<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
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 (IRS EmployerIdentification No.)
ofincorporation or organization)
100 Sea Horse Drive 60085
Waukegan, Illinois (Zip Code)
(Address of principal executive
offices)
847-689-6200
Registrant's telephone number, including area code:
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Number of shares of Common Stock of $0.01 par value outstanding at March 31,
2000 was 20,439,531 shares.
- --------------------------------------------------------------------------------
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<PAGE>
OUTBOARD MARINE CORPORATION
FORM 10-Q PART I, ITEM 1
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
March 31, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial statements required by this form:
Condensed Statements of Consolidated Operations and Comprehensive
Income................................................................. 3
Condensed Statements of Consolidated Financial Position................. 4
Condensed Statements of Consolidated Cash Flows......................... 5
Notes to Condensed Consolidated Financial Statements.................... 6
</TABLE>
2
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
2000 1999
--------- ---------
(Dollars in
millions except
amounts per share)
<S> <C> <C>
Net sales................................................ $ 269.1 $ 255.2
Costs of goods sold...................................... 225.7 201.9
--------- ---------
Gross earnings......................................... 43.4 53.3
Selling, general, and administrative expense............. 64.4 57.1
--------- ---------
Loss from operations................................... (21.0) (3.8)
Interest expense......................................... 8.3 8.2
Other income, net........................................ (0.7) (1.2)
--------- ---------
Loss before provision for income taxes................. (28.6) (10.8)
Provision for income taxes............................... 1.1 1.1
--------- ---------
Net loss before preferred dividends.................... (29.7) (11.9)
Preferred dividends...................................... 1.8 --
--------- ---------
Net loss of common shareholders........................ $ (31.5) $ (11.9)
========= =========
Net loss of common shareholders.......................... $ (31.5) $ (11.9)
Other comprehensive expense
Foreign currency translation adjustments............... (1.5) (1.6)
--------- ---------
Other comprehensive expense.......................... (1.5) (1.6)
--------- ---------
Comprehensive loss................................... $ (33.0) $ (13.5)
========= =========
Net loss of common shareholder per share of common stock
Basic.................................................. $ (1.54) $ (0.58)
========= =========
Diluted................................................ $ (1.54) $ (0.58)
========= =========
Average shares of common stock outstanding
Basic ................................................. 20.4 20.4
Diluted................................................ 20.4 20.4
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
(Dollars in millions)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 39.0 $ 25.0
Receivables, net..................................... 142.7 104.9
Inventories, net:
Finished products.................................. 77.4 66.6
Raw material, work in process and service parts.... 117.0 122.0
------- -------
Total inventories................................ 194.4 188.6
Other current assets................................. 20.1 17.2
------- -------
Total current assets............................. 396.2 335.7
Restricted cash........................................ 31.0 30.6
Property, plant and equipment, net..................... 194.2 200.5
Product tooling, net................................... 27.1 29.5
Goodwill, net.......................................... 106.4 107.2
Trademarks, patent and other intangibles, net.......... 79.2 79.3
Other assets........................................... 67.1 65.6
------- -------
Total assets..................................... $ 901.2 $ 848.4
======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Loan payable......................................... $ 68.0 $ 58.0
Accounts payable..................................... 105.2 99.2
Accrued and other.................................... 190.5 183.2
Current maturities of long-term debt................. 7.3 8.4
------- -------
Total current liabilities........................ 371.0 348.8
Long-term debt......................................... 236.4 241.4
Postretirement benefits other than pensions............ 99.1 99.1
Other non-current liabilities.......................... 80.6 78.8
Preferred stock........................................ 30.9 --
Shareholders' investment:
Common stock and capital surplus..................... 313.4 277.5
Accumulated deficit.................................. (220.7) (189.2)
Accumulated other comprehensive income............... (9.5) (8.0)
------- -------
Total shareholders' investment................... 83.2 80.3
------- -------
Total liabilities and shareholders' investment... $ 901.2 $ 848.4
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------- ---
2000 1999
--------- ---------
(Dollars in
millions)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss of common shareholders.................... $ (31.5) $ (11.9)
Adjustments to reconcile net loss of common
shareholders to net cash used for operations:
Depreciation and amortization.................... 13.8 12.3
Changes in current accounts excluding the effects
of noncash transactions:
Increase in receivables........................ (39.0) (20.7)
Increase in inventories........................ (7.1) (1.3)
Increase in other current assets............... (3.0) (0.2)
Increase in accounts payable, accrued
liabilities and income taxes.................. 14.1 1.9
Other, net..................................... 0.8 5.2
--------- ---------
Net cash used for operating activities....... (51.9) (14.7)
Cash Flows from Investing Activities:
Expenditures for plant and equipment, and tooling.. (6.6) (11.1)
Proceeds from sale of plant and equipment.......... 4.6 0.2
--------- ---------
Net cash used for investing activities....... (2.0) (10.9)
Cash Flows from Financing Activities:
Net increase in short-term debt.................... 10.0 47.6
Payments of long-term debt, including current
maturities........................................ (6.1) (10.1)
Proceeds from issuance of preferred stock and
warrants.......................................... 65.0 --
Restricted cash.................................... (0.4) (0.3)
Other, net......................................... -- (0.1)
--------- ---------
Net cash provided by financing activities.... 68.5 37.1
Exchange rate effect on cash......................... (0.6) 0.5
--------- ---------
Net increase in cash and cash equivalents............ 14.0 12.0
Cash and cash equivalents at beginning of period..... 25.0 13.6
--------- ---------
Cash and cash equivalents at end of period........... $ 39.0 $ 25.6
========= =========
Supplemental Cash Flows Disclosures:
Interest paid...................................... $ 2.0 $ 2.3
========= =========
Income taxes paid.................................. $ 1.5 $ 0.8
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Unless the context otherwise requires, all references herein to the
"Company" or "OMC" shall mean Outboard Marine Corporation, a Delaware
corporation, and its consolidated subsidiaries. The accompanying unaudited
condensed consolidated financial statements present information in accordance
with generally accepted accounting principles for interim financial information
and have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all information or
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the information furnished
reflects all adjustments necessary for a fair statement of the results of the
interim periods and all such adjustments are of a normal recurring nature.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1999. The 2000 interim results are not
necessarily indicative of the results which may be expected for the remainder
of the year. Certain amounts in 1999 have been reclassified to conform with the
2000 presentation.
2. Short-Term Borrowings
The Company entered into an Amended and Restated Loan and Security
Agreement, effective as of January 6, 1998 (as amended, the "Credit
Agreement"), with a syndicate of lenders for which Bank of America, N.A. is
administrative and collateral agent (the "Agent"). The Credit Agreement, which
is in effect to December 31, 2001, provides a revolving credit facility (the
"Revolving Credit Facility") of up to $150.0 million, subject to borrowing base
limitations, to finance working capital with a $50.0 million sublimit for
letters of credit. The Revolving Credit Facility is secured by a first and only
security interest in all of the Company's existing and hereafter acquired
accounts receivable, inventory, chattel paper, documents, instruments, deposit
accounts, contract rights, patents, trademarks and general intangibles and is
guaranteed by the Company's four principal domestic operating subsidiaries. On
February 1, 2000 the Company entered into an Eighth Amendment to the Amended
and Restated Loan and Security Agreement which among other things (i) increased
the borrowing capacity by increasing intellectual property availability to
$20.0 million and increasing the advance rate for finished goods inventory to
65%, (ii) eliminated tangible net worth, interest coverage, and leverage ratio
covenants, and (iii) established minimum availability requirements, maximum
capital and tooling expenditures, and a minimum earnings before interest,
taxes, depreciation and amortization ("EBITDA") covenant test to reflect
expected operating results. The Company's ability to remain in compliance with
its covenants will depend upon several factors, including its ability to
generate sales and maintain costs at acceptable levels. Factors outside the
Company's control, including but not limited to third party supplier issues,
may also affect the Company's compliance. At March 31, 2000, the Company was in
compliance with the covenants.
3. Contingent Liabilities
The Company is engaged in a 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
6
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 closedown costs associated with discontinued
operations or facilities, including the environmental costs of operation and
maintenance until disposition. At March 31, 2000 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.
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
approximately $33 million for a period not to exceed 18 months from the date of
invoice. The Company resells any repurchased products at a discount. Losses
incurred under this program have not been material. For the three month periods
ended March 31, 2000 and 1999, the Company repurchased approximately $0.3
million and $1.1 million of products, respectively. The Company accrues for
losses which are anticipated in connection with expected repurchases. The
Company does not expect these repurchases to materially affect its results of
operations, financial position, or cash flows.
4. Restructuring Charges
During the fiscal year ended September 30, 1998, the Company finalized a
restructuring plan for the closure of its Milwaukee, WI and Waukegan, IL engine
facilities. The Company recorded a $98.5 million restructuring charge related
to these closures. The Company has outsourced substantially all of the sub-
assembly production previously performed in its Milwaukee facility and
transferred the balance of production to other facilities within the Company.
The Company is still in the process of doing the same for the Waukegan facility
and anticipates substantial completion of such plan by the end of fiscal year
2000.
As of March 31, 2000, the Company has made payments approximating $3.7
million against the restructuring reserve established in fiscal year 1998. The
remaining $20.1 million cash component of the restructuring reserve will be
substantially spent in the remainder of fiscal year 2000 as the plants are
closed and prepared for sale.
As part of its outsourcing efforts, the Company is negotiating with a
potential vendor for the lease of space in the Waukegan facility for the
continued supply of die cast parts. Although there can be no assurance, if the
Company is successful in its negotiations, there may be a reduction of the
employee severance and other costs previously recorded for this facility. The
Company anticipates having more information regarding the negotiations in the
second quarter of 2000.
5. Preferred Stock and Warrants Issuance
On January 28, 2000, the Company sold an aggregate of 650,000 shares of
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), and warrants (the "Warrants") to purchase an aggregate of
5,750,000 shares of its Common Stock, par value $.01 per share (the "Common
Stock"), for an aggregate consideration of $65.0 million in a private placement
transaction with Greenlake Holdings II, LLC and Quantum Industrial Partners,
LDC. Approximately $15.0 million of the Series A Preferred Stock was
7
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
issued in exchange for certain subordinated notes previously issued by the
Company to the purchasers. The Series A Preferred Stock has an initial
liquidation preference of $100 per share and an initial conversion price of $14
per share (in each case, subject to adjustment upon occurrence of certain
events). The Series A Preferred Stock is convertible into Common Stock at any
time. The Series A Preferred Stock has an annual dividend rate of 15% of the
then current liquidation preference, and is entitled to share ratably in any
dividends paid on the Common Stock. Dividends will accrue if not paid in cash,
and the liquidation preference will be increased by the amount of any accrued
but unpaid dividends. The Series A Preferred Stock may be redeemed at any time
after October 1, 2008, upon written request of the holders of at least 75% of
the then outstanding shares. The Company may redeem all outstanding shares of
the Series A Preferred Stock if, at any time, less than 10% of the total Series
A Preferred Stock originally sold on January 28, 2000 remains outstanding. The
Warrants are exercisable at any time until January 28, 2010, at an exercise
price of $.01 per share of Common Stock, payable in cash or in shares of Common
Stock. The Company intends to use the proceeds from the sale of the Series A
Preferred Stock and Warrants for general corporate purposes, including funding
its working capital and making capital expenditures.
Upon issuance of the Series A Preferred Stock and Warrants, the Company
recorded the value of each instrument in the Statement of Consolidated
Financial Position based upon the fair market value of each instrument at the
time of issuance. The fair value per Warrant on the date of issuance using the
Black-Scholes option-pricing model was $6.25 for an aggregate fair value of
$35.9 million. The fair value of the Warrants were estimated on the date of
issuance using the following assumptions: risk-free interest rate of 6.3% and
an expected life of 8.6 years. The fair value of the Series A Preferred Stock
was determined as the difference between the aggregate amount of $65 million
and the value of the Warrants, or $29.1 million. In the three months ended
March 31, 2000, the Company has accrued $1.6 million in preferred dividend
expense and $0.2 million in amortization expense related to the discount on the
preferred stock. These amounts have been recorded in the Company's Statement of
Consolidated Operations and Comprehensive Income as Preferred dividends.
6. Segment Data
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes primarily
corporate staffing expense and amortization expense on the Company's intangible
assets.
<TABLE>
<CAPTION>
Marine
Engines Boats Other Total
------- ------ ----- ------
(Dollars in millions)
<S> <C> <C> <C> <C>
Three Months Ended March 31, 2000
Revenues.................................... $138.5 $130.6 $ -- $269.1
Intersegment revenues....................... 15.1 -- -- 15.1
Earnings (loss) from operations............. (14.6) 1.1 (7.5) (21.0)
Three Months Ended March 31, 1999
Revenues.................................... $140.2 $115.0 $ -- $255.2
Intersegment revenues....................... 19.9 -- -- 19.9
Earnings (loss) from operations............. 0.9 1.2 (5.9) (3.8)
</TABLE>
8
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of loss from operations for combined reportable segments to
consolidated loss before provision for income taxes is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
2000 1999
--------- ---------
(Dollars in
millions)
<S> <C> <C>
Loss from operations for reportable segments.......... $ (21.0) $ (3.8)
Interest expense...................................... 8.3 8.2
Other income, net..................................... (0.7) (1.2)
--------- ---------
Loss before provision for income taxes................ $ (28.6) $ (10.8)
========= =========
</TABLE>
7. Subsequent Events
On May 2, 2000 the Company sold a $15.0 million Subordinated Note (the "15%
Note") and Warrants (the "New Warrants") to purchase 330,000 shares of the
Company's Common Stock, par value $0.01, to Quantum Industrial Partners LDC.
The 15% Note bears an interest rate of 15% and has a maturity date of May 31,
2000, which may be extended for four additional 30 day periods upon 5 days
written notice by the Company. The 15% Note is convertible into shares of the
Company's Series B Convertible Preferred Stock. The New Warrants are
exercisable at any time until May 2, 2010, at an exercise price of $0.01 per
share of Common Stock, payable in cash or in shares of Common Stock.
8. Subsidiary Guarantor Information
On May 21, 1998, the Company issued $160.0 million of 10 3/4% Senior Notes
due 2008 ("Notes"). The Company's payment obligations under the Notes are
guaranteed by certain of the Company's wholly-owned subsidiaries ("Guarantor
Subsidiaries"). Such guarantees are full, unconditional, unsecured and
unsubordinated on a joint and several basis by each of the Guarantor
Subsidiaries. As of and through March 31, 2000, the Guarantor Subsidiaries were
wholly-owned, but not the only wholly-owned, subsidiaries of the Company. The
Credit Agreement and the Indenture governing the Notes contain certain
covenants which, among other things, restrict the ability of the Company and
certain of its subsidiaries to incur additional indebtedness; pay dividends or
make distributions in respect to their capital stock; enter into certain
transactions with shareholders and affiliates; make certain investments and
other restricted payments; create liens; enter into certain sale and leaseback
transactions and sell assets. These covenants are, however, subject to a number
of exceptions and qualifications. Separate financial statements of the
Guarantor Subsidiaries are not presented because management of the Company has
determined that they are not material to investors.
The following condensed consolidating financial data illustrates the
composition of the Company ("Parent Company"), the Guarantor Subsidiaries and
the Company's non-guarantor subsidiaries ("Other Subsidiaries"). Investments in
subsidiaries are accounted for by the Company under the equity method of
accounting for purposes of the supplemental consolidating presentation.
Earnings of subsidiaries are, therefore, reflected in the Company's investment
accounts and earnings. The Company has not allocated goodwill to the Guarantor
Subsidiaries or the other subsidiaries in association with the acquisition by
and merger with Greenmarine.
9
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash
equivalents.......... $ 16.0 $ 0.1 $ 22.9 $ -- $ 39.0
Receivables, net...... 77.5 25.2 40.0 -- 142.7
Intercompany
receivables
(payables)........... (11.2) (2.4) 13.6 -- --
Inventories, net...... 107.1 49.5 40.8 (3.0) 194.4
Other current assets.. 11.8 1.4 6.9 -- 20.1
------ ------ ------ ------- ------
Total current
assets............. 201.2 73.8 124.2 (3.0) 396.2
Restricted cash......... 31.0 -- -- -- 31.0
Property, plant and
equipment, net......... 144.5 32.1 17.6 -- 194.2
Product tooling, net.... 21.9 5.0 0.2 -- 27.1
Goodwill and other
intangibles, net....... 180.8 -- 4.8 -- 185.6
Other assets............ 59.4 0.4 7.3 -- 67.1
Intercompany notes,
net.................... (88.8) -- 88.8 -- --
Investment in
subsidiaries........... 259.2 -- -- (259.2) --
------ ------ ------ ------- ------
Total assets........ $809.2 $111.3 $242.9 $(262.2) $901.2
====== ====== ====== ======= ======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Loan payable.......... $ 68.0 $ -- $ -- $ -- $ 68.0
Accounts payable...... 82.9 15.1 7.2 -- 105.2
Accrued and other..... 136.0 32.6 22.7 (0.8) 190.5
Current maturities of
long-term debt....... 7.0 0.3 -- -- 7.3
------ ------ ------ ------- ------
Total current
liabilities........ 293.9 48.0 29.9 (0.8) 371.0
Long-term debt.......... 234.5 1.9 -- -- 236.4
Other non-current
liabilities............ 164.4 7.7 7.6 -- 179.7
Preferred stock......... 30.9 -- -- -- 30.9
Shareholders'
investment............. 85.5 53.7 205.4 (261.4) 83.2
------ ------ ------ ------- ------
Total liabilities
and shareholders'
investment......... $809.2 $111.3 $242.9 $(262.2) $901.2
====== ====== ====== ======= ======
</TABLE>
10
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents......................... $ 9.3 $ 0.5 $ 15.2 $ -- $ 25.0
Receivables, net.................................. 58.1 16.8 30.0 -- 104.9
Intercompany receivables (payables)............... (34.3) 1.2 33.1 -- --
Inventories, net.................................. 102.6 46.7 41.1 (1.8) 188.6
Other current assets.............................. 9.6 2.0 5.6 -- 17.2
------ ------ ------ ------- ------
Total current assets............................ 145.3 67.2 125.0 (1.8) 335.7
Restricted cash..................................... 30.6 -- -- -- 30.6
Property, plant and equipment, net.................. 150.1 32.4 18.1 (0.1) 200.5
Product tooling..................................... 24.3 5.0 0.2 -- 29.5
Goodwill and other intangibles, net................. 181.3 -- 5.2 -- 186.5
Other assets........................................ 56.0 2.5 7.1 -- 65.6
Intercompany notes, net............................. (88.3) -- 88.3 -- --
Investment in subsidiaries.......................... 256.5 -- -- (256.5) --
------ ------ ------ ------- ------
Total assets.................................... $755.8 $107.1 $243.9 $(258.4) $848.4
====== ====== ====== ======= ======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Loan payable...................................... $ 58.0 $ -- $ -- $ -- $ 58.0
Accounts payable.................................. 73.6 16.4 9.2 -- 99.2
Accrued and other................................. 133.5 29.6 21.7 (1.6) 183.2
Current maturities of long-term debt.............. 8.2 0.2 -- -- 8.4
------ ------ ------ ------- ------
Total current liabilities....................... 273.3 46.2 30.9 (1.6) 348.8
Long-term debt...................................... 239.3 2.1 -- -- 241.4
Other non-current liabilities....................... 162.6 7.7 7.6 -- 177.9
Shareholders' investment............................ 80.6 51.1 205.4 (256.8) 80.3
------ ------ ------ ------- ------
Total liabilities and shareholders' investment.. $755.8 $107.1 $243.9 $(258.4) $848.4
====== ====== ====== ======= ======
</TABLE>
11
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net sales............... $144.5 $132.0 $62.2 $(69.6) $269.1
Cost of goods sold...... 125.4 115.4 53.3 (68.4) 225.7
------ ------ ----- ------ ------
Gross earnings........ 19.1 16.6 8.9 (1.2) 43.4
Selling, general and
administrative
expense................ 42.3 14.8 7.3 -- 64.4
------ ------ ----- ------ ------
Earnings (loss) from
operations........... (23.2) 1.8 1.6 (1.2) (21.0)
Non-operating expense
(income)............... 8.7 (0.1) (1.0) -- 7.6
Equity earnings (loss)
in subsidiaries........ 3.3 -- -- (3.3) --
------ ------ ----- ------ ------
Earnings (loss) before
provision for income
taxes................ (28.6) 1.9 2.6 (4.5) (28.6)
Provision for income
taxes.................. -- -- 1.1 -- 1.1
------ ------ ----- ------ ------
Net earnings (loss)
before preferred
dividends............ (28.6) 1.9 1.5 (4.5) (29.7)
Preferred dividends..... 1.8 -- -- -- 1.8
------ ------ ----- ------ ------
Net earnings (loss) of
common shareholders.. $(30.4) $ 1.9 $ 1.5 $ (4.5) $(31.5)
====== ====== ===== ====== ======
Net earnings (loss) of
common shareholders.... $(30.4) $ 1.9 $ 1.5 $ (4.5) $(31.5)
Other comprehensive
expense
Foreign currency
translation
adjustment........... (0.1) -- (1.4) -- (1.5)
------ ------ ----- ------ ------
Other comprehensive
expense............ (0.1) -- (1.4) -- (1.5)
------ ------ ----- ------ ------
Comprehensive income
(loss)............. $(30.5) $ 1.9 $ 0.1 $ (4.5) $(33.0)
====== ====== ===== ====== ======
</TABLE>
12
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net sales............... $141.7 $116.2 $68.6 $(71.3) $255.2
Cost of goods sold...... 113.9 101.2 57.5 (70.7) 201.9
------ ------ ----- ------ ------
Gross earnings........ 27.8 15.0 11.1 (0.6) 53.3
Selling, general and
administrative
expense................ 36.3 13.1 7.7 -- 57.1
------ ------ ----- ------ ------
Earnings (loss) from
operations........... (8.5) 1.9 3.4 (0.6) (3.8)
Non-operating expense
(income)............... 9.8 0.2 (3.0) -- 7.0
Equity earnings (loss)
in subsidiaries........ 7.0 -- -- (7.0) --
------ ------ ----- ------ ------
Earnings (loss) before
provision for income
taxes................ (11.3) 1.7 6.4 (7.6) (10.8)
Provision for income
taxes.................. -- -- 1.1 -- 1.1
------ ------ ----- ------ ------
Net earnings (loss)... $(11.3) $ 1.7 $ 5.3 $ (7.6) $(11.9)
====== ====== ===== ====== ======
Net earnings (loss)..... $(11.3) $ 1.7 $ 5.3 $ (7.6) $(11.9)
Other comprehensive
expense
Foreign currency
translation
adjustment........... (0.2) -- (1.4) -- (1.6)
------ ------ ----- ------ ------
Other comprehensive
expense............ (0.2) -- (1.4) -- (1.6)
------ ------ ----- ------ ------
Comprehensive income
(loss)............. $(11.5) $ 1.7 $ 3.9 $ (7.6) $(13.5)
====== ====== ===== ====== ======
</TABLE>
13
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings (loss) of
common shareholders.... $(30.4) $ 1.9 $ 1.5 $(4.5) $(31.5)
Adjustments to reconcile
net earnings (loss) of
common shareholders to
net cash provided by
(used for) operations:
Depreciation and
amortization......... 11.7 1.4 0.7 -- 13.8
Changes in current
accounts excluding
the effects of
noncash transactions:
Decrease (increase) in
receivables.......... (19.4) (8.4) (11.2) -- (39.0)
Decrease (increase) in
intercompany
receivables and
payables, and
intercompany note
receivables and note
payables............. (23.6) 3.6 20.0 -- --
Decrease (increase) in
inventories.......... (4.4) (2.7) (1.2) 1.2 (7.1)
Decrease (increase) in
other current
assets............... (2.1) 0.5 (1.4) -- (3.0)
Increase (decrease) in
accounts payable,
accrued liabilities
and income taxes..... 11.9 2.5 (0.3) -- 14.1
Other, net............ 0.5 -- 0.3 -- 0.8
------ ----- ------ ----- ------
Net cash provided by
(used for)
operating
activities......... (55.8) (1.2) 8.4 (3.3) (51.9)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Expenditures for plant
and equipment, and
tooling................ (5.2) (1.1) (0.3) -- (6.6)
Proceeds from sale of
plant and equipment.... 2.6 2.0 -- -- 4.6
Equity earnings
(loss)................. (3.3) -- -- 3.3 --
Change in subsidiary
investment............. -- -- -- -- --
Other, net.............. -- -- -- -- --
------ ----- ------ ----- ------
Net cash provided by
(used for)
investing
activities......... (5.9) 0.9 (0.3) 3.3 (2.0)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in short-
term debt.............. 10.0 -- -- -- 10.0
Payments of long-term
debt, including
current maturities..... (6.0) (0.1) -- -- (6.1)
Issuance of preferred
stock and warrants..... 65.0 -- -- -- 65.0
Change in subsidiary
capital................ -- -- -- -- --
Change in restricted
cash................... (0.4) -- -- -- (0.4)
Other, net.............. -- -- -- -- --
------ ----- ------ ----- ------
Net cash provided by
(used for)
financing
activities......... 68.6 (0.1) -- -- 68.5
Exchange Rate Effect on
Cash.................... (0.2) -- (0.4) -- (0.6)
------ ----- ------ ----- ------
Net increase (decrease)
in Cash and Cash
Equivalents............. 6.7 (0.4) 7.7 -- 14.0
Cash and Cash Equivalents
at Beginning of Period.. 9.3 0.5 15.2 -- 25.0
------ ----- ------ ----- ------
Cash and Cash Equivalents
at End of Period........ $ 16.0 $ 0.1 $ 22.9 $ -- $ 39.0
====== ===== ====== ===== ======
</TABLE>
14
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net earnings (loss) of
common shareholders... $(11.3) $ 1.7 $ 5.3 $(7.6) $(11.9)
Adjustments to
reconcile net earnings
(loss) of common
shareholders to net
cash provided by (used
for) operations:
Depreciation and
amortization ....... 5.0 6.8 0.5 -- 12.3
Changes in current
accounts excluding
the effects of
noncash
transactions:
Decrease (increase)
in receivables.... 5.7 (12.4) (14.0) -- (20.7)
Decrease (increase)
in intercompany
receivables and
payables, and
intercompany note
receivables and
note payables..... (16.5) 6.5 10.0 -- --
Decrease (increase)
in inventories.... (4.2) 3.5 (1.2) 0.6 (1.3)
Decrease (increase)
in other current
assets............ (0.9) 0.6 0.1 -- (0.2)
Increase (decrease)
in accounts
payable, accrued
liabilities and
income taxes...... (2.2) 2.9 1.3 (0.1) 1.9
Other, net........... 3.0 0.1 2.0 0.1 5.2
------ ------ ------ ----- ------
Net cash provided
by (used for)
operating
activities....... (21.4) 9.7 4.0 (7.0) (14.7)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Expenditures for plant
and equipment, and
tooling............... 6.8 (16.1) (1.8) -- (11.1)
Proceeds from sale of
plant and equipment... 0.1 0.1 -- -- 0.2
Equity earnings
(loss)................ (7.0) -- -- 7.0 --
Change in subsidiary
investment............ (4.5) -- -- 4.5 --
Other, net............. -- -- -- -- --
------ ------ ------ ----- ------
Net cash provided
by (used for)
investing
activities....... (4.6) (16.0) (1.8) 11.5 (10.9)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase in short-
term debt............. 47.6 -- -- -- 47.6
Payments of long-term
debt, including
current maturities.... (12.5) 2.4 -- -- (10.1)
Change in subsidiary
capital............... 0.9 4.2 (0.6) (4.5) --
Change in restricted
cash.................. (0.3) -- -- -- (0.3)
Other, net............. (0.1) -- -- -- (0.1)
------ ------ ------ ----- ------
Net cash provided
by (used for)
financing
activities....... 35.6 6.6 (0.6) (4.5) 37.1
Exchange Rate Effect on
Cash................... (0.3) -- 0.8 -- 0.5
------ ------ ------ ----- ------
Net increase (decrease)
in Cash and Cash
Equivalents............ 9.3 0.3 2.4 -- 12.0
Cash and Cash
Equivalents at
Beginning of Period.... 2.2 0.1 11.3 -- 13.6
------ ------ ------ ----- ------
Cash and Cash
Equivalents at End of
Period................. $ 11.5 $ 0.4 $ 13.7 $ -- $ 25.6
====== ====== ====== ===== ======
</TABLE>
15
<PAGE>
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART 1, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MARCH 31, 2000
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements of the Company, together with the notes
thereto, included elsewhere herein.
General
Market Share. As of March 31, 2000, the Company's twelve month rolling
domestic outboard engine and boat market share have remained at their December
31, 1999 levels of 32% and 9%, respectively.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Net Sales. Net sales increased to $269.1 million in the three months ended
March 31, 2000 from $255.2 million in the three months ended March 31, 1999, an
increase of $13.9 million or 5.4%. The increased sales were driven by boat
segment sales, which increased $15.6 million as a result of higher unit sales
of recreational and fishing boats (primarily saltwater). Total marine engine
segment sales decreased slightly as increased parts and accessories sales were
offset by lower engine sales. Worldwide engine unit sales were negatively
affected as a result of third-party supplier quantity and quality problems.
Cost of Goods Sold. Cost of goods sold increased to $225.7 million in the
three months ended March 31, 2000 from $201.9 million in the three months ended
March 31, 1999, an increase of $23.8 million or 11.8%. Gross earnings in the
three months ended March 31, 2000 was 16.1% of net sales as compared with 20.9%
of net sales for the comparable period in 1999. The reduction in gross earnings
percent for the quarter was attributable mainly to the marine engine segment
which had higher manufacturing costs in the three months ended March 31, 2000
than in the comparable period for the prior year. The increased manufacturing
costs were primarily driven by spending related to productivity and quality
improvement initiatives at each engine facility and costs incurred as a result
of third-party vendor issues. Additionally, cost of sales were negatively
impacted by increased warranty/rework accruals related to certain boat and
engine products.
Selling, General and Administrative ("SG&A") Expense. SG&A expense increased
to $64.4 million in the three months ended March 31, 2000 from $57.1 million in
the three months ended March 31, 1999, an increase of $7.3 million or 12.8%.
SG&A expense as a percentage of net sales increased to 23.9% in the three
months ended March 31, 2000 from 22.4% in the three months ended March 31,
1999. The SG&A expense increase was primarily due to (i) increased marketing
expenses for promotional programs and (ii) the prior-year period including an
$0.8 million accrual reversal related to a lawsuit settlement.
Loss from Operations. Loss from operations was $21.0 million in the three
months ended March 31, 2000 compared with a $3.8 million loss in the three
months ended March 31, 1999, an increase of $17.2 million. The increased loss
was attributable to higher cost of goods sold and SG&A expense, as discussed
above.
Non-Operating Expense (Income). Interest expense totaled $8.3 million in the
three months ended March 31, 2000 as compared to $8.2 million in the three
months ended March 31, 1999. Other non-operating income was $0.7 million in the
three months ended March 31, 2000 compared to $1.2 million in the
16
<PAGE>
comparable period in the prior year. The decrease in other non-operating income
was attributable to higher foreign exchange losses related to the Company's
European and Australian operations.
Provision for Income Taxes. The provision for income taxes was $1.1 million
in both the three months ended March 31, 2000 and March 31, 1999. The income
tax provisions 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 considered realizable, at this time, under
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
Preferred Dividends. Preferred dividend expense, related to the 650,000
shares of Series A Convertible Preferred Stock (see Note 5 of the Notes to the
Condensed Consolidated Financial Statements), was $1.8 million in the three
months ended March 31, 2000. This amount reflects an accrual of $1.6 million in
preferred dividend expense and $0.2 million in amortization expense related to
the discount on the preferred stock.
Financial Condition; Liquidity and Capital Resources
The Company's business is seasonal in nature with receivables, inventory,
and short-term borrowings usually at their peak levels in the Company's fiscal
quarter ending March 31 and declining thereafter as the Company's products
enter the consumer buying season. Current assets at March 31, 2000 increased
$60.5 million from December 31, 1999 due primarily to increases in accounts
receivable and cash and cash equivalents balances. Receivables at March 31,
2000 increased $37.8 million due primarily to increases in net sales in March
2000 as compared to sales during December 1999. Cash and cash equivalents
increased by $14.0 million due primarily to the Company's issuance of preferred
stock and warrants in January 2000 (see Note 5 of the Notes to Condensed
Consolidated Financial Statements). Additionally, inventories at March 31, 2000
increased $5.8 million in anticipation of the consumer buying season. The
Company had $31.0 million in restricted cash at March 31, 2000, which cash is
held in interest reserve accounts, as required, for the benefit of the
Company's senior lenders, as discussed in more detail below.
Cash used for operations was $51.9 million for the three months ended March
31, 2000 compared with $14.7 million for the three months ended March 31, 1999.
This increase in cash used was driven primarily by the increased net loss as
well as the increase in accounts receivable. Expenditures for plant and
equipment and tooling were $6.6 million for the three months ended March 31,
2000 compared to $11.1 million for the three months ended March 31, 1999. The
lower level of expenditures is primarily due to the timing of implementing
certain capital projects in 2000. The $6.6 million was used primarily for
production enhancements, information technology projects, and new model
development.
Short-term debt was $68.0 million at March 31, 2000 comprising borrowings
under the Company's Revolving Credit Facility. These borrowings were used to
fund operations, pay $5.8 million of the Company's Medium-Term Notes Series A
which came due in March 2000, as well as fund capital expenditures.
On January 28, 2000, the Company sold an aggregate of 650,000 shares of
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), and warrants (the "Warrants") to purchase an aggregate of
5,750,000 shares of its Common Stock, par value $.01 per share (the "Common
Stock"), for an aggregate consideration of $65.0 million, in a private
placement transaction to Greenlake Holdings II, LLC and Quantum Industrial
Partners, LDC. Approximately $15.0 million of the Series A Preferred Stock was
issued in exchange for certain subordinated notes previously issued by the
Company to the purchasers. The Series A Preferred Stock has an initial
liquidation preference of $100 per share and an initial conversion price of $14
per share (in each case, subject to adjustment upon occurrence of certain
events). The Series A Preferred Stock is convertible into Common Stock at any
time. The Series A Preferred Stock has an annual dividend rate of 15% of the
then current liquidation preference, and is entitled to share ratably in any
dividends paid on the Common Stock. Dividends will accrue if not paid in cash,
and the liquidation preference will be increased by the amount of any accrued
but unpaid dividends. The Series A Preferred Stock may be redeemed at any time
17
<PAGE>
after October 1, 2008, upon written request of the holders of at least 75% of
the then outstanding shares. The Company may redeem all outstanding shares of
the Series A Preferred Stock if, at any time, less than 10% of the total Series
A Preferred Stock originally sold on January 28, 2000 remains outstanding. The
Warrants are exercisable at any time until January 28, 2010, at an exercise
price of $.01 per share of Common Stock, payable in cash or in shares of Common
Stock. The Company intends to use the proceeds from the sale of the Series A
Preferred Stock and Warrants for general corporate purposes, including funding
its working capital and making capital expenditures (see Note 5 of the Notes to
Condensed Consolidated Financial Statements).
The Company entered into an Amended and Restated Loan and Security
Agreement, effective as of January 6, 1998 (as amended, the "Credit
Agreement"), with a syndicate of lenders for which Bank of America, N.A. is
administrative and collateral agent (the "Agent"). The Credit Agreement, which
is in effect to December 31, 2001, provides a revolving credit facility (the
"Revolving Credit Facility") of up to $150.0 million, subject to borrowing base
limitations, to finance working capital with a $50.0 million sublimit for
letters of credit. As of March 31, 2000, the Company had $68.0 million of
borrowings outstanding and $37.0 million of letters of credit outstanding under
the Revolving Credit Agreement. This resulted in the Company having $26.4
million of unused borrowing capacity under the Revolving Credit Agreement after
considering borrowing base limitations and minimum availability requirements.
The Revolving Credit Facility is secured by a first and only security interest
in all of the Company's existing and hereafter acquired accounts receivable,
inventory, chattel paper, documents, instruments, deposit accounts, contract
rights, patents, trademarks and general intangibles and is guaranteed by the
Company's four principal domestic operating subsidiaries. On February 1, 2000
the Company entered into an Eighth Amendment to the Amended and Restated Loan
and Security Agreement which among other things (i) increased the borrowing
capacity by increasing intellectual property availability to $20.0 million and
increasing the advance rate for finished goods inventory to 65%, (ii)
eliminated tangible net worth, interest coverage, and leverage ratio covenants,
and (iii) established minimum availability requirements, maximum capital and
tooling expenditures, and a minimum earnings before interest, taxes,
depreciation and amortization ("EBITDA") covenant test to reflect expected
operating results. The Company's ability to remain in compliance with its
covenants will depend upon several factors, including its ability to generate
sales and maintain costs at acceptable levels. Factors outside the Company's
control, including but not limited to third party supplier issues, may also
affect the Company's compliance. At March 31, 2000, the Company was in
compliance with the covenants.
On May 27, 1998, the Company issued $160.0 million of 10 3/4% Senior Notes
Series A ("Series A Notes") due 2008, with interest payable semiannually on
June 1 and December 1 of each year. The net proceeds from the issuance of the
Series A Notes totaled $155.2 million, of which $150.0 million was used to
repay debt assumed by the Company following the merger.
Concurrently with the issuance of the Series A Notes, the Company entered
into a depositary agreement which provided for the establishment and
maintenance of an interest reserve account for the benefit of the holders of
the Series A Notes and an interest reserve account for the benefit of the other
senior creditors of the Company. An aggregate amount of cash equal to one
year's interest due to these lenders was deposited into these interest reserve
accounts. At March 31, 2000, the "Restricted Cash" held in these interest
reserve accounts totaled $31.0 million. The "Restricted Cash" must remain in
such accounts until at least May 27, 2001. These accounts may be accessed by
the Company for the payment of the respective interest only, provided certain
criteria are met by the Company.
On April 14, 1999, the Company completed an exchange offer of all the Series
A Notes for Senior Notes Series B ("Series B Notes") which are registered under
the Securities Act of 1933, pursuant to a Registration Statement on Form S-4
and an accompanying Prospectus. The form and terms of the Series B Notes are
the same form and terms of the Series A Notes except (i) the Series B
designation, (ii) the Series B notes have been registered under the Securities
Act and, therefore, will not bear legends restricting the transfer thereof, and
(iii) holders of the Series B notes are not entitled to registration rights as
the exchange offer was intended to satisfy such exchange and registration
rights.
18
<PAGE>
At March 31, 2000, $62.9 million principal amount of the Company's 9 1/8%
Debentures due 2017 (the "9 1/8% Debentures") was outstanding. The 9 1/8%
Debentures mature on April 15, 2017, and interest thereon is payable semi-
annually on April 15 and October 15 of each year. The 9 1/8% Debentures are
redeemable through the operation of a sinking fund beginning on April 15, 1998,
and each year thereafter to and including April 15, 2016 at a sinking fund
redemption price equal to 100% of the principal amount thereof plus accrued
interest to the redemption date. As of March 31, 2000, the Company had
repurchased and deposited with the trustee for the 9 1/8% Debentures $34.8
million principal amount of 9 1/8% Debentures, which will be used to satisfy
its mandatory sinking fund obligations through April 15, 2004.
At March 31, 2000, an aggregate of $5.0 million principal amount of the
Company's Medium-Term Notes Series A (the "Medium-Term Notes") was outstanding.
The Medium-Term Notes bear interest at a rate of 8.625%. The maturity dates of
the Medium-Term Notes are March 15, 2001. Interest on the outstanding Medium-
Term Notes is payable semi-annually each March 30 and September 30 and at
maturity.
At March 31, 2000, $6.8 million principal amount of the Company's 7%
Convertible Subordinated Debentures due 2002 (the "Convertible Debentures") was
outstanding. Following the Merger, the Company purchased $67.7 million
principal amount of Convertible Debentures. Immediately prior to the merger,
the Convertible Debentures were convertible into shares of common stock of the
Company at the conversion price of $22.25 per share. As a result of the merger,
the remaining $6.8 million principal amount of outstanding Convertible
Debentures are no longer convertible into shares of common stock of the
Company. Each holder of the remaining outstanding Convertible Debentures now
has the right to convert (at $22.25 per share) such holder's Convertible
Debentures and receive cash in an amount equal to what each holder would have
received had they converted the Convertible Debentures into common stock
immediately prior to the merger ($18.00 per share). Accordingly, the remaining
outstanding Convertible Debentures are convertible into the right to receive a
cash payment equal to $809 for each $1,000 principal amount of Convertible
Debentures so converted (i.e., ($18.00/$22.25) x $1,000). The outstanding
Convertible Debentures are convertible at any time prior to their maturity on
July 1, 2002.
The Company has various Industrial Revenue Bonds outstanding in an aggregate
principal amount of approximately $10.6 million as of March 31, 2000. The
Industrial Revenue Bonds have various maturity dates between 2002 and 2007.
Interest rates on the Industrial Revenue Bonds range from 6% to 12.037%.
On May 2, 2000 the Company sold a $15.0 million Subordinated Note (the "15%
Note") and Warrants (the "New Warrants") to purchase 330,000 shares of the
Company's Common Stock, par value $0.01, to Quantum Industrial Partners LDC.
The 15% Note bears an interest rate of 15% and has a maturity date of May 31,
2000, which may be extended for four additional 30 day periods upon 5 days
written notice by the Company. The 15% Note is convertible into shares of the
Company's Series B Convertible Preferred Stock. The New Warrants are
exercisable at any time until May 2, 2010, at an exercise price of $0.01 per
share of Common Stock, payable in cash or in shares of Common Stock.
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
approximately $33 million for a period not to exceed 18 months from the date of
invoice. The Company resells any repurchased products at a discount. Losses
incurred under this program have not been material. For the three month periods
ending March 31, 2000 and 1999, the Company repurchased approximately $0.3
million and $1.1 million of products, respectively. The Company accrues for
losses that are anticipated in connection with expected repurchases. The
Company does not expect these repurchases to materially affect its results of
operations, financial position, or cash flows.
Based upon the current level of operations, the Company believes that its
cash flow from operations together with the sale of the Series A Preferred
Stock and Warrants, the 15% Note and Warrants on May 2, 2000, the available
borrowing capacity under the Credit Agreement, and the interest reserve
accounts and its
19
<PAGE>
other sources of liquidity (including issuances of additional subordinated
notes, preferred stock, and warrants), will be adequate to meet its presently
anticipated requirements for working capital and accrued liabilities, capital
expenditures, interest payments, and scheduled principal payments for the next
two years. There can be no assurance, however, that the Company's business will
continue to generate cash flow at or above current levels. If the Company is
unable to generate sufficient cash flow from operations in the future to
service its debt and accrued liabilities and make necessary capital
expenditures, or if its future earnings growth is insufficient to meet all
required principal payments out of internally generated funds, the Company may
be required to refinance all or a portion of its existing debt, sell assets or
obtain additional financing. There can be no assurance that any such
refinancing or asset sales would be possible or that any additional financing
could be obtained on attractive terms, particularly in view of the Company's
high level of debt. The Company's ability to remain in compliance with its
covenants will depend upon several factors, including its ability to generate
sales and maintain costs at acceptable levels. Factors outside the Company's
control, including but not limited to third party supplier issues, may also
affect the Company's compliance. At March 31, 2000, the Company was in
compliance with the covenants.
Third Party Suppliers
As part of the closure of the Company's Milwaukee, Wisconsin and Waukegan,
Illinois engine component facilities, the Company outsourced a majority of the
products manufactured at those facilities to third party suppliers. In
anticipation of the outsourcing of these components, the Company manufactured
an incremental amount of inventory that it, and the chosen supplier, believed
would be adequate to provide the Company with enough inventory to continue
manufacturing through the period necessary to relocate, validate and begin
production of the components. For the most part, the incremental inventory was
adequate to allow the Company to manufacture finished outboards until the
chosen supplier was able to supply the quantity and quality of these components
required by the Company. However, as a result of various issues, validation and
full production capabilities for some of the components has taken longer than
anticipated and production of finished outboard engines has been constrained.
These supply issues will continue to affect production into the Company's
second quarter.
Euro Currency Conversion
On January 1, 1999, eleven of the fifteen member countries of the European
Union adopted the euro as their common legal currency. The euro trades on
currency exchanges and is available for non-cash transactions. From January 1,
1999 through January 1, 2002, each of the participating countries are scheduled
to maintain their national ("legacy") currencies as legal tender for goods and
services. Beginning January 1, 2002, new euro-denominated bills and coins will
be issued, and legacy currencies will be withdrawn from circulation no later
than July 1, 2002. The Company's foreign operating subsidiaries that will be
affected by the euro conversion have established plans to address any business
issues raised, including the competitive impact of cross-border price
transparency. It is not anticipated that there will be any near term business
ramifications; however, the long-term implications, including any changes or
modifications that will need to be made to business and financial strategies
are still being reviewed. From an accounting, treasury and computer system
standpoint, the impact from the euro currency conversion is not expected to
have a material impact on the financial position or results of operations of
the Company.
Accounting Standard
In June 1998, the Financial Accounting Standards Board issued Statement 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains
20
<PAGE>
and losses to offset related results on the hedged item in the income
statement, and requires that a Company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS
133 is effective for fiscal years beginning after December 31, 2000. The
Company has not yet quantified the impacts of adopting SFAS 133 on its
financial statements and has not determined the timing of or method of its
adoption of SFAS 133.
Inflation
Inflation may cause or may be accompanied by increases in gasoline prices
and interest rates. Such increases may adversely affect the sales of the
Company's products. Because of the low level of inflation, inflation did not
have a significant impact on operating results during the quarter ended March
31, 2000.
Market Risk
The Company is exposed to market risk from changes in interest and foreign
exchange rates and commodity prices. From time to time, the Company enters into
financial arrangements in the ordinary course of business to hedge these
exposures. Changes in market risk did not have a significant impact on
operating results during the quarter ended March 31, 2000.
Forward-Looking Statements
This report on Form 10-Q contains forward-looking statements, which may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company wishes to ensure that all
such forward-looking statements are accompanied by meaningful cautionary
statements pursuant to the safe harbor established in such act. All statements
other than statements of historical facts included in this Form 10-Q may
constitute forward-looking statements. Forward-looking statements include the
intent, belief or current expectations of the Company and members of its senior
management team. All forward-looking statements are inherently uncertain as
they are based on various expectations and assumptions concerning future events
and they are subject to numerous known and unknown risks and uncertainties that
could cause actual events or results to differ materially from those projected
and which include, but are not limited to, the impact of competitive products
and pricing, successful implementation of turnaround strategies, 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
this report on Form 10-Q and documents filed by the Company with the Securities
and Exchange Commission.
21
<PAGE>
Part II--OTHER INFORMATION
Item 1. Legal Proceedings
During the three months ended March 31, 2000, no reportable events or
material developments occurred regarding the legal proceedings of the Company.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits. Reference is made to the Exhibit Index on Page 24
b. Reports on Form 8-K. On January 28, 2000 the Company filed a Report on
Form 8-K announcing the issuance of 650,000 shares of Series A
Convertible Preferred Stock, par value $.01 per share, and Warrants to
purchase an aggregate of 5,750,000 shares of its Common Stock, par value
$.01 per share, for an aggregate consideration of $65.0 million in a
private placement transaction to Greenlake Holdings II, LLC and Quantum
Industrial Partners, LDC.
22
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Outboard Marine Corporation
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Eric T. Martinez Interim Chief Financial May 15, 2000
______________________________________ Officer and Vice
Eric T. Martinez President and Treasurer
(Principal Financial
Officer)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3.1(a) Restated Certificate of Incorporation of the Company (filed as
Exhibit 3(a) to the Company's Annual Report on Form 10-K/A for the
year ended September 30, 1997 (the "1997 10-K"))*
3.1(a)(1) Amendement to Restated Certificate of Incorporation of the Company,
(filed as Exhibit 3.1(a)(1) to the 1999 10K)*
Amended and Restated bylaws of the Company (filed as Exhibit 3(B) to
3.2(a) the 1997 10-K)*
(a)(1) Amended and Restated bylaws of the Company (adopted July 23,
1998)(filed as Exhibit 3.2(a)(1) to the Company's Registration
Statement on Form S-4 (Registration No. 333-57949) (the "Form S-
4"))*
4.1 Indenture for the 10 3/4% Senior Notes due 2008, Series A (the "Old
Notes") and 10 3/4% Senior Notes due 2008, Series B (the "Exchange
Notes"), dated as of May 27, 1998 among the Company, the Subsidiary
Guarantors and State Street Bank and Trust Company, as trustee
(filed as Exhibit 4.1 to the Form S-4)*
4.2 Form of Exchange Note (filed as Exhibit 4.2 to the Form S-4)*
4.3 Form of Subsidiary guarantee of the Old Notes and the Exchange Notes
(included in Exhibit 4.1) (filed as Exhibit 4.1 to the Form S-4)*
4.4 Depositary Agreement dated as of May 27, 1998 among the Company,
State Street Bank and Trust Company, as trustee, NationsBank, N.A.,
as administrator agent, and State Street Bank and Trust Company, as
depositary agent (filed as Exhibit 4.6 to the Form S-4)*
4.5 With respect to rights of holders of the Company's 9 1/8% Sinking
Fund Debentures due 2017, reference is made to Exhibit 4(A) to the
Company's Registration Statement Number 33-12759 filed on March 20,
1987*
4.6 With respect to rights of holders of the Company's 7% Convertible
Subordinated Debentures due 2002, reference is made to the Company's
Registration Statement Number 33-47354 filed on April 28, 1992*
4.7 With respect to the Supplemental Indenture dated September 30, 1997
related to the Company's 7% Convertible Subordinated Debentures due
2002, reference is made to Exhibit 4(c) to the 1997 10-K*
4.8 Outboard Marine Corporation Certificate of the Powers, Designations,
Preferences and Rights of the Series A Convertible Preferred Stock,
Par Value $.01 Per Share (filed as Exhibit 4.8 to the 1999 10-K)*
4.9 Series A Convertible Preferred Stock and Warrant Purchase Agreement
(filed as Exhibit 4.9 to the 1999 10-K)*
4.10 Stockholder Agreement between Outboard Marine Corporation, Quantum
Industrial Partners LDC and Greenlake Holdings II LLC (filed as
Exhibit 4.10 to the 1999 10-K)*
4.11 Warrant to Purchase Shares of Common Stock of Outboard Marine
Corporation by Quantum Industrial Partners LDC (filed as Exhibit
4.11 to the 1999 10-K)*
4.12 Warrant to Purchase Shares of Common Stock of Outboard Marine
Corporation by Greenlake Holdings II LLC (filed as Exhibit 4.12 to
the 1999 10-K)*
4.13 Registration Rights Agreement between Outboard Marine Corporation,
Quantum Industrial Partners LDC, Greenlake Holdings II LLC and
Greenmarine Holdings LLC (filed as Exhibit 4.13 to the 1999 10-K)*
4.14 Subordinated Note and Warrant Purchase Agreement between Outboard
Marine Corporation, Greenlake Holdings III LLC and Quantum
Industrial Partners LDC, attached hereto and incorporated herein as
Exhibit 4.14.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.15 Certificate of Amendment of Certificate of Powers, Designations,
Preferences and Rights of the Series A Convertible Preferred Stock Par
Value $.01 per share of Outboard Marine Corporations, attached hereto
and incorporated herein as Exhibit 4.15.
4.16 First Amendment to Stockholder Agreement between Outboard Marine
Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II
LLC & Greenlake Holdings III LLC, attached hereto and incorporated
herein as Exhibit 4.16.
4.17 First Amendment to Registration Rights Agreement between Outboard
Marine Corporation, Quantum Industrial Partners LDC, Greenlake
Holdings II LLC, Greenlake Holdings III LLC and Greenmarine Holdings
LLC, attached hereto and incorporated herein as Exhibit 4.17.
4.18 Warrant to purchase Shares of Common Stock of Outboard Marine
Corporation by Quantum Industrial Partners LDC, attached hereto and
incorporate herein as Exhibit 4.18.
10.1 Severance Agreements between the Company and certain elected and
appointed officers and certain other executives of the Company,
reference is made to Exhibit 99.3 and 99.4 of the Company's Schedule
14D-9 filed with the Securities and Exchange Commission on July 15,
1997*
10.2 Employment Agreement of Mr. Hines dated October 6, 1997, reference is
made to Exhibit 10(J) to the 1997 10-K*
10.3 Amended and Restated Loan and Security Agreement between the Company
and NationsBank of Texas, N.A. dated January 6, 1998, reference is
made to Exhibit 10(E) to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 1997*
10.4 First Amendment to Amended and Restated Loan and Security Agreement
between the Company and NationsBank of Texas, N.A. dated May 21, 1998
(filed as Exhibit 10.5 to the Form S-4)*
10.5 Employment Agreement of Mr. Jones dated March 10, 1998, reference is
made to Exhibit 10(F) to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1998*
10.6 With respect to the Personal Rewards and Opportunity Program,
reference is made to Exhibit 10(G) to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1998*
10.7 Employment Agreement of Robert Gowens dated October 1, 1998 (filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 (the "1998 10-K"))*
10.8 Second Amendment to Amended and Restated Loan and Security Agreement
between the Company and NationsBank of Texas, N.A. dated effective as
of August 31, 1998 (filed as Exhibit 10.9 to the 1998 10-K)*
10.9 Third Amendment to Amended and Restated Loan and Security Agreement
between the Company and NationsBank of Texas, N.A. dated effective as
of December 21, 1998 (filed as Exhibit 10.10 to the 1998 10-K)*
10.10 Fourth Amendment to Amended and Restated Loan and Security Agreement
between the Company and NationsBank of Texas, N.A. dated effective as
of February 1, 1999 (filed as Exhibit 10.11 to the Transition Report
on Form 10-K for the transition period ended December 31, 1998)*
10.11 Fifth Amendment to Amended and Restated Loan and Security Agreement
between the Company and NationsBank of Texas, N.A. dated effective as
of February 25, 1999 (filed as Exhibit 10.12 to the Transition Report
on Form 10-K for the transition period December 31, 1998)*
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.12 Promissory Note dated December 4, 1998 with Robert Gowens, Jr. and
Donna Gowens, as Maker, and the Company, as Payee (filed as Exhibit
10.16 to the Transition Report on Form 10-K for the transition period
ended December 31, 1998)*
10.13 Second Mortgage dated December 4, 1998 with Robert Gowens, Jr. and
Donna Gowens, as Mortgagor, and the Company, as Mortgagee (filed as
Exhibit 10.17 to the Transition Report on Form 10-K for the transition
period ended December 31, 1998)*
10.14 Nonqualified Stock Option Agreement dated October 1, 1998 between the
Company and Robert B. Gowens (filed as Exhibit 10.18 to the Transition
Report on Form 10-K for the transition period ended December 31,
1998)*
10.15 Secured Promissory Note dated October 6, 1997 with Andrew Hines, as
Maker, and the Company, as Payee (filed as Exhibit 10.19 to the
Transition Report on Form 10-K for the transition period ended
December 31, 1998)*
10.16 Sixth Amendment to Amended and Restated Loan and Security Agreement
between the Company and Bank of America, N.A., dated effective as of
July 30, 1999 (filed as Exhibit 10.16 to the Company's Quarterly
Report on form 10-Q for the fiscal quarter ended June 30, 1999)*
10.17 Pledge and Security Agreement dated October 6, 1997 between the
Company and Andrew Hines (filed as Exhibit 10.20 to the Transition
Report on Form 10-K for the transition period ended December 31,
1998)*
10.18 Nonqualified Stock Option Grant Agreement dated October 6, 1997
between the Company and Andrew Hines (filed as Exhibit 10.21 to the
Transition Report on Form 10-K for the transition period ended
December 31, 1998)*
10.19 Incentive Stock Option Grant Agreement dated December 30, 1997 between
the Company and David Jones (filed as Exhibit 10.22 to the Transition
Report on Form 10-K for the transition period ended December 31,
1998)*
10.20 Nonqualified Stock Option Grant Agreement dated March 10, 1998 between
the Company and David Jones (filed as Exhibit 10.23 to the Transition
Report on Form 10-K for the transition period ended December 31,
1998)*
10.21 Nonqualified Stock Option Grant Agreement dated March 10, 1998 between
the Company and David Jones (filed as Exhibit 10.24 to the Transition
Report on Form 10-K for the transition period ended December 31,
1998)*
10.22 Seventh Amendment to Amended and Restated Loan and Security Agreement
between the Company and Bank of America, N.A., dated effective as of
October 27, 1999 (filed as Exhibit 10.22 to the Form 10-Q for the
period ended September 30, 1999)*
10.23 Eighth Amendment to Amended and Restated Loan and Security Agreement
between the Company and Bank of America, N.A., dated effective as of
January 31, 2000 (filed as Exhibit 10.23 to the 1999 10-K)*
10.24 Subordinated Note dated May 2, 2000 issued by Outboard Marine
Corporation to Quantum Industrial Partners LDC as lender, attached
hereto and incorporated herein as Exhibit 10.24.
11. Computation of per share earnings (loss)
21. Subsidiaries of Registrant (filed as Exhibit 21 to the 1999 10-K)*.
27. Financial Data Schedule
</TABLE>
- --------
* Incorporated herein by reference.
26
<PAGE>
EXHIBIT 4.14
================================================================================
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
among
OUTBOARD MARINE CORPORATION,
QUANTUM INDUSTRIAL PARTNERS LDC
and
GREENLAKE HOLDINGS III LLC
______________________________
May 1, 2000
______________________________
================================================================================
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page #
----
<S> <C>
ARTICLE I DEFINITIONS............................................... 1
1.1 Definitions............................................... 1
ARTICLE II PURCHASE AND SALE OF SUBORDINATED
NOTES AND WARRANTS 7
2.1 Purchase and Sale of Subordinated Notes and Warrants...... 7
2.2 Use of Proceeds........................................... 7
2.3 Closing................................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY................................................... 7
3.1 Corporate Existence and Power............................. 7
3.2 Authorization; No Contravention........................... 8
3.3 Governmental Authorization; Third Party Consents.......... 8
3.4 Binding Effect............................................ 8
3.5 Compliance with Laws...................................... 9
3.6 Capitalization............................................ 9
3.7 No Default or Breach; Contractual Obligations............. 10
3.8 Financial Statements...................................... 10
3.9 No Material Adverse Change; Ordinary Course of Business... 10
3.10 Private Offering.......................................... 10
3.11 Intellectual Property..................................... 11
3.12 Broker's, Finder's or Similar Fees........................ 11
3.13 Litigation; Observance of Statutes and Orders............. 11
3.14 Taxes..................................................... 12
3.15 Title to Property; Leases................................. 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.......... 12
4.1 Existence and Power....................................... 12
4.2 Authorization; No Contravention........................... 12
4.3 Governmental Authorization; Third Party Consents.......... 13
4.4 Binding Effect............................................ 13
4.5 Purchase for Own Account.................................. 13
4.6 Restricted Securities..................................... 14
4.7 Broker's, Finder's or Similar Fees........................ 14
4.8 Accredited Investor....................................... 14
4.9 Disclosure of Information................................. 14
4.10 Investment Experience..................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO
CLOSE..................................................... 15
5.1 Representations and Warranties............................ 15
5.2 Secretary's Certificate................................... 15
5.3 Subordinated Notes........................................ 15
5.4 Warrants 15
5.5 Registration Rights Agreement Amendment................... 15
5.6 Stockholders Agreement Amendment.......................... 15
5.7 Certificate of Designation Amendment...................... 16
5.8 Opinion of Counsel........................................ 16
ARTICLE VI CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE................................... 16
6.1 Representations and Warranties............................ 16
6.2 Payment of Purchase Price................................. 16
6.3 Registration Rights Agreement Amendment................... 16
6.4 Stockholders Agreement Amendment.......................... 16
6.5 Certificate of Designation Amendment...................... 16
ARTICLE VII INDEMNIFICATION............................................ 17
7.1 Indemnification........................................... 17
7.2 Notification.............................................. 17
7.3 Limitation on Indemnification............................. 18
ARTICLE VIII AFFIRMATIVE COVENANTS..................................... 19
8.1 Financial Statements and Other Information................ 19
8.2 Reservation of Stock...................................... 20
8.3 Books and Records......................................... 20
8.4 Inspection................................................ 20
ARTICLE IX MISCELLANEOUS............................................. 20
9.1 Survival of Representations and Warranties................ 20
9.2 Notices................................................... 20
9.3 Successors and Assigns; Third Party Beneficiaries......... 22
9.4 Amendment and Waiver...................................... 22
9.5 Counterparts.............................................. 22
9.6 Headings.................................................. 23
9.7 GOVERNING LAW............................................. 23
9.8 Severability.............................................. 23
9.9 Rules of Construction..................................... 23
9.10 Right to Conduct Activities............................... 23
9.11 Entire Agreement.......................................... 23
9.12 Fees...................................................... 23
9.13 Publicity................................................. 24
9.14 Further Assurances........................................ 24
</TABLE>
ii
<PAGE>
EXHIBITS
A Form of Subordinated Note
B Form of Warrant
C Form of Certificate of Designations
D Form of Registration Rights Agreement Amendment
E Form of Stockholders Agreement Amendment
F Form of Certificate of Designation Amendment
G Form of OMC Opinion of Counsel
SCHEDULES
2.1 Purchased Shares, Warrant Shares and Purchase Price
iii
<PAGE>
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT, dated May 1, 2000
(this "Agreement"), among Outboard Marine Corporation, a Delaware corporation
---------
(the "Company") Quantum Industrial Partners LDC ("QIP") and Greenlake Holdings
------- ---
III LLC ("Greenlake" and together with QIP, the "Purchasers").
--------- ----------
WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to each of the Purchasers, for the
aggregate purchase price set forth opposite such Purchaser's name on Schedule
--------
2.1 hereto, (i) a Subordinated Note substantially in the form of Exhibit A
- --- ---------
hereto (each, a "Subordinated Note") in the face amount set forth opposite such
-----------------
Purchaser's name on Schedule 2.1 hereto, and (ii) a warrant (the "Warrant") to
------------ -------
purchase, subject to the terms and conditions thereof, the aggregate number of
shares (subject to adjustment) of Common Stock, par value $.01 per share, of the
Company (the "Common Stock") set forth opposite such Purchaser's name on
------------
Schedule 2.1 hereto, at an exercise price of $.01 per share (subject to
- ------------
adjustment), containing the terms and conditions set forth in the form of
warrant attached hereto as Exhibit B.
---------
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
-----------
A. Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" (as defined in
---------
Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of, and
any Person controlling, controlled by, or under common control with, any
Purchaser. For the purposes of this Agreement, "control" includes the ability
to have investment discretion through contractual means or by operation of law.
"Agreement" means this Agreement as the same may be amended,
---------
supplemented or modified in accordance with the terms hereof.
"Audited Financial Statements" has the meaning set forth in Section
----------------------------
3.8 of this Agreement.
<PAGE>
2
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the Closing
-------
Date, as the same may be amended from time to time.
"Certificate of Designation" means a Certificate of Designation with
--------------------------
respect to the shares of Series B Preferred Stock which shall be adopted by the
Board of Directors and duly filed with the Secretary of State of the State of
Delaware on or before the Conversion Date substantially in the form attached
hereto as Exhibit C.
---------
"Certificate of Designation Amendment" means a Certificate of
------------------------------------
Amendment to the Certificate of Designation of the Series A Preferred Stock
substantially in the form attached hereto as Exhibit F.
---------
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company, as the same may be amended from time to time.
"Claims" has the meaning set forth in Section 7.1 of this Agreement.
------
"Closing" has the meaning set forth in Section 2.3 of this Agreement.
-------
"Closing Date" has the meaning set forth in Section 2.3 of this
------------
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
successor statute thereto.
"Commission" means the United States Securities and Exchange
----------
Commission or any similar agency then having jurisdiction to enforce the
Securities Act.
"Common Stock" has the meaning set forth in the recitals to this
------------
Agreement.
"Company" has the meaning set forth in the preamble to this Agreement.
-------
"Condition of the Company" means the assets, business, properties,
------------------------
prospects, operations or financial condition of the Company.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of
------------------
<PAGE>
3
another Person (the "primary obligor"), whether or not contingent, (a) to
---------------
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss or failure or inability to
perform in respect thereof. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof.
"Contractual Obligations" means, as to any Person, any provision of
-----------------------
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Conversion Date" means the date on which shares of Series B Preferred
---------------
Stock are first issued upon conversion of the Subordinated Notes issued
hereunder.
"Copyrights" means any foreign or United States copyright
----------
registrations and applications for registration thereof, and any non-registered
copyrights.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission thereunder.
"GAAP" means United States generally accepted accounting principles in
----
effect from time to time.
"Governmental Authority" means the government of any nation, state,
----------------------
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Greenlake" has the meaning set forth in the recitals to this
---------
Agreement.
"Indebtedness" means, as to any Person, (a) all obligations of such
------------
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations of such Person
evidenced by notes, bonds,
<PAGE>
4
debentures or similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
and accrued commercial or trade liabilities arising in the ordinary course of
business, (d) all interest rate and currency swaps, caps, collars and similar
agreements or hedging devices under which payments are obligated to be made by
such Person, whether periodically or upon the happening of a contingency, (e)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (f)
all obligations of such Person under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (g) all indebtedness secured
by any Lien (other than Liens in favor of lessors under leases other than leases
included in clause (f)) on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is non-recourse to the credit of that Person, and (h) any
Contingent Obligation of such Person.
"Indemnified Party" has the meaning set forth in Section 7.1 of this
-----------------
Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1 of this
------------------
Agreement.
"Intellectual Property" has the meaning set forth in Section 3.10 of
---------------------
this Agreement.
"Interim Financial Statements" has the meaning set forth in Section
----------------------------
3.8 of this Agreement.
"Internet Assets" means any Internet domain names and other computer
---------------
user identifiers and any rights in and to sites on the worldwide web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.
"Knowledge" means the knowledge of the Company.
---------
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences).
"Losses" has the meaning set forth in Section 7.1 of this Agreement.
------
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
business, operations, financial condition, assets, prospects or properties of
the Company
<PAGE>
5
and its subsidiaries taken as a whole, or (ii) the ability of the Company to
perform its obligations under the Transaction Documents, or (iii) the validity
or enforceability of the Transaction Documents.
"Orders" has the meaning set forth in Section 3.2 of this Agreement.
------
"Patents" means any foreign or United States patents and patent
-------
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"Permits" has the meaning set forth in Section 3.5 of this Agreement.
-------
"Person" means any individual, firm, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.
"Purchasers" has the meaning set forth in the preamble to this
----------
Agreement.
"QIP" has the meaning set forth in the recitals to this Agreement.
---
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, dated January 28, 2000, among the Company, QIP and Greenlake Holdings
II LLC.
"Registration Rights Agreement Amendment" means an amendment to
---------------------------------------
Registration Rights Agreement in substantially the form of Exhibit D hereto.
---------
"Requirements of Law" means, as to any Person, any law, statute,
-------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"Securities" means the Subordinated Note and the Warrants issuable
----------
hereunder, the shares of Series B Preferred Stock issuable upon conversion of
the Subordinated Notes, the shares of Common Stock issuable upon conversion of
the Series B Preferred Stock, and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder.
"Series A Preferred Stock" means the shares of Series A Convertible
------------------------
Preferred Stock, par value $.01 per share, of the Company having the powers,
<PAGE>
6
designations, preferences and rights set forth in the Certificate of the Powers,
Designations, Preferences and Rights of the Series A Convertible Preferred
Stock, Par Value $.01 Per Share of the Company, as filed by the Company with the
Secretary of State of Delaware on January 28, 2000.
"Series B Preferred Stock" means the shares of Series B Convertible
------------------------
Preferred Stock, par value $.01 per share, of the Company having the powers,
designations, preferences and rights set forth in the Certificate of
Designation, and issuable by the Company upon conversion of the Subordinated
Notes in accordance with the terms set forth in this Agreement and in the
Subordinated Notes.
"Software" means any computer software programs, source code, object
--------
code, data and documentation, including, without limitation, any computer
software programs that incorporate and run the Company's pricing models,
formulae and algorithms.
"Stock Equivalents" means any security or obligation which is by its
-----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or securities of the Company, and any option, warrant or other
subscription or purchase right with respect to common stock or such other
capital stock or securities.
"Stockholders Agreement" means the Stockholders Agreement dated
----------------------
January 28, 2000, among the Company, QIP and Greenlake Holdings II LLC.
"Stockholders Agreement Amendment" means an amendment to Stockholders
--------------------------------
Agreement in substantially the form of Exhibit E hereto.
---------
"Trade Secrets" means any trade secrets, research records, processes,
-------------
procedures, manufacturing formulae, technical know-how, technology, blue prints,
designs, plans, inventions (whether patentable and whether reduced to practice),
invention disclosures and improvements thereto.
"Trademarks" means any foreign or United States trademarks, service
----------
marks, trade dress, trade names, brand names, designs and logos, corporate
names, product or service identifiers, whether registered or unregistered, and
all registrations and applications for registration thereof.
"Transaction Documents" means, collectively, this Agreement, the
---------------------
Subordinated Notes, the Warrants, the Registration Rights Agreement Amendment
and the Stockholders Agreement Amendment.
"Warrant" has the meaning set forth in the recitals to this Agreement.
-------
<PAGE>
7
"Warrant Shares" has the meaning set forth in Section 2.1 of this
--------------
Agreement.
ARTICLE II.
PURCHASE AND SALE OF SUBORDINATED NOTES AND WARRANTS
----------------------------------------------------
A. Purchase and Sale of Subordinated Notes and Warrants. Subject
----------------------------------------------------
to the terms and conditions herein set forth, the Company agrees to issue and
sell to each Purchaser, and each Purchaser agrees to purchase from the Company,
for the aggregate purchase price set forth opposite such Purchaser's name on
Schedule 2.1 hereto, on the Closing Date (a) a Subordinated Note in the face
- ------------
amount set forth opposite such Purchaser's name on Schedule 2.1 hereto, and (ii)
------------
a Warrant to purchase the aggregate number of shares of Common Stock set forth
opposite such Purchaser's name on Schedule 2.1 hereto (all of the shares of
------------
Common Stock issuable upon exercise of the Warrants being purchased pursuant
hereto being referred to herein as the "Warrant Shares").
--------------
B. Use of Proceeds. The Company shall use the proceeds from the
---------------
sale of the Subordinated Notes and the Warrants to the Purchasers for general
corporate purposes, including to fund the Company's working capital and to make
capital expenditures.
C. Closing. The closing of the sale and purchase of the
-------
Subordinated Notes and Warrants (the "Closing") shall take place at the offices
-------
of Paul, Weiss, Rifkind, Wharton & Garrison, at 10:00 a.m., local time, on May
1, 2000 or at such other time, place and date that the Company and the
Purchasers may agree in writing (the "Closing Date"). On the Closing Date, the
------------
Company shall deliver to each Purchaser (a) a Subordinated Note in the face
amount set forth beside such Purchaser's name in Schedule 2.1 hereto and (b) a
Warrant to purchase the number of Warrant Shares set forth beside such
Purchaser's name in Schedule 2.1 hereto against delivery by such Purchaser to
the Company of the aggregate purchase price therefor as set forth beside such
Purchaser's name in Schedule 2.1 hereto by wire transfer of immediately
available funds.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to each of the Purchasers as
follows:
A. Corporate Existence and Power. The Company (a) is a corporation
-----------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of
<PAGE>
8
its incorporation; (b) has all requisite power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is proposed to be, engaged; and (c) is
duly qualified as a foreign corporation, licensed and in good standing under the
laws of each jurisdiction in which its ownership, lease or operation of property
or the conduct of its business requires such qualification, except where the
failure to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect. The Company has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents.
B. Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and of each of the transactions contemplated hereby and thereby,
including, without limitation, the sale, issuance and delivery of the Securities
(assuming, in the case of the issuance of the shares of Series B Preferred
Stock, the filing of the Certificate of Designation with the Secretary of State
of Delaware prior to the issuance thereof), (a) have been duly authorized by all
necessary corporate action of the Company; (b) do not contravene the terms of
the Certificate of Incorporation or the By-laws; (c) do not violate, conflict
with or result in any breach or contravention of, or the creation of any Lien
under, any Contractual Obligation of the Company or any Requirement of Law
applicable to the Company, except as would not have a Material Adverse Effect;
and (d) do not violate any judgment, injunction, writ, award, decree or order of
any nature (collectively, "Orders") of any Governmental Authority against, or
------
binding upon, the Company.
C. Governmental Authorization; Third Party Consents. Except for the
------------------------------------------------
filing with the Secretary of State of Delaware of the Certificate of Designation
prior to the issuance of any shares of Series B Preferred Stock, or with respect
to filings that are required or permitted to be made pursuant to federal or
state securities laws, no approval, consent, exemption, authorization or other
action by, or notice to, or filing with, any Governmental Authority or any other
Person, and no lapse of a waiting period under a Requirement of Law, is
necessary or required in connection with the execution, delivery or performance
(including, without limitation, the sale, issuance and delivery of the
Securities) by, or enforcement against, the Company of this Agreement and the
other Transaction Documents or the transactions contemplated hereby and thereby.
D. Binding Effect. This Agreement and each of the other Transaction
--------------
Documents have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
<PAGE>
9
E. Compliance with Laws.
--------------------
(1) The Company is in compliance with all Requirements of Law
and all Orders issued by any court or Governmental Authority against the Company
in all material respects.
(2) (i) The Company has all licenses, permits and approvals of
any Governmental Authority (collectively, "Permits") that are necessary for the
-------
conduct of the business of the Company; (ii) such Permits are in full force and
effect; and (iii) no violations are or have been recorded in respect of any
Permit, in each case, except as would not, individually or in the aggregate,
have a Material Adverse Effect.
F. Capitalization. On the Closing Date, the authorized capital
--------------
stock of the Company shall consist of (i) 36,000,000 shares of Common Stock, of
which 20,439,531 shares shall be issued and outstanding, (ii) 650,000 shares of
Series A Preferred Stock, all of which are issued and outstanding, and (iii)
350,000 shares of undesignated "blank check" preferred stock. The Company has
reserved an aggregate of (1) 4,642,857 shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock, (2) 5,750,000 shares of Common Stock
for issuance upon exercise of common stock purchase warrants issued under that
certain Series A Convertible Preferred Stock and Warrant Purchase Agreement,
dated January 28, 2000, among the Company, QIP and Greenlake Holdings II LLC,
(3)330,000 shares of Common Stock for issuance upon exercise of the Warrants,
and (4) an aggregate of 1,900,000 shares of Common Stock for issuance upon the
exercise of stock options issued or issuable under the Outboard Marine
Corporation Personal Rewards and Opportunities Plan. Except as described in the
immediately preceding sentence or as provided in the Transaction Documents, on
the Closing Date, there will be no options, warrants, conversion privileges,
subscription or purchase rights or other rights outstanding to purchase or
otherwise acquire (i) any authorized but unissued, unauthorized or treasury
shares of the Company's capital stock, (ii) any Stock Equivalents or (iii) other
securities of the Company. The issuance of the Subordinated Notes and the
Warrants has been duly authorized. Assuming the accuracy of and compliance with
each Purchaser's representations, warranties and covenants contained in Sections
4.5, 4.6, 4.8, 4.9 and 4.10 hereof and in each of Section 17 of the Warrant,
Section 13 of the Subordianted Note and Sections 2.1 through (and including) 2.4
of the Stockholders Agreement, as amended by the Stockholders Agreement
Amendment, the issuance and sale to the Purchasers of the Subordinated Notes and
Warrants, the conversion of the Subordinated Notes in accordance with the terms
hereof and thereof, and the exercise of the Warrants in accordance with the
terms thereof will be exempt from the registration requirements of the
Securities Act. The Warrant Shares and the shares of Series B Preferred Stock
and any shares of Common Stock issuable upon conversion of the shares of Series
B Preferred Stock will be, when issued in accordance with the Transaction
Documents, duly authorized, fully paid and non-assessable and not subject to any
preemptive rights or similar rights that have not been satisfied. The issued
and outstanding
<PAGE>
10
shares of Common Stock are all duly authorized, validly issued, fully paid and
non-assessable.
G. No Default or Breach; Contractual Obligations. The Company has
---------------------------------------------
not received notice of a current or pending default and is not in default under,
or with respect to, any Contractual Obligation nor, to the Company's knowledge,
does any condition exist that with notice or lapse of time or both would
constitute a default thereunder, except as would not have a Material Adverse
Effect. All of the Contractual Obligations are valid, subsisting, in full force
and effect and binding upon the Company and, to the Company's Knowledge, the
other parties thereto. To the Knowledge of the Company, no other party to any
such Contractual Obligation is in material default thereunder, nor does any
condition exist that with notice or lapse of time or both would constitute a
material default by such other party thereunder.
H. Financial Statements. The consolidated balance sheet of the
--------------------
Company and its subsidiaries as of December 31, 1999, and the related
consolidated statements of income, stockholders equity and cash flows for the
year then ended, including the notes and schedules thereto, certified by KPMG
LLP, independent public accountants, that have been delivered by the Company to
the Purchasers fairly present the consolidated financial position of the Company
and its subsidiaries as at December 31, 1999 and the consolidated results of
operations for the Company and its subsidiaries for the period then ended, in
each case in accordance with generally accepted accounting principles
consistently applied for the period covered thereby (the foregoing consolidated
financial statements at and for the period ending December 31, 1999 are referred
to herein as the "Audited Financial Statements"). The unaudited consolidated
----------------------------
balance sheet of the Company and its subsidiaries as of March 31, 2000 and the
related unaudited consolidated statements of income, stockholders equity and
cash flows for the three months then ended, that have been delivered by the
Company to the Purchasers fairly present the consolidated financial position of
the Company and its subsidiaries as at March 31, 2000 and the consolidated
results of operations for the Company and its subsidiaries for the three months
then ended, in each case in accordance with generally accepted accounting
principles applied on a basis consistent with the Audited Financials, except for
normal year-end adjustments and the absence of footnotes required by GAAP (the
foregoing unaudited consolidated financial statements at March 31, 2000 and for
the three months then ending are referred to herein as the "Interim Financial
-----------------
Statements").
- ----------
I. No Material Adverse Change; Ordinary Course of Business. Since
-------------------------------------------------------
December 31, 1999, there has been no change in the financial condition,
operations, business or properties of the Company or any of its subsidiaries
except (x) as disclosed in the Company's reports under the Securities Exchange
Act of 1934, as amended, as filed with the Securities and Exchange Commission
subsequent to December 31, 1999 and prior to the date hereof, (y) as disclosed
in the Interim Financial Statements or (y) changes that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
<PAGE>
11
J. Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Subordinated Notes or the Warrants.
K. Intellectual Property.
---------------------
(1) Except as would not, individually or in the aggregate, have
a Material Adverse Effect: (i) The Company is the owner of all, or has the
license or right to use, sell and license all of, the Copyrights, Patents, Trade
Secrets, Trademarks, Internet Assets, Software and other proprietary rights
(collectively, "Intellectual Property") that are used in connection with its
---------------------
business as presently conducted or contemplated in its business plan, free and
clear of all Liens.
(ii) None of the Intellectual Property of the Company is
subject to any outstanding Order, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
Knowledge of the Company, threatened, which challenges the validity,
enforceability, use or ownership of the item.
(iii) To the knowledge of the Company, none of the
Intellectual Property currently sold or licensed by the Company to any Person or
used by or licensed to the Company by any Person infringes upon or otherwise
violates any Intellectual Property rights of others.
(iv) No litigation is pending and no Claim has been made
against the Company or, to the Knowledge of the Company, is threatened,
contesting the right of the Company to sell or license to any Person or use the
Intellectual Property presently sold or licensed to such Person or used by the
Company.
(2) To the Knowledge of the Company, no Person is infringing
upon or otherwise violating the Intellectual Property rights of the Company.
L. Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
in connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with the Company or any action taken by the
Company.
M. Litigation; Observance of Statutes and Orders.
---------------------------------------------
1. There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
subsidiary or any property of the Company or any subsidiary in any court or
before any arbitrator of any kind or before or by any governmental authority
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
<PAGE>
12
2. Neither the Company nor any subsidiary is in default under
any order, judgment, decree or ruling of any court, arbitrator or governmental
authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation environmental laws) of any governmental
authority, which default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
N. Taxes. The Company and its subsidiaries have filed all income
-----
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (x) the amount of which, or the failure to file with
respect to which, is not individually or in the aggregate material or (y) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
subsidiary, as the case may be, has established adequate reserves in accordance
with generally accepted accounting principles.
O. Title to Property; Leases. The Company and its subsidiaries
-------------------------
have good title to their respective properties, including all such properties
reflected in the audited balance sheet as of December 31, 1999 or purported to
have been acquired by the Company or any subsidiary after said date (except as
sold or otherwise disposed of), in each case free and clear of liens, except for
(x) liens securing the Company's obligations under the Company's credit
facilities and in respect of the Company's borrowings, and (y) those defects in
title and liens that, individually or in the aggregate, would not have a
Material Adverse Effect. All material leases are valid and subsisting and are
in full force and effect in all material respects except to the extent that the
failure to be so would not, individually or in the aggregate, have a Material
Adverse Effect.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each of the Purchasers hereby represents and warrants, severally and
not jointly, to the Company as follows:
A. Existence and Power. Such Purchaser (a) is duly organized and
-------------------
validly existing under the laws of the jurisdiction of its formation and (b) has
the requisite power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other Transaction Agreements to
which it is a party.
<PAGE>
13
B. Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Agreements to which it is a party and the transactions contemplated
hereby and thereby, (a) have been duly authorized by all necessary action, (b)
do not contravene the terms of such Purchaser's organizational documents, or any
amendment thereof, and (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of such Purchaser or any Requirement of Law applicable to such
Purchaser, and (d) do not violate any Orders of any Governmental Authority
against, or binding upon, such Purchaser.
C. Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Subordinated Notes and the Warrants) by, or
enforcement against, such Purchaser of this Agreement and each of the other
Transaction Agreements to which it is a party or the transactions contemplated
hereby and thereby.
D. Binding Effect. This Agreement and each of the other Transaction
--------------
Agreements to which it is a party have been duly executed and delivered by such
Purchaser and constitutes the legal, valid and binding obligations of such
Purchaser, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
E. Purchase for Own Account. The Subordinated Notes and the
------------------------
Warrants to be acquired by such Purchaser pursuant to this Agreement and any
shares of Series B Preferred Stock or shares of Common Stock received upon
conversion or exercise of the Subordinated Notes, the shares of Series B
Preferred Stock or the Warrants or as a result of the ownership thereof are
being or will be acquired for investment for its own account and with no
intention of distributing, transferring, assigning or reselling or otherwise
disposing thereof or any part thereof in any transaction that would be in
violation of the securities laws of the United States of America, or any state,
without prejudice, however, to the rights of such Purchaser at all times to sell
or otherwise dispose of all or any part of such Securities under an effective
registration statement under the Securities Act, or under an exemption from such
registration available under the Securities Act, and subject, nevertheless, to
the disposition of such Purchaser's property being at all times within its
control. If such Purchaser should in the future decide to dispose of any of the
Securities, such Purchaser understands and agrees that it may do so only once it
reasonably satisfies the Company that such transfer is in compliance with the
Securities Act and applicable state securities laws, as then in effect. Such
Purchaser agrees to the imprinting,
<PAGE>
14
so long as required by law, of a legend on certificates representing all of the
Securities to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE
EXERCISE OR CONVERSION THEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE
SECURITIES REPRESENTED HEREBY. TRANSFEREES OF SUCH SECURITIES SHOULD
REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS."
F. Restricted Securities. Such Purchaser understands that the
---------------------
Securities are "restricted securities" under the Securities Act and will not be
registered at the time of their issuance under the Securities Act for the reason
that the sale provided for in this Agreement is exempt pursuant to Section 4(2)
of the Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Purchaser's representations set forth herein and on
such Purchaser's agreement to comply with Section 17 of the Warrant and Section
13 of the Subordinated Note, and that such Securities may be resold without
registration under the Securities Act only in certain limited circumstances
defined therein. Such Purchaser represents that it is reasonably familiar with
such resale restrictions in the Securities Act, Rule 144 promulgated thereunder,
and the other applicable federal and state rules and regulations.
G. Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.
H. Accredited Investor. Such Purchaser is an "Accredited Investor"
-------------------
within the meaning of Rule 501 of Regulation D under the Securities Act, as
presently in effect.
<PAGE>
15
I. Disclosure of Information. Such Purchaser has carefully reviewed
-------------------------
the representations and warranties concerning the Company contained in this
Agreement and has had adequate opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Securities and the business, assets, prospects and financial condition of the
Company.
J. Investment Experience. Such Purchaser is, or has been, an
---------------------
investor in securities of companies similar to the Company and has or is
represented by one who has such knowledge and experience in financial or
business matters that it is capable of evaluation of the merits and risks of an
investment in the Securities.
ARTICLE V.
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
----------------------------
The obligation of the Purchasers to purchase the Subordinated Notes
and the Warrants, to pay the purchase price therefor at the Closing and to
perform any obligations hereunder shall be subject to the satisfaction as
determined by, or waiver by, the Purchasers of the following conditions on or
before the Closing Date.
A. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Article III hereof shall be true and
correct in all material respects at and on the Closing Date as if made at and on
such date, except to the extent that any representation and warranty expressly
speaks as of an earlier date, in which case such representation and warranty is
true and correct as of such date and except for any activities or transactions
which may have taken place after the date hereof which are contemplated by this
Agreement.
B. Secretary's Certificate. The Purchasers shall have received a
-----------------------
certificate from the Company, in form and substance satisfactory to the
Purchasers, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, certifying as to the incumbency and specimen signature
of each officer of the Company executing this Agreement, each other Transaction
Document and any other document delivered in connection herewith on behalf of
the Company.
C. Subordinated Notes. The Company shall have delivered to each of
------------------
the Purchasers a Subordinated Note in the face amount set forth opposite such
Purchaser's name on Schedule 2.1 hereto.
------------
D. Warrants. The Company shall have duly executed and delivered to
--------
each of the Purchasers a Warrant to purchase that number of shares of Common
Stock set forth opposite such Purchaser's name on Schedule 2.1 hereto.
------------
<PAGE>
16
E. Registration Rights Agreement Amendment. The Company shall have
---------------------------------------
duly executed and delivered the Registration Rights Agreement Amendment.
F. Stockholders Agreement Amendment. The Company shall have duly
--------------------------------
executed and delivered the Stockholders Agreement Amendment.
G. Certificate of Designation Amendment. The Company shall have
------------------------------------
filed with the Secretary of State of Delaware the Certificate of Designation
Amendment substantially in the form of Exhibit F hereto.
---------
H. Opinion of Counsel. The Purchasers shall have received an
------------------
opinion of Counsel for the Company, dated the Closing Date, relating to the
transactions contemplated by or referred to herein, substantially in the form
attached hereto as Exhibit G.
---------
ARTICLE VI.
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
---------------------------
The obligation of the Company to issue and sell the Subordinated Notes
and the Warrants and the obligation of the Company to perform its other
obligations hereunder shall be subject to the satisfaction as determined by, or
waiver by, the Company of the following conditions on or before the Closing
Date:
A. Representations and Warranties. The representations and
------------------------------
warranties of the Purchasers contained in Article IV hereof shall be true and
correct on at and on the Closing Date as if made at and on such date, except to
the extent that any representation and warranty expressly speaks as of an
earlier date, in which case such representation and warranty is true and correct
as of such date and except for any activities or transactions which may have
taken place after the date hereof which are contemplated by this Agreement.
B. Payment of Purchase Price. Each Purchaser shall have paid the
-------------------------
aggregate purchase price for the Subordinated Note and the Warrant to be
purchased by such Purchaser.
C. Registration Rights Agreement Amendment. Each Purchaser shall
---------------------------------------
have duly executed and delivered the Registration Rights Agreement Amendment.
D. Stockholders Agreement Amendment. Each Purchaser have duly
--------------------------------
executed and delivered the Stockholders Agreement Amendment.
<PAGE>
17
E. Certificate of Designation Amendment. The stockholders of the
------------------------------------
Company (including the holders of at least 75% of the shares of Series A
Preferred Stock voting separately as a class) shall have approved the filing by
the Company of the Certificate of Designation Amendment.
ARTICLE VII.
INDEMNIFICATION
---------------
A. Indemnification. Except as otherwise provided in this Article
---------------
VII, the Company (the "Indemnifying Party") agrees to indemnify, defend and hold
------------------
harmless each of the Purchasers and its Affiliates and their respective
officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, an "Indemnified Party") to the fullest extent
-----------------
permitted by law from and against any and all losses, actions, suits,
proceedings, claims, complaints, disputes, arbitrations or investigations
(collectively, "Claims" or written threats thereof (including, without
------
limitation, any Claim by a third party), damages, expenses (including reasonable
fees, disbursements and other charges of counsel incurred by the Indemnified
Party in any action between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party) or other liabilities
(collectively, "Losses") resulting from or arising out of any breach of any
------
representation or warranty, covenant or agreement by the Company in this
Agreement or the other Transaction Documents; provided, however, that the
-------- -------
Indemnifying Party shall not be liable under this Article VII to an Indemnified
Party to the extent that it is finally judicially determined that such Losses
resulted or arose from the breach by such Indemnified Party of any
representation, warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement or the other Transaction Documents or the willful
misconduct or gross negligence of such Indemnified Party; and provided further,
-------- -------
that if and to the extent that such indemnification is unenforceable for any
reason, the Indemnifying Party shall make the maximum contribution to the
payment and satisfaction of such Losses which shall be permissible under
applicable laws. The amount of any payment to any Indemnified Party herewith in
respect of any Loss shall be of sufficient amount to make such Indemnified Party
whole. In connection with the obligation of the Indemnifying Party to indemnify
for expenses as set forth above, the Indemnifying Party shall, upon presentation
of appropriate invoices containing reasonable detail, reimburse each Indemnified
Party for all such expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and any third party) as they are incurred by such Indemnified Party; provided,
--------
however, that if an Indemnified Party is reimbursed under this Article VII for
- -------
any expenses, such reimbursement of expenses shall be refunded to the extent it
is finally judicially determined that the Losses in question resulted primarily
from the willful misconduct or gross negligence of such Indemnified Party.
<PAGE>
18
B. Notification. Each Indemnified Party under this Article VII
------------
shall, promptly after the receipt of notice of the commencement of any Claim
against such Indemnified Party in respect of which indemnity may be sought from
the Indemnifying Party under this Article VII, notify the Indemnifying Party in
writing of the commencement thereof. The omission of any Indemnified Party to
so notify the Indemnifying Party of any such action shall not relieve the
Indemnifying Party from any liability which it may have to such Indemnified
Party (a) other than pursuant to this Article VII or (b) under this Article VII
unless, and only to the extent that, such omission results in the Indemnifying
Party's forfeiture of substantive rights or defenses. In case any such Claim
shall be brought against any Indemnified Party, and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
--------
however, that any Indemnified Party may, at its own expense, retain separate
- -------
counsel to participate in such defense at its own expense. Notwithstanding the
foregoing, in any Claim in which both the Indemnifying Party, on the one hand,
and an Indemnified Party, on the other hand, are, or are reasonably likely to
become, a party, such Indemnified Party shall have the right to employ separate
counsel and to control its own defense of such Claim if, in the reasonable
opinion of counsel to such Indemnified Party, a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided, however, that the Indemnifying Party (i) shall not be
-------- -------
liable for the fees and expenses of more than one counsel to all Indemnified
Parties and (ii) shall reimburse the Indemnified Parties for all of such fees
and expenses of such counsel incurred in any action between the Indemnifying
Party and the Indemnified Parties or between the Indemnified Parties and any
third party, as such expenses are incurred. The Indemnifying Party agrees that
it will not, without the prior written consent of the Purchasers, settle,
compromise or consent to the entry of any judgment in any pending or threatened
Claim relating to the matters contemplated hereby (if any Indemnified Party is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising or that may arise out of such
Claim. The Indemnifying Party shall not be liable for any settlement of any
Claim effected against an Indemnified Party without its written consent, which
consent shall not be unreasonably withheld. The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
- -------- -------
contrary contained in this Agreement, nothing in this Article VII shall restrict
or limit any rights that any Indemnified Party may have to seek equitable
relief.
C. Limitation on Indemnification. Anything in this Agreement to the
-----------------------------
contrary notwithstanding, no payment shall be made to an Indemnified Party
pursuant to Section 7.1 of this Agreement until the amounts which the Purchasers
would otherwise be entitled to receive as indemnification under this Agreement
aggregate at least $115,000, at which time the Purchaser shall be entitled to
receive any such payments and any
<PAGE>
19
subsequent payments in full. Anything in this Agreement to the contrary
notwithstanding, the liability of the Company under this Article shall in no
event exceed the total purchase price paid for the Subordinated Notes and the
Warrants received by the Company pursuant to this Agreement.
ARTICLE VIII.
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees with each Purchaser that so
long as such Purchaser holds any Subordinated Note, shares of Series B Preferred
Stock or Warrant:
A. Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to such Purchaser, in form and substance reasonably satisfactory to such
Purchaser:
3. as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited balance
sheet of the Company as of the end of such fiscal year and the related
statements of operations and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company for such fiscal year and by the opinion of a
nationally recognized independent certified public accounting firm which report
shall state without qualification that such financial statements present fairly
the financial condition as of such date and results of operations and cash flows
for the periods indicated in conformity with GAAP applied on a consistent basis;
4. commencing with the quarterly fiscal period ending on June
30, 2000, as soon as available, but in any event not later than forty-five (45)
days after the end of each of the first three fiscal quarters of each fiscal
year, the unaudited balance sheet of the Company, and the related statements of
operations and cash flows for such quarter and for the period commencing on the
first day of the fiscal year and ending on the last day of such quarter, all
certified by an appropriate officer of the Company as presenting fairly the
financial condition as of such date and results of operations and cash flows for
the periods indicated in conformity with GAAP applied on a consistent basis,
subject to normal year-end adjustments and the absence of footnotes required by
GAAP; and
5. commencing with the month ending on May 31, 2000, as soon as
available, but in any event not later than thirty (30) days after the end of the
first eleven months of each fiscal year, the unaudited balance sheet of the
Company, and the related statements of operations and cash flows for such month
and for the period commencing on the first day of the fiscal year and ending on
the last day of such month, all certified by an appropriate officer of the
Company as presenting fairly the financial condition as of such date and results
of operations and cash flows for the periods indicated in conformity with
<PAGE>
20
GAAP applied on a consistent basis, subject to normal year-end adjustments and
the absence of footnotes required by GAAP.
B. Reservation of Stock. The Company shall at all times reserve
--------------------
and keep available out of its authorized shares of preferred stock the maximum
number of shares of preferred stock that may be required to be designated as
shares of Series B Preferred Stock and issued upon conversion of the
Subordinated Notes. The Company shall at all times reserve and keep available
out of its authorized shares of Common Stock, solely for the purpose of issuing
and delivering such shares upon conversion of the shares of Series B Preferred
Stock, as provided in the Certificate of Designations, and the exercise of the
Warrants, the maximum number of shares of Common Stock that may be issuable or
deliverable upon such conversion or exercise.
C. Books and Records. The Company shall keep proper books of
-----------------
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Company in accordance
with GAAP consistently applied.
D. Inspection. The Company shall permit representatives of the
----------
Purchasers to visit and inspect any of its properties, to examine its corporate,
financial and operating records and make copies thereof or abstracts therefrom,
to discuss its affairs, finances and accounts with their respective directors,
officers and independent public accountants, and shall provide the Purchasers
and their representatives with reasonable access to its officers and employees,
all at such reasonable times during normal business hours and as often as may be
reasonably requested upon reasonable advance notice to the Company.
ARTICLE IX.
MISCELLANEOUS
-------------
A. Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement until the first anniversary of the Closing Date.
B. Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
if to the Company:
Outboard Marine Corporation
<PAGE>
21
100 Sea Horse Drive
Waukegan, IL 60085
Telecopy: (847) 689-6200
Attention: General Counsel
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy: (212) 450-4800
Attention: Julia K. Cowles, Esq.
(i) if to Quantum Industrial Partners LDC.:
Kaya Flamboyan 9,
Villemstad
Curacao
Netherlands-Antilles
with a copy to:
Soros Fund Management LLC
888 Seventh Avenue
New York, NY 10016
Telecopy: (212) 664-0544
Attention: Michael Neus, Esq.
and a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Richard S. Borisoff, Esq.
(ii) If to Greenlake:
Greenlake Holdings III LLC
c/o Greenway Partners, L.P.
277 Park Avenue
New York, NY 10016
Telecopy: (212) 350-5253
Attention: Gary Duberstein
<PAGE>
22
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Telecopy: (212) 310-8007
Attention: David Blittner, Esq.
All such notices, demands and other communications shall be deemed to
have been duly given when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is mechanically acknowledged, if telecopied.
C. Successors and Assigns; Third Party Beneficiaries. This
-------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws
and the terms and conditions thereof, the Purchasers may assign any of their
rights under this Agreement or the other Transaction Documents to any of their
respective Affiliates. The Company may not assign any of its rights under this
Agreement without the written consent of the Purchasers. Except as provided in
Article VII, no Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement.
D. Amendment and Waiver.
--------------------
6. No failure or delay on the part of the Company or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchasers at law, in equity or otherwise.
7. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Purchasers from the terms of
any provision of this Agreement, shall be effective (i) only if it is made or
given in writing and signed by the Company and the Purchasers purchasing 75% in
principal amount of the Subordinated Notes, and (ii) only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement, no notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances.
<PAGE>
23
E. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
F. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
G. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
H. Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
I. Rules of Construction. Unless the context otherwise requires,
---------------------
"or" is not exclusive and references to sections or subsections refer to
sections or subsections of this Agreement.
J. Right to Conduct Activities. The Company and each Purchaser
---------------------------
hereby acknowledges that some or all of the Purchasers are professional
investment funds, and as such, invest in numerous portfolio companies, some of
which may be competitive with the Company's business. No Purchaser shall be
liable to the Company or to any other Purchaser for any claim arising out of, or
based upon, the investment activities of such Purchaser, including without
limitation, any claim arising out of, or based upon, (i) the investment by
Purchaser in an entity competitive to the Company, or (ii) actions taken by any
partner, officer or other representative of any Purchaser to assist any such
competitive company, or otherwise, and whether or not such action has a
detrimental effect of the Company.
K. Entire Agreement. This Agreement, together with the exhibits
----------------
and schedules hereto, and the other Transaction Documents are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, representations, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement, together with
the exhibits and schedules hereto, and the other Transaction Documents supersede
all prior agreements and understandings between the parties with respect to such
subject matter.
<PAGE>
24
L. Fees. Upon the Closing, the Company shall reimburse each of the
----
Purchasers for all expenses incurred by each such Purchaser in the course of
conducting such Purchaser's due diligence investigation of the Company
(including any fees and expenses of outside consultants to such Purchaser) and
for the fees, disbursements and other charges of counsel incurred in connection
with the transactions contemplated by this Agreement.
M. Publicity.
---------
(a) Except as may be required by applicable Requirements of Law,
none of the parties hereto shall issue a publicity release or public
announcement or otherwise make any disclosure concerning this Agreement and the
transactions contemplated hereby without prior approval by the other parties
hereto. If any announcement is required by law or the rules of any securities
exchange or market on which shares of Common Stock are traded to be made by any
party hereto, prior to making such announcement such party will deliver a draft
of such announcement to the other parties and shall give the other parties
reasonable opportunity to comment thereon.
(b) For so long as QIP or any of its Affiliates owns any
Securities, QIP shall have the opportunity to review and modify any provision of
any public release, public announcement or government filing which is to be
released to the public, which provision mentions QIP or any of its Affiliates,
prior to the release of such document to the public, it being understood and
agreed that Soros Private Equity Partners LLC will be identified as making
investments on behalf of QIP.
N. Further Assurances. Each of the parties shall execute such
------------------
documents and use reasonable efforts to perform such further acts (including,
without limitation, obtaining any consents, exemptions, authorizations or other
actions by, or giving any notices to, or making any filings with, any
Governmental Authority or any other Person) as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Subordinated Note and Warrant Purchase Agreement on the date
first written above.
OUTBOARD MARINE CORPORATION
By:/s/ Eric T. Martinez
------------------------------------
Name: Eric T. Martinez
Title: Interim CFO and Vice President
and Treasurer
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Michael C. Neus
------------------------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
GREENLAKE HOLDINGS III LLC
By: /s/ Gary K. Duberstein
------------------------------------
Name: Gary K. Duberstein
Title: Vice President
<PAGE>
SCHEDULE 2.1
------------
PURCHASED SHARES AND WARRANT SHARES AND PURCHASE PRICE
------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Purchaser/1/ Face Amount of Warrant Shares Purchase Price
Subordinated Note
<S> <C> <C> <C>
Quantum Industrial $15,000,000 330,000 $15,000,000
Partners LDC
Greenlake Holdings III LLC ___________ _______ ___________
</TABLE>
___________________
/1/ Subsequent to the Closing, QIP may sell a portion of the Subordinated Notes
and Warrants purchased at the Closing to Greenlake or its Affiliate on such
terms as QIP and Greenlake may agree.
<PAGE>
EXHIBIT 4.15
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES A CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
OF
OUTBOARD MARINE CORPORATION
_______________________________
(Pursuant to Section 242 of the
General Corporation Law of the State of Delaware)
Outboard Marine Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), does hereby certify
as follows:
1. The name of the Corporation is Outboard Marine Corporation.
2. The date of filing of the Amended and Restated Certificate of
Incorporation of the Corporation with the Secretary of State was September 30,
1997, and the date of filing of the Certificate of the Powers, Designations,
Preferences and Rights of the Series A Convertible Preferred Stock, Par Value
$.01 Per Share (the "Certificate of Designation"), with the Secretary of State
was January 28, 2000.
3. This Certificate of Amendment amends the Certificate of
Designation, as now in effect, to (i) provide for the issuance of shares of
Series B Convertible Preferred Stock as Senior Stock and (ii) exempt from the
anti-dilution adjustment provisions contained therein certain specific issuances
of Common Stock by the Corporation.
4. Section 2 of the Certificate of Designation is hereby amended to
read in its entirety as follows:
2. Rank. The Series A Preferred Stock shall, with respect to
----
dividend distributions and distributions of assets and rights upon the
liquidation, winding up and dissolution of the Corporation, rank (i) junior
to the outstanding shares of Senior Stock, and (ii) senior to all classes
of common stock of the
<PAGE>
2
Corporation (including, without limitation, the common stock, par value
$.01 per share, of the Corporation (the "Common Stock")) and to each other
class or series of capital stock of the Corporation hereafter created other
than the shares of Series B Preferred Stock (the Common Stock and each
other class or series of capital stock of the Corporation other than the
Senior Stock are hereinafter collectively referred to as the "Junior
Stock").
5. Section 5(c)(iii) of the Certificate of Designation is hereby
amended to read in its entirety as follows:
(iii) Issuance of Common Stock Below Current
--------------------------------------
Market Price or Conversion Price. If the Corporation shall, at any time or
--------------------------------
from time to time, sell or issue shares of Common Stock (regardless of
whether originally issued or from the Corporation's treasury), or rights,
options, warrants or convertible or exchangeable securities containing the
right to subscribe for or purchase shares of Common Stock (excluding (A)
shares issued in any of the transactions described in Section 5(c)(i) or
(ii), (B) shares issued upon the conversion of any shares of Series A
Preferred Stock, (C) options issuable pursuant to bona fide employee
benefit plans or arrangements approved or adopted by the Corporation's
Board of Directors, and the shares of Common Stock issuable on exercise of
such options, (D) warrants issued by the Corporation pursuant to the
Purchase Agreement and the shares of Common Stock issuable upon exercise of
such warrants, (E) Common Stock purchase warrants issued pursuant to that
certain Subordinated Notes and Warrant Purchase Agreement, dated May 1,
2000 (the "Note Purchase Agreement") among the Corporation, Quantum
Industrial Partners LDC and Greenlake Holdings III LLC, and the shares of
Common Stock issuable upon the exercise of such warrants, and (F) shares
issuable upon the conversion of any shares of Series B Preferred Stock
which may be issued upon conversion of the Subordinated Notes issued by the
Corporation pursuant to the Note Purchase Agreement) at a price per share
of Common Stock (determined, in the case of rights, options, warrants or
convertible or exchangeable securities, by dividing (x) the total
consideration received or receivable by the Corporation in consideration of
the sale or issuance of such rights, options, warrants or convertible or
exchangeable securities, plus the total consideration payable to the
Corporation upon exercise or conversion or exchange thereof, by (y) the
total number of shares of Common Stock covered by such rights, options,
warrants or convertible or exchangeable securities) lower than either the
Current Market Price per share of Common Stock or the Conversion Price
immediately prior to such sale or issuance, then the Conversion Price shall
be reduced to the price determined by multiplying the Conversion Price in
effect immediately prior thereto by a fraction, the numerator of which
shall be the sum of (I) the number of shares of Common Stock outstanding
immediately prior to such sale or issuance, plus (II) the quotient obtained
by dividing the aggregate consideration received (determined as provided
below) for such sale or issuance by the Applicable Price, and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such sale or issuance. Such adjustment shall
be made successively whenever such sale or issuance is made. For the
purposes of such adjustments, the shares of Common Stock which the holder
of any such rights, options, warrants, or convertible or exchangeable
securities shall be entitled to
<PAGE>
3
subscribe for or purchase shall be deemed to be issued and outstanding as
of the date of such sale or issuance and the consideration "received" by
the Corporation therefor shall be deemed to be the consideration actually
received or receivable by the Corporation (plus any underwriting discounts
or commissions in connection therewith) for such rights, options, warrants
or convertible or exchangeable securities, plus the consideration stated in
such rights, options, warrants or convertible or exchangeable securities to
be payable to the Corporation for the shares of Common Stock covered
thereby. If the Corporation shall sell or issue shares of Common Stock for
a consideration consisting, in whole or in part, of property other than
cash or its equivalent, then in determining the "price per share of Common
Stock" and the "consideration" received or receivable by or payable to the
Corporation for purposes of the first sentence and the immediately
preceding sentence of this Section 5(c)(iii), the fair value of such
property shall be determined in good faith by the Board of Directors of the
Corporation and shall be the value which is agreed upon by at least 75% of
the members thereof or if 75% of the members of the Board of Directors of
the Corporation are unable to agree upon the value of such consideration,
the value thereof shall be determined by an independent investment bank of
nationally recognized stature that is selected by 75% of the members of the
Board of Directors. The determination of whether any adjustment is required
under this Section 5(c)(iii) by reason of the sale and issuance of rights,
options, warrants or convertible or exchangeable securities and the amount
of such adjustment, if any, shall be made only at the time of such issuance
or sale and not at the subsequent time of issuance or sale of Common Stock
upon the exercise or conversion of such rights, options, warrants or
convertible or exchangeable securities. Upon the expiration of any such
options, warrants or rights, the termination of any such rights to convert
or exchange or the expiration of any options, warrants or rights related to
such convertible or exchangeable securities, the then current Conversion
Price, to the extent in any affected by or computed using such options,
warrants, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number
of shares of Common Stock actually issued upon the exercise of such
options, warrants or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.
6. Section 6(a) of the Certificate of Designation is hereby amended
to read in its entirety as follows:
(a) Redemption Demand. Upon the demand of the holders of at
-----------------
least 75% of the outstanding shares of Series A Preferred Stock made in
writing to the Corporation at any time after October 1, 2008 (a "Redemption
Demand"), the Corporation shall be required to redeem all of the shares of
Series A Preferred Stock, at a redemption price per share equal to the
Liquidation Preference per share plus an amount in cash equal to the
product of (x) 15% of the then current Liquidation Preference, multiplied
by (y) a fraction, the numerator of which is the actual number of days from
(and including) the most recent Dividend Payment Date to (but excluding)
the Redemption Date, and the denominator of which is 365 (the "Redemption
Price"), but only to the extent that (A) funds are legally available
therefor, (B) such redemption would not cause a default or event of default
under any
<PAGE>
4
documents governing the Corporation's outstanding indebtedness or lines of
credit, and (C) such redemption would not violate the terms governing any
Senior Stock then outstanding. If at the time a Demand Notice is received
by the Corporation funds are legally available to redeem some but not all
of the outstanding shares of Series A Preferred Stock, then the Corporation
shall redeem as many shares of Series A Preferred Stock as its legally
available funds permit.
7. Section 6(b) of the Certificate of Designation is hereby amended
to read in its entirety as follows:
(b) Redemption at Corporation's Option. On and after
----------------------------------
the date on which fewer than 10% of the shares of Series A Preferred Stock
issued on the Series A Preferred Stock Issue Date remain outstanding, the
Corporation shall have the right, at its sole option and election, to
redeem all of the outstanding shares of Series A Preferred Stock, on not
less than 30 days' notice of the date of redemption (any such redemption
date pursuant to this Section 6(b) being referred to herein as an "Optional
Redemption Date") at a redemption price per share equal to the Liquidation
Preference per share plus an amount in cash equal to the product of (x) 15%
of the then current Liquidation Preference, multiplied by (y) a fraction,
the numerator of which is the actual number of days from (and including)
the most recent Dividend Payment Date to (but excluding) the Optional
Redemption Date, and the denominator of which is 365 (the "Optional
Redemption Price"), but only to the extent that (A) funds are legally
available therefor, (B) such redemption would not cause a default or event
of default under any documents governing the Corporation's outstanding
indebtedness or lines of credit, and (C) such redemption would not violate
the terms governing any Senior Stock then outstanding.
8. Section 8 of the Certificate of Designation is hereby amended to
read in its entirety as follows:
8. Reissuance of Series A Preferred Stock. Shares of Series A
--------------------------------------
Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon compliance
with any applicable provisions of the laws of Delaware) have the status of
authorized and unissued shares of preferred stock undesignated as to series
and may be redesignated and reissued as part of any series of preferred
stock (other than Series A Preferred Stock or Series B Preferred Stock).
9. Section 10 of the Certificate of Designation is hereby amended to
add the following additional defined terms:
"Senior Stock" means the outstanding shares of Series B Preferred
Stock.
"Series B Preferred Stock" means the outstanding shares of the
Corporation's Series B Convertible Preferred Stock, par value $.01 per
share.
<PAGE>
5
10. Such amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware and by Section 7(c) of the Certificate of Designation.
IN WITNESS WHEREOF, the Corporation has authorized the undersigned to
execute this certificate on this second day of May, 2000.
OUTBOARD MARINE CORPORATION
By: /s/ Eric T. Martinez
--------------------
Name: Eric T. Martinez
Title: Interim CFO and Vice President and
Treasurer
<PAGE>
EXHIBIT 4.16
FIRST AMENDMENT TO
STOCKHOLDERS AGREEMENT
AMENDMENT, dated May 2, 2000 (this "Amendment Agreement"), among
-------------------
Outboard Marine Corporation, a Delaware corporation (the "Company"), Quantum
-------
Industrial Partners LDC, a Cayman Islands limited duration company ("QIP"),
---
Greenlake Holdings II LLC, a Delaware limited liability company ("Greenlake II")
------------
and Greenlake Holdings III LLC, a Delaware limited liability company ("Greenlake
---------
III"), to that certain STOCKHOLDERS AGREEMENT, dated January 28, 2000 (the
- ---
"Existing Agreement"), among the Company, QIP, and Greenlake II. Unless
------------------
otherwise set forth in this Amendment Agreement, capitalized terms have the
respective meanings assigned to them in the Existing Agreement.
WHEREAS, the Company, QIP and Greenlake II entered into the Existing
Agreement in connection with their acquisition on January 28, 2000 of an
aggregate of 650,000 shares of the Company's Series A Convertible Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), and warrants
------------------------
(the "Existing Warrants") to purchase an aggregate of 5,750,000 shares of the
-----------------
Company's Common Stock in order to restrict the transfer of such securities and
to provide for, among other things, first offer, tag-along and preemptive rights
and certain other rights under certain conditions; and
WHEREAS, the Company proposes to issue and sell to QIP and Greenlake
III or their affiliates $15,000,000 aggregate principal amount of the Company's
Subordinated Notes due June 1, 2000 (the "Subordinated Notes"), and warrants
------------------
(the "New Warrants") to purchase an aggregate of 330,000 shares of the Company's
------------
Common Stock pursuant to the terms of a Subordinated Note and Warrant Purchase
Agreement, dated the date hereof (the "Subordinated Notes Purchase Agreement"),
-------------------------------------
among the Company, QIP and Greenlake III; and
WHEREAS, the Existing Agreement provides that the Existing Agreement
may amended by an amendment in writing signed by the Company and the
Stockholders holding 75% of the voting power of the Shares held by Stockholders;
and
WHEREAS, QIP and Greenlake II hold, in the aggregate, in excess of 75%
of the voting power of the Shares held by Stockholders; and
WHEREAS, the parties wish to amend the Existing Agreement in order to
(i) exempt the transactions contemplated by the Subordinated Notes Purchase
Agreement from the preemptive rights provisions of the Existing Agreement, (ii)
restrict the transfer of the securities to be issued pursuant to the
Subordinated Notes Purchase Agreement, and (iii) to add Greenlake III as a
Stockholder hereunder;
<PAGE>
2
NOW, THEREFORE, the Company, QIP, Greenlake II and Greenlake III
hereby agree to amend the Existing Agreement as follows:
1. Amendments to Section 1 of the Existing Agreement (Definitions).
---------------------------------------------------------------
(a) Section 1 of the Existing Agreement is hereby amended to add
the following additional definitions:
"Amendment Agreement" means the Amendment Agreement, dated
-------------------
May 2, 2000, among the Company, QIP, Greenlake II and Greenlake III
amending that certain Stockholders Agreement, dated January 28, 2000, among
the Company, QIP, and Greenlake II.
"Existing Agreement" is defined in the preamble to the
------------------
Amendment Agreement.
"Existing Warrants" is defined in the first recital of the
-----------------
Amendment Agreement.
"Greenlake II" is defined in the preamble to the Amendment
------------
Agreement.
"Greenlake III" is defined in the preamble to the Amendment
-------------
Agreement.
"New Warrants" is defined in the second recital of the
------------
Amendment Agreement.
"Series A Preferred Stock" is defined in the first recital
------------------------
of the Amendment Agreement.
"Series B Preferred Stock" means the shares of the Company's
------------------------
Series B Convertible Preferred Stock issuable upon conversion of the
Subordinated Notes.
"Subordinated Notes" is defined in the second recital of the
------------------
Amendment Agreement.
"Subordinated Notes Purchase Agreement" is defined in the
-------------------------------------
second recital of the Amendment Agreement.
<PAGE>
3
(b) Section 1 of the Existing Agreement is hereby further
amended by substituting the following definitions for the definition of such
terms contained in the Existing Agreement:
"Preferred Stock" means the shares of the Company's Series A
---------------
Preferred Stock and Series B Preferred Stock.
"Stockholders" means (a) QIP, Greenlake II and Greenlake III
------------
and any transferee thereof who has agreed to be bound by the terms and
conditions of this Agreement in accordance with Section 2.4 and (b) any
Person who has agreed to be bound by the terms and conditions of this
Agreement in accordance with Section 5.2(a), and the term "Stockholder"
-----------
shall mean any such Person.
"Warrants" means the Existing Warrants and the New Warrants.
--------
2. Amendment of Section 4 of the Existing Agreement (Future Issuance
-----------------------------------------------------------------
of Shares; Preemptive Rights). Section 4 of the Existing Agreement is hereby
- -----------------------------
amended by adding an new Subsection 4.5 providing as follows:
4.5 Exempt Transactions. Anything in Sections 4.1 through
-------------------
4.4 to the contrary notwithstanding, the Company may consummate the
transactions contemplated by the Subordinated Notes Purchase Agreement,
including the issuance of the Subordinated Notes and the New Warrants,
without complying with the provisions of said Sections 4.1 through 4.4, and
the holders of the securities issued pursuant to the Subordinated Notes
Purchase Agreement, as well as any securities into which such securities
may be converted or for which such securities may be exercised, shall enjoy
all rights of ownership thereof notwithstanding the fact that the Company
has not complied with the provisions of Section 4.1 through 4.4 hereof in
connection with the initial issuance thereof.
3. Amendment to Section 5.1 of the Existing Agreement (After-
----------------------------------------------------------
Acquired Securities). Section 5.1 of the Existing Agreement is hereby amended
- --------------------
and restated in its entirety to read as follows:
5.1 After-Acquired Securities. All of the provisions of
-------------------------
this Agreement shall apply to all of the Shares and Common Stock
Equivalents issued pursuant to the Stock Purchase Agreement and to the
Subordinated Notes Purchase Agreement (including, without limitation,
shares of Series B Preferred Stock issued upon conversion of the
Subordinated Notes).
<PAGE>
4
4. Amendment to Section 6.4 of the Existing Agreement (Board
---------------------------------------------------------
Representation). Section 6.4 of the Existing Agreement is hereby amended and
- ---------------
restated in its entirety to read as follows:
6.4 Board Representation. For so long as QIP, Greenlake II
--------------------
and Greenlake III, or Affiliates thereof, collectively own at least 50% of
the outstanding shares of Preferred Stock, the Company's Board of Directors
shall be expanded to add one additional director (the "Additional
----------
Director") who shall be selected by the holders of a majority of the
--------
outstanding shares of Preferred Stock. The Company will use its best
efforts to cause the Additional Director to be nominated and to solicit
proxies for his or her election.
5. Representations and Agreements of Greenlake III. Greenlake III
-----------------------------------------------
does hereby acknowledge and agree that (i) it has been given a copy of the
Existing Agreement and this Amendment Agreement, afforded ample opportunity to
read and to have counsel review it, and is thoroughly familiar with its terms,
(ii) any Shares (including any Common Stock Equivalents) which it may now or
hereafter acquire are and shall be subject to the terms and conditions set forth
in the Existing Agreement, as amended by this Amendment Agreement (the
"Agreement"), and (iii) it agrees fully to be bound by the terms of the
Agreement as a Stockholder, as such term is defined in the Agreement.
6. Miscellaneous.
-------------
6.1 Headings. The headings in this Amendment Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.2 GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
6.3 Continuation of Existing Agreement. Any reference in the
----------------------------------
Existing Agreement to "this Agreement" of "hereof" or using words of similar
meaning, shall be deemed to refer to the Existing Agreement as amended by this
Amendment Agreement. Except as specifically amended hereby, the Existing
Agreement shall continue in full force and effect in accordance with its terms.
<PAGE>
5
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Amendment Agreement on the date first written above.
OUTBOARD MARINE CORPORATION
By: /s/ Eric T. Martinez
-------------------------------
Name: Eric T. Martinez
Title: Interim CFO and Vice President and
Treasurer
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Michael C. Neus
--------------------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
GREENLAKE HOLDINGS II LLC
By: /s/ Gary K. Duberstein
--------------------------------
Name: Gary K. Duberstein
Title: Vice President
GREENLAKE HOLDINGS III LLC
By: /s/ Gary K. Duberstein
--------------------------------
Name: Gary K. Duberstein
Title: Vice President
<PAGE>
EXHIBIT 4.17
FIRST AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
AMENDMENT, dated May 2, 2000 (this "Amendment Agreement"), among
-------------------
Outboard Marine Corporation, a Delaware corporation (the "Company"), Quantum
-------
Industrial Partners LDC, a Cayman Islands limited duration company ("QIP"),
---
Greenlake Holdings II LLC, a Delaware limited liability company ("Greenlake
---------
II"), Greenlake Holdings III LLC, a Delaware limited liability company
("Greenlake III") and Greenmarine Holdings LLC, a Delaware limited liability
-------------
company ("Greenmarine") to that certain REGISTRATION RIGHTS AGREEMENT, dated
-----------
January 28, 2000 (the "Existing Agreement"), among the Company, QIP, Greenlake
------------------
II, and Greenmarine. Unless otherwise set forth in this Amendment Agreement,
capitalized terms have the respective meanings assigned to them in the Existing
Agreement.
WHEREAS, the Company, QIP, Greenlake II and Greenmarine entered into
the Existing Agreement in connection with the acquisition by QIP and Greenlake
II on January 28, 2000 of an aggregate of 650,000 shares of the Company's Series
A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred
------------------
Stock"), and warrants (the "Existing Warrants") to purchase an aggregate of
- ----- -----------------
5,750,000 shares of the Company's Common Stock in order to grant to the holders
of such securities registration rights with respect thereto; and
WHEREAS, the Company proposes to issue and sell to QIP and Greenlake
III or their affiliates $15,000,000 aggregate principal amount of the Company's
Subordinated Notes due June 1, 2000 (the "Subordinated Notes"), and warrants
------------------
(the "New Warrants") to purchase an aggregate of 330,000 shares of the Company's
------------
Common Stock pursuant to the terms of a Subordinated Note and Warrant Purchase
Agreement, dated the date hereof (the "Subordinated Notes Purchase Agreement"),
-------------------------------------
among the Company, QIP and Greenlake III; and
WHEREAS, the Subordinated Notes are convertible, under certain
circumstances, into shares of the Company's Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"); and
------------------------
WHEREAS, in order to induce each of QIP and Greenlake III to purchase
the Subordinated Notes and New Warrants from the Company, the Company has agreed
to amend the Existing Agreement to grant registration rights with respect to the
shares of Common Stock issuable upon exercise of the New Warrants or upon
conversion of the shares of Series B Preferred Stock;
WHEREAS, the Existing Agreement provides that the Existing Agreement
may amended by an amendment in writing signed by the Company and the
Stockholders holding Registrable Securities representing at least a majority of
the aggregate number of Registrable Securities owned by all of the Stockholders;
and
<PAGE>
2
WHEREAS, QIP, Greenlake II and Greenmarine hold, in the aggregate, in
excess of a majority of the aggregate number of Registrable Securities owned by
all of the Stockholders;
NOW, THEREFORE, the Company, QIP, Greenlake II, Greenlake III and
Greenmarine hereby agree to amend the Existing Agreement as follows:
1. Amendments to Section 1 of the Existing Agreement (Definitions).
---------------------------------------------------------------
(a) Section 1 of the Existing Agreement is hereby amended to add
the following additional definitions:
"Amendment Agreement" means the Amendment Agreement, dated
-------------------
May 2, 2000, among the Company, QIP, Greenlake II, Greenlake III and
Greenmarine, amending that certain Registration Rights Agreement, dated
January 28, 2000, among the Company, QIP, Greenlake II, and Greenmarine.
"Existing Agreement" is defined in the preamble to the
------------------
Amendment Agreement.
"Existing Warrants" is defined in the first recital of the
-----------------
Amendment Agreement.
"Greenlake II" is defined in the preamble to the Amendment
------------
Agreement.
"Greenlake III" is defined in the preamble to the Amendment
-------------
Agreement.
"New Warrants" is defined in the second recital of the
------------
Amendment Agreement.
"Series A Preferred Stock" is defined in the first recital
------------------------
of the Amendment Agreement.
"Series B Preferred Stock" is defined in the third recital
------------------------
of the Amendment Agreement.
<PAGE>
3
"Subordinated Notes" is defined in the second recital of the
------------------
Amendment Agreement.
"Subordinated Notes Purchase Agreement" is defined in the
-------------------------------------
second recital of the Amendment Agreement.
(b) Section 1 of the Existing Agreement is hereby further
amended by substituting the following definitions for the definition of such
terms contained in the Existing Agreement:
"Preferred Stock" means the shares of the Company's Series A
---------------
Preferred Stock and Series B Preferred Stock.
"Registrable Securities" means each of the following: (a)
----------------------
any and all shares of Common Stock owned by the Designated Holders after
giving effect to the consummation of the transactions contemplated by the
Subordinated Notes Purchase Agreement or issued or issuable to such
Designated Holders upon conversion of shares of Preferred Stock (including,
without limitation, shares of Common Stock issued or issuable upon
conversion of any shares of Series B Preferred Stock which may be issued
upon conversion of the Subordinated Notes) or exercise of the Warrants and
(b) any shares of Common Stock issued or issuable to any of the Designated
Holders with respect to the Registrable Securities by way of stock dividend
or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise and any shares of Common Stock issuable upon conversion, exercise
or exchange thereof.
"Stockholders" means each of QIP, Greenlake II, Greenlake
------------
III and Greenmarine and any transferee of any of them to whom Registrable
Securities are transferred in accordance with Section 10(f) of this
Agreement.
"Stockholders' Agreement" means the Stockholders' Agreement,
-----------------------
dated January 28, 2000, among the Company, QIP and Greenlake II, as the
same may be amended from time to time.
"Warrants" means the Existing Warrants and the New Warrants.
--------
2. Amendments to Section 10 of the Exiting Agreement
-------------------------------------------------
(Miscellaneous).
- ---------------
(a) Section 10(k) of the Existing Agreement is hereby amended
and restated to read in its entirety as follow:
<PAGE>
4
(k) Entire Agreement. This Agreement is intended by the
----------------
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein and in the Stock Purchase Agreement, the
Subordinated Notes Purchase Agreement and the Stockholders' Agreement.
This Agreement supersedes all prior agreements and understandings among the
parties with respect to such subject matter.
(b) Section 10(m) of the Existing Agreement is hereby amended
and restated to read in its entirety as follow:
(m) Other Agreements. Nothing contained in this Agreement
----------------
shall be deemed to be a waiver of, or release from, any obligations any
party hereto may have under, or any restrictions on the transfer of
Registrable Securities or other securities of the Company imposed by, any
other agreement including, but not limited to, the Stock Purchase
Agreement, the Subordinated Notes Purchase Agreement or the Stockholders'
Agreement.
3. Miscellaneous.
-------------
3.1 Headings. The headings in this Amendment Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
3.2 GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
3.3 Continuation of Existing Agreement. Any reference in the
----------------------------------
Existing Agreement to "this Agreement" of "hereof" or using words of similar
meaning, shall be deemed to refer to the Existing Agreement as amended by this
Amendment Agreement. Except as specifically amended hereby, the Existing
Agreement shall continue in full force and effect in accordance with its terms.
[Remainder of Page Intentionally Left Blank]
<PAGE>
5
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Amendment Agreement on the date first written above.
OUTBOARD MARINE CORPORATION
By: /s/ Eric T. Martinez
--------------------------------------
Name: Eric T. Martinez
Title: Interim CFO and Vice President and Treasurer
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Michael C. Neus
--------------------------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
GREENLAKE HOLDINGS II LLC
By: /s/ Gary K. Duberstein
--------------------------------------
Name: Gary K. Duberstein
Title: Vice President
GREENLAKE HOLDINGS III LLC
By: /s/ Gary K. Duberstein
--------------------------------------
Name: Gary K. Duberstein
Title: Vice President
GREENMARINE HOLDINGS LLC
By: /s/ Michael C. Neus
--------------------------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
<PAGE>
EXHIBIT 4.18
THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE
EXERCISE OR CONVERSION THEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE
SECURITIES REPRESENTED HEREBY. TRANSFEREES OF SUCH SECURITIES SHOULD
REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS.
--------------------------
Date: May 2, 2000
WARRANT TO PURCHASE
330,000 SHARES OF COMMON STOCK OF
OUTBOARD MARINE CORPORATION
Void after 5:00 P.M. (Eastern Time) on the
Expiration Date (as defined herein)
THIS CERTIFIES that Quantum Industrial Partners LDC (the "Warrant Holder"),
or registered assigns, is entitled to purchase from OUTBOARD MARINE CORPORATION
(the "Company"), a Delaware corporation, at any time after the date hereof and
until 5:00 P.M. (Eastern Time) on the Expiration Date, Three Hundred and Thirty
Thousand (330,000) fully paid and nonassessable shares of Common Stock of the
Company, $.01 par value per share (the "Common Stock"), at a purchase price of
$.01 per share, in each case subject to adjustment as provided in Section 6
hereof.
1
<PAGE>
1. Definitions. For the purpose of this Warrant:
-----------
(a) "Expiration Date" shall mean May 2, 2010.
---------------
(b) "Warrant Price" shall mean the price per share at which
-------------
shares of Common Stock of the Company are purchasable hereunder, as such
price may be adjusted from time to time hereunder.
(c) "Warrant Shares" shall mean the Common Stock purchased upon
--------------
exercise of Warrants.
(d) "Warrants" shall mean this original Warrant to purchase
--------
Common Stock of the Company and any and all Warrants which are issued in
exchange or substitution for the Warrant pursuant to the terms of this Warrant.
2. Method of Exercise of Warrants. This Warrant may be exercised at
------------------------------
any time and from time to time after the date hereof and prior to 5:00 P.M.
(Eastern Time) on the Expiration Date, in whole or in part (but not as to
fractional shares), by the surrender of the Warrant, manually or by facsimile
transmission, with the Purchase Agreement attached hereto as Exhibit A properly
---------
completed and duly executed, at the principal office of the Company at the
address set forth in Section 10(ii) hereof, or such other location which shall
at that time be the principal office of the Company (the "Principal Office"),
----------------
and upon payment to it by certified check or bank draft or wire transfer of
immediately available funds to the order of the Company of the purchase price
for the shares to be purchased upon such exercise. The person entitled to the
shares so purchased shall be treated for all purposes as the holder of such
shares as of the close of business on the date of exercise and certificates for
the shares of stock so purchased shall be delivered to the person so entitled
within a reasonable time, not exceeding thirty (30) days, after such exercise.
Unless this Warrant has expired, a new Warrant of like tenor and for such number
of shares as the holder of this Warrant shall direct, representing in the
aggregate the right to purchase a number of shares with respect to which this
Warrant shall not have been exercised, shall also be issued to the holder of
this Warrant within such time.
3. Conversion Right.
----------------
(a) In lieu of the payment of the Exercise Price, the Warrant
Holder shall have the right (but not the obligation), to require the Company to
convert this Warrant, in whole or in part, into shares of Common Stock (the
"Conversion Right") as provided for in this Section 3. Upon exercise of the
--------- -----
Conversion Right, the Company shall deliver to the Warrant Holder (without
payment by the Warrant Holder of any of the Warrant Price) in accordance with
Section 2 that number of shares of Common Stock equal to the quotient obtained
by dividing (i) the value of the Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate Warrant Price in effect
immediately prior to the exercise of the Conversion Right from the aggregate
Current Market Price (as defined herein) for the shares of Common Stock
issuable upon exercise of the Warrant immediately prior to the exercise of the
Conversion Right)
2
<PAGE>
by (ii) the Current Market Price of one share of Common Stock immediately prior
to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Warrant Holder
at any time and from time to time prior to 5:00 p.m. (Eastern Time) on the
Expiration Date by surrender of the Warrant, together with notice of such
exercise, to the Company, and specifying the total number of shares of Common
Stock that the Warrant Holder will be issued pursuant to such conversion.
(c) Current Market Price of a share of Common Stock as of a
particular date (the "Determination Date") shall mean the average closing price
------------------
of the Company's Common Stock on the principal securities exchange or market on
which such shares are then traded for the last thirty (30) trading days prior to
the Determination Date, or if the Common Stock is not traded on any such
principal securities exchange or market at the time the Conversion Right is
exercised, a market price per share determined in good faith by the Board of
Directors of the Company or, if such determination is not satisfactory to the
Warrant Holder, by a nationally recognized investment banking firm selected by
the Company and the Warrant Holder, the expenses for which shall be borne
equally by the Company and the Warrant Holder.
4. Exchange. This Warrant is exchangeable, upon the surrender
--------
hereof by the holder hereof at the Principal Office of the Company, for new
Warrants of like tenor registered in such holder's name and representing in the
aggregate the right to purchase the number of shares purchasable under the
Warrant being exchanged, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by said
holder at the time of such surrender.
5. Transfer. Any transfer or assignment of this Warrant, whether in
--------
whole or in part without, must be made in compliance with all applicable federal
and state securities laws and the Company shall not be required to give effect
to any such purported transfer or assignment unless it is reasonably satisfied
that such transfer has been made in compliance with all applicable federal and
state securities laws. Subject to the immediately preceding sentence, this
Warrant is transferable, in whole or in part, at the Principal Office of the
Company by the holder hereof, in person or by duly authorized attorney, upon
presentation of this Warrant, properly endorsed, for transfer. Each holder of
this Warrant, by holding it, agrees that the Warrant, when endorsed in blank,
may be deemed negotiable, and that the holder hereof, when the Warrant shall
have been so endorsed, may be treated by the Company and all other persons
dealing with the Warrant as the absolute owner hereof for any purpose and as the
person entitled to exercise the rights represented by the Warrant, or to the
transfer thereof on the books of the Company, any notice to the contrary
notwithstanding.
6. Certain Covenants of the Company. The Company covenants and
--------------------------------
agrees that all shares which may be issued upon the exercise of this Warrant
will, upon issuance, be duly authorized and validly issued, fully paid and
nonassessable. The Company covenants and agrees that none of the shares which
may be issued upon the exercise of this Warrant will, upon issuance, be in
violation of or subject to any preemptive rights of any person. The Company
further
3
<PAGE>
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
7. Adjustment of Warrant Price and Number of Shares. The number and
------------------------------------------------
kind of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Reclassification, Consolidation or Merger. At any time while the
-----------------------------------------
Warrants remain outstanding and unexpired, in case of any reclassification or
change of outstanding securities issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from no par
value to par value or as a result of a subdivision or combination of outstanding
securities issuable upon the exercise of the Warrants) or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
rights of outstanding securities issuable upon exercise of the Warrants, other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination of
outstanding securities issuable upon exercise of the Warrants), the Company, or
such successor corporation, as the case may be, shall, without payment of any
additional consideration therefor, execute new Warrants providing that the
holders of the Warrants shall have the right to exercise such new Warrants (upon
terms not less favorable to the holders than those then applicable to the
Warrants) and to receive upon such exercise, in lieu of each share of Common
Stock or other security theretofore issuable upon exercise of the Warrants, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation or merger by the
holder of one share of Common Stock or other security issuable upon exercise of
the Warrants had the Warrants been exercised immediately prior to such
reclassification, change, consolidation or merger. Such new Warrants shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 7. The provisions
of this subsection 7(a) shall similarly apply to successive reclassifications,
changes, consolidations and mergers.
(b) Subdivision or Combination of Shares. If the Company at any
------------------------------------
time while the Warrants remain outstanding and unexpired shall subdivide or
combine its Common Stock, (i) the Warrant Price shall be proportionately
reduced, and the number of shares of Common Stock for which this Warrant may be
exercised shall be proportionately increased, in case of subdivision of such
shares, as of the effective date of such subdivision, or, if the Company shall
take a record of holders of its Common Stock for the purpose of so subdividing,
as of such record date, whichever is earlier, or (ii) the Warrant Price shall be
proportionately increased, and the number of shares of Common Stock for which
this Warrant may be exercised shall be proportionately reduced, in the case of
combination of such shares, as of the effective date of such combination, or, if
the Company shall take a record of holders of its Common Stock for the purpose
of so combining, as of such record date, whichever is earlier.
4
<PAGE>
(c) Stock Dividends. If the Company at any time while the
---------------
Warrants remain outstanding and unexpired shall pay a dividend in shares of its
Common Stock, or make other distribution to the holders of Common Stock or of
options, warrants or rights to subscribe for or purchase shares of Common Stock
or of evidences of indebtedness issued by the Company or any other person, then
the Warrant Price shall be adjusted, as of the date the Company shall take a
record of the holders of its Common Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the date of
such payment or other distribution), to that price determined by multiplying the
Warrant Price in effect immediately prior to such payment or other distribution
by a fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution (the
"Fraction"), and the number of shares of Common Stock issuable upon exercise of
this Warrant shall be adjusted by multiplying such number by the reciprocal of
the Fraction. The number of shares of Common Stock at any time outstanding shall
not include any shares thereof then directly or indirectly owned or held by or
for the account of the Company or any wholly-owned subsidiary. The provisions of
this subsection 7(c) shall not apply under any of the circumstances for which an
adjustment is provided in subsections 7(a) or 7(b).
(d) Liquidating Dividends, Etc. If the Company at any time while
--------------------------
the Warrants remain outstanding and unexpired makes a distribution of its assets
to the holders of its Common Stock as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
subsections 7(a) through 7(c)), the Warrant Holder shall be entitled to receive
upon the exercise hereof, in addition to the shares of Common Stock receivable
upon such exercise, and without payment of any consideration other than the
Warrant Price, an amount of such assets so distributed equal to the value of
such distribution per share of Common Stock multiplied by the number of shares
of Common Stock which, on the record date for such distribution, are issuable
upon exercise of this Warrant (with no further adjustment being made following
any event which causes a subsequent adjustment in the number of shares of Common
Stock issuable upon the exercise hereof), and an appropriate provision therefor
shall be made a part of any such distribution. The value of a distribution which
is paid in other than cash shall be determined by 75% of the members of the
Board of Directors of the Company, or if 75% of the members of the Board of
Directors are unable to agree upon the value of such consideration, the value
thereof shall be determined by an independent investment bank of nationally
recognized stature that is selected by 75% of the members of the Board of
Directors.
(e) Notice of Adjustments. Whenever the Warrant Price or the
---------------------
number of shares of Common Stock purchasable under the terms of this Warrant at
the Warrant Price shall be adjusted pursuant to this Section 6, the Company
shall promptly prepare a certificate signed by its President or a Vice President
and by its Treasurer or Assistant Treasurer or its Secretary or Assistant
Secretary, setting forth in reasonable detail the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a
5
<PAGE>
description of the basis on which the Company's Board of Directors made any
determination hereunder), and the Warrant Price and number of shares of Common
Stock purchasable at that Warrant Price after giving effect to such adjustment,
and shall promptly cause copies of such certificate to be mailed (by first class
and postage prepaid) to the registered holder of this Warrant.
8. Fractional Shares. No fractional shares of the Company's Common
-----------------
Stock will be issued in connection with any purchase hereunder but in lieu of
such fractional shares, the Company shall make a cash refund therefor equal in
amount to the product of the applicable fraction multiplied by the Warrant Price
paid by the holder for its Warrant Shares upon such exercise.
9. Loss, Theft, Destruction or Mutilation. Upon receipt by the
--------------------------------------
Company of evidence reasonably satisfactory to it that any Warrant has been
mutilated, destroyed, lost or stolen, and in the case of any destroyed, lost or
stolen Warrant, a bond of indemnity reasonably satisfactory to the Company, or
in the case of a mutilated Warrant, upon surrender and cancellation thereof, the
Company will execute and deliver in the Warrant Holder's name, in exchange and
substitution for the Warrant so mutilated, destroyed, lost or stolen, a new
Warrant of like tenor substantially in the form thereof with appropriate
insertions and variations.
10. Notices. All notices, demands and other communications provided
--------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
6
<PAGE>
(i) if to the Warrant Holder:
Quantum Industrial Partners LDC
Kaya Flamboyan 9,
Villemstad
Curacao
Netherlands-Antilles
with a copy to each of:
Soros Fund Management LLC
888 Seventh Avenue
New York, NY 10016
Telecopy: (212) 664-0544
Attention: Michael Neus, Esq.
and
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 757-3990
Attention: Richard Borisoff, Esq.
(ii) if to the Company, to the attention of each of its
Treasurer and General Counsel at:
Outboard Marine Corporation
100 Sea-Horse Drive
Waukegan, IL 60085
Telecopy: (847) 689-6246
with a copy to:
Davis, Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy: (212) 450-4800
Attention: Julia K. Cowles, Esq.
All such notices and communications shall be deemed to have been duly
given when hand delivered by hand, if personally delivered; when delivered by
courier or overnight mail, if delivered by commercial courier service or
overnight mail; five (5) business days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is mechanically
7
<PAGE>
acknowledged, if telecopied. Any party may by notice given in accordance with
this Section 10 designate another address or person for receipt of notices
hereunder.
11. Headings. The descriptive headings of the several sections of
--------
this Warrant are inserted for convenience only and do not constitute a part of
this Warrant.
12. Payment of Taxes. The issuance of certificates for Warrant
----------------
Shares shall be made without charge to the Warrant Holder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the Warrant
-------- -------
Holder shall be required to pay any and all taxes that may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the then Warrant Holder as upon the books of the
Company.
13. Binding Effect; Benefits. This Warrant shall inure to the
------------------------
benefit of and shall be binding upon the Company and the Warrant Holder and
their respective successors and assigns. Nothing in this Warrant, expressed or
implied, is intended to or shall confer on any person other than the Company and
the Warrant Holder, or their respective successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Warrant.
14. Severability. Any term or provision of this Warrant which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
15. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
16. No Rights or Liabilities as Stockholders. No Warrant Holder
----------------------------------------
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of this
Warrant for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the Warrant Holder, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
Warrant Holder shall have exercised this Warrant and been issued Common Stock in
accordance with the provisions hereof. Nothing contained in this Warrant shall
be determined as imposing any liabilities on the Warrant Holder to purchase any
securities, whether such liabilities are asserted by the Company or by creditors
or stockholders of the Company or otherwise.
8
<PAGE>
17. Compliance with Securities Laws.
-------------------------------
(a) The Warrant Holder, by acceptance hereof, acknowledges that
this Warrant and the shares of Common Stock to be issued upon exercise hereof
are being acquired solely for the Warrant Holder's own account and not as a
nominee for any other party, and for investment, and that the Warrant Holder
will not offer, sell or otherwise dispose of this Warrant or any shares of
Common Stock to be issued upon exercise hereof except under circumstances that
will not result in a violation of the Securities Act or any state securities
laws. Upon exercise of this Warrant, the Warrant Holder shall, if requested by
the Company, confirm in writing, in a form satisfactory to the Company, that the
shares of Common Stock so purchased are being acquired solely for the Warrant
Holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale.
(b) This warrant and all shares of Common Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE
EXERCISE OR CONVERSION THEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE
SECURITIES REPRESENTED HEREBY. TRANSFEREES OF SUCH SECURITIES SHOULD
REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS."
18. Market Stand-Off Agreement. Each holder of this Warrant or any
--------------------------
portion hereof hereby agrees that, during the period of duration specified by
the Company and, in the case of an underwritten public offering, an underwriter
of Common Stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale, grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) all or any portion of this
Warrant or shares of Common Stock issued or issuable upon exercise of the
Warrant held by it at any time during such period except common stock included
in such registration; provided, however, that such market stand-off time period
shall not exceed 180 days in the case of an initial public offering and 90 days
in the case of all other offerings.
9
<PAGE>
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instruction with respect to the foregoing restriction until the
end of such period.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer on the date of this Warrant.
OUTBOARD MARINE CORPORATION
By: /s/ Eric T. Martinez
----------------------------
10
<PAGE>
Exhibit A
---------
PURCHASE AGREEMENT
------------------
Date: ______________________________
TO:
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to purchase __________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by this Warrant.
Signature: ________________________________
Address: ________________________________
________________________________
________________________________
* * *
ASSIGNMENT
----------
For Value Received, __________________________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Warrant, with respect to the number of shares of Common Stock covered
by such Warrant, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------
Dated: _______________________ Signature:
_____________________________
Witness:
_____________________________
11
<PAGE>
-1-
EXHIBIT 10.24
THIS NOTE, AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THIS NOTE, AND THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF, MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS.
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THIS
NOTE. TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO DETERMINE
THEIR RIGHTS AND OBLIGATIONS.
OUTBOARD MARINE CORPORATION
SUBORDINATED NOTE
$15,000,000 New York, New York
May 2, 2000
SECTION 1. Payment of Principal and Interest.
---------------------------------
OUTBOARD MARINE CORPORATION (the "Issuer"), a Delaware corporation, hereby
promises to pay to the order of Quantum Industrial Partners LDC or its
successors or assigns (the "Holder") the principal sum of Fifteen Million
Dollars ($15,000,000). The principal amount of this Promissory Note (herein,
this "Note") remaining unpaid from time to time shall bear interest from the
date hereof, until paid in full, payable in accordance with Section 3 hereof.
This Note is one of a series of notes (the "Notes") in the aggregate principal
amount of $15,000,000 issued under the terms of a Subordinated Note and Warrant
Purchase Agreement, dated May 2, 2000 (the "Purchase Agreement"), among the
Issuer, Quantum Industrial Partners LDC and Greenlake Holdings III LLC. All
payments of principal and interest under this Note and the other Notes shall be
paid ratably to the respective holders thereof (the "Holders") based on the
respective outstanding principal amount of each of the Notes. The Issuer agrees
to repay the entire principal amount of the Notes, and all accrued and unpaid
interest
<PAGE>
-2-
thereon, on the Maturity Date (as defined below), unless this Note has been
converted in accordance with Section 6 hereof.
SECTION 2. Maturity Date.
-------------
The "Maturity Date" shall be June 1, 2000 (the "Initial Maturity
Date"), provided, however, that at the Issuer's request, upon not less than five
days written notice in advance of the Initial Maturity Date or the upcoming
Extended Maturity Date (as defined below), as the case may be, the Issuer may,
with the consent of the Holders, extend the Maturity Date for an additional
thirty day period (each such extended Maturity Date being referred to as an
"Extended Maturity Date"); provided, however, that no more than four such
extensions shall be permitted hereunder.
SECTION 3. Interest.
--------
(a) Interest on all amounts outstanding under the Notes shall be payable
on the Initial Maturity Date and each Extended Maturity Date, if any. Interest
shall be paid on the unpaid principal amount of the Notes at the rate of 15% per
annum. All interest on the Notes shall be calculated on the basis of a 365 day
year and the actual number of days elapsed. The Issuer shall pay interest on any
overdue principal at the rate per annum set forth above; it shall pay interest
on any overdue payment of interest at the same rate to the extent lawful.
(b) Notwithstanding anything herein to the contrary, the interest
payable by the Issuer with respect to the Notes shall not exceed the maximum
amount permitted by applicable law and, to the extent that any payments in
excess of such permitted amount are received by the Holder, such excess shall be
considered payments in respect of the principal amount of the Notes.
SECTION 4. Payments Generally.
------------------
(a) Principal and interest hereunder shall be payable to the Holder
without set-off or counterclaim by wire transfer of immediately available funds,
in lawful money of the United States of America, to the bank account of the
Holder as notified in writing to the Issuer.
(b) If any payment on this Note becomes due and payable on a day other
than a Business Day, the date such payment becomes due and payable shall be
extended to the next succeeding Business Day, and with respect to payments of
principal, interest thereon shall be payable during such extension at the rate
set forth in Section 3 hereof.
SECTION 5. Optional Redemption.
-------------------
At its option, the Issuer may prepay the Notes in whole or in part at any
time or from time to time upon not less than 5 days' advance written notice to
the Holder (the "Optional Redemption") but only to the extent that such Optional
Redemption would not violate Section 10
<PAGE>
-3-
hereof or result in a default or event of default under or in respect of the
Senior Obligations. If the Issuer exercises such Optional Redemption, there
shall be no prepayment penalty or premium.
SECTION 6. Mandatory Conversion.
--------------------
Subject to the terms and provisions of this Section 6, the holders of the
outstanding Notes shall have the right, at their option, exercisable by giving a
Qualified Demand (as defined below) to the Issuer, to cause all outstanding
indebtedness evidenced by the Notes (including default interest, if any, to the
Conversion Time (as defined below)) to be converted, into shares of Series B
Preferred Stock (as defined in the Purchase Agreement) as provided in the
immediately following paragraph; provided, however, that (i) any Qualified
-------- -------
Demand made on or prior to tenth day preceding the Maturity Date shall be deemed
to be a demand to convert on the Maturity Date, and (ii) any Qualified Demand
made subsequent to the tenth day preceding the Maturity Date shall be deemed to
be a demand to convert on such date as may be selected by the Issuer and set
forth in a written notice given to all holders of Notes but which shall in no
event be earlier than the Maturity Date or later than the tenth day following
the date of receipt by the Issuer of a Qualified Demand; provided further,
----------------
however, the receipt by the Issuer of a Qualified Demand at any time prior to
- -------
the Maturity Date shall not prevent the Issuer from paying the Notes in full on
the Maturity Date and upon such payment, any Qualified Demand theretofore
received by the Issuer shall be null and void. As used herein, a "Qualified
Demand," means a written demand to convert the Notes into shares of Series B
Preferred Stock made upon the Issuer by the holders of not less than 75% of the
outstanding principal amount of the Notes. Any such Qualified Demand shall
state that such demand is being made pursuant to this Section 6 and shall set
forth the amount (the "Proposed Series B Conversion Price") to be included in
Section 5 (a) of the Certificate of Designation (as defined in the Purchase
Agreement) as the "Conversion Price" of the shares of Series B Preferred Stock
(the "Series B Conversion Price").
Upon receipt by the Issuer of a Qualified Demand, the Issuer shall notify
the holders of the Notes in writing (an "Issuer Notice") whether or not it
agrees to the Proposed Series B Conversion Price, and if it does so agree it
shall further state that it has received a Qualified Demand and that the Issuer
will either (i) pay the full principal amount of the Notes and all accrued
interest thereon on the then current Maturity Date (it being understood that the
Issuer may elect this alternative only if such payment would not violate Section
10 hereof or result in a default or event of default under or in respect of the
Senior Obligations), or (ii) issue, on the date specified in the Issuer Notice
(the "Specified Date"), in exchange for the delivery of the Notes, shares of
Series B Preferred Stock at the rate of one share of Series B Preferred Stock
for each $100 of outstanding principal amount of the Notes and accrued interest
thereon, if any, to the Specified Date, and cash in lieu of fractional shares.
If the Qualified Demand was received by the Issuer on or prior to the tenth day
preceding the Maturity Date, the Specified Date shall be the Maturity Date; if
the Qualified Demand was received by the Issuer after the tenth day preceding
the Maturity Date the Specified Date shall be a Business Day selected by the
Issuer which shall not be earlier than the Maturity Date nor later than 10 days
following the date on which the Issuer received the Qualified Demand. If the
Issuer agrees to the Proposed Series B Conversion Price, such amount shall be
the Series B Conversion Price and on or prior to the Conversion Date the
<PAGE>
-4-
Issuer shall use its best efforts to (i) cause such amount to be set forth in
the Certificate of Designation, and (ii) cause the Certificate of Designation to
be duly executed on behalf of the Issuer and filed with the Secretary of State
of the State of Delaware. If the Issuer does not agree with the Proposed Series
B Conversion Price, it shall so inform the Holders, and it shall not be required
to proceed with the mandatory conversion contemplated hereby. Under no
circumstances will the Series B Conversion Price be greater than the conversion
price then applicable to the shares of the Issuer's Series A Convertible
Preferred Stock.
Any conversion of the Notes shall be deemed to occur at 11:00 am New York
time on the Specified Date (the "Conversion Time") and the rights of the holder
of any Note shall cease with respect to such Note at such time and the holder of
a Note shall thereafter be treated for all purposes as having become the record
holder of the shares of Series B Preferred Stock into which such Note has been
converted. Following the Conversion Time, the Issuer shall promptly deliver to
each holder of a Note, upon surrender of such Note to the Issuer, a certificate
representing the number of fully paid and nonassessable shares of Series B
Preferred Stock into which such Note was converted, together with cash in lieu
of any fractional shares.
SECTION 7. Covenants.
---------
In addition to the other undertakings herein contained, the Issuer hereby
covenants to the Holder that so long as any amount payable hereunder is
outstanding the Issuer shall perform the following obligations:
(a) Use of Proceeds. The Issuer shall use the proceeds of the Notes as
---------------
set forth in the Purchase Agreement.
(b) Merger, Consolidation, etc. The Issuer shall not consolidate with or
--------------------------
merge with any other corporation or convey, transfer or lease substantially all
of its assets in a single transaction or series of transactions to any Person
unless:
(i) either (A) the Issuer is the surviving corporation of such
merger (in the case of a merger), or (B) the successor formed by such
consolidation or the survivor of such merger (if other than the Issuer) or
the Person that acquires by conveyance, transfer or lease substantially all
of the assets of the Issuer as an entirety, as the case may be, is a
corporation organized and existing under the laws of the United States or
any State thereof (including the District of Columbia), and such Person has
executed and delivered to the Holder its assumption (in form reasonably
satisfactory to the Holder) of the due and punctual performance and
observance of each covenant and condition of this Note; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing.
<PAGE>
-5-
SECTION 8. Events of Default.
-----------------
Except upon the occurrence of an event under (e) or (f) below, whereupon
this Note shall become immediately due and payable without notice or declaration
by the Holder, the Holder may, subject to Section 10, by written notice to the
Issuer, declare this Note immediately due and payable, whereupon this Note and
all sums due hereunder shall become immediately due and payable without protest,
presentment, demand or notice (except the notice referred to above in this
Section 8) or without petition to any court, all of which are expressly waived
by the Issuer, if any of the following events (each an "Event of Default") shall
occur:
(a) principal or interest due under this Note shall not be paid as and
when due, whether at maturity, by declaration or otherwise, except where such
payment is prohibited by the terms of Section 10; or
(b) any representation by the Issuer in the Purchase Agreement shall
prove to be false or incorrect in any material respect as of the date made; or
(c) the Issuer shall default in any material respect in the due
performance of any term or covenant of this Note (which is not the subject of
another subsection of this Section 8) which default, if remediable, shall
continue unremedied for a period of thirty (30) days after the earlier of (i)
the day an officer of the Issuer obtains actual knowledge of such default, and
(ii) the day the Holder gives written notice of such default to the Issuer; or
(d) (i) the Issuer or any subsidiary is in default (as principal or as
guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $2,000,000 beyond any period of grace
provided with respect thereto, or (ii) the Issuer or any subsidiary is in
default in the performance of or compliance with any term of any Indebtedness in
an aggregate outstanding principal amount of at least $2,000,000 or of any
mortgage, indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Indebtedness has
become, or has been declared, due and payable before its stated maturity or
before its regularly scheduled dates of payment; or
(e) the Issuer or any subsidiary shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator for itself or any of its assets
or properties, (ii) admit in writing its inability to pay its debts as they
mature, (iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
any answer admitting the material allegations of a petition filed against it in
any proceeding under any such law or if action shall be taken by the Issuer or
such subsidiary for the purpose of effecting any of the foregoing, (vi) have
commenced against it any case, proceeding or other action of a nature described
in (i) through (v) above which results in the
<PAGE>
-6-
entry of an order for relief, or which remains undismissed for a period of 60
days or (vii) take or be subject to any action similar to those specified in
clauses (i) through (vi) in any jurisdiction; or
(f) an order, judgment or decree shall be entered, without the
application, approval or consent of the Issuer or any subsidiary, with respect
to the Issuer or such subsidiary or all or a substantial part of the assets of
the Issuer or any such subsidiary, appointing a receiver, trustee or liquidator
of the Issuer or such subsidiary, or any similar order, judgment or decree shall
be entered or appointment made in any jurisdiction, and such order, judgment or
decree or appointment shall continue unstayed and in effect for a period of 60
days; or
(g) a final judgment or judgments for the payment of money aggregating
in excess of $2,000,000 are rendered against one or more of the Issuer and its
subsidiaries and which judgments are not, within 60 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within 60
days after the expiration of such stay.
SECTION 9. Application of Payments.
-----------------------
Each payment or prepayment received by the Holder hereunder, except as
expressly set forth herein, shall be applied, first, to the payment of accrued
interest on this Note to the date of such payment and second, to the payment of
the principal amount of this Note.
SECTION 10. Subordination Agreement.
-----------------------
(a) The Issuer covenants and agrees and the Holder, by the Holder's
acceptance hereof, likewise covenants and agrees, for itself and any future
holder of this Note or the Indebtedness evidenced hereby, that, to the extent
and in the manner set forth below in this Section 10, the Company's Senior
Obligations will be senior in right of payment to the Debt. The Holder by
accepting this Note acknowledges and agrees that the subordination provisions
set forth in this Section 10 are, and are intended to be, an inducement and a
consideration to each holder of any Senior Obligation, whether such Senior
Obligation was created or acquired before or after the issuance of this Note, to
acquire and continue to hold, or to continue to hold, such Senior Obligation and
such holder of Senior Obligations shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or continuing
to hold, such Senior Obligations.
(b) As used herein, "senior in right of payment" means that unless and
until the Senior Obligations have been paid in full, without the express prior
written consent of the holders of such Senior Obligations, the Holder will not
take, demand (including by means of any legal action) or receive from the
Issuer, and the Issuer will not make, give or permit, directly or indirectly, by
set-off, redemption, purchase or in any other manner, any payment of or security
for the whole or any part of the Debt (other than equity securities of the
Issuer, including, but not limited to shares of Series B Preferred Stock upon
conversion of the Note pursuant to Section 6 hereof); provided, however, that
-------- -------
(x) subject to clauses (i), (ii), (iii) and (iv) below, the Issuer may make, and
the Holder may receive, scheduled payments on account of the Debt in accordance
with
<PAGE>
-7-
the terms hereof except (i) during a Senior Blockage Period (as defined below),
(ii) when a default in the payment of any principal of, premium if any, or
interest on the Senior Obligations has occurred and is continuing or would
result therefrom, (iii) when any noncompliance with the requirements of Section
12.1(a) of the Amended and Restated Loan and Security Agreement (as defined
below) has occurred and is continuing or would result therefrom, or (iv) an
Insolvency Event occurs, and (y) upon the acceleration of the maturity of any
Senior Obligations, the Holder may accelerate the scheduled maturities of the
Debt if and to the extent permitted hereby at such time but such acceleration
shall not give the Holder any right to take, demand (including by means of any
legal action) or receive from the Issuer, or the Issuer the right to make, give
or permit, directly or indirectly, by set-off, redemption, purchase or in any
other manner, any payment of or security for the whole or any part of the Debt
unless and until the Senior Obligations have been paid in full. As used herein
"Senior Blockage Period" means a period commencing on the date that the holders
of the Senior Obligations shall have delivered to the Issuer a Senior Blockage
Notice (as defined below) and ending on the earliest of (A) 189 days after the
date of such Senior Blockage Notice, (B) the date the default identified in such
Senior Blockage Notice is cured or waived, (C) the date that the holders of the
Senior Obligations shall have given notice to the Issuer of termination of the
Senior Blockage Period, and (D) the date on which the Senior Obligations are
paid in full. As used herein "Senior Blockage Notice" means a notice given to
the Issuer by a holder of Senior Obligations that a Senior Blockage Event (as
defined below) has occurred; provided, however, that under no circumstances may
a Senior Blockage Notice be given more than one time during any 365 day
consecutive period by or one behalf of each of (x) the holders of the Issuer's
10-3/4% Senior Notes due 2008, and (y) the holders of the Secured Obligations,
as defined in the Amended and Restated Loan and Security Agreement. As used
herein "Senior Blockage Event" means a default in the performance or observance
of any term or condition relating to any Senior Obligations (other than a
default in the payment of any principal of, premium, if any, or interest on the
Senior Obligations or a default in compliance with the requirements of Section
12.1(a) of the Amended and Restated Loan and Security Agreement) has occurred
and is continuing that, with the passage of time or the giving of notice, or
both, permits or would permit the holders of the Senior Obligations to declare
such Senior Obligations to be due and payable.
(c) Any payment or distribution of assets of the Issuer, whether in
cash, property or securities, to which the Holder would be entitled except for
the provisions hereof, shall be paid or delivered by the Holder, or any
receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other
Person making such payment or distribution, to the holders of the Senior
Obligations or their representative, as their respective interests may appear,
to the extent necessary to pay in full all Senior Obligations, before any
payment or distribution shall be made to the Holder.
(d) The expressions "prior payment in full," "payment in full," "paid in
full" and any other similar terms or phrases when used herein with respect to
the Senior Obligations shall mean the payment in full in money or money's worth
of all the Senior Obligations and the expression "any payment of or security for
the whole or any part of the Debt" and any other similar terms of phrases when
used herein shall not be deemed to include a payment or distribution of stock or
<PAGE>
-8-
securities of the Issuer provided for by a plan or reorganization or
readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy law
or of any other corporation provided for by such plan of reorganization or
readjustment, which stock or securities are subordinated in right of payment to
all then outstanding Senior Obligations to the same extent as this Note is so
subordinated as provided in this Section 10. The consolidation of the Issuer
with, or the merger of the Issuer into, another Person or the liquidation or
dissolution of the Issuer following the conveyance or transfer of all or
substantially all of its properties and assets as an entirety to another Person
upon the terms and conditions set forth in Section 7(b) shall not be deemed a
"proceeding" for the purposes of this Section 10 if the Person formed by such
consolidation or into which the Issuer is merged or the Person which acquires by
conveyance or transfer such properties and assets as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Section 7(b).
(e) If any payment or distribution, whether consisting of money,
property or securities, is collected or received by the Holder in respect of the
Debt, except payments of principal or interest permitted hereunder, the Holder
forthwith shall promptly deliver the same to Issuer, in the form received, duly
endorsed to Issuer. Until so delivered, such payment or distribution shall be
held in trust by the Holder as the property of Issuer (subject to the interests
of any holders of Senior Obligations, as their interests may appear), segregated
from other funds and property held by the Holder.
(f) As used herein, "Senior Obligations" shall mean collectively the
unpaid principal of, premium, if any, and interest on (including, without
limitation, interest accruing after the maturity thereof and interest accruing
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Issuer, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Issuer's outstanding 10-3/4% Senior Notes due 2008, and all
Secured Obligations, as defined in the Amended and Restated Loan and Security
Agreement, dated effective as of January 6, 1998, as amended through and
including the Eighth Amendment thereto, dated effective as of January 31, 2000
(the "Amended and Restated Loan and Security Agreement"), by and among the
Issuer and the other borrowers and guarantors party thereto, the lenders party
thereto, and Bank of America, N.A., as agent for such lenders, now or hereafter
owing (including, without limitation, any increases thereof), and any and all
renewals, extensions, restatements, replacements and refinancing thereof
(whether among the same parties, or any of them, or with any other lender or
lenders).
(g) Issuer and Holder each agrees that (i) any default under or in
connection with the Senior Obligations may be waived, and any demand for payment
of any Senior Obligations made by any holder of Senior Obligations may be
rescinded, in whole or in part by such holder, (ii) the holders of any Senior
Obligations may exercise, or refrain from exercising, any rights and remedies in
respect of the Senior Obligations, (iii) the Senior Obligations may be extended,
modified, increased, compromised or released, in whole or in part and (iv) any
agreement evidencing, securing or otherwise governing or relating to the Senior
Obligations may be
<PAGE>
-9-
amended, renewed, extended, refinanced, increased, replaced or otherwise
modified, in each case without impairing, releasing or otherwise affecting the
provisions of Section 10.
(g) Nothing set forth in this Section 10 shall be deemed in any way to
limit or prevent the holder of this Note from exercising its rights under, or
the Issuer from complying with its obligations under, Section 6 hereof, or
prevent the Issuer at any time from issuing or the Holder from at any time
receiving and retaining equity securities of the Issuer in exchange for or in
full or partial satisfaction of the Debt evidenced hereby, regardless of whether
or not any payment by the Issuer under this Note would otherwise be prohibited
under the terms of this Section 10.
SECTION 11. Additional Definitions.
----------------------
As used herein, the following terms have the respective meanings set forth
below:
"Business Day" means, for the purposes of this Note, any day other than a
Saturday, a Sunday or a day on which commercial banks in New York are required
or authorized to be closed.
"Capital Leases" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with generally accepted accounting
principles.
"Debt" means collectively the unpaid principal of, premium, if any, and
interest on (including, without limitation, interest accruing after the maturity
date of the Notes and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Issuer, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Notes and all other
indebtedness of the Issuer in respect thereof, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
incurred, in each case whether on account of principal, premium, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet
<PAGE>
-10-
condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of
such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Indebtedness" with respect to any Person, means, on any date of
determination (without duplication):
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business consistent with past practice);
(c) all liabilities appearing on its balance sheet in accordance with
generally accepted accounting principles in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
"Insolvency Event" means (A) a Loan Party (as defined in the Amended and
Restated Loan and Security Agreement) shall commence a voluntary case under the
federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition
seeking to take advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or
<PAGE>
-11-
composition for adjustment of debts, (iii) consent to or fail to contest in a
timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (iv) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (v) admit in
writing its inability to pay its debts as they become due, (vi) make a general
assignment for the benefit of creditors, (vii) take any corporate action for the
purpose of authorizing any of the foregoing or (B) a case or other proceeding
shall be commenced against a Loan Party or any of its subsidiaries in any court
of competent jurisdiction seeking relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or the appointment of a trustee, receiver, custodian, liquidator or the
like of a Loan Party or any of its subsidiaries or of all or any substantial
part of the assets, domestic or foreign, of a Loan Party or any of its
subsidiaries.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Preferred Stock" means any class of capital stock of a corporation that is
preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its subsidiaries or such
Person and one or more of its subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its subsidiaries or such Person and one or more of its
subsidiaries. Unless the context otherwise clearly requires, any reference to a
"subsidiary" is a reference to a subsidiary of the Issuer.
"Swaps" means, with respect to any Person, payment obligations with respect
to interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Note, the amount of the obligation under
any Swap shall be the amount determined in respect thereof as of the end of the
then most recently ended fiscal quarter of such Person, based on the assumption
that such Swap had terminated at the end of such fiscal quarter, and in making
such determination, if any agreement relating to such Swap provides for the
netting of amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
SECTION 12. Issuer's Obligations Unconditional.
----------------------------------
<PAGE>
-12-
Except as expressly set forth herein, the obligations of the Issuer
hereunder are unconditional and neither any reference to any other document or
agreement herein nor the subordination for the benefit of the holders of the
Senior Obligations pursuant to Section 10 hereof is intended or shall be deemed
to render the Issuer's obligations hereunder conditional as between the Issuer
and the Holder.
SECTION 13. Assignment, Etc.
----------------
(a) This Note shall be binding upon each of the Issuer, the Holder
and their respective successors and assigns; provided, however, the Issuer may
-------- -------
not assign this Note without the prior written consent of the Holder. The Holder
may sell, assign or transfer this Note without any requirement of consent by the
Issuer, provided, however, that the Indebtedness evidenced by this Note shall
continue to be subject to the terms of Section 10 hereof.
(b) The Holder, by acceptance hereof, acknowledges that this Note and
the shares of Series B Preferred Stock issuable upon conversion hereof in
accordance with Section 6 hereof are being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Note or any shares
of Series B Preferred Stock issuable upon conversion hereof in accordance with
Section 6 hereof except under circumstances that will not result in a violation
of the Securities Act of 1933 or any state securities laws. Upon conversion of
this Note in accordance with Section 6 hereof, the Holder shall, if requested by
the Issuer, confirm in writing, in a form reasonably satisfactory to the Issuer,
that the shares of Series B Preferred Stock to be issued to such Holder are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(c) All shares of Series B Preferred Stock issuable upon conversion
hereof in accordance with Section 6 hereof shall be stamped or imprinted with a
legend in substantially the following form (in addition to any legend required
by state securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE
CONVERSION HEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE
SECURITIES REPRESENTED HEREBY.
<PAGE>
-13-
TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO DETERMINE
THEIR RIGHTS AND OBLIGATIONS."
SECTION 14. Indemnification.
---------------
The Issuer shall pay, indemnify, and hold the Holder harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys' fees and
expenses) or disbursements of any kind or nature whatsoever ("Losses") arising
out of or in connection with (a) the enforcement of any rights of the Holder
under this Note, and (b) any claim (whether or not asserted in any legal
proceeding), litigation, investigation, arbitration or proceeding relating to
this Note (collectively, "indemnified liabilities") provided that the Issuer
--------
shall have no obligation hereunder to the Holder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of the
Holder. The agreements in this Section 11 shall survive the repayment of this
Note and all other amounts payable hereunder.
SECTION 15. No Waiver, Cumulative Remedies.
------------------------------
The Holder shall not by any act (except by a written instrument signed by
the Holder), delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any Event of Default or
in any breach of any of the terms and conditions hereof. No failure to
exercise, nor any delay in exercising, on the part of the Holder, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Holder of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Holder
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
SECTION 16. Waiver of Protest, Presentment, etc.
------------------------------------
The Issuer hereby waives protest, presentment, notice of dishonor and
notice of acceleration of maturity and agrees to continue to remain bound for
the payment of principal, interest and all other sums due under this Note
notwithstanding any change or changes by way of release, surrender, exchange,
modification or substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and interest.
SECTION 17. Notice.
------
All notices, demands and other communications provided for or permitted
hereunder shall be made in writing and shall be sent by registered or certified
first-class mail, return receipt requested, telecopier, courier service or
personal delivery:
<PAGE>
-14-
a. if to the Issuer, to the attention of each of its Treasurer
and General Counsel, at:
Outboard Marine Corporation
100 Sea-Horse Drive
Waukegan, IL 60085
Facsimile No.: (847) 689-6246
b. if to the Holder:
Quantum Industrial Parters LDC
Kaya Flamboyan 9,
Villemstad
Curacao
Netherlands-Antilles
with a copy to:
Soros Fund Management LLC
888 Seventh Avenue
New York, NY 10016
Telecopy: (212) 664-0544
Attention: Michael Neus, Esq.
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial overnight courier service; five business days after
being deposited in the mail, post prepaid, if mailed; and when receipt is
acknowledged, if telecopied. The Issuer or the Holder may change the address to
which notices, demands and other communications hereunder are to be delivered by
giving the other party notice in the manner herein set forth.
SECTION 18. Governing Law.
-------------
THIS NOTE AND THE LEGAL RELATIONS BETWEEN THE ISSUER AND THE HOLDER SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
SECTION 19. Consent to Jurisdiction and Service of Process.
----------------------------------------------
Any legal action, suit or proceeding arising out of or relating to this
Note or the agreements and transactions contemplated hereby may be instituted
only in a state or federal court of the State of New York located in the borough
of Manhattan and the Issuer agrees not to assert, by way of motion, as a defense
or otherwise, in any such action, suit or proceeding, any claim that
<PAGE>
-15-
it is not subject personally to the jurisdiction of such court, that its
property is exempt or immune from attachment or execution, that the action, suit
or proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Note, the agreements contemplated
hereby or the subject matter hereof or thereof may not be enforced in or by such
court. The Issuer further irrevocably submits to the jurisdiction of any such
court in any such action, suit or proceeding. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against the Issuer if given by registered or certified mail, return receipt
requested, or by any other means of mail that requires a signed receipt, postage
prepaid, mailed to the Issuer as herein provided.
SECTION 20. WAIVER OF JURY TRIAL.
--------------------
THE ISSUER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY
AGREEMENT OR TRANSACTIONS CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM IN
CONNECTION HEREWITH.
OUTBOARD MARINE CORPORATION
By: /s/ Eric T. Martinez
--------------------
Name: Eric T. Martinez
Title: Interim CFO and Vice President
and Treasurer
<PAGE>
OUTBOARD MARINE CORPORATION
EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
(Dollars and Shares in Millions Except per Share Data) 2000 1999
-------------- -------------
<S> <C> <C>
Basic Earnings per Share:
Net loss of common shareholders ($31.5) ($11.9)
Weighted Average Number of Shares 20.4 20.4
------------- ---------------
Basic Earnings (Loss) Per Share ($1.54) ($0.58)
============= ===============
Diluted Earnings Per Shares:
Net Income (Loss) ($31.5) ($11.9)
Weighted Average Number of Shares 20.4 20.4
Common Stock Equivalents (Stock Options) ---- ----
------------- ---------------
Average Shares Outstanding 20.4 20.4
------------- ---------------
Diluted Earnings (Loss) Per Share ($1.54) ($0.58)
============= ===============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 39,000
<SECURITIES> 0
<RECEIVABLES> 142,700
<ALLOWANCES> 0
<INVENTORY> 194,400
<CURRENT-ASSETS> 396,200
<PP&E> 194,200
<DEPRECIATION> 0
<TOTAL-ASSETS> 901,200
<CURRENT-LIABILITIES> 371,000
<BONDS> 236,400
0
30,900
<COMMON> 200
<OTHER-SE> 83,000
<TOTAL-LIABILITY-AND-EQUITY> 901,200
<SALES> 269,100
<TOTAL-REVENUES> 269,100
<CGS> 225,700
<TOTAL-COSTS> 225,700
<OTHER-EXPENSES> 63,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,306
<INCOME-PRETAX> (28,600)
<INCOME-TAX> 1,100
<INCOME-CONTINUING> (29,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,500)
<EPS-BASIC> (1.54)
<EPS-DILUTED> (1.54)
</TABLE>
