<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
------------------------------------------------
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended JUNE 26, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from
to
-------------- --------------
Commission File Number 1-9183
HARLEY-DAVIDSON, INC.
------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Wisconsin 39-1382325
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 West Juneau Avenue, Milwaukee, Wisconsin 53208
- - ---------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (414) 342-4680
--------------
None
-----------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock Outstanding as of August 1, 1994 38,115,762 Shares
------------------
<PAGE>
HARLEY-DAVIDSON, INC.
FORM 10-Q INDEX
FOR THE QUARTER ENDED JUNE 26, 1994
Page
----
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-14
Part II. Other Information
Item 1. Legal Proceedings 15
Item 4. Submission of Items to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Harley-Davidson, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three months ended Six months ended
------------------ ----------------
June 26, June 27, June 26, June 27,
1994 1993 1994 1993
-------- -------- --------- ---------
Sales $401,372 $334,378 $745,077 $603,963
Cost of goods sold 288,013 243,525 541,429 437,655
-------- -------- -------- --------
Gross profit 113,359 90,853 203,648 166,308
Selling, administrative and
engineering expenses 64,724 50,788 121,893 101,073
-------- -------- -------- --------
Income from operations 48,635 40,065 81,755 65,235
Interest expense - net (56) (261) (367) (742)
Other income - net 617 352 1,960 690
-------- -------- -------- --------
Income from operations before
provision for income taxes
and accounting changes 49,196 40,156 83,348 65,183
Provision for income taxes 14,594 16,361 27,914 26,247
-------- -------- -------- --------
Income before accounting changes 34,602 23,795 55,434 38,936
Cumulative effect of accounting changes:
Postretirement health care
benefits, net of tax - - - (32,124)
Income taxes - - - 1,796
-------- -------- -------- --------
Net income $ 34,602 $ 23,795 $ 55,434 $ 8,608
======== ======== ======== ========
Weighted average common shares
outstanding 38,081 37,953 38,057 37,929
Earnings per common share:
Income before cumulative effect of
accounting changes $0.91 $0.63 $1.46 $1.03
Cumulative effect of accounting
changes:
Postretirement health care
benefits - - - (0.85)
Income taxes - - - 0.05
----- ----- ----- -----
Net income $0.91 $0.63 $1.46 $0.23
===== ===== ===== =====
Cash dividends per share $0.06 $0.06 $0.12 $0.06
===== ===== ===== =====
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
ASSETS
June 26, Dec. 31, June 27,
1994 1993* 1993
-------- -------- --------
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $97,740 $ 77,709 $ 55,529
Accounts receivable, net of allowance
for doubtful accounts 143,639 86,031 115,888
Inventories (Note 2) 141,610 140,151 119,640
Deferred income taxes 20,296 20,296 18,105
Prepaid expenses 7,624 9,571 8,611
-------- -------- --------
Total current assets 410,909 333,758 317,773
Property, plant and equipment, net 212,592 205,768 183,916
Deferred income taxes 16,276 11,676 10,306
Goodwill - - 55,116
Other assets 36,632 32,083 31,794
-------- -------- --------
$676,409 $583,285 $598,905
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 24,986 $ 20,580 $ 14,692
Current maturities of long-term debt 573 789 921
Accounts payable 55,168 56,350 53,680
Accrued expenses and other liabilities 142,067 113,043 121,767
-------- -------- --------
Total current liabilities 222,794 190,762 191,060
Postretirement health care benefits 57,653 54,999 52,633
Other long-term liabilities 15,383 12,612 12,039
Contingencies (Note 3)
Stockholders' equity:
Common stock 385 385 385
Additional paid-in capital 140,467 137,150 132,283
Retained earnings 240,276 189,410 212,178
Cumulative foreign currency translation
adjustment 1,203 186 1,011
-------- -------- --------
382,331 327,131 345,857
Less treasury stock, at cost (1,581) (1,583) (1,587)
Unearned compensation (171) (636) (1,097)
-------- -------- --------
Total stockholders' equity 380,579 324,912 343,173
-------- -------- --------
$676,409 $583,285 $598,905
======== ======== ========
*Condensed from audited financial statements.
<PAGE>
Harley-Davidson, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six months ended
-------------------
June 26, June 27,
1994 1993
-------- --------
Cash flows from operating activities:
Net income $55,434 $ 8,608
Depreciation and amortization 17,595 17,601
Long-term employee benefits 4,864 53,971
Deferred income taxes (4,600) (22,333)
Change in current assets and current liabilities:
Accounts receivable (57,608) (22,710)
Inventory (1,459) (17,469)
Prepaid expenses 1,947 1,006
Accounts payable and accrued liabilities 27,842 20,871
------- -------
Net cash provided by operating activities 44,015 39,545
Cash flows from investing activities:
Purchase of property and equipment (24,156) (16,223)
Investment in joint ventures - (10,350)
Other - net (2,810) 669
------- -------
Net cash used in investing activities (26,966) (27,092)
Cash flows from financing activities:
Reduction of long-term debt (175) (476)
Net increase (decrease) in notes payable 4,406 (1,241)
Dividends paid (4,568) -
Issuance of stock under employee stock plans 3,319 671
------- -------
Net cash provided by (used in) financing activities 2,982 (1,046)
------- -------
Net increase in cash and cash equivalents 20,031 11,407
Cash and cash equivalents:
At beginning of period 77,709 44,122
------- -------
At end of period $97,740 $55,529
======= =======
<PAGE>
HARLEY-DAVIDSON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTE 1 - BASIS OF PRESENTATION
The condensed interim consolidated financial statements included herein have
been prepared by the Company without audit. However, the foregoing statements
contain all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of Company management, necessary to present fairly the
consolidated financial position as of June 26, 1994 and June 27, 1993, and the
results of operations for the three and six month periods then ended.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Registrant Company's annual report on Form 10-K for the year ended December 31,
1993.
NOTE 2 - INVENTORIES
The Company values its inventories at the lower of cost, using the last-in,
first-out (LIFO) method, or market. Inventories consist of the following:
June 26, Dec. 31, June 27,
1994 1993 1993
-------- -------- --------
Components at the lower of cost, first-in,
first-out (FIFO), or market:
Raw material & work-in-process $ 51,007 $54,155 $ 46,291
Finished goods 68,012 66,865 55,426
Parts & accessories 40,689 35,366 33,377
-------- ------- --------
159,708 156,386 135,094
Excess of FIFO over LIFO 18,098 16,235 15,454
-------- ------- --------
Inventories as reflected in the
accompanying condensed consolidated
balance sheets $141,610 $140,151 $119,640
======== ======== ========
NOTE 3 - CONTINGENCIES
The Company is involved with government agencies in various environmental
matters, including a matter involving soil and groundwater contamination at its
York, Pennsylvania facility (the Facility). The Facility was formerly used by
the U.S. Navy and AMF (the predecessor corporation of Minstar). The Company
purchased the facility from AMF in 1981. Although the Company is not certain as
to the extent of the environmental contamination at the Facility, it is working
with the Pennsylvania Department of Environmental Resources. The Company is
currently pursuing cost recovery litigation against the Navy and believes that
the Navy, by virtue of its ownership and operation of the Facility, will
ultimately be responsible for a substantial portion of the environmental
remediation costs at the Facility. In addition, in March 1991 the Company
entered into a settlement agreement with Minstar related to certain
indemnification obligations assumed by Minstar in
<PAGE>
NOTE 3 - CONTINGENCIES (CONTINUED)
connection with the Company's purchase of the Facility. Pursuant to this
settlement, Minstar is obligated to reimburse the Company for a portion of its
investigation and remediation costs at the Facility. Although substantial
uncertainty exists concerning the nature and scope of the environmental
remediation that will ultimately be required at the Facility, based on
preliminary information currently available to the Company and taking into
account the Company's estimate of the probable liability of the Navy, and the
settlement agreement with Minstar, the Company estimates that it will incur
approximately $4 million of additional remediation and related costs at the
Facility. The Company has established reserves for this amount. The Company has
also put certain of its insurance carriers on notice that it intends to make
claims relating to the environmental contamination at the Facility. However,
the Company is currently unable to determine the probable amount of recovery
available, if any, under insurance policies.
NOTE 4 - INVESTMENTS
Company holds 49% investments in Eagle Credit Corporation (Eagle) and another
investment. The Company accounts for these investments using the equity method.
As of June 26, 1994, the Company's carrying value of its investment in these
unconsolidated affiliates totaled $9.8 million which is included in the other
assets classification in the accompanying condensed consolidated balance sheets.
The summarized information below represents an aggregation of the Company's
unconsolidated affiliates.
Six months ended
June 26,
1994
----------------
Earnings data:
Revenue $9,337
Gross profit/ net interest margin 7,898
Operating income 1,720
Net income 1,720
Company's equity in net income 843
June 26,
1994
--------
Balance sheet data:
Total assets $91,401
Total liabilities 69,307
<PAGE>
ITEM 2.
HARLEY-DAVIDSON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 26, 1994
COMPARED TO THE THREE MONTHS ENDED JUNE 27, 1993
MOTORCYCLE UNITS AND CONSOLIDATED NET SALES
FOR THE THREE MONTH PERIODS ENDED JUNE 26, 1994 AND JUNE 27, 1993
Incr
1994 1993 (Decr) %
------ ------ ------ ----
Motorcycle units 25,006 22,951 2,055 9.0%
Net sales (in millions):
Motorcycles $232.5 $205.3 $27.2 13.2%
Motorcycle Parts and Accessories 64.4 51.6 12.8 24.8
----- ------ ----- ----
Total Motorcycles and Related Products 296.9 256.9 40.0 15.6
Recreational Vehicles 74.9 51.2 23.7 46.1
Commercial Vehicles 26.3 23.0 3.3 14.3
Other 3.3 3.3 - 2.7
----- ----- ----- ----
Total Transportation Vehicles 104.5 77.5 27.0 34.9
----- ----- ----- ----
Harley-Davidson, Inc. Consolidated
Net Sales $401.4 $334.4 $67.0 20.0%
====== ====== ===== ====
The Company reported record consolidated net sales of $401.4 million during the
second quarter of 1994, a $67.0 million (20.0%) increase over the second
quarter of 1993. Both the Motorcycles and Related Products segment (the
"Motorcycle segment") and the Transportation Vehicles segment contributed to
the increase.
Net sales increases in the Motorcycle segment were primarily volume related.
Motorcycle unit shipments increased 9.0% compared to the same quarter in 1993.
The Motorcycle division met, and periodically exceeded, its 380 units-per-day
production schedule throughout the second quarter. In addition, Motorcycle
assembly operations worked three Saturdays and some daily overtime during the
quarter to help satisfy strong demand in the marketplace.
While the Motorcycle division shipped 25,006 units during the quarter, similar
results should not be projected to the final quarters of 1994. The Motorcycle
division has fewer working days in the second half of the year, which includes
eleven of the year's thirteen holidays and a week of shut-down. If production
continues at the scheduled rate of 380 units-per-day for the rest of the year,
motorcycle production should approximate 93,000 units during 1994 (compared to
81,696 during 1993). The Motorcycle division remains on schedule and on budget
to attain its goal of manufacturing at a rate of 425 units-per-day (100,000
units-per-year) sometime in 1996.
The Parts and Accessories division contributed approximately $12.8 million to
the overall consolidated net sales increase. This change represents a 24.8%
percent increase in parts and accessories net sales compared to the second
quarter of 1993. The division recorded improvements in each of its major
product categories.
The Transportation Vehicles segment recorded 1994 second quarter net sales of
$104.5 million, a $27.0 million (34.9%) increase over the same period during
1993. The Recreational Vehicles division generated $23.7 million of the change
primarily through volume increases. Higher priced "Class A" (motorized) units
comprised a majority of the increase. The Company is pleased with this
quarter's performance of the Recreational Vehicles division, but remains
cautious pending customer acceptance of the 1995 models. New model
introductions are scheduled for the division's dealer meeting at the end of
August. The manufacturing phase-in of the new models begins in July and runs
through October. Accordingly, many of the new models will not be available for
shipment until the end of the third quarter.
The Commercial Vehicles division recorded a $3.3 million (14.3%) net sales
increase over the second quarter of 1993. During the second quarter of 1994,
the division reported that it had been awarded a contract to manufacture 550
walk-in vans for Frito-Lay beginning during the fourth quarter of 1994 and
running into early 1995.
CONSOLIDATED GROSS PROFIT
FOR THE THREE MONTH PERIODS ENDED JUNE 26, 1994 AND JUNE 27, 1993
(Dollars in Millions)
Percent Percent
of sales of sales
1994 1993 Change 1994 1993
----- ----- ------ ------- -------
Motorcycles and Related Products $93.6 $79.2 $14.4 31.5% 30.8%
Transportation Vehicles 19.8 11.7 8.1 18.9 15.1
----- ----- ----- ---- ----
Consolidated Harley-Davidson, Inc. $113.4 $90.9 $22.5 28.2% 27.2%
====== ===== ===== ==== ====
Consolidated gross profit increased $22.5 million (24.8%) compared to the
second quarter of 1993. Both segments contributed to the increase.
The Motorcycle segment contributed $14.4 million to the second quarter increase
in consolidated gross profit related primarily to volume increases in
motorcycle unit shipments and parts and accessories business. Compared to the
second quarter of 1993, the segment's gross profit margin benefited from
increased volume and favorable mix.
The Transportation Vehicles segment recorded an $8.1 million improvement in
gross profit during the second quarter of 1994 compared to the same quarter in
1993. The Recreational Vehicles division was responsible for a majority of the
increase, primarily on volume increases. The volume increases occurred
primarily in the motorized Class A products resulting in a favorable shift in
product mix (away from lower margin towable products) for the quarter.
CONSOLIDATED OPERATING EXPENSES
FOR THE THREE MONTH PERIODS ENDED JUNE 26, 1994 AND JUNE 27, 1993
(Dollars in Millions)
Percent
1994 1993 Change Change
----- ----- ------ ------
Motorcycles and Related Products $46.5 $37.6 $8.9 23.8%
Transportation Vehicles 15.0 11.4 3.6 31.7
Corporate 3.2 1.8 1.4 74.8
----- ----- ----- ----
Consolidated Harley-Davidson, Inc. $64.7 $50.8 $13.9 27.4%
===== ===== ===== ====
Consolidated operating expenses increased $13.9 million (27.4%) over the second
quarter of 1993.
Increases in the Motorcycle segment were primarily volume related. Other areas
of increased spending included MotorClothes advertising costs, the VR Racing
(road racing) program, and variable compensation.
The Transportation Vehicles segment recorded a $3.6 million (31.7%) increase in
operating expenses during the second quarter of 1994 compared to the second
quarter of 1993. Primary areas of increase included research and development
costs and selling and promotional programs. The Recreational Vehicles division
has been investing heavily in research and development and has added
engineering expertise to its workforce. 1994 second quarter operating expense
benefitted from the elimination of goodwill amortization ($.7 million during
the second quarter of 1993) that resulted from the goodwill write-down recorded
by the Company during the fourth quarter of 1993.
Consolidated income taxes
- - -------------------------
The Company's second quarter tax provision includes a one-time benefit of $4.6
million related to the legal reorganization and recapitalization of the
Transportation Vehicles segment. Excluding this benefit, the Company's
effective tax rate in the second quarter of 1994 would have been 39% compared
to 40% for all of 1993.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 26, 1994
COMPARED TO THE SIX MONTHS ENDED JUNE 27, 1993
MOTORCYCLE UNITS AND CONSOLIDATED NET SALES
FOR THE SIX MONTH PERIODS ENDED JUNE 26, 1994 AND JUNE 27, 1993
Incr
1994 1993 (Decr) %
----- ----- ----- ----
Motorcycle units 48,062 42,453 5,609 13.2%
Net sales (in millions):
Motorcycles $441.6 $373.5 $68.1 18.2%
Motorcycle Parts and Accessories 113.9 88.7 25.2 28.4
------ ------ ----- ----
Total Motorcycles and Related Products 555.5 462.2 93.3 20.2
Recreational Vehicles 134.2 97.3 36.9 38.0
Commercial Vehicles 49.1 38.2 10.9 28.6
Other 6.3 6.3 - -
------ ------ ------ ----
Total Transportation Vehicles 189.6 141.8 47.8 33.8
------ ------ ------ ----
Harley-Davidson, Inc. Consolidated
Net Sales $745.1 $604.0 $141.1 23.4%
====== ====== ====== ====
The Company reported record net sales for the first six months of $745.1
million, an increase of $141.1 million (23.4%) compared to the first six months
of 1993. Net sales increases were generated by both the Motorcycle segment and
the Transportation Vehicles segment.
Worldwide demand within the Motorcycle segment continues to outweigh supply.
Dealer inventories of motorcycles in most major markets remain virtually non-
existent. The most recent information available (through April) indicates a
U.S. heavyweight (751+cc) market share of 59.8% compared to 63.6% for the same
period in 1993. The decrease in market share is attributable to the division's
capacity constraints in a growing market.
Parts and accessories net sales also exhibited strong growth during the first
two quarters of 1994. Overall, net sales of parts and accessories increased
28.4% compared to the first six months of 1993. The MotorClothes product
continues to be the fastest growing portion of the parts and accessories'
product line, currently comprising approximately 35% of parts and accessories
net sales.
The Transportation Vehicles segment recorded net sales of $189.6 million during
the first six months of 1994, an increase of $47.8 million (33.8%) compared to
the first six months of 1993. The Recreational Vehicles division generated the
majority of the increase, primarily on volume increases. The most recent Class
A market share information available (through April) indicates that industry
registrations have increased 24% compared to registrations of the Recreational
Vehicles division's products which are up 39.5% during the same period. Most of
the volume increases were generated by the division's lower-end Endeavor and
Vacationer models. The division has not seen the same result in its towable
product registrations which are up 12.4% for the first four months of 1994
compared to industry registrations which are up 17.7%.
The Commercial Vehicles division recorded a $10.9 million (28.6%) increase in
net sales during the first six months of 1994 compared to the same period in
1993. The division benefited from a 6% volume increase and a shift in mix to
its higher priced walk-in units. A majority of the increase occurred during the
first quarter which benefitted from a substantial backlog at the end of 1993.
Industry wide demand for commercial vehicle chassis has resulted in major
domestic chassis manufacturers putting their customers (including the
Commercial Vehicles division) on an allocation system. The Commercial Vehicles
division has recently experienced minor delays in the allocation of chassis as
a result of these systems but does not currently anticipate significant delays
during the remainder of the year.
CONSOLIDATED GROSS PROFIT
FOR THE SIX MONTH PERIODS ENDED JUNE 26, 1994 AND JUNE 27, 1993
(Dollars in Millions)
Percent Percent
of sales of sales
1994 1993 Change 1994 1993
---- ---- ------ ------- -------
Motorcycles and Related Products $170.4 $143.0 $27.4 30.7% 30.9%
Transportation Vehicles 33.3 23.3 10.0 17.5 16.4
------ ------ ----- ---- ----
Consolidated Harley-Davidson, Inc. $203.7 $166.3 $37.4 27.3% 27.5%
====== ====== ===== ==== ====
Consolidated gross profit for the first six months of 1994 totaled $203.7
million, an increase of $37.4 million (22.5%) over the same period in 1993.
The Motorcycle segment reported a $27.4 million (19.1%) increase for the
period. The segment's gross profit margin remained essentially unchanged at
30.7% for the period compared to the first six months of 1993. The margin
benefitted from increased volume and a shift in product mix. These benefits
were largely offset by weather related overtime during the first quarter and
additional costs during both quarters associated with the reorganizations and
enhancements of the Motorcycle segment's manufacturing facilities. The
reorganizations and enhancements are part of the Company's three year
manufacturing strategy announced during the third quarter of 1993.
The Transportation Vehicles segment recorded gross profit of $33.3 million
during the first six months of 1994, an increase of $10.0 million (42.8%)
compared to the first six months of 1993. The Recreational Vehicles division
generated the majority of the increase, primarily on volume increases. The
Commercial Vehicles division benefitted from an increase in volume and a shift
in mix toward higher-margin walk-in units.
CONSOLIDATED OPERATING EXPENSES
FOR THE SIX MONTH PERIODS ENDED JUNE 26, 1994 AND JUNE 27, 1993
(Dollars in Millions)
Percent
1994 1993 Change Change
----- ----- ------ -------
Motorcycles and Related Products $88.3 $73.9 $14.4 19.4%
Transportation Vehicles 28.3 23.6 4.7 20.1
Corporate 5.3 3.6 1.7 47.9
------ ------ ----- ----
Consolidated Harley-Davidson, Inc. $121.9 $101.1 $20.8 20.6%
====== ====== ===== ====
Consolidated Operating expenses of $121.9 million for the first six months of
1994 increased $20.8 million (20.6%) compared to the first six months of 1993.
The Motorcycle segment generated the majority of the increase related primarily
to volume increases. The Transportation Vehicles segment increase was
generally the result of additional research and development and promotional
programs as discussed earlier.
Consolidated income taxes
- - -------------------------
The Company's tax provision includes a one-time benefit of $4.6 million related
to the legal reorganization of the Transportation Vehicles segment. Excluding
this benefit, the Company's effective tax rate would have been 39% compared to
40% for all of 1993.
Environmental
- - -------------
The Company's policy is to comply with applicable environmental laws and
regulations. The Company has a compliance program in place to monitor, and
report on, environmental issues. The Company is currently involved with its
former parent (Minstar) and the U.S. Navy in cost recovery litigation
surrounding the remediation of the Company's manufacturing facility in York,
PA. The Company currently estimates that it will be responsible for
approximately $4 million related to the remediation of the York facility. The
Company has established reserves for this amount (refer to footnote 3 to the
accompanying condensed consolidated financial statements).
Recurring costs associated with managing hazardous substances and pollution in
on-going operations are not material.
The Company regularly invests in equipment to support and improve its various
manufacturing processes. While the Company considers environmental matters in
capital expenditure decisions, and while some capital expenditures also act to
improve environmental compliance, only a small portion of the Company's annual
capital expenditures relate to equipment which has the sole purpose of
environmental compliance. The Company anticipates that capital expenditures for
equipment used to limit hazardous substances/ pollutants during 1994 will
approximate $2 million.
LIQUIDITY AND CAPITAL RESOURCES AS OF JUNE 26, 1994
- - ---------------------------------------------------
The Company generated $44.0 million of cash from operating activities during
the first six months of 1994 compared to $39.5 million during the same period
in 1993. Cash flow from higher earnings during the first two quarters of 1994
was largely offset by a net increase in working capital items, primarily
accounts receivable. A majority of the increase in accounts receivable is the
result of typical shipping patterns during the year. Accounts receivable as of
the end of the second quarter of 1994 increased approximately 24% over the
balance at the close of the second quarter of 1993. This increase is comparable
to the 20% increase in net sales recorded during the second quarter of 1994
versus the similar period during 1993.
Investing activities utilized approximately $27.0 million during the first six
months of 1994, compared to $27.1 million for the same period in 1993. Capital
expenditures amounted to $24.2 million and $16.2 million during the first six
months of 1994 and 1993, respectively. The Company anticipates 1994 capital
expenditures will approximate $90-100 million. The Company anticipates funding
these expenditures with internally generated funds.
The Company believes that available cash, cash flow from operations and
existing lines of credit will be sufficient to meet its normal operating
requirements.
The Company's Board of Directors declared two cash dividends during the first
six months of 1994 including, most recently, a $.06 cash dividend declared on
May 14, 1994 payable June 7, 1994 to shareholders of record May 24.
<PAGE>
PART II OTHER INFORMATION
HARLEY-DAVIDSON, INC.
FORM 10-Q
JUNE 26, 1994
Item 1. Legal Proceedings
- - --------------------------
The Company is involved with government agencies in various environmental
matters, including a matter involving soil and groundwater contamination at its
York, Pennsylvania facility. See footnote 3 to the accompanying condensed
consolidated financial statements.
Item 4. Submission of Items to a Vote of Security Holders
- - ----------------------------------------------------------
(a) The Company's Annual Meeting of Shareholders was held on May 14, 1994.
(b) At the Company's Annual Meeting of Shareholders, the following directors
were elected for terms expiring in 1997 by the vote indicated:
Shares
Shares Voted Withholding
in Favor of Authority
------------ -----------
Vaughn L. Beals, Jr. 31,816,420 99,008
Donald A. James 31,818,931 96,497
James A. Norling 31,803,997 111,431
(c) Matters other than election of directors and approval of auditors,
brought for vote at the Company's Annual Meeting of Shareholders, passed
by the note indicated.
Shares Voted
--------------------
For Against Abstained
--------- --------- ---------
Amendments to the Harley-Davidson, Inc.
1986, 1988 and 1990 stock option plans 30,323,101 1,472,596 119,731
Approval of the Harley-Davidson, Inc.
Corporate Short-Term Incentive Plan 30,681,624 1,091,156 142,648
Approval of the Harley-Davidson, Inc.
restructuring of the motorcycle
division* 24,111,665 292,689 145,060
* Broker non votes related to this matter totaled 7,366,014 shares.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits
10.1 Harley-Davidson, Inc. 1986 Stock Option Plan (as amended)
10.2 Harley-Davidson, Inc. 1988 Stock Option Plan (as amended)
10.3 Harley-Davidson, Inc. 1990 Stock Option Plan (as amended)
(b) Reports on Form 8-K
None.
<PAGE>
Part II - Other Information
HARLEY-DAVIDSON, INC.
FORM 10-Q
JUNE 26, 1994
Signatures
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARLEY-DAVIDSON, INC.
Date: 8/9/94 /s/ James L. Ziemer
------------ ------------------------
James L. Ziemer
Vice President and Chief
Financial Officer (Principal
Financial Officer)
8/9/94 /s/ James M. Brostowitz
------------ ------------------------
James M. Brostowitz
Vice President, Controller
(Principal Accounting Officer)
and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- - ----------- ----------- ----
10.1 Harley-Davidson, Inc. 1986 Stock
Option Plan (as amended). 18
10.2 Harley-Davidson, Inc. 1988 Stock
Option Plan (as amended). 25
10.3 Harley-Davidson, Inc. 1990 Stock
Option Plan (as amended). 32
HARLEY-DAVIDSON, INC.
1986 STOCK OPTION PLAN
(AS AMENDED THROUGH MAY 14, 1994)
ARTICLE I
PURPOSE
The purpose of the Harley-Davidson, Inc. 1986 Stock Option Plan is to
provide favorable opportunities for certain selected employees of Harley-
Davidson, Inc. and its subsidiaries to purchase or receive shares of Common
Stock of Harley-Davidson, Inc., or to benefit from the appreciation thereof.
Such opportunities should provide an increased incentive for these employees to
contribute to the future success and prosperity of Harley-Davidson, Inc., thus
enhancing the value of the stock for the benefit of the shareholders, and
increase the ability of Harley-Davidson, Inc. to attract and retain individuals
of exceptional skill upon whom, in large measure, its sustained progress, growth
and profitability depend.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1. Board: The Board of Directors of Harley-Davidson, Inc.
2.2. Code: The Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
2.3. Committee: The Human Resources Committee of the Board
2.4. Common Stock: The common stock of Harley-Davidson, Inc.
2.5. Company: Harley-Davidson, Inc. and any of its Subsidiaries.
2.6. Disability: Disability within the meaning of Section
22(e)(3) of the Code, as determined by the Committee.
2.7. Disinterested Persons: Disinterested persons within the
meaning of Rule 16b-3 as promulgated under the Securities Exchange Act of
1934, as amended.
2.8. Employer: The entity that employs the employee or Optionee.
2.9. Fair Market Value: The average of the high and low reported
sales prices of Common Stock on the New York Stock Exchange Composite Tape on
the date for which fair market value is being determined.
2.10. ISO: An incentive stock option within the meaning of Section
422A of the Code and which is designated as an incentive stock option by the
Committee.
2.11. Non-ISO: A stock option which is not an ISO.
2.12. Option: A stock option granted under the Plan.
2.13. Option Price: The purchase price of a share of Common Stock
under an Option.
2.14. Optionee: An employee of the Company who has been granted
one or more Options.
2.15. Parent Corporation: A parent corporation, as defined in
Section 424(e) of the Code.
2.16. Plan: The Harley-Davidson, Inc. 1986 Stock Option Plan.
2.17. Retirement: Retirement on or after age sixty-five or, with
the advance consent of the Committee, at an earlier age.
2.18. Subsidiary: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity of
which more than fifty percent (50%) of the voting power or ownership interest
is directly and/or indirectly held by the Company.
2.19. Termination Date: A date fixed by the Committee but not
later than the day preceding the tenth anniversary of the date on which the
Option is granted.
ARTICLE III
ADMINISTRATION
3.1. Except as otherwise provided in the Plan, the Committee shall
administer the Plan and shall have full power to grant Options, construe and
interpret the Plan, establish and amend rules and regulations for its
administration, and perform all other acts relating to the Plan, including the
delegation of administrative responsibilities, which it believes reasonable and
proper.
3.2. Subject to the provisions of the Plan, the Board shall establish the
policies and criteria pursuant to which the Committee shall grant Options and
administer the Plan. Subject to the provisions of the Plan, and pursuant to the
policies and criteria established by the Board, the Committee shall, in its
discretion determine which employees of the Company shall be granted Options,
the number of shares subject to option under any such Options, the dates after
which Options may be exercised, in whole or in part, whether Options shall be
ISOs, and the terms and conditions of the Options.
3.3. The Committee may at any time, with the consent of the Optionee, in
its sole discretion, cancel any Option and issue to the Optionee a new Option
for an equivalent or lesser number of Common Stock shares, and at a lesser
Option Price.
3.4. Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and administration of
the Plan shall be final and conclusive.
3.5. Any action undertaken by the Board pursuant to this Article III
shall be null and void if a majority of the directors acting on the matter are
not Disinterested Persons; provided, further, notwithstanding any other
provision of the Plan, if a majority of the members of the Board are not
Disinterested Persons, the powers and responsibilities granted to the Board
under Article III of the Plan shall be exercised solely by the Committee until
such time as a majority of the members of the Board are Disinterested Persons.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1. The total number of shares of Common Stock available for grants of
Options under the Plan shall be 400,000; provided that Options for not more than
100,000 shares of Common Stock shall be granted to an Optionee in any calendar
year under the Plan, which amount shall be reduced by the amount of Common Stock
subject to options granted to such Optionee in such calendar year under any
other stock option plan of the Company. The foregoing amounts shall be subject
to adjustment in accordance with Article VIII of the Plan. These shares may be
either authorized but unissued or reacquired shares of Common Stock. If an
Option or portion thereof shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares covered by such Option
shall be available for future grants of Options. An Option, or portion thereof,
exercised through the exercise of a stock appreciation right pursuant to Section
6.7 of the Plan shall be treated, for the purposes of this Article, as though
the Option, or portion thereof, had been exercised through the purchase of
Common Stock, with the result that the shares of Common Stock subject to the
Option, or portion thereof, that was so exercised shall not be available for
future grants of Options.
ARTICLE V
ELIGIBILITY
5.1. Options may be granted to key employees of the Company or to persons
who have been engaged to become key employees of the Company. Key employees
will comprise, in general, those who contribute to the management, direction and
overall success of the Company, including those who are members of the Board.
Members of the Board who are not employees of the Company shall not be eligible
for Option grants.
ARTICLE VI
TERM OF OPTIONS
6.1. Option Agreements: All Options shall be evidenced by written
agreements executed by the Company and the Optionee. Such Options shall be
subject to the applicable provisions of the Plan, and shall contain such
provisions as are required by the Plan and any other provisions the Committee
may prescribe. All agreements evidencing Options shall specify the total number
of shares subject to each grant, the Option Price and the Termination Date.
Those Options that comply with the requirements for an ISO set forth in Section
422A of the Code shall be designated ISOs and all other Options shall be
designated Non-ISOs.
6.2. Option Price: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.
6.3. Period of Exercise: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after
the Termination Date.
6.4. Special Rules Regarding ISOs Granted to Certain Employees:
Notwithstanding any contrary provisions of Sections 6.2 and 6.3 of the Plan, no
ISO shall be granted to any employee who, at the time the Option is granted,
owns (directly or indirectly, within the meaning of Section 424(d) of the Code)
more than ten percent of the total combined voting power of all classes of stock
of the Employer or of any Subsidiary or Parent Corporation thereof, unless (a)
the Option Price under such Option is at least 110 percent of the Fair Market
Value of a share of Common Stock on the date the Option is granted and (b) the
Termination Date of such Option is a date not later than the day preceding the
fifth anniversary of the date on which the Option is granted.
6.5 Manner of Exercise and Payment: An Option, or portion thereof, shall
be exercised by delivery of a written notice of exercise to the Company and
payment of the full price of the shares being purchased pursuant to the Option.
An Optionee may exercise an Option with respect to less than the full number of
shares for which the Option may then be exercised, but an Optionee must exercise
the Option in full shares of Common Stock. The price of Common Stock purchased
pursuant to an Option, or portion thereof, may be paid:
a. in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company.
b. through the delivery of shares of Common Stock with an aggregate
Fair Market Value on the date of exercise equal to the Option Price, or
c. by any combination of the above methods of payment.
The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, including, without limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option.
6.6. Withholding Taxes: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon the
exercise of an Option requiring tax withholding, an Optionee may make a written
election to have shares of Common Stock withheld by the Company from the shares
otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an
Optionee shall be at the sole discretion of the Committee. Where the exercise
of an Option does not give rise to an obligation to withhold Federal income
taxes on the date of exercise, the Company may, in its discretion, require an
Optionee to place shares of Common Stock purchased under the Option in escrow
for the benefit of the Company until such time as Federal income tax withholding
is required on amounts included in the gross income of the Optionee as a result
of the exercise of an Option. At such time, the Company, in its discretion, may
require an Optionee to pay to the Company the amount that the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise of the Option, in which case
the shares of Common Stock will be released from escrow to the Optionee.
Alternatively, subject to acceptance by the Committee, in its sole discretion,
an Optionee may make a written election to have shares of Common Stock held in
escrow applied toward the Company's obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise of the Option,
based on the Fair Market Value of the shares on the date of the termination of
the escrow arrangement. Upon application of such shares toward the Company's
withholding obligation, any shares of Common Stock held in escrow and not, in
the judgment of the Committee, necessary to satisfy such obligation shall be
released from escrow to the Optionee.
6.7. Stock Appreciation Rights: At or after the grant of an Option, the
Committee, in its discretion, may provide an Optionee with an alternate means of
exercising an Option, or a designated portion thereof, by granting the Optionee
a stock appreciation right. A "stock appreciation right" is a right to receive,
upon exercise of an Option or any portion thereof, in the Committee's sole
discretion, an amount of cash equal to, and/or shares of Common Stock having a
Fair Market Value on the date of exercise equal to, the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the Option
Price, multiplied by the number of shares of Common Stock that the Optionee
would have received had the Option or portion thereof been exercised through the
purchase of shares of Common Stock at the Option Price, provided that (a) such
Option or portion thereof has been designated as exercisable in this alternative
manner, (b) such Option or portion thereof is otherwise exercisable, and (c) the
Fair Market Value of a share of Common Stock on the date of exercise exceeds the
Option Price.
6.8. Nontransferability of Options: Each Option shall, during the
Optionee's lifetime, be exercisable only by the Optionee, and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws of
descent and distribution or be subject to attachment, execution or other similar
process. In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of an Option or of any right hereunder,
except as provided for herein, or in the event of any levy or any attachment,
execution or similar process upon the rights or interest hereby conferred, the
Company may terminate the Option by notice to the Optionee and the Option shall
thereupon become null and void.
6.9. Cessation of Employment of Optionee:
a. Cessation of Employment other than by Reason of Retirement,
Disability or Death. If an Optionee shall cease to be employed by the
Company otherwise than by reason of Retirement, Disability, or death, each
Option held by the Optionee, together with all rights hereunder, shall
terminate on the date of cessation of employment, to the extent not
previously exercised.
b. Cessation of Employment by Reason of Retirement or Disability. If
an Optionee shall cease to be employed by the Company by reason of
Retirement or Disability, each Option held by the Optionee shall remain
exercisable, to the extent it was exercisable at the time of cessation of
employment, until the earliest of:
i. the Termination Date,
ii. the death of the Optionee, or such later date not more than
one year after the death of the Optionee as the Committee, in its
discretion, may provide pursuant to Section 6.09(c) of the Plan.
iii. the third anniversary of the date of the cessation of the
Optionee's employment, if employment ceased by reason of Retirement, or
iv. the first anniversary of the date of the cessation of the
Optionee's employment by reason of Disability;
and thereafter all such Options shall terminate together with all rights
hereunder, to the extent not previously exercised.
c. Cessation of Employment by Reason of Death. In the event of the
death of the Optionee, while employed by the Company, an Option may be
exercised at any time or from time to time prior to the earlier of the
Termination Date or the first anniversary of the date of the Optionee's
death, by the person or persons to whom the Optionee's rights under each
Option shall pass by will or by the applicable laws of descent and
distribution, to the extent that the Optionee was entitled to exercise it on
the Optionee's date of death. In the event of the death of the Optionee
while entitled to exercise an Option pursuant to Section 6.09(b), the
Committee, in its discretion, may permit such Option to be exercised at any
time or from time to time prior to the Termination Date during a period of
up to one year from the death of the Optionee, as determined by the
Committee, by the person or persons to whom the Optionee's rights under each
Option shall pass by will or by the applicable laws of descent and
distribution, to the extent that the Option was exercisable at the time of
cessation of the Optionee's employment. Any person or persons to whom an
Optionee's rights under an Option have passed by will or by the applicable
laws of descent and distribution shall be subject to all terms and
conditions of the Plan and the Option applicable to the Optionee.
6.10. Notification of Sales of Common Stock: Any Optionee who disposes of
shares of Common Stock acquired upon the exercise of an ISO either (a) within
two years after the date of the grant of the ISO under which the stock was
acquired or (b) within one year after the transfer of such shares to the
Optionee, shall notify the Company of such disposition and of the amount
realized upon such disposition.
ARTICLE VII
LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY
7.1. Notwithstanding any other provision of this Plan, in the case of an
ISO, the aggregate Fair Market Value (determined at the time the ISO is granted)
of the shares of Common Stock with respect to which all "incentive stock option
plans" (within the meaning of Section 422A of the Code) are first exercisable by
the Optionee during any calendar year (under this Plan and under all other
incentive stock option plans of the Employer, any Subsidiary and any Parent
Corporation) shall not exceed $100,000.
ARTICLE VIII
ADJUSTMENTS
8.1. If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable; (b) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common Stock; or (c) any
other event shall occur which in the judgment of the Committee necessitates
action by way of adjusting the terms of the outstanding Options, the Committee
shall forthwith take any such action as in its judgment shall be necessary to
preserve the Optionee's rights substantially proportionate to the rights
existing prior to such event and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Article IV above shall
be increased or decreased, as the case may be, proportionately; provided,
however, that each such adjustment, in the case of ISOs, shall be made in such
manner as not to constitute a "modification" within the meaning of Section
424(h)(3) of the Code. The judgment of the Committee with respect to any matter
referred to in this Article shall be conclusive and binding upon each Optionee.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1. The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board may deem
appropriate, provided, however, that no such amendment shall be made, which
would, without approval of the shareholders:
a. materially modify the eligibility requirements for receiving
Options;
b. increase the number of Shares of Common Stock which may be issued
pursuant to Options, except as is provided for in accordance with Article
VIII of the Plan;
c. reduce the minimum Option Price;
d. extend the period of granting Options; or
e. materially increase in any other way the benefits accruing to
Optionees.
9.2. No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to an Optionee under the Plan.
9.3. The Board may amend this Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if any, to
the Code.
ARTICLE X
GOVERNMENT AND OTHER REGULATIONS
10.1. The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Plan Does Not Confer Employment or Stockholder Rights: The right of
the Company to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as
otherwise provided by any agreement between the Company and the Optionee, is
specifically reserved. Neither the Optionee nor any person entitled to exercise
the Optionee's rights in the event of the Optionee's death shall have any rights
of a stockholder with respect to the shares subject to each Option, except to
the extent that, and until, such shares shall have been issued upon the exercise
of each Option.
11.2. Plan Expenses: Any expenses of administering this Plan shall be
borne by the Company.
11.3. Use of Exercise Proceeds: Payments received from Optionees upon the
exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.
11.4. Indemnification: In addition to such other rights of
indemnification as they may have as members of the Board, or the Committee, the
members of the Committee and the Board shall be indemnified by the Company
against all costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be party by
reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except a judgment based upon a finding
of bad faith; provided that upon the institution of any such action, suit or
proceeding a Committee or Board member shall, in writing, give the Company
notice thereof and an opportunity, at its own expense, to handle and defend the
same before such Committee or Board member undertakes to handle and defend it on
such member's own behalf.
ARTICLE XII
SHAREHOLDER APPROVAL AND EFFECTIVE DATES
12.1. The Plan shall become effective when it is adopted by the Board.
However, the Plan and all Options shall terminate after the passage of one year
from the date the Plan was adopted by the Board unless:
a. within such one year period, the Plan is approved by the vote at a
meeting of the shareholders of Harley-Davidson, Inc. of the holders of a
majority of the outstanding shares of Harley-Davidson, Inc. entitled to
vote; provided that if at a meeting of such shareholders held within such
one year period, the Plan is not so approved, the Plan and all Options shall
terminate at the time of that meeting of shareholders; or
b. within such one year period, the Plan is approved by the written
consent of the holders of a majority of the outstanding shares of Harley-
Davidson, Inc. entitled to vote.
Options may not be granted under the Plan after May 16, 1996.
HARLEY-DAVIDSON, INC.
1988 STOCK OPTION PLAN
(AS AMENDED THROUGH MAY 14, 1994)
ARTICLE I
PURPOSE
The purpose of the Harley-Davidson, Inc. 1988 Stock Option Plan is to
provide favorable opportunities for certain selected employees of Harley-
Davidson, Inc. and its subsidiaries to purchase or receive shares of Common
Stock of Harley-Davidson, Inc., or to benefit from the appreciation thereof.
Such opportunities should provide an increased incentive for these employees to
contribute to the future success and prosperity of Harley-Davidson, Inc., thus
enhancing the value of the stock for the benefit of the shareholders, and
increase the ability of Harley-Davidson, Inc. to attract and retain individuals
of exceptional skill upon whom, in large measure, its sustained progress, growth
and profitability depend.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1. Board: The Board of Directors of Harley-Davidson, Inc.
2.2. Code: The Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
2.3. Committee: The Human Resources Committee of the Board
2.4. Common Stock: The common stock of Harley-Davidson, Inc.
2.5. Company: Harley-Davidson, Inc. and any of its Subsidiaries.
2.6. Disability: Disability within the meaning of Section
22(e)(3) of the Code, as determined by the Committee.
2.7. Disinterested Persons: Disinterested persons within the
meaning of Rule 16b-3 as promulgated under the Securities Exchange Act of
1934, as amended.
2.8. Employer: The entity that employs the employee or Optionee.
2.9. Fair Market Value: The average of the high and low reported
sales prices of Common Stock on the New York Stock Exchange Composite Tape on
the date for which fair market value is being determined.
2.10. ISO: An incentive stock option within the meaning of Section
422A of the Code and which is designated as an incentive stock option by the
Committee.
2.11. Non-ISO: A stock option which is not an ISO and which is
designated as a Non-ISO by the Committee.
2.12. Option: A stock option granted under the Plan. Options
include both ISOs and Non-ISOs.
2.13. Option Price: The purchase price of a share of Common Stock
under an Option.
2.14. Optionee: An employee of the Company who has been granted
one or more Options.
2.15. Parent Corporation: A parent corporation, as defined in
Section 424(e) of the Code.
2.16. Plan: The Harley-Davidson, Inc. 1988 Stock Option Plan.
2.17. Retirement: Retirement on or after age sixty-five or, with
the advance consent of the Committee, at an earlier age.
2.18. Subsidiary: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity of
which more than fifty percent (50%) of the voting power or ownership interest
is directly and/or indirectly held by the Company.
2.19. Termination Date: A date fixed by the Committee but not
later than the day preceding the tenth anniversary of the date on which the
Option is granted.
ARTICLE III
ADMINISTRATION
3.1. Except as otherwise provided in the Plan, the Committee shall
administer the Plan and shall have full power to grant Options, construe and
interpret the Plan, establish and amend rules and regulations for its adminis-
tration, and perform all other acts relating to the Plan, including the delega-
tion of administrative responsibilities, which it believes reasonable and
proper.
3.2. Subject to the provisions of the Plan, the Board shall establish the
policies and criteria pursuant to which the Committee shall grant Options and
administer the Plan. Subject to the provisions of the Plan, and pursuant to the
policies and criteria established by the Board, the Committee shall, in its
discretion determine which employees of the Company shall be granted Options,
the number of shares subject to option under any such Options, the dates after
which Options may be exercised, in whole or in part, whether Options shall be
ISOs, and the terms and conditions of the Options.
3.3. The Committee may at any time, with the consent of the Optionee, in
its sole discretion, cancel any Option and issue to the Optionee a new Option
for an equivalent or lesser number of Common Stock shares, and at a lesser
Option Price.
3.4. Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and administration of
the Plan shall be final and conclusive.
3.5. Any action undertaken by the Board pursuant to this Article III
shall be null and void if a majority of the directors acting on the matter are
not Disinterested Persons; provided, further, notwithstanding any other provi-
sion of the Plan, if a majority of the members of the Board are not Disinterest-
ed Persons, the powers and responsibilities granted to the Board under Article
III of the Plan shall be exercised solely by the Committee until such time as a
majority of the members of the Board are Disinterested Persons.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1. The total number of shares of Common Stock available for grants of
Options under the Plan shall be 800,000; provided that Options for not more than
100,000 shares of Common Stock shall be granted to an Optionee in any calendar
year under the Plan, which amount shall be reduced by the amount of Common Stock
subject to options granted to such Optionee in such calendar year under any
other stock option plan of the Company. The foregoing amounts shall be subject
to adjustment in accordance with Article VIII of the Plan. These shares may be
either authorized but unissued or reacquired shares of Common Stock. If an
Option or portion thereof shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares covered by such Option
shall be available for future grants of Options. An Option, or portion thereof,
exercised through the exercise of a stock appreciation right pursuant to Section
6.7 of the Plan shall be treated, for the purposes of this Article, as though
the Option, or portion thereof, had been exercised through the purchase of
Common Stock, with the result that the shares of Common Stock subject to the
Option, or portion thereof, that was so exercised shall not be available for
future grants of Options.
ARTICLE V
ELIGIBILITY
5.1. Options may be granted to key employees of the Company or to persons
who have been engaged to become key employees of the Company. Key employees
will comprise, in general, those who contribute to the management, direction and
overall success of the Company, including those who are members of the Board.
Members of the Board who are not employees of the Company shall not be eligible
for Option grants.
ARTICLE VI
TERM OF OPTIONS
6.1. Option Agreements: All Options shall be evidenced by written
agreements executed by the Company and the Optionee. Such Options shall be
subject to the applicable provisions of the Plan, and shall contain such
provisions as are required by the Plan and any other provisions the Committee
may prescribe. All agreements evidencing Options shall specify the total number
of shares subject to each grant, the Option Price and the Termination Date.
Those Options that comply with the requirements for an ISO set forth in Section
422A of the Code shall be designated ISOs and all other Options shall be
designated Non-ISOs.
6.2. Option Price: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.
6.3. Period of Exercise: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after
the Termination Date.
6.4. Special Rules Regarding ISOs Granted to Certain Employees: Notwith-
standing any contrary provisions of Sections 6.2 and 6.3 of the Plan, no ISO
shall be granted to any employee who, at the time the Option is granted, owns
(directly or indirectly, within the meaning of Section 424(d) of the Code) more
than ten percent of the total combined voting power of all classes of stock of
the Employer or of any Subsidiary or Parent Corporation thereof, unless (a) the
Option Price under such Option is at least 110 percent of the Fair Market Value
of a share of Common Stock on the date the Option is granted and (b) the
Termination Date of such Option is a date not later than the day preceding the
fifth anniversary of the date on which the Option is granted.
6.5 Manner of Exercise and Payment: An Option, or portion thereof, shall
be exercised by delivery of a written notice of exercise to the Company and
payment of the full price of the shares being purchased pursuant to the Option.
An Optionee may exercise an Option with respect to less than the full number of
shares for which the Option may then be exercised, but an Optionee must exercise
the Option in full shares of Common Stock. The price of Common Stock purchased
pursuant to an Option, or portion thereof, may be paid:
a. in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company.
b. through the delivery of shares of Common Stock with an aggregate
Fair Market Value on the date of exercise equal to the Option Price, or
c. by any combination of the above methods of payment.
The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and prohibi-
tions on the use of Common Stock to exercise an Option as it deems appropriate,
including, without limitation, any limitation or prohibition designed to avoid
certain accounting consequences which may result from the use of Common Stock as
payment upon exercise of an Option.
6.6. Withholding Taxes: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon the
exercise of an Option requiring tax withholding, an Optionee may make a written
election to have shares of Common Stock withheld by the Company from the shares
otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an
Optionee shall be at the sole discretion of the Committee. Where the exercise
of an Option does not give rise to an obligation to withhold Federal income
taxes on the date of exercise, the Company may, in its discretion, require an
Optionee to place shares of Common Stock purchased under the Option in escrow
for the benefit of the Company until such time as Federal income tax withholding
is required on amounts included in the gross income of the Optionee as a result
of the exercise of an Option. At such time, the Company, in its discretion, may
require an Optionee to pay to the Company the amount that the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise of the Option, in which case
the shares of Common Stock will be released from escrow to the Optionee.
Alternatively, subject to acceptance by the Committee, in its sole discretion,
an Optionee may make a written election to have shares of Common Stock held in
escrow applied toward the Company's obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise of the Option,
based on the Fair Market Value of the shares on the date of the termination of
the escrow arrangement. Upon application of such shares toward the Company's
withholding obligation, any shares of Common Stock held in escrow and not, in
the judgment of the Committee, necessary to satisfy such obligation shall be
released from escrow to the Optionee.
6.7. Stock Appreciation Rights: At or after the grant of an Option, the
Committee, in its discretion, may provide an Optionee with an alternate means of
exercising an Option, or a designated portion thereof, by granting the Optionee
a stock appreciation right. A "stock appreciation right" is a right to receive,
upon exercise of an Option or any portion thereof, in the Committee's sole
discretion, an amount of cash equal to, and/or shares of Common Stock having a
Fair Market Value on the date of exercise equal to, the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the Option
Price, multiplied by the number of shares of Common Stock that the Optionee
would have received had the Option or portion thereof been exercised through the
purchase of shares of Common Stock at the Option Price, provided that (a) such
Option or portion thereof has been designated as exercisable in this alternative
manner, (b) such Option or portion thereof is otherwise exercisable, and (c) the
Fair Market Value of a share of Common Stock on the date of exercise exceeds the
Option Price.
6.8. Nontransferability of Options: Each Option shall, during the
Optionee's lifetime, be exercisable only by the Optionee, and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws of
descent and distribution or be subject to attachment, execution or other similar
process. In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of an Option or of any right hereunder,
except as provided for herein, or in the event of any levy or any attachment,
execution or similar process upon the rights or interest hereby conferred, the
Company may terminate the Option by notice to the Optionee and the Option shall
thereupon become null and void.
6.9. Cessation of Employment of Optionee:
a. Cessation of Employment other than by Reason of Retirement, Disabil-
ity or Death. If an Optionee shall cease to be employed by the Company
otherwise than by reason of Retirement, Disability, or death, each Option
held by the Optionee, together with all rights hereunder, shall terminate on
the date of cessation of employment, to the extent not previously exercised.
b. Cessation of Employment by Reason of Retirement or Disability. If
an Optionee shall cease to be employed by the Company by reason of Retire-
ment or Disability, each Option held by the Optionee shall remain exercis-
able, to the extent it was exercisable at the time of cessation of employ-
ment, until the earliest of:
i. the Termination Date,
ii. the death of the Optionee, or such later date not more than
one year after the death of the Optionee as the Committee, in its
discretion, may provide pursuant to Section 6.09(c) of the Plan.
iii. the third anniversary of the date of the cessation of the
Optionee's employment, if employment ceased by reason of Retirement, or
iv. the first anniversary of the date of the cessation of the
Optionee's employment by reason of Disability;
and thereafter all such Options shall terminate together with all rights
hereunder, to the extent not previously exercised.
c. Cessation of Employment by Reason of Death. In the event of the
death of the Optionee, while employed by the Company, an Option may be
exercised at any time or from time to time prior to the earlier of the
Termination Date or the first anniversary of the date of the Optionee's
death, by the person or persons to whom the Optionee's rights under each
Option shall pass by will or by the applicable laws of descent and distribu-
tion, to the extent that the Optionee was entitled to exercise it on the
Optionee's date of death. In the event of the death of the Optionee while
entitled to exercise an Option pursuant to Section 6.09(b), the Committee,
in its discretion, may permit such Option to be exercised at any time or
from time to time prior to the Termination Date during a period of up to one
year from the death of the Optionee, as determined by the Committee, by the
person or persons to whom the Optionee's rights under each Option shall pass
by will or by the applicable laws of descent and distribution, to the extent
that the Option was exercisable at the time of cessation of the Optionee's
employment. Any person or persons to whom an Optionee's rights under an
Option have passed by will or by the applicable laws of descent and distri-
bution shall be subject to all terms and conditions of the Plan and the
Option applicable to the Optionee.
6.10. Notification of Sales of Common Stock: Any Optionee who disposes of
shares of Common Stock acquired upon the exercise of an ISO either (a) within
two years after the date of the grant of the ISO under which the stock was
acquired or (b) within one year after the transfer of such shares to the
Optionee, shall notify the Company of such disposition and of the amount
realized upon such disposition.
ARTICLE VII
LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY
7.1. Notwithstanding any other provision of this Plan, in the case of an
ISO, the aggregate Fair Market Value (determined at the time the ISO is granted)
of the shares of Common Stock with respect to which all "incentive stock option
plans" (within the meaning of Section 422A of the Code) are first exercisable by
the Optionee during any calendar year (under this Plan and under all other
incentive stock option plans of the Employer, any Subsidiary and any Parent
Corporation) shall not exceed $100,000.
ARTICLE VIII
ADJUSTMENTS
8.1. If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable; (b) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common Stock; or (c) any
other event shall occur which in the judgment of the Committee necessitates
action by way of adjusting the terms of the outstanding Options, the Committee
shall forthwith take any such action as in its judgment shall be necessary to
preserve the Optionee's rights substantially proportionate to the rights
existing prior to such event and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock subject to out-
standing Options, the number of shares available under Article IV above shall be
increased or decreased, as the case may be, proportionately; provided, however,
that each such adjustment, in the case of ISOs, shall be made in such manner as
not to constitute a "modification" within the meaning of Section 424(h)(3) of
the Code. The judgment of the Committee with respect to any matter referred to
in this Article shall be conclusive and binding upon each Optionee.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1. The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board may deem
appropriate, provided, however, that no such amendment shall be made, which
would, without approval of the shareholders:
a. materially modify the eligibility requirements for receiving Op-
tions;
b. increase the number of Shares of Common Stock which may be issued
pursuant to Options, except as is provided for in accordance with Article
VIII of the Plan;
c. reduce the minimum Option Price;
d. extend the period of granting Options; or
e. materially increase in any other way the benefits accruing to
Optionees.
9.2. No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to an Optionee under the Plan.
9.3. The Board may amend this Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if any, to
the Code.
ARTICLE X
GOVERNMENT AND OTHER REGULATIONS
10.1. The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Plan Does Not Confer Employment or Stockholder Rights: The right of
the Company to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as other-
wise provided by any agreement between the Company and the Optionee, is specifi-
cally reserved. Neither the Optionee nor any person entitled to exercise the
Optionee's rights in the event of the Optionee's death shall have any rights of
a stockholder with respect to the shares subject to each Option, except to the
extent that, and until, such shares shall have been issued upon the exercise of
each Option.
11.2. Plan Expenses: Any expenses of administering this Plan shall be
borne by the Company.
11.3. Use of Exercise Proceeds: Payments received from Optionees upon the
exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.
11.4. Indemnification: In addition to such other rights of indemnifica-
tion as they may have as members of the Board, or the Committee, the members of
the Committee and the Board shall be indemnified by the Company against all
costs and expenses reasonably incurred by them in connection with any action,
suit or proceeding to which they or any of them may be party by reason of any
action taken or failure to act under or in connection with the Plan or any
Option granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except a judgment based upon a finding of bad
faith; provided that upon the institution of any such action, suit or proceeding
a Committee or Board member shall, in writing, give the Company notice thereof
and an opportunity, at its own expense, to handle and defend the same before
such Committee or Board member undertakes to handle and defend it on such
member's own behalf.
ARTICLE XII
SHAREHOLDER APPROVAL AND EFFECTIVE DATES
12.1. The Plan shall become effective when it is adopted by the Board.
However, the Plan and all Options shall terminate after the passage of one year
from the date the Plan was adopted by the Board unless:
a. within such one year period, the Plan is approved by the vote at a
meeting of the shareholders of Harley-Davidson, Inc. of the holders of a
majority of the outstanding shares of Harley-Davidson, Inc. entitled to
vote; provided that if at a meeting of such shareholders held within such
one year period, the Plan is not so approved, the Plan and all Options shall
terminate at the time of that meeting of shareholders; or
b. within such one year period, the Plan is approved by the share-
holders of Harley-Davidson, Inc.
Options may not be granted under the Plan after March 7, 1998.
HARLEY-DAVIDSON, INC.
1990 STOCK OPTION PLAN
(AS AMENDED THROUGH MAY 14, 1994)
ARTICLE I
PURPOSE
The purpose of the Harley-Davidson, Inc. 1990 Stock Option Plan is to
provide favorable opportunities for certain selected employees of Harley-
Davidson, Inc. and its subsidiaries to purchase or receive shares of Common
Stock of Harley-Davidson, Inc., or to benefit from the appreciation thereof.
Such opportunities should provide an increased incentive for these employees to
contribute to the future success and prosperity of Harley-Davidson, Inc., thus
enhancing the value of the stock for the benefit of the shareholders, and
increase the ability of Harley-Davidson, Inc. to attract and retain individuals
of exceptional skill upon whom, in large measure, its sustained progress, growth
and profitability depend.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1. Board: The Board of Directors of Harley-Davidson, Inc.
2.2. Code: The Internal Revenue Code of 1986, as amended.
2.3. Committee: The Human Resources Committee of the Board
2.4. Common Stock: The common stock of Harley-Davidson, Inc.
2.5. Company: Harley-Davidson, Inc. and any of its Subsidiaries.
2.6. Disability: Disability within the meaning of Section
22(e)(3) of the Code, as determined by the Committee.
2.7. Disinterested Persons: Disinterested persons within the
meaning of Rule 16b-3 as promulgated under the Securities Exchange Act of
1934, as amended.
2.8. Employer: The entity that employs the employee or Optionee.
2.9. Fair Market Value: The average of the high and low reported
sales prices of Common Stock on the New York Stock Exchange Composite Tape on
the date for which fair market value is being determined.
2.10. ISO: An incentive stock option within the meaning of Section
422A of the Code and which is designated as an incentive stock option by the
Committee.
2.11. Non-ISO: A stock option which is not an ISO and which is
designated as a Non-ISO by the Committee.
2.12. Option: A stock option granted under the Plan. Options
include both ISOs and Non-ISOs.
2.13. Option Price: The purchase price of a share of Common Stock
under an Option.
2.14. Optionee: An employee of the Company who has been granted
one or more Options.
2.15. Parent Corporation: A parent corporation, as defined in
Section 424(e) of the Code.
2.16. Plan: The Harley-Davidson, Inc. 1990 Stock Option Plan.
2.17. Retirement: Retirement on or after age sixty-five or, with
the advance consent of the Committee, at an earlier age.
2.18. Subsidiary: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity of
which more than fifty percent (50%) of the voting power or ownership interest
is directly and/or indirectly held by the Company.
2.19. Termination Date: A date fixed by the Committee but not
later than the day preceding the tenth anniversary of the date on which the
Option is granted.
ARTICLE III
ADMINISTRATION
3.1. Except as otherwise provided in the Plan, the Committee shall
administer the Plan and shall have full power to grant Options, construe and
interpret the Plan, establish and amend rules and regulations for its adminis-
tration, and perform all other acts relating to the Plan, including the delega-
tion of administrative responsibilities, which it believes reasonable and
proper.
3.2. Subject to the provisions of the Plan, the Board shall establish the
policies and criteria pursuant to which the Committee shall grant Options and
administer the Plan. Subject to the provisions of the Plan, and pursuant to the
policies and criteria established by the Board, the Committee shall, in its
discretion determine which employees of the Company shall be granted Options,
the number of shares subject to option under any such Options, the dates after
which Options may be exercised, in whole or in part, whether Options shall be
ISOs, and the terms and conditions of the Options.
3.3. The Committee may at any time, with the consent of the Optionee, in
its sole discretion, cancel any Option and issue to the Optionee a new Option
for an equivalent or lesser number of Common Stock shares, and at a lesser
Option Price.
3.4. Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and administration of
the Plan shall be final and conclusive.
3.5. Any action undertaken by the Board pursuant to this Article III
shall be null and void if a majority of the directors acting on the matter are
not Disinterested Persons; provided, further, notwithstanding any other provi-
sion of the Plan, if a majority of the members of the Board are not Disinterest-
ed Persons, the powers and responsibilities granted to the Board under Article
III of the Plan shall be exercised solely by the Committee until such time as a
majority of the members of the Board are Disinterested Persons.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1. The total number of shares of Common Stock available for grants of
Options under the Plan shall be 1,800,000; provided that Options for not more
than 100,000 shares of Common Stock shall be granted to an Optionee in any
calendar year under the Plan, which amount shall be reduced by the amount of
Common Stock subject to options granted to such Optionee in such calendar year
under any other stock option plan of the Company. The foregoing amounts shall
be subject to adjustment in accordance with Article VIII of the Plan. If an
Option or portion thereof shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares covered by such Option
shall be available for future grants of Options. An Option, or portion thereof,
exercised through the exercise of a stock appreciation right pursuant to Section
6.7 of the Plan shall be treated, for the purposes of this Article, as though
the Option, or portion thereof, had been exercised through the purchase of
Common Stock, with the result that the shares of Common Stock subject to the
Option, or portion thereof, that was so exercised shall not be available for
future grants of Options.
ARTICLE V
ELIGIBILITY
5.1. Options may be granted to key employees of the Company or to persons
who have been engaged to become key employees of the Company. Key employees
will comprise, in general, those who contribute to the management, direction and
overall success of the Company, including those who are members of the Board.
Members of the Board who are not employees of the Company shall not be eligible
for Option grants.
ARTICLE VI
TERM OF OPTIONS
6.1. Option Agreements: All Options shall be evidenced by written
agreements executed by the Company and the Optionee. Such Options shall be
subject to the applicable provisions of the Plan, and shall contain such
provisions as are required by the Plan and any other provisions the Committee
may prescribe. All agreements evidencing Options shall specify the total number
of shares subject to each grant, the Option Price and the Termination Date.
Those Options that comply with the requirements for an ISO set forth in Section
422A of the Code shall be designated ISOs and all other Options shall be
designated Non-ISOs.
6.2. Option Price: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.
6.3. Period of Exercise: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after
the Termination Date.
6.4. Special Rules Regarding ISOs Granted to Certain Employees: Notwith-
standing any contrary provisions of Sections 6.2 and 6.3 of the Plan, no ISO
shall be granted to any employee who, at the time the Option is granted, owns
(directly or indirectly, within the meaning of Section 424(d) of the Code) more
than ten percent of the total combined voting power of all classes of stock of
the Employer or of any Subsidiary or Parent Corporation thereof, unless (a) the
Option Price under such Option is at least 110 percent of the Fair Market Value
of a share of Common Stock on the date the Option is granted and (b) the
Termination Date of such Option is a date not later than the day preceding the
fifth anniversary of the date on which the Option is granted.
6.5 Manner of Exercise and Payment: An Option, or portion thereof, shall
be exercised by delivery of a written notice of exercise to the Company and
payment of the full price of the shares being purchased pursuant to the Option.
An Optionee may exercise an Option with respect to less than the full number of
shares for which the Option may then be exercised, but an Optionee must exercise
the Option in full shares of Common Stock. The price of Common Stock purchased
pursuant to an Option, or portion thereof, may be paid:
a. in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company.
b. through the delivery of shares of Common Stock with an aggregate
Fair Market Value on the date of exercise equal to the Option Price, or
c. by any combination of the above methods of payment.
The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and prohibi-
tions on the use of Common Stock to exercise an Option as it deems appropriate,
including, without limitation, any limitation or prohibition designed to avoid
certain accounting consequences which may result from the use of Common Stock as
payment upon exercise of an Option.
6.6. Withholding Taxes: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon the
exercise of an Option requiring tax withholding, an Optionee may make a written
election to have shares of Common Stock withheld by the Company from the shares
otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an
Optionee shall be at the sole discretion of the Committee. Where the exercise
of an Option does not give rise to an obligation to withhold Federal income
taxes on the date of exercise, the Company may, in its discretion, require an
Optionee to place shares of Common Stock purchased under the Option in escrow
for the benefit of the Company until such time as Federal income tax withholding
is required on amounts included in the gross income of the Optionee as a result
of the exercise of an Option. At such time, the Company, in its discretion, may
require an Optionee to pay to the Company the amount that the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise of the Option, in which case
the shares of Common Stock will be released from escrow to the Optionee.
Alternatively, subject to acceptance by the Committee, in its sole discretion,
an Optionee may make a written election to have shares of Common Stock held in
escrow applied toward the Company's obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise of the Option,
based on the Fair Market Value of the shares on the date of the termination of
the escrow arrangement. Upon application of such shares toward the Company's
withholding obligation, any shares of Common Stock held in escrow and not, in
the judgment of the Committee, necessary to satisfy such obligation shall be
released from escrow to the Optionee.
6.7. Stock Appreciation Rights: At or after the grant of an Option, the
Committee, in its discretion, may provide an Optionee with an alternate means of
exercising an Option, or a designated portion thereof, by granting the Optionee
a stock appreciation right. A "stock appreciation right" is a right to receive,
upon exercise of an Option or any portion thereof, in the Committee's sole
discretion, an amount of cash equal to, and/or shares of Common Stock having a
Fair Market Value on the date of exercise equal to, the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the Option
Price, multiplied by the number of shares of Common Stock that the Optionee
would have received had the Option or portion thereof been exercised through the
purchase of shares of Common Stock at the Option Price, provided that (a) such
Option or portion thereof has been designated as exercisable in this alternative
manner, (b) such Option or portion thereof is otherwise exercisable, and (c) the
Fair Market Value of a share of Common Stock on the date of exercise exceeds the
Option Price.
6.8. Nontransferability of Options: Each Option shall, during the
Optionee's lifetime, be exercisable only by the Optionee, and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws of
descent and distribution or be subject to attachment, execution or other similar
process. In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of an Option or of any right hereunder,
except as provided for herein, or in the event of any levy or any attachment,
execution or similar process upon the rights or interest hereby conferred, the
Company may terminate the Option by notice to the Optionee and the Option shall
thereupon become null and void.
6.9. Cessation of Employment of Optionee:
a. Cessation of Employment other than by Reason of Retirement, Disabil-
ity or Death. If an Optionee shall cease to be employed by the Company
otherwise than by reason of Retirement, Disability, or death, each Option
held by the Optionee, together with all rights hereunder, shall terminate on
the date of cessation of employment, to the extent not previously exercised.
b. Cessation of Employment by Reason of Retirement or Disability. If
an Optionee shall cease to be employed by the Company by reason of Retire-
ment or Disability, each Option held by the Optionee shall remain exercis-
able, to the extent it was exercisable at the time of cessation of employ-
ment, until the earliest of:
i. the Termination Date,
ii. the death of the Optionee, or such later date not more than
one year after the death of the Optionee as the Committee, in its
discretion, may provide pursuant to Section 6.09(c) of the Plan.
iii. the third anniversary of the date of the cessation of the
Optionee's employment, if employment ceased by reason of Retirement, or
iv. the first anniversary of the date of the cessation of the
Optionee's employment by reason of Disability;
and thereafter all such Options shall terminate together with all rights
hereunder, to the extent not previously exercised.
c. Cessation of Employment by Reason of Death. In the event of the
death of the Optionee, while employed by the Company, an Option may be
exercised at any time or from time to time prior to the earlier of the
Termination Date or the first anniversary of the date of the Optionee's
death, by the person or persons to whom the Optionee's rights under each
Option shall pass by will or by the applicable laws of descent and distribu-
tion, to the extent that the Optionee was entitled to exercise it on the
Optionee's date of death. In the event of the death of the Optionee while
entitled to exercise an Option pursuant to Section 6.09(b), the Committee,
in its discretion, may permit such Option to be exercised at any time or
from time to time prior to the Termination Date during a period of up to one
year from the death of the Optionee, as determined by the Committee, by the
person or persons to whom the Optionee's rights under each Option shall pass
by will or by the applicable laws of descent and distribution, to the extent
that the Option was exercisable at the time of cessation of the Optionee's
employment. Any person or persons to whom an Optionee's rights under an
Option have passed by will or by the applicable laws of descent and distri-
bution shall be subject to all terms and conditions of the Plan and the
Option applicable to the Optionee.
6.10. Notification of Sales of Common Stock: Any Optionee who disposes of
shares of Common Stock acquired upon the exercise of an ISO either (a) within
two years after the date of the grant of the ISO under which the stock was
acquired or (b) within one year after the transfer of such shares to the
Optionee, shall notify the Company of such disposition and of the amount
realized upon such disposition.
ARTICLE VII
LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY
7.1. Notwithstanding any other provision of this Plan, in the case of an
ISO, the aggregate Fair Market Value (determined at the time the ISO is granted)
of the shares of Common Stock with respect to which all "incentive stock option
plans" (within the meaning of Section 422A of the Code) are first exercisable by
the Optionee during any calendar year (under this Plan and under all other
incentive stock option plans of the Employer, any Subsidiary and any Parent
Corporation) shall not exceed $100,000.
7.2. Each Option granted under the Plan shall have a limited right of
surrender allowing the Optionee to surrender that Option within the 30-day
period following a Change of Control Event and to receive cash, in lieu of
exercising the Option, in the amount by which the highest "COC Fair Market
Value" (as hereinafter defined) of the number of shares of Common Stock covered
by the Option during the 60 days preceding the date on which the Change of
Control Event occurs exceeds the exercise price for the shares of Common Stock
covered by the Option. For this purpose, the "COC Fair Market Value" of the
Common Stock means the highest closing price of one share of Common Stock as
reported on the New York Stock Exchange Composite Tape. If the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, the COC Fair
Market Value of the Common Stock shall be the closing price of one share of
Common Stock on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last quoted sale
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market of the Common Stock, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other system then in use, or, if on any such date the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices of the Common Stock as furnished by a professional market maker making a
market in the Common Stock selected by the Board. If on any such date no market
maker is making a market in the Common Stock or other Stock, the COC Fair Market
Value shall be determined in good faith by the Continuing Directors. For
purposes of this Section 7.2:
(a) "Change of Control Event" means any one of the following: (i)
Continuing Directors no longer constitute at least two-thirds of the Direc-
tors constituting the Board; (ii) any person or groups (as defined in Rule
13d-5 under the Securities Exchange Act of 1934, as amended ("Exchange
Act")), together with its affiliates, becomes the beneficial owner, directly
or indirectly, of 20% or more of the Corporation's then outstanding Common
Stock or 20% or more of the voting power of the Corporation's then outstand-
ing securities entitled generally to vote for the election of the
Corporation's Directors; (iii) the approval by the Corporation's stockhold-
ers of the merger or consolidation of the Corporation with any other corpo-
ration, the sale of substantially all of the Corporation's assets or the
liquidation or dissolution of the Corporation, unless, in the case of a
merger or consolidation, the Continuing Directors in office immediately
prior to such merger or consolidation constitute at least two-thirds of the
directors constituting the board of directors of the surviving corporation
of such merger or consolidation and any parent (as defined in Rule 12b-2
under the Exchange Act) of such corporation; or (iv) at least two-thirds of
the Continuing Directors in office immediately prior to any other action
proposed to be taken by the Corporation's stockholders or by the Board of
Directors determine that such proposed action, if taken, would constitute a
change of control of the Corporation and such action is taken; and
(b) "Continuing Director" means any person who either (i) was a
Director on November 1 1989, or (ii) was designated before such person's
initial election as a Director as a Continuing Director by a majority of the
Continuing Directors.
ARTICLE VIII
ADJUSTMENTS
8.1. If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable; (b) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common Stock; or (c) any
other event shall occur which in the judgment of the Committee necessitates
action by way of adjusting the terms of the outstanding Options, the Committee
shall forthwith take any such action as in its judgment shall be necessary to
preserve the Optionee's rights substantially proportionate to the rights
existing prior to such event and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock subject to out-
standing Options, the number of shares available under Article IV above shall be
increased or decreased, as the case may be, proportionately; provided, however,
that each such adjustment, in the case of ISOs, shall be made in such manner as
not to constitute a "modification" within the meaning of Section 424(h)(3) of
the Code. The judgment of the Committee with respect to any matter referred to
in this Article shall be conclusive and binding upon each Optionee.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1. The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board may deem
appropriate, provided, however, that no such amendment shall be made, which
would, without approval of the shareholders:
a. materially modify the eligibility requirements for receiving Op-
tions;
b. increase the number of Shares of Common Stock which may be issued
pursuant to Options, except as is provided for in accordance with Article
VIII of the Plan;
c. reduce the minimum Option Price;
d. extend the period of granting Options; or
e. materially increase in any other way the benefits accruing to
Optionees.
9.2. No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to an Optionee under the Plan.
9.3. The Board may amend this Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if any, to
the Code.
ARTICLE X
GOVERNMENT AND OTHER REGULATIONS
10.1. The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Plan Does Not Confer Employment or Stockholder Rights: The right of
the Company to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as other-
wise provided by any agreement between the Company and the Optionee, is specifi-
cally reserved. Neither the Optionee nor any person entitled to exercise the
Optionee's rights in the event of the Optionee's death shall have any rights of
a stockholder with respect to the shares subject to each Option, except to the
extent that, and until, such shares shall have been issued upon the exercise of
each Option.
11.2. Plan Expenses: Any expenses of administering this Plan shall be
borne by the Company.
11.3. Use of Exercise Proceeds: Payments received from Optionees upon the
exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.
11.4. Indemnification: In addition to such other rights of indemnifica-
tion as they may have as members of the Board, or the Committee, the members of
the Committee and the Board shall be indemnified by the Company against all
costs and expenses reasonably incurred by them in connection with any action,
suit or proceeding to which they or any of them may be party by reason of any
action taken or failure to act under or in connection with the Plan or any
Option granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except a judgment based upon a finding of bad
faith; provided that upon the institution of any such action, suit or proceeding
a Committee or Board member shall, in writing, give the Company notice thereof
and an opportunity, at its own expense, to handle and defend the same before
such Committee or Board member undertakes to handle and defend it on such
member's own behalf.
ARTICLE XII
SHAREHOLDER APPROVAL AND EFFECTIVE DATES
12.1. The Plan shall become effective when it is adopted by the Board.
However, the Plan and all Options shall terminate after the passage of one year
from the date the Plan was adopted by the Board unless:
a. within such one year period, the Plan is approved by the vote at a
meeting of the shareholders of Harley-Davidson, Inc. of the holders of a
majority of the outstanding shares of Harley-Davidson, Inc. entitled to
vote; provided that if at a meeting of such shareholders held within such
one year period, the Plan is not so approved, the Plan and all Options shall
terminate at the time of that meeting of shareholders; or
b. within such one year period, the Plan is approved by the written
consent of the holders of a majority of the outstanding shares of Harley-
Davidson, Inc. entitled to vote.
Options may not be granted under the Plan after May 13, 2000.
