving Note, duly executed.
(i) Financing Statements. All financing statements required by Lender
in connection with perfection of Lender's security interests in
the Collateral.
(j) Insurance. Evidence of insurance in compliance with the
requirements of paragraph 4.8.
(k) Affiliate Subordination Agreements. All Affiliate Subordination
Agreements, if any, required by Lender under paragraph 7.16.
(l) Guaranty Agreements. Each Guaranty Agreement, duly executed and
delivered by each respective Affiliate Guarantor.
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(m) Proprietary Rights Agreements. A Patent Security Agreement and a
Trademark Security Agreement, duly executed by Borrower in form
acceptable to Lender.
(n) Other Documents. Such other items as Lender may request in order
to perfect or protect its interests and rights under the Loan
Documents.
VI. REPRESENTATIONS AND WARRANTIES
6.1 Corporate Name; Trade Names. Borrower and each Affiliate Guarantor
is conducting, transacting and carrying on its business under its name
shown in Article I and such other names as may be specified in Schedule
6.1, and is not engaged in business under any other name. Except as
provided in Schedule 6.1, during the past five (5) years neither Borrower
nor any Affiliate Guarantor has (i) done business under any other name,
(ii) been party to a merger or consolidation or (iii) acquired any of the
property included within the Collateral from any other Person outside the
ordinary course of business.
6.2 Chief Executive Office. Borrower's and each Affiliate Guarantor's
chief executive office is located at the address specified for such Person
in Article I.
6.3 Existence. Each of Borrower, ABG, FBG, LAC and GP is a corporation,
duly incorporated, validly existing, and in good standing under the laws of
the state of its incorporation, and is duly qualified or licensed to
transact business in all jurisdictions the laws of which require it to be
so qualified or licensed. RBG is a limited partnership, duly formed,
validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified or licensed to transaction business in all
jurisdictions the laws of which require it to be so qualified or licensed.
6.4 Power and Authority; Validity. Each of Borrower, the Affiliate
Guarantors and GP possesses all requisite power and authority to own, lease
and operate its properties and to carry on its business and to execute,
deliver and comply with the Loan Documents to which it is a party. Each of
the Loan Documents to which such Person is a party has been duly authorized
by all necessary action and has been duly executed and delivered by such
Person, and evidences valid and binding obligations enforceable in
accordance with its respective terms.
6.5 No Conflicting Agreements. Each of Borrower and the Affiliate
Guarantors represents that the execution, delivery and performance of the
Loan Documents to which such Person is a party will not violate its
articles of incorporation, bylaws, certificate of limited partnership or
partnership agreement (as applicable) nor constitute a default under, or
result in a breach of, any contract, agreement or other instrument to which
it is a party or which is applicable to its property.
6.6 Borrower's Share Ownership. Each of Borrower's outstanding shares of
Capital Stock has been duly and validly issued and is fully paid and
nonassessable. Except as set forth on Schedule 6.6, there are no
subscriptions, options to purchase, conversion or exchange rights, warrants
or other agreements, claims or commitments of any nature obligating
Borrower to issue, transfer, deliver or sell additional shares of its
Capital Stock.
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6.7 Subsidiaries. Each of Borrower's Subsidiaries is a corporation
organized (or with respect to RBG, a limited partnership formed), validly
existing and in good standing under the laws of the jurisdiction of its
incorporation (or formation, as applicable), and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now conducted and proposed to be conducted. All outstanding
Capital Stock of each Subsidiary has been validly issued and is fully paid
and non-assessable, and all Capital Stock owned by Borrower is free and
clear of any lien, pledge, security interest or other encumbrance.
6.8 Financial Statements. Borrower has delivered to Lender financial
statements respecting its consolidated financial condition and operations
for Lender's review and reliance in connection with approving the Revolving
Facility. Such financial statements were prepared in accordance with GAAP,
and are correct and complete, and fairly present the financial condition of
Borrower and its Subsidiaries on the respective dates thereof and the
results of its operations for the respective periods then ended. There has
been no material adverse change in the business, properties or financial
condition of Borrower and its Subsidiaries since the dates of such
financial statements, respectively.
6.9 Litigation. Other than as disclosed to Lender in Schedule 6.9, each of
Borrower and the Affiliate Guarantors represents that it is not a party to
any pending lawsuits or proceedings before or by any state or federal court
or other Governmental Authority and is not aware of any threatened or
potential lawsuits, proceedings, claims or investigations which in the
event of any unfavorable or adverse determination could result in a
Material Adverse Effect. The items, if any, disclosed in Schedule 6.9, in
the event of any unfavorable or adverse determination, will not result in
or cause a Material Adverse Effect.
6.10 Compliance with Laws. Each of Borrower and the Affiliate Guarantors
represents that it is not in violation of any laws, regulations and orders
in any respect which will result in or cause, or reasonably would be
expected to result in or cause, a Material Adverse Effect.
6.11 Judgments. There are no outstanding or unpaid judgments against
Borrower or any Affiliate Guarantor.
6.12 Taxes. All tax returns or filings required to be filed by Borrower or
any Affiliate Guarantor have been filed and taxes imposed upon Borrower or
any Affiliate Guarantor which are due and payable have been paid.
6.13 Title to Property. Each of Borrower and the Affiliate Guarantors has
good and marketable title to all property reflected in the financial
statements previously delivered to Lender or purported to have been
acquired since such date, except property sold or otherwise disposed of
subsequent to such date in the ordinary course of business. Such Person
possesses all Patents, licenses, Trademarks, trade names, trade name rights
and Copyrights which are required to conduct its business as now conducted
without any known infringement or conflict by or against the rights of any
other Person.
6.14 Consents. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution,
delivery and performance of the Loan Documents. Borrower and the Affiliate
Guarantors have all required governmental permits and licenses, if any, for
purposes of carrying on their operations and activities and are in full
compliance with the terms and conditions thereof, and all such permits and
licenses are in full force and effect.
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6.15 Full Disclosure. Borrower and the Affiliate Guarantors have disclosed
to Lender all material facts known to Borrower or any Affiliate Guarantor
concerning their financial condition and business operations. All
information furnished by Borrower or any Affiliate Guarantor to Lender was
true and complete at the time of delivery thereof to Lender, and there has
been no material change in any such information except as may have been
disclosed to Lender in writing. There is no fact known to Borrower or any
Affiliate Guarantor which would be reasonably expected to result in a
Material Adverse Effect during the term of this Agreement.
6.16 Solvency. As of, and immediately following the effective date of this
Agreement: (i) the fair saleable value of all assets of each of Borrower
and the Affiliate Guarantors exceeds the amount of all of such Person's
existing debts and liabilities (including contingent liabilities); (ii) the
assets of such Person do not constitute an unreasonably small capital for
the operation of such Person's business as now conducted and as intended to
be conducted, taking into account all known or projected capital
requirements for such operations; (iii) such Person does not intend to
incur debts beyond its ability to pay as they mature; and (iv) such
Person's cash flow is sufficient to pay all existing debts and liabilities
as they become due.
6.17 Employee Relations. Neither Borrower nor any Affiliate Guarantor is
aware of any contemplated, threatened or pending strike, work stoppage or
other labor dispute involving its employees or the employees of any of its
Affiliates.
6.18 Representations and Warranties Cumulative. The representations and
warranties contained in this Article VI are in addition to all other
representations and warranties provided in the Loan Documents.
ARTICLE VII. COVENANTS
Throughout the Contract Term and until payment and performance in
full of the Obligations, Borrower and the Affiliate Guarantors (as
applicable) agree as follows (unless otherwise allowed by prior written
consent of Lender):
7.1 Authority. Immediately following any effective change thereof (and
at such other times, from time to time, at the request of Lender) Borrower
shall certify to Lender the names and signatures of all Persons authorized
to execute and deliver Collateral Reports to Lender and any other
documentation contemplated by or relating to any of the Loan Documents.
7.2 Books and Records. Borrower and the Affiliate Guarantors shall keep
and maintain proper, complete and consistent books of record and account
respecting the Collateral and such Person's affairs and financial condition
in accordance with GAAP, and shall permit Lender from time to time, by and
through its authorized agents, to visit and inspect any of its properties,
inspect and copy its books and records, and discuss its affairs, finances,
accounts and operations with its officers.
7.3 Existence. Borrower, each Affiliate Guarantor and GP shall preserve
and maintain its existence, good standing and authority to transact
business in all jurisdictions where necessary for the proper conduct of its
business, and shall maintain all of its properties, rights, privileges and
franchises necessary or desirable in the normal conduct of its business.
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7.4 Annual Financial Statements. Borrower shall deliver to Lender, as soon
as practicable after the end of each fiscal year, and in any event within
one hundred twenty (120) days thereafter, its unqualified audited
consolidated balance sheet as of the end of such fiscal year, and its
audited consolidated statement of income and retained earnings and
statements of cash flow, in reasonable detail, prepared in accordance with
GAAP and certified by an independent certified public accounting firm
acceptable to Lender as fairly presenting Borrower's and its Subsidiaries'
consolidated financial condition and results of operations. Such financial
statements shall be accompanied by a copy of the report to management
delivered to Borrower by such accountants and also by a statement signed by
Borrower's president or chief financial officer representing to Lender that
such financial statements are true and complete and fairly present
Borrower's financial condition and results of operation, and that no event
or condition that would be the subject of a required notice under paragraph
7.9 or paragraph 7.10 is in existence as of the date of delivery of such
statements.
7.5 Interim Financial Statements. Borrower shall deliver to Lender, as
soon as practicable after the end of each calendar month, and in any event
within thirty (30) days thereafter, a balance sheet as of the end of such
month, and income statement for such month and for the period from the
beginning of the current fiscal year to the end of such month, for Borrower
and each Affiliate Guarantor and consolidating schedules thereof, in
reasonable detail and prepared in accordance with GAAP. Such financial
statements shall be accompanied by a statement signed by Borrower's
president or chief financial officer representing to Lender that such
financial statements are true and complete and fairly present Borrower's
and each Affiliate Guarantor's financial condition and results of
operations, and that no event or condition that would be the subject of a
required notice under paragraph 7.9 or paragraph 7.10 is in existence as of
the date of delivery of such statements.
7.6 Collateral Reports. Borrower shall timely deliver to Lender all
Collateral Reports required by paragraph 4.6.
7.7 Information. In addition to information and items specifically
required by the Loan Documents, Borrower shall promptly furnish to Lender
such other information, documentation or projections respecting Borrower's
or any Affiliate Guarantor's business affairs, assets and liabilities as
Lender may request, subject to any written confidentiality agreement, a
copy of which shall be provided to Lender, or privilege limitations.
7.8 Notification of Contingent Liabilities. Promptly upon receiving notice
or otherwise becoming aware thereof, Borrower shall notify Lender of any
pending or threatened lawsuit, claim, action, liability, investigation or
proceeding to which Borrower or any Affiliate Guarantor is a party or
subject to and which would be required to be reported on Borrower's
financial statements as prepared in accordance with GAAP.
7.9 Notification of Material Changes. Borrower will notify Lender in
writing at least thirty (30) days prior to the occurrence of any of the
following: (i) change of Borrower's or any Affiliate Guarantor's name;
(ii) change of Borrower's or any Affiliate Guarantor's address or principal
place of business; (iii) change of the location of Borrower's or any
Affiliate Guarantor's books and records; (iv) change of the location of any
Collateral to any location where Lender's security interest therein is not
presently perfected under applicable law; (v) the opening of any new place
of business or the closing of any existing place of business of Borrower or
any Affiliate Guarantor; or (vi) use of any trade name, fictitious name or
other assumed name by Borrower or any Affiliate Guarantor. Borrower shall
promptly notify Lender of any change in any other material fact or
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circumstance represented or warranted in any of the Loan Documents.
7.10 Notification Regarding Default. Borrower shall immediately notify
Lender in writing upon becoming aware of the existence of any condition or
event which constitutes an Event of Default or any condition or event
which, after notice or lapse of time, or both, would constitute an Event of
Default, therein specifying the nature and period of existence thereof and
what action Borrower is taking or proposes to take with respect to such
condition or event. Borrower shall immediately notify Lender in writing if
it knows, or reasonably expects, that an Event of Default will occur,
therein specifying the nature of the anticipated Event of Default. Without
limiting the foregoing, Borrower will also immediately notify Lender of any
of the following: (i) Borrower's or any Affiliate Guarantor's board of
directors has authorized the filing by Borrower or such Affiliate Guarantor
of a petition in bankruptcy; (ii) Borrower or any Affiliate Guarantor is
aware that any covenant under this Agreement has been breached, or
reasonably expects that any such covenant will be breached; (iii) Borrower
or any Affiliate Guarantor is aware that any Account Debtor obligated on
any Receivables in excess of $100,000 is in bankruptcy; and (iv)
repossession or attempted repossession by any Person of any Inventory owned
by Borrower or any Affiliate Guarantor.
7.11 Payment of Taxes. Borrower and each Affiliate Guarantor shall
promptly pay, or cause to be paid, when due, any and all taxes except such
taxes as may be contested in good faith by appropriate proceedings,
provided, that adequate reserves shall be maintained as are appropriate
according to GAAP. Lender shall have the right in its discretion to
include any such amount in the Reserve. Borrower and each Affiliate
Guarantor agrees that it shall immediately notify Lender of the initiation
of any such contest and advise Lender from time to time of the status
thereof. Borrower and each Affiliate Guarantor shall promptly pay any
amounts adjudged to be due pursuant to any such contest, with all costs,
penalties and interest thereon, before such judgment becomes final or any
writ or order is issued under which the Collateral, or any portion thereof,
may become subject to any lien or encumbrance.
7.12 Compliance with Laws. Borrower and each Affiliate Guarantor shall
comply with all applicable laws, regulations and orders applicable to it or
its property, a violation of which would reasonably be expected to result
in a Material Adverse Effect.
7.13 Compliance with Agreements. Borrower and each Affiliate Guarantor
shall comply in all material respects with all agreements, indentures,
mortgages or documents binding upon such Person or affecting its property
or business.
7.14 Fees, Costs and Expenses. Borrower agrees to promptly pay upon demand
all costs, fees and expenses as provided in paragraph 10.11.
7.15 Waivers and Consents Respecting the Collateral. Borrower shall
furnish to Lender such waivers and consents as may reasonably be requested
by Lender with respect to Lender's security interests and liens in the
Collateral.
7.16 Subordination Agreements. All present and future obligations due by
Borrower or any Affiliate Guarantor to Borrower, an Affiliate Guarantor or
an Affiliate of Borrower or an Affiliate Guarantor (excluding ordinary
course items such as travel and expense reimbursements and other similar
ordinary course items determined by agreement) shall be subordinate in
right of payment and claim to the Obligations, and at Lender's request
Borrower shall provide to Lender subordination agreements executed by
Borrower , any Affiliate Guarantor and such Affiliates in form satisfactory
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to Lender ("Affiliate Subordination Agreements").
7.17 Change of Fiscal Year. Borrower shall notify Lender at least ninety
(90) days prior to the effective date of any change in Borrower's or any
Affiliate Guarantor's fiscal year.
7.18 Sale of Assets. Except for sales of assets Borrower or any Affiliate
Guarantor has determined are no longer necessary to its business as
presently conducted, neither Borrower nor any Affiliate Guarantor will sell
or dispose of any assets other than in the ordinary course of business;
provided, however, Borrower may sell or grant a license in any Proprietary
Rights in the ordinary course of business, except for Proprietary Rights
consisting of, or related to, any Trademark of "Johnson" or "Evinrude";
provided further, the proceeds of any sale permitted hereunder shall be
delivered to Lender in payment of the Obligations in accordance with the
terms of this Agreement.
7.19 Prohibition Against Liens on Collateral. Neither Borrower nor any
Affiliate Guarantor will grant, create or allow to exist any Lien on any of
the Collateral.
7.20 Dissolution, Liquidation, Merger. Neither Borrower nor any Affiliate
Guarantor will dissolve or liquidate, or become a party to any merger or
consolidation with any Person.
7.21 Capital and Surplus Retention. Borrower will not:
(a) declare or cause to be declared, directly or indirectly, actual or
constructive dividends, or distribute, reserve, secure or
otherwise commit distributions on account of its capital stock;
(b) declare or pay any bonus compensation to any shareholder;
(c) increase the compensation payable to any employee who is a
shareholder;
(d) make any loans or advances to any Affiliate outside the ordinary
course of business;
(e) Except as set forth in paragraph 2.5, make any payments on any
loans, advances or obligations to or for the benefit of any
Affiliate or make any payments on any Indebtedness which by its
terms or by agreement is subordinate to Lender in respect of
payment or security therefor;
7.22 Covenants Cumulative. The covenants contained in this Article VII are
in addition to all other covenants provided in the Loan Documents.
ARTICLE VIII. EVENT OF DEFAULT
8.1 Event of Default. Each of the following shall constitute an Event of
Default under this Agreement:
(a) The failure of timely payment of the Obligations, or any part
thereof, on demand or as they otherwise become due in accordance
with the terms of the Loan Documents;
(b) Any violation, breach or default of any covenant, agreement or
other obligation under this Agreement [not otherwise covered by
paragraph 8.1(a)] or any of the Loan Documents;
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(c) Any representation or warranty made by Borrower or any Affiliate
Guarantor in the Loan Documents was false in any material respect
at the time when made;
(d) Lender at any time believes, in accordance with the standards
prescribed by the Code, that the prospect for payment or
performance of the Obligations is impaired;
(e) The occurrence of any event or circumstance which Lender
reasonably believes has or may result in a Material Adverse
Effect;
(f) The filing of any petition or proceeding by or against Borrower or
any Affiliate Guarantor under the United States Bankruptcy Code,
as amended from time to time, or any other applicable state or
federal law relating to bankruptcy reorganization or other relief
for debtors, or the appointment of a conservator, receiver,
trustee or liquidator of all or a substantial part of the assets
of Borrower or any Affiliate Guarantor;
(g) The use of any funds borrowed from Lender under this Agreement for
any purpose other than as provided in this Agreement;
(h) The filing or commencement of any attachment, sequestration,
garnishment, execution or other action against or with respect to
any of the Collateral with an aggregate value in excess of
$50,000;
(i) The filing or commencement of any attachment, sequestration,
garnishment, execution or other action against or with respect to
any of Borrower's or any Affiliate Guarantor's property not
included within the Collateral if the outcome, pendency or effect
thereof is reasonably expected to result in or cause a Material
Adverse Effect;
(j) Any breach or default in the payment or performance of any
material obligation, or any defined event of default, under the
terms, provisions or conditions of any contract or instrument
pursuant to which Borrower or any Affiliate Guarantor has incurred
any indebtedness or obligation or other liability to any Person,
and the expiration of thirty (30) days from the date of such
breach, default or event of default;
(k) The entry of any judgment against Borrower or any Affiliate
Guarantor in an amount equal to or exceeding $1,000,000;
(l) The dissolution or liquidation of Borrower or any Affiliate
Guarantor, or the taking of any action by the board of directors
or shareholders of Borrower or any Affiliate Guarantor to dissolve
or liquidate;
(m) Any qualification by a certified public accountant relative to any
financial statement delivered to Lender under this Agreement that
is not acceptable to Lender in its discretion.
8.2 Demand Obligations. It is expressly agreed that the enumeration of
Events of Default shall not impair the nature of the Revolving Facility as
being a demand obligation as provided in paragraph 2.3 of this Agreement,
provided, that Lender agrees to provide Borrower with at least fifteen (15)
days prior written notice of intention to make any such demand, provided
further, however, that no such prior written notice shall be required if
any Event of Default is in existence, or in connection with instances
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involving fraud, or if Lender believes that circumstances exist in which
there is a threat or likelihood of material diminution in value of the
Collateral, or any portion thereof.
ARTICLE IX. REMEDIES
9.1 Discretionary Funding. THE REVOLVING FACILITY IS A DISCRETIONARY
LENDING FACILITY AND LENDER SHALL NOT AT ANY TIME BE OBLIGATED TO MAKE
LOANS HEREUNDER. ALL LOAN REQUESTS UNDER THE REVOLVING FACILITY ARE
SUBJECT TO APPROVAL BY LENDER AND MAY BE GRANTED IN WHOLE OR IN PART, OR
DECLINED IN WHOLE OR IN PART, WITHOUT PRIOR NOTICE IN LENDER'S SOLE
DISCRETION, WHETHER OR NOT AN EVENT OF DEFAULT MAY BE IN EXISTENCE.
9.2 Remedies. Should an Event of Default occur at any time, Lender may at
its option take any or all of the following action: (i) commence such
actions against Borrower or any Affiliate Guarantor as may be necessary to
enforce the Obligations, or any part thereof; (ii) take such steps as
Lender may deem appropriate to foreclose and enforce any and all liens and
security interests now or hereafter granted to Lender to secure payment and
performance of the Obligations, or any part thereof; or (iii) exercise and
avail itself of any and all other remedies as may be available under the
Loan Documents or as otherwise may be available according to law. Lender
at all times shall have the rights and remedies of a secured party under
the Code, including, but not limited to, the right to take possession or
enforce direct payment of the Receivables. Lender may demand, collect,
receipt for, settle, compromise adjust, sue for, foreclose or otherwise
realize upon the Collateral as Lender may determine. In taking possession
of any Collateral, Lender is authorized to enter upon any premises owned or
leased by Borrower or any Affiliate Guarantor where any Collateral is
located. At its option, Lender may require Borrower or any Affiliate
Guarantor to assemble the Collateral and make it available to Lender at a
place to be designated by Lender which is reasonably convenient to both
Lender and Borrower or such Affiliate Guarantor. Each of Borrower and the
Affiliate Guarantors agrees that Lender shall be entitled to dispose of any
Collateral on Borrower's or such Affiliate Guarantor's premises. Unless
the Collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, Lender will give
Borrower or any Affiliate Guarantor reasonable notice of the time and place
of any public sale thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. For this purpose, it
is agreed that at least five (5) days notice of the time of sale or other
intended disposition of the Collateral delivered in accordance with
paragraph 10.3 shall be deemed to be reasonable notice in conformity with
the Code. Lender may adjourn or otherwise reschedule any public sale by
announcement at the time and place specified in the notice of such public
sale, and such sale may be made at the time and place as so announced
without necessity of further notice. Lender shall not be obligated to sell
or dispose of any Collateral, notwithstanding any prior notice of intended
disposition. With respect to any instruments or chattel paper at any time
included within the Collateral, Lender shall not have any duty or
obligation to take steps to preserve rights against prior parties. It is
expressly agreed that the enumeration of remedies conditioned upon the
existence of an Event of Default shall not impair the nature of the
Revolving Facility as being a demand obligation as provided in paragraph
2.3 of this Agreement.
9.3 Cash Collateral; Injunctive Relief. All cash proceeds of Collateral
from time to time existing, including, without limitation, collections and
payments of Receivables and cash receipts, if any, for other Collateral,
whether consisting of cash, checks or other similar items, at all times
shall be subject to an express trust for the benefit of Lender. All such
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proceeds shall be subject to Lender's continuing security interests under
this Agreement. Except as may be specifically allowed otherwise by this
Agreement, each of Borrower and the Affiliate Guarantors are expressly
prohibited from using, spending, retaining or otherwise exercising any
dominion over such proceeds. Each of Borrower and the Affiliate Guarantors
acknowledges and agrees that an action for damages against Borrower or any
Affiliate Guarantor for any breach of such prohibitions shall not be an
adequate remedy at law. In the event of any such breach, each of Borrower
and the Affiliate Guarantors agrees to the fullest extent allowed by law
that Lender shall be entitled to injunctive relief to restrain such breach
and require compliance with the requirements of this Agreement.
9.4 Enforcement Costs; Application of Proceeds. Borrower shall pay to
Lender on demand any and all expenses, including legal expenses, reasonable
attorneys' fees, court costs, collection costs and traveling expenses,
incurred or paid by Lender in protecting or enforcing any of its rights
hereunder, including its right to take possession, hold, store, prepare for
sale, sell or otherwise dispose of the Collateral and collect the proceeds
of any Collateral. Until reimbursed or otherwise paid, Lender is hereby
authorized to add all such expenses to the principal amount of the
Obligations. After deducting all of such expenses, any remaining proceeds
of collection or sale of the Collateral shall be applied in payment of the
Obligations in such manner as Lender may determine, and the excess, if any,
shall be disbursed by Lender in accordance with applicable law. Borrower
expressly agrees that it shall remain liable for any deficiency.
9.5 Waiver of Notices. Except as otherwise expressly provided in this
Agreement, each of Borrower and the Affiliate Guarantors expressly waives
presentment, demand, notice of intention to demand, protest and any other
notices of any kind with respect to the Obligations.
9.6 Setoff. Borrower irrevocably authorizes Lender to charge any account
of Borrower maintained with Lender with such amount as may be necessary
from time to time to pay any Obligations. Borrower agrees that Lender
shall have a contractual right to setoff any and all deposits or other sums
at any time credited by or due from Lender to Borrower against any part of
the Obligations. Such right of setoff may be exercised at any time by
Lender without prior notice, irrespective of whether an Event of Default
exists or whether Lender has demanded payment of the Obligations. Upon the
occurrence of an Event of Default and for so long as the same shall remain
in existence and not cured or waived, Lender shall be entitled in its
discretion to hold any such deposits or other sums pending demand for
payment.
9.7 Performance by Lender. Should Borrower or any Affiliate Guarantor fail
to perform any covenant, duty or agreement required by the Loan Documents,
Lender may, at its sole option and election, perform or attempt to perform
same on behalf of such Person at such Person's cost and expense, provided
that Lender shall have no obligation or duty to take any such action. Each
of Borrower and the Affiliate Guarantors agrees to reimburse Lender for
such costs and expenses on demand.
9.8 Non-waiver. Forbearance or indulgence by Lender of any Event of
Default or any other event or condition which is or would be the subject of
a required notice under paragraph 7.10, at any time from time to time,
shall not be deemed a waiver of any rights of Lender under the Loan
Documents. The acceptance by Lender at any time and from time to time of
any partial payment of the Obligations shall not be deemed to be a waiver
of any Event of Default then existing. No delay or omission by Lender in
exercising any right or remedy shall impair such right or remedy, or be
construed as a waiver thereof, nor shall any single or partial exercise of
any such rights or remedies preclude other or further exercise thereof.
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Lender shall not be required or obligated to file suit or otherwise pursue
any other Person for enforcement or collection of any of the Obligations or
to take any action to realize upon any of the Collateral.
9.9 Application of Payments. During the existence of any Event of Default,
all payments and proceeds of Collateral received by Lender shall be applied
to the Obligations in Lender's discretion, and Lender shall have the right
to adjust or reapply in another manner any such payments and proceeds as
Lender may determine in its discretion.
ARTICLE X. MISCELLANEOUS
10.1 Effective date; Termination. This Agreement shall become effective
upon acceptance by Lender, as of the effective date specified in the
introductory paragraph of this Agreement. Subject to all other provisions
of the Loan Documents, the Revolving Facility shall continue in full force
and effect until expiration of the Contract Term. The Revolving Facility
may be terminated as to future transactions (i) by either party as of the
end of the applicable current Contract Term, conditioned upon at least
sixty (60) days prior written notice to the other of such intended
termination, or (ii) by Lender at any time when any Event of Default is in
existence (including any Event of Default arising solely upon Borrower's
failure to pay the Obligations, or any part thereof, upon demand by Lender
as otherwise allowed by this Agreement), in which event all Obligations
shall automatically be and become due and payable in full as of such date.
Notwithstanding any termination or notice of termination, the Obligations
and all rights and remedies of Lender hereunder with respect thereto,
including, without limitation, all rights and remedies with respect to the
Collateral shall remain in full force and effect until the Obligations have
been paid in full.
10.2 Payments. All payments or collections received by Lender after its
internally established time for closing business on any Business Day shall
be deemed received as of the next succeeding Business Day. All payments
shall be made in immediately available funds, at Lender's address specified
in paragraph 1.48. Any payment which is due on a day which is not a
Business Day shall instead be deemed to be due on the next succeeding
Business Day, and interest thereon shall accrue and be payable at the then
applicable rate during the time of such extension.
10.3 Notices. Any consent, approval, notice, request or demand from one
party to another must be made in writing to be effective, and shall be
deemed to have been given on the third Business Day after its deposit in
the United States mail, postage prepaid and properly addressed, by
certified or registered mail, return receipt requested, or on the Business
Day on which it is actually delivered by messenger delivery, telecopy or
other electronic transmission, whichever is earlier. The address of each
party for the purposes hereof is as follows:
Borrower and Affiliate Guarantors:
Outboard Marine Corporation
OMC Aluminum Boat Group, Inc.
OMC Fishing Boat Group, Inc.
OMC Latin America/Caribbean, Inc.
Recreational Boat Group Limited Partnership
100 Sea-Horse Drive
Waukegan, Illinois 60085
Attention: Treasurer
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Telecopy: (847) 689-5661
With a copy to:
Outboard Marine Corporation
OMC Aluminum Boat Group, Inc.
OMC Fishing Boat Group, Inc.
OMC Latin America/Caribbean, Inc.
Recreational Boat Group Limited Partnership
100 Sea-Horse Drive
Waukegan, Illinois 60085
Attention: General Counsel
Telecopy: (847) 689-6246
Lender:
NationsBank of Texas, N.A.
901 Main Street, 6th floor
Dallas, Texas 75202
Attention: BUSINESS CREDIT/Division Manager: URGENT
Telecopy: (214)-508-0480
or such other address as may hereafter be designated and delivered in writing.
10.4 Use of Loan Proceeds. No portion of the proceeds of any loans under
the Revolving Facility shall be used to purchase or carry any "margin
stock" as defined under Regulation "U" of the Board of Governors of the
Federal Reserve System, or to repay or refinance any debt previously
incurred by Borrower or any other Person for such purpose.
10.5 Lender's Records; Account Statements. Lender's records in respect of
loans advanced, accrued interest, payments received and applied and other
matters in respect of calculation of the amount of the Obligations shall be
deemed conclusive absent demonstration of error. All statements of account
rendered by Lender to Borrower relating to principal, accrued interest or
costs owing by Borrower under this Agreement shall be presumed to be
correct and accurate unless, within thirty (30) days after receipt thereof,
Borrower shall notify Lender in writing of any claimed error therein.
10.6 Indemnity. EACH OF BORROWER AND THE AFFILIATE GUARANTORS HEREBY
INDEMNIFIES AND AGREES TO HOLD HARMLESS AND DEFEND ALL INDEMNIFIED PERSONS
FROM AND AGAINST ANY AND ALL INDEMNIFIED CLAIMS. UPON NOTIFICATION AND
DEMAND, EACH OF BORROWER AND THE AFFILIATE GUARANTORS AGREES TO PROVIDE
DEFENSE OF ANY INDEMNIFIED CLAIM AND PAY ALL COSTS AND EXPENSES OF COUNSEL
SELECTED BY ANY INDEMNIFIED PERSON IN RESPECT THEREOF. ANY INDEMNIFIED
PERSON AGAINST WHOM ANY INDEMNIFIED CLAIM MAY BE ASSERTED RESERVES THE
RIGHT TO SETTLE OR COMPROMISE ANY SUCH INDEMNIFIED CLAIM AS SUCH
INDEMNIFIED PERSON MAY DETERMINE IN ITS/HIS/HER SOLE DISCRETION, AND THE
OBLIGATIONS OF SUCH INDEMNIFIED PERSON, IF ANY, PURSUANT TO ANY SUCH
SETTLEMENT OR COMPROMISE SHALL BE DEEMED INCLUDED WITHIN THE INDEMNIFIED
CLAIMS. THE INDEMNIFICATION PROVIDED FOR IN THIS PARAGRAPH SHALL SURVIVE
ANY TERMINATION OF THIS AGREEMENT AND SHALL CONTINUE FOR THE BENEFIT OF ALL
INDEMNIFIED PERSONS. EXCEPT AS SPECIFICALLY PROVIDED IN THIS PARAGRAPH,
EACH OF BORROWER AND THE AFFILIATE GUARANTORS WAIVES ALL NOTICES FROM ANY
INDEMNIFIED PERSON.
10.7 Non-applicability of Chapter 15 of Texas Credit Code. Chapter 15 of
the Texas Credit Code shall not be applicable to this Agreement or the
Revolving Facility.
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10.8 Judgment Interest. It is agreed that any judgement entered by a court
in favor of Lender against Borrower or any Affiliate Guarantor for payment
of the Obligations, or any part thereof, shall provide for post-judgement
interest on the amount thereof at a rate equal to the Maximum Rate.
10.9 Interest Limitation. In no contingency or event whatsoever shall the
amount of interest under the Loan Documents paid by Borrower, received by
Lender, agreed to be paid by Borrower, or requested or demanded to be paid
by Lender, exceed the Maximum Rate. In the event any such sums paid to
Lender by Borrower would exceed the Maximum Rate, Lender shall
automatically apply such excess to any unpaid amount of the Obligations or,
if the amount of such excess exceeds said unpaid amount, such excess shall
be paid to Borrower. All sums paid, or agreed to be paid, by Borrower
which are or hereafter may be construed to be compensation for the use,
forbearance or detention of money shall be amortized, prorated, spread and
allocated in respect of the Obligations throughout the full term of this
Agreement until the Obligations are paid in full. Notwithstanding any
provisions contained in the Loan Documents, or in the Revolving Note or
other related documents executed pursuant hereto, Lender shall never be
entitled to receive, collect or apply as interest any amount in excess of
the Maximum Rate and, in the event Lender ever receives, collects or
applies any amount in respect of Borrower that otherwise would be in excess
of the Maximum Rate, such amount shall automatically be deemed to be
applied in reduction of the unpaid principal balance of the Obligations
and, if such principal balance is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest
paid or payable under any specific contingency exceeds the Maximum Rate,
Borrower and Lender shall, to the maximum extent permitted under applicable
law, (i) characterize any non-principal payment as a standby fee,
commitment fee, prepayment charge, delinquency charge or reimbursement for
a third-party expense rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) amortize, prorate, allocate
and spread in equal parts throughout the entire period during which the
Obligations were outstanding the total amount of interest at any time
contracted for, charged or received. Nothing herein contained shall be
construed or so operate as to require Borrower to pay any interest, fees,
costs or charges greater than is permitted by applicable law. Subject to
the foregoing, Borrower hereby agrees that the actual effective rate of
interest from time to time existing with respect to loans made by Lender to
Borrower, including all amounts agreed to by Borrower or charged or
received by Lender, which may be deemed to be interest under applicable
law, shall be deemed to be a rate which is agreed to and stipulated by
Borrower and Lender in accordance with applicable law.
10.10 Continuing Rights of Lender in respect of Obligations. In the event
any amount from time to time applied in reduction of the Obligations is
subsequently set aside, avoided, declared invalid or recovered by Borrower,
any Affiliate Guarantor or any trustee or in bankruptcy, or in the event
Lender is otherwise required to refund or repay any such amount pursuant to
any applicable law, then the Obligations shall automatically be deemed to
be revived and increased to the extent of such amount and the same shall
continue to be secured by the Collateral as if such amount had not been so
applied.
10.11 Fees, Costs and Expenses. Borrower agrees to pay all costs and
expenses incurred by Lender in connection with the Loan Documents,
including, without limitation: (i) negotiation, preparation and closing of
the Loan Documents, including appraisal fees, reasonable attorneys fees and
disbursements, search fees, filing and recording fees, (ii) ongoing
administration of the Loan Documents, including, without limitation, fees
and costs incurred in consultation with attorneys, accountants or
appraisers or in connection with any factual investigation, (iii)
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negotiation, preparation and closing of any amendment, waiver or consent
relating to the Loan Documents, including appraisal fees, reasonable
attorneys fees and disbursements, search fees, filing and recording fees,
and (iv) enforcing any provision of the Loan Documents, collecting the
Obligations, exercising any rights or remedies or pursuing or defending any
claim arising out of, or in any way relating to the Loan Documents,
including, without limitation, fees and costs of attorneys, experts or
other consultants retained by Lender in connection therewith and any other
fees pursuant to paragraph 9.4. Borrower will pay any applicable stamp,
registration, recordation and similar taxes, fees and charges in respect of
the Collateral or perfection or maintenance of Lender's rights under the
Loan Documents, and agrees to indemnify Lender against any liabilities
resulting from any delay, deferral or omission in payment of any such
taxes, fees or charges. All fees, costs and expenses for which Borrower is
obligated under the Loan Documents shall be payable to Lender on demand.
At Lender's option, the amount of such fees, costs and expenses may be
deducted from the proceeds of any loan hereunder or added to the unpaid
principal due by Borrower under the Revolving Facility, in which event such
fees, costs and expenses will be deemed paid and the amount thereof shall
be treated as a loan under the Revolving Facility.
10.12 Acceptance and Performance. This Agreement shall become effective
only upon acceptance by Lender at its offices in Dallas, Dallas County,
Texas. The Obligations are payable at Lender's offices in Dallas, Dallas
County, Texas. Borrower and Lender each agrees that Dallas County, Texas
shall be the exclusive venue for litigation of any dispute or claim arising
under or relating to the Loan Documents, and that such county is a
convenient forum in which to decide any such dispute. Borrower and Lender
each consents to the personal jurisdiction of the state and federal courts
located in Dallas County, Texas for the litigation of any such dispute or
claim.
10.13 Obligations. Lender's rights in respect of the Obligations shall not
be impaired by reason that the amount thereof at any time exceeds any
stated maximum or other limitation provided herein.
10.14 Waiver of Trial by Jury. THE PARTIES HERETO AGREE THAT NEITHER PARTY
SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN THEM
CONCERNING THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION
THEREWITH, IN EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY
BEING EXPRESSLY WAIVED BY LENDER, BORROWER AND THE AFFILIATE GUARANTORS.
LENDER, BORROWER AND THE AFFILIATE GUARANTORS EACH ACKNOWLEDGES THAT SUCH
WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE
RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF ADVICE OF
COUNSEL OF ITS CHOOSING.
10.15 Copies Valid as Financing Statements. A carbon, photographic or
other reproduction, including photocopy, telecopy or electronic
transmission, of this Agreement or any financing statement shall be
sufficient as a financing statement.
10.16 Governing Law. This Agreement, and all documents and instruments
executed in connection herewith, shall be governed by and construed
according to the laws of the State of Texas, provided, that to the extent
federal law would allow a higher rate of interest than would be allowed by
the laws of the State of Texas, then with respect to the provisions of any
law with purport to limit the amount of interest that may be contracted
for, charged or received in connection with any of the Obligations, such
federal law shall apply.
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10.17 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof, and
may be modified or amended only by an instrument in writing executed by an
authorized officer of each party hereto.
10.18 Parties Bound. This Agreement shall be binding upon and inure to the
benefit of Borrower, the Affiliate Guarantors and Lender, and their
respective successors in interest and assigns. Neither Borrower nor any
Affiliate Guarantor may assign any right, power, duty or obligation under
this Agreement, or any document or instrument executed in connection
herewith, without the prior written consent of Lender. This Agreement is
intended for the benefit of Borrower and Lender, and their respective
successors in interest and assigns only, and may not be relied upon by any
other Person.
10.19 Accounting Terms. Except as otherwise specifically provided herein,
all accounting and financial terms used herein shall be determined in
accordance with GAAP.
10.20 Exhibits. All exhibits referenced herein, and attached hereto, are
incorporated in this Agreement and made a part hereof for all purposes.
10.21 Cumulative Rights. All rights and remedies of Lender under the Loan
Documents are cumulative, and are in addition to rights and remedies
available to Lender by law. Such rights and remedies may be exercised
concurrently or successively, at such times as Lender may determine in its
discretion. Borrower and the Affiliate Guarantors waive any right to
require marshaling of assets.
10.22 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future laws
effective during the Contract Term, such provisions shall be fully
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of
this Agreement. In such case, the remaining provisions of the Agreement
shall remain in full force and effect and shall not be effected thereby.
10.23 Multiple Counterparts. This Agreement may be executed simultaneously
in one or more multiple originals, each of which shall be deemed an
original, but all of which together shall constitute one and the same
Agreement. A facsimile or photocopy of an executed counterpart of this
Agreement shall be sufficient to bind the party or parties whose
signature(s) appear thereon.
10.24 Survival. All covenants, agreements, representations, and warranties
made by Borrower or any Affiliate Guarantor herein shall survive the
execution, delivery and closing of this Agreement, and all documents
executed in connection herewith, and shall not be affected by any
investigation made by any party.
10.25 Interpretation. Standards of reasonableness or requirements of
similar import, and the conduct of Borrower, any Affiliate Guarantor or
Lender in connection with the Loan Documents, shall be measured according
to applicable standards prescribed by the Code.
10.26 Express Waivers in respect of Cross-Collateralization and Cross
Guaranties. In connection with the matters provided in paragraph 4.13,
each Affiliate Guarantor agrees as follows:
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(a) Each Affiliate Guarantor hereby waives: (i) notice of acceptance
of this Agreement; (ii) notice of any loans or other financial
accommodations made or extended under the Loan Documents or the
creation or existence of any Obligations; (iii) notice of the
amount of the Obligations; subject, however, to each Affiliate
Guarantor's right to make inquiry of Lender to ascertain the
amount of the Obligations at any reasonable time; (iv) notice of
any adverse change in the financial condition of any other
Affiliate Guarantor or of any other fact that might increase any
Affiliate Guarantor's risk with respect to such other Affiliate
Guarantor under this Agreement; (v) notice of presentment for
payment, demand, protest and notice thereof as to any promissory
notes or other instruments among the Loan Documents; and (vii) all
other notices (except if such notice is specifically required to
be given to an Affiliate Guarantor hereunder or under any of the
Loan Documents to which such Affiliate Guarantor is a party) and
demands to which such Affiliate Guarantor might otherwise be
entitled.
(b) Each Affiliate Guarantor hereby waives the right by statute or
otherwise to require Lender to institute suit against Borrower or
any other Affiliate Guarantor or to exhaust any rights and
remedies which Lender has or may have against Borrower or any
other Affiliate Guarantor. Each Affiliate Guarantor further
waives any defense arising by reason of any disability or other
defense of Borrower or any other Affiliate Guarantor (other than
the defense that the Obligations shall have been fully and finally
performed and indefeasibly paid) or by reason of the cessation
from any cause whatsoever of the liability of any such Affiliate
Guarantor in respect thereof.
(c) Each Affiliate Guarantor hereby waives and agrees not to assert
against Lender: (i) any defense (legal or equitable), set-off,
counterclaim or claim which such Affiliate Guarantor may now or at
any time hereafter have against Borrower or any other Affiliate
Guarantor or any other party liable to Lender; (ii) any defense,
set-off, counterclaim or claim of any kind or nature available to
Borrower or any other Affiliate Guarantor against Lender, arising
directly or indirectly from the present or future lack of
perfection, sufficiency, validity or enforceability of the
Obligations or any security therefor; (iii) any right or defense
arising by reason of any claim or defense based upon an election
of remedies by Lender under any applicable law; (iv) the benefit
of any statute of limitations affecting Borrower or any other
Affiliate Guarantor's liability hereunder.
(d) In addition to the foregoing waivers, each Affiliate Guarantor
hereby waives outright and absolutely, any right of subrogation
such Affiliate Guarantor has or may have against Borrower or any
other Affiliate Guarantor with respect to the Obligations. In
addition, each Affiliate Guarantor hereby waives any right to
proceed against Borrower or any other Affiliate Guarantor, now or
hereafter, for contribution, indemnity, reimbursement and any
other suretyship rights and claims, whether direct or indirect,
liquidated or contingent, whether arising under express or implied
contract or by operation of law, which such Affiliate Guarantor
may now have or hereafter have as against Borrower or any such
other Affiliate Guarantor with respect to the Obligations. Each
Affiliate Guarantor also hereby waives any rights to recourse to
or with respect to any asset of Borrower or any other Affiliate
Guarantor. Each Affiliate Guarantor agrees that in light of the
immediately foregoing waivers, the execution of this Agreement
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shall not be deemed to make such Affiliate Guarantor a "creditor"
of Borrower or any other Affiliate Guarantor, and that for
purposes of Sections 547 and 550 of the Bankruptcy Code such
Affiliate Guarantor shall not be deemed a "creditor" of Borrower
or any other Affiliate Guarantor.
(e) Each Affiliate Guarantor consents and agrees that, without notice
to or by such Affiliate Guarantor and without affecting or
impairing the obligations of such Affiliate Guarantor hereunder,
Lender may, by action or inaction: (i) compromise, settle, extend
the duration or the time for the payment of, or discharge the
performance of, or may refuse to or otherwise not enforce the Loan
Documents; (ii) release all or any one or more parties to any one
or more of the Loan Documents or grant other indulgences to
Borrower or any other Affiliate Guarantor in respect thereof;
(iii) amend or modify in any manner and at any time (or from time
to time) any of the Loan Documents; or (iv) release or substitute
any other guarantor, if any, of the Obligations, or enforce,
exchange, release or waive any security for the Obligations or any
other guaranty of the Obligations, or any portion thereof.
(f) Lender shall have the right to seek recourse against each
Affiliate Guarantor to the fullest extent provided for herein, and
no election by Lender to proceed in one form of action or
proceeding, or against any party, or on any obligation, shall
constitute a waiver of Lender's right to proceed in any other form
of action or proceeding or against other parties unless Lender has
expressly waived such right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding
by Lender under any document or instrument evidencing the
Obligations shall serve to diminish the liability of each
Affiliate Guarantor under this Agreement except to the extent that
Lender finally and unconditionally shall have realized
indefeasible payment by such action or proceeding.
(g) Each Affiliate Guarantor represents and warrants to Lender that
such Affiliate Guarantor is currently informed of the financial
condition of Borrower and all other Affiliate Guarantors and of
all other circumstances which a diligent inquiry would reveal and
which bear upon the risk of nonpayment of the Obligations. Each
Affiliate Guarantor further represents and warrants to Lender that
such Affiliate Guarantor has read and understands the terms and
conditions of the Loan Documents. Each Affiliate Guarantor hereby
covenants that it will continue to keep informed of the financial
condition of Borrower and all other Affiliate Guarantors and of
all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Obligations.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the effective date specified in the introductory
paragraph.
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BORROWER:
OUTBOARD MARINE CORPORATION
By: ANDREW P. HINES
Name: Andrew P/ Hines
Title: Executive Vice President and
Chief Financial Officer
By: THOMAS G. GOODMAN
Name: Thomas G. Goodman
Title: Treasurer
AFFILIATE GUARANTORS:
OMC ALUMINUM BOAT GROUP, INC.
By: GORDON G. REPP
Name: Gordon G. Repp
Title: Assistant Secretary and Treasurer
OMC FISHING BOAT GROUP, INC.
By: GORDON G. REPP
Name: Gordon G. Repp
Title: Assistant Secretary and Treasurer
OMC LATIN AMERICA/CARIBBEAN, INC.
By: GORDON G. REPP
Name: Gordon G. Repp
Title: Assistant Secretary and Treasurer
RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP
By: OMC Recreational Boat Group, Inc.,
General Partner
By: GORDON G. REPP
Name: Gordon G. Repp
Title: Assistant Secretary and Treasurer
LENDER:
NATIONSBANK OF TEXAS, N.A.
By: JOSEPH R. LEHRER
Name: Joseph r. Lehrer
Title: Vice President
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<PAGE> 151
EXHIBIT 10 (L)
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("First Amendment") dated as of
September 10, 1997 by and among GREENMARINE ACQUISITION CORP. (the "Borrower")
and AMERICAN ANNUITY GROUP, INC., a Delaware corporation, and GREAT AMERICAN
INSURANCE COMPANY, and Ohio corporation (each a "Lender" and collectively the
"Lenders".)
WHEREAS, Borrower and Lenders have entered into a Credit Agreement dated as
of August 13, 1997 (the "Credit Agreement") which they now wish to amend in
accordance with the terms and provisions hereof;
NOW, THEREFORE, the parties hereto agree to amend the Credit Agreement upon
such terms and conditions as follows:
1. Capitalized Terms. All capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement unless the context hereof
requires otherwise. Any definitions as capitalized terms set forth herein
shall be deemed incorporated into the Credit Agreement as amended by this First
Amendment.
2. Definitions. Section 1.2 of the Credit Agreement is hereby amended to
add the following definitions to read in their entirety as follows:
"Tender Offer/Merger Expenses" means costs and expenses in connection
with the Tender Offer incurred by Acquisition, break-up fees, golden
parachute payments and similar expenses incurred by OMC or New OMC
arising after a change of control in connection with either the Merger
or the Tender Offer, and attorney fees, brokers' and finders' fees
incurred by or on behalf of Acquisition in connection with either the
Tender Offer or the Merger."
3. Conditions Precedent. Section 3.1(j) of the Credit Agreement is hereby
amended to change the words "to pay expenses of the Tender Offer" and the end
thereof to read "to pay Tender Offer/Merger Expenses, up to an amount, in the
aggregate, not to exceed $27,500,000."
4. Tender Offer/Merger Expenses. Article 6 of the Credit Agreement is
hereby amended to add a new Section 6.13 to read in its entirety as follows:
"Section 6.13 Prepayment. While any Loan is outstanding, to the extent
that either (i) amounts expended by Borrower or OMC for Tender Offer/Merger
Expenses exceed $27,500,000 or (ii) amounts expended by OMC or New OMC to
"fund rabbi trusts" upon a change of control of OMC exceed $14,600,000,
then in each such case Borrower shall have received, after the funding of
the Phase I Loans, cash equity in the amount of such required prepayment."
5. Reaffirmation of Covenants, Warranties and Representations. Borrower
hereby agrees and covenants that all representations and warranties in the
Credit Agreement, including without limitation all of those warranties and
representations set forth in Article 4, are true and accurate as of the date
hereof. Borrower further reaffirms all covenants in the Credit Agreement, as
if fully set forth herein, except to the extent modified by this First
Amendment.
6. Miscellaneous.
(a) All of the terms, conditions and provisions of the Agreement not
herein modified shall remain in full force and effect. In the event a
term, condition or provision of the Agreement conflicts with a term,
condition or provision of this First Amendment, the latter shall govern.
(b) This First Amendment shall be governed by and shall be construed and
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<PAGE> 152
interpreted in accordance with the laws of the State of Ohio.
(c) This First Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
(d) This First Amendment may be executed in several counterparts, each
of which shall constitute an original, but all which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, this First Amendment has been duly executed and
delivered by or on behalf of each of the parties as of the day and in the year
first above written.
GREENMARINE ACQUISITION CORP.
BY: ALFRED D. KINGSLEY
------------------
Alfred D. Kingsley
AMERICAN ANNUITY GROUP, INC.
BY: MARK F. MUETHING
----------------
Mark F. Muething
Senior Vice President
GREAT AMERICAN INSURANCE COMPANY
BY: EVE CUTLER ROSEN
----------------
Eve Cutler Rosen
Vice President & Assistant
Secretary
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<PAGE> 153
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Second Amendment"), dated as of
September 15, 1997, by and among GREENMARINE ACQUISITION CORP., a Delaware
corporation ("Acquisition"), and AMERICAN ANNUITY GROUP, INC., an Ohio
corporation (each a "Lender", and collectively, the "Lenders").
WHEREAS, Acquisition and Lenders have entered into a Credit Agreement,
dated as of August 13, 1997, as amended (the "Credit Agreement"), which they
now wish to amend in accordance with the terms and provisions hereof;
NOW, THEREFORE, the parties hereto agree to amend the Credit Agreement as
follows:
1. Section 3.1. Section 3.1(j) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
(j) Stockholder Equity. Parent shall own beneficially or of record, or
shall have transferred to Acquisition, at least Two Million (2,000,000)
shares of OMC. In addition, Acquisition shall have received additional
stockholders' equity equal to the Minimum Equity Requirement, all of the
cash portion of which shall have been used to purchase or will be used
simultaneously with the initial funding of the Loan to purchase shares
of OMC pursuant to the Tender Offer and to pay expenses of the Tender
Offer.
2. Section 4.1. Section 4.1(d) of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
(d) Other than shares of Capital Stock of OMC acquired or to be acquired
pursuant to the Tender Offer or from Parent, Acquisition does not own or
hold of record (whether directly or indirectly) any shares of any class
of the capital stock of any corporation, nor does Acquisition own or
hold (whether directly or indirectly) any legal and/or beneficial equity
interest in any partnership, business trust or joint venture or in any
other unincorporated trade or business enterprise.
3. Miscellaneous.
(a) All of the terms, conditions and provisions of the Credit Agreement
not herein modified shall remain in full force and effect. In the event
a term, condition or provision of the Credit Agreement conflicts with a
term, condition or provision of this Second Amendment, the latter shall
govern.
(b) This Second Amendment shall be governed by and shall be construed
and interpreted in accordance with the laws of the State of Ohio.
(c) This Second Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
(d) This Second Amendment may be executed in several counterparts, each
of which shall constitute an original, but all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, this Second Amendment has been duly executed and
delivered by or on behalf of the parties as of the date first above written.
GREENMARINE ACQUISITION CORP.
BY: GARY K. DUBERSTEIN
------------------
Gary K. Duberstein
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<PAGE> 154
AMERICAN ANNUITY GROUP, INC.
BY: MARK F. MUETHING
----------------
Mark F. Muething
Senior Vice President
GREAT AMERICAN INSURANCE COMPANY
BY: EVE CUTLER ROSEN
----------------
Eve Cutler Rosen
Vice President & Assistant
Secretary
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<PAGE> 155
THIS THIRD AMENDMENT TO CREDIT AGREEMENT ("Third Amendment"), dated as of
November 10, 1997, by and among OUTBOARD MARINE CORPORATION, a Delaware
corporation ("OMC") and AMERICAN ANNUITY GROUP, INC., a Delaware corporation,
and GREAT AMERICAN INSURANCE COMPANY, an Ohio corporation (each a "Lender", and
collectively, the "Lenders").
WHEREAS, Greenmarine Acquisition Corp., a Delaware corporation
("Acquisition"), and Lenders entered into a Credit Agreement, dated as of
August 13, 1997, as amended (the "Credit Agreement");
WHEREAS, Acquisition was merged with and into OMC pursuant to Section 283
of the General Corporation Law of the State of Delaware on September 30, 1997
in accordance with, and upon the filing with the Secretary of State of Delaware
of, a Certificate of Ownership and Merger of Acquisition with and into OMC;
WHEREAS, OMC executed an Adoption Agreement, dated September 30, 1997,
adopting the Credit Agreement as the successor to Acquisition;
WHEREAS, OMC and the Lenders now wish to amend the Credit Agreement in
accordance with the terms and provisions hereof;
NOW, THEREFORE, the parties hereto agree to amend the Credit Agreement as
follows:
1. Section 6.7. Section 6.7(f) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
(f) Liens of OMC existing at the Merger or Liens securing any
replacement bank credit facility referred to in Section 6.10 hereof as
long as such Liens are of the type and extent provided for in the Bank
Credit Agreement; and
2. Section 6.8. Section 6.8 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
Section 6.8 No Additional Negative Pledges. Borrower will not create
any prohibition or restriction (including any agreement to provide equal
or ratable security to any other Person in the event a Lien is granted
to or for the benefit of the Lenders) on the creation or existence of
any Lien upon the assets of Borrower; provided, however, that this
limitation shall not prohibit the agreement by the Borrower not to
permit Liens on collateral for the replacement bank credit facility
referred to in Section 6.10 hereof other than in favor of such lender.
3. Miscellaneous.
(a) All of the terms, conditions and provisions of the Credit Agreement
not herein modified shall remain in full force and effect. In the event
a term, condition or provision of the Credit Agreement conflicts with a
term, condition or provision of this Third Amendment, the latter shall
govern.
(b) This Third Amendment shall be governed by and shall be construed and
interpreted in accordance with the laws of the State of Ohio.
(c) This Third Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
(d) This Third Amendment may be executed in several counterparts, each
of which shall constitute an original, but all of which together shall
constitute one and the same agreement.
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<PAGE> 156
IN WITNESS WHEREOF, this Third Amendment has been duly executed and
delivered by or on behalf of the parties as of the date first above written.
OUTBOARD MARINE CORPORATION
By: THOMAS G. GOODMAN
-----------------
Thomas G. Goodman
Treasurer
AMERICAN ANNUITY GROUP, INC.
BY: MARK F. MUETHING
----------------
Mark F. Muething
Senior Vice President
GREAT AMERICAN INSURANCE COMPANY
BY: EVE CUTLER ROSEN
----------------
Eve Cutler Rosen
Vice President & Assistant
Secretary
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<PAGE> 157
EXHIBIT 11
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In millions except amounts per share)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
September 30 September 30
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
Net Earnings (Loss) $ (52.4) $ 7.6 $ (79.1) $ (7.3)
======= ======= ======= =======
Weighted Average Number of Shares 20.3 20.1 20.2 20.1
Common Stock Equivalents * 0.1 * *
------- ------- ------- -------
Average Shares Outstanding 20.3 20.2 20.2 20.1
======= ======= ======= =======
Primary Earnings (Loss) Per Share $ (2.58) $ 0.38 $ (3.91) $ (0.36)
======= ======= ======= =======
Fully Diluted Earnings per Share:
Net Earnings (Loss) $ (52.4) $ 7.6 $ (79.1) $ (7.3)
Add: After-Tax Interest and
Related Expense Amortiza-
tion on 7% Convertible
Subordinated Debentures 0.8 0.8 3.3 3.3
------- ------- ------- -------
Net Earnings (Loss) Adjusted $ (51.6) $ 8.4 $ (75.8) $ (4.0)
======= ======= ======= =======
Weighted Average Number of Shares 20.2 20.1 20.1 20.1
Common Stock Equivalents (Stock Options) 0.1 0.1 0.1 0.1
Weighted Average Common
Shares Assuming
Conversion of 7% Convertible
Subordinated Debentures 3.4 3.4 3.4 3.4
------- ------- ------- -------
Average Shares Outstanding 23.7 23.6 23.6 23.6
======= ======= ======= =======
Fully Diluted Earnings Per Share $ ** $ 0.36 $ ** $ **
======= ======= ======= =======
* The computation of primary earnings per share of common stock is computed without common
stock equivalents because inclusion of common stock equivalents is antidilutive.
** The computation of fully diluted earnings per share of common stock is antidilutive;
therefore, the amount reported for primary and fully diluted earnings per share is
the same.
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</TABLE>
<PAGE> 158
EXHIBIT 12
Outboard Marine Corporation and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
(In millions except ratios)
Pre-Merger Company
----------------------------------------------------
Years ended September 30 1997 1996 1995 1994 1993
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Earnings (loss):
Earnings (loss) before provision for
income taxes $ (76.3) $ (10.4) $ 60.8 $ 53.4 $ (159.9)
Interest expense 16.2 12.3 23.1 15.1 19.8
Interest portion of rent expense 1.1 1.2 1.3 1.3 1.0
------- ------- ------- ------- --------
Earnings (loss) $ (59.0) $ 3.1 $ 85.2 $ 69.8 $ (139.1)
======= ======= ======= ======= ========
Fixed Charges:
Interest expense 16.2 12.3 23.1 15.1 19.8
Interest portion of rent expense 1.1 1.2 1.3 1.3 1.0
------- ------- ------- ------- --------
Fixed Charges $ 17.3 $ 13.5 $ 24.4 $ 16.4 $ 20.8
======= ======= ======= ======= ========
Ratio of earnings to fixed charges 0.2 3.5 4.3
======= ======= =======
Excess of fixed charges over earnings $ 76.3 $ 159.9
======= ========
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</TABLE>
<PAGE> 159
EXHIBIT 21
Parent Corporation
------------------
Jurisdiction of
Subsidiary Incorporation Ownership
---------------------------------- -------------- ---------
Outboard Marine Corporation Delaware Closely
Held
Domestic Subsidiaries
---------------------
(As of January 12, 1998)
Jurisdiction of
Subsidiary Incorporation Ownership
---------------------------------- -------------- ---------
OMC Aluminum Boat Group, Inc. Delaware 100%
Syracuse Transportation, Inc. Indiana 100%
OMC & Co. Delaware 100%
OMC Development Inc. Delaware 100%
OMC Distributors, Inc.-San Francisco California 100%
OMC Europe, Inc. Delaware 100%
OMC Fishing Boat Group, Inc. Delaware 100%
OMC Holdings, Inc. Delaware 100%
1
RBG LEASING L. P. Delaware 51%
OMC Latin America/Caribbean, Inc. Delaware 100%
OMC Partners, Inc. Delaware 100%
OMC Recreational Boat Group, Inc. Delaware 100%
Recreational Boat Group Limited 2
Partnership Delaware 62.2%
OMC Venture, Inc. Delaware 100%
OMCEMA, Inc. Delaware 100%
Outboard Marine Holdings, Inc. Delaware 100%
Outboard Marine Venture Capital
Corporation Delaware 100%
-----------------------------------------------------------------
1
51% owned by OMC Holdings, Inc. and 49% owned by Spinnaker Investments, Inc.
a nonaffliated company
2
Outboard Marine Corporation owns the other 37.8%
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<PAGE> 160
International Subsidiaries
--------------------------
Jurisdiction of
Subsidiary and Address Incorporation Ownership
---------------------- -------------- ---------
OMC Europe, V.O.F. Belgium 100%
OMC Holdings France, S.N.C. France 100%
OMC France, S.N.C. France 100%
OMC Power Boats S.A.R.L. France France 100%
OMC Norge AS Norway 100%
OMC Outboard Marine
Deutschland G.M.B.H. Germany 100%
OMC Sverige Aktiebolag Sweden 100%
Outboard Marine Corporation
Asia Limited Hong Kong 100%
Outboard Marine Corporation
(Australia), PTY, Ltd. Australia 100%
Outboard Marine Corporation
of Canada, Ltd. Ontario 100%
Altra Marine Products, Inc. Quebec 100%
Outboard Marine de Mexico,
S.A. de C.V. Mexico 100%
Outboard Marine GmbH Germany 100%
3
FICHT GmbH & Co. KG Germany 51%
Outboard Marine Motors Amazonia LTDA Brazil 100%
Outboard Marine Nederland B.V. Netherlands 100%
-----------------------------------------------------------------
3
51% owned by Outboard Marine G.M.B.H. & 49% owned by members of the Ficht
family.
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<PAGE> 161
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports incorporated by reference and included in this Form 10-K, into the
Company's previously filed Registration Statement on Form S-3 (File Nos.
33-12759 and 33-47354).
BY: ARTHUR ANDERSEN LLP
-------------------
Arthur Andersen LLP
Chicago, Illinois
January 12, 1998
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