GENMAR HOLDINGS INC, S-1/A, 1999-10-18

GENMAR HOLDINGS INC
S-1/A, 1999-10-18
SHIP & BOAT BUILDING & REPAIRING

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1999

REGISTRATION NO. 333-85447
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

GENMAR HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 3732 41-1778106
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
Incorporation or Organization) Classification Code Number)
</TABLE>

100 SOUTH FIFTH STREET
SUITE 2400
MINNEAPOLIS, MINNESOTA 55402
(612) 339-7900
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

MARY P. MCCONNELL, ESQ.
GENMAR HOLDINGS, INC.
100 SOUTH FIFTH STREET
SUITE 2400
MINNEAPOLIS, MINNESOTA 55402
(612) 339-7900

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------

COPIES TO:

<TABLE>
<S> <C>
STEPHEN M. BESEN, ESQ. H. WATT GREGORY, III, ESQ.
WEIL, GOTSHAL & MANGES LLP GIROIR, GREGORY, HOLMES & HOOVER,
PLC
767 FIFTH AVENUE 111 CENTER STREET, SUITE 1900
NEW YORK, NEW YORK 10153 LITTLE ROCK, ARKANSAS 72201
(212) 310-8000 (501) 372-3000
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ______________

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______________

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION, DATED OCTOBER 18, 1999

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS

6,500,000 SHARES

[LOGO]

COMMON STOCK

------------------

Genmar Holdings, Inc. is offering 6,500,000 shares of its common stock. This
is our initial public offering and no public market currently exists for our
shares. We have received approval to have our common stock listed on the Nasdaq
National Market under the symbol "GNMR." We estimate that the initial public
offering price will be between $11.00 and $13.00 per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

---------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds to Genmar.......................................... $ $
</TABLE>

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Genmar has granted the underwriters a 30-day option to purchase up to an
additional 975,000 shares of common stock at the public offering price less the
underwriting discount above, solely to cover over-allotments, if any.
Stephens Inc. expects to deliver the shares of common stock on October , 1999.

STEPHENS INC. U.S. BANCORP PIPER JAFFRAY

The date of this prospectus is October , 1999.
<PAGE>

[INSIDE FRONT COVER]

[GENMAR LOGO] [PICTURE OF CARVER BOAT]

[PICTURE OF GLOBE
WITH WORDS "TECHNOLOGY,"
"INNOVATION" AND
"QUALITY"]

[PICTURE OF
CRESTLINER BOAT]

A HISTORY OF
INNOVATION,
A WORLD OF
OPPORTUNITIES. [AQUASPORT LOGO]

As the second largest [CARVER YACHTS LOGO]

manufacturer of motorized [CRESTLINE LOGO]

recreational boats in the United [GLASTRON LOGO]

States, Genmar produces some [LARSON LOGO]

of the industry's leading brands. [LOGIC LOGO]

These names extend around the [LUND LOGO]

world through our network of [NOVA LOGO]

approximately 1,300 independent [RANGER BOATS LOGO]

authorized dealers who are in [TROJAN YACHTS LOGO]

all 50 states and approximately [WELLCRAFT LOGO]

30 foreign countries.

[PICTURE OF WELLCRAFT BOAT]

<PAGE>

[INSIDE SPREAD]

[A 2-PAGE SPREAD DEPICTING GENMAR TECHNOLOGY]

[LEFT PAGE]

We have recently introduced new manufacturing processes that allow us to produce

higher quality boats more efficiently and with substantially fewer regulated air

emissions. We believe these innovations have positioned us to enter new markets

and considerably increase our market share in the recreational boat industry.

VEC
Virtual Engineered Composites

Virtual Engineered Composites (VEC) is an innovative closed-mold fiberglass
manufacturing process that improves production efficiency and substantially
reduces regulated air emissions relative to traditional processes. Genmar
believes VEC technology introduces a new level of automation and quality
control to boat manufacturing.

[3 DEPICTIONS OF UTILIZATION OF VEC TECHNOLOGY]

<PAGE>

[RIGHT PAGE]

Roplene

Roplene construction is a closed rotational mold technology, proprietary to
our Logic division, that uses advanced recyclable polyethylene materials and
produces minimal regulated air emissions in the manufacturing process. This
technology allows us to produce highly durable boats, which are marketed as
the World's Toughest Boats.-TM-

[3 DEPICTIONS OF UTILIZATION OF ROPLENE CONSTRUCTIONS]

Robotics

Robotics are becoming increasingly important to Genmar's manufacturing
processes.

[PICTURE OF ROBOTICS] [GENMAR LOGO]

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 7
Special Note Regarding Forward-Looking
Statements.......................... 13
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
The Company........................... 17
Selected Financial Data............... 19
Unaudited Pro Forma Financial Data.... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
</TABLE>

<TABLE>
Business.............................. 36
<CAPTION>
PAGE
--------
<S> <C>
Management............................ 50
Certain Transactions.................. 57
Principal Stockholders................ 60
Description of Capital Stock.......... 62
Shares Eligible for Future Sale....... 65
Underwriting.......................... 66
Legal Matters......................... 68
Experts............................... 68
Additional Information................ 69
Index to Consolidated Financial
Statements.......................... 70
</TABLE>

------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED.

------------------------

Until 1999, all dealers effecting transactions in the common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

------------------------

Unless otherwise indicated, all information in this prospectus:

- Except for the audited historical consolidated financial statements,
reflects a 9-for-1 split of our common stock after giving effect to the
spin-off of Hatteras;

- Reflects the issuance of 5,593,500 shares of common stock in exchange for
outstanding warrants;

- Assumes a public offering price of $12.00 per share;

- Assumes the filing of our amended and restated certificate of
incorporation, which, among other things, will authorize 200,000,000
shares of common stock; and

- Assumes no exercise of the underwriters' over-allotment option.
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS, WHICH INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

GENMAR HOLDINGS, INC.

OVERVIEW

We are the second largest manufacturer of motorized recreational boats in
the United States. We produce boats under the leading brand names of Aquasport,
Carver, Crestliner, Glastron, Larson, Logic, Lund, Nova, Ranger, Scarab, Trojan
and Wellcraft. We sell our products through an established network of
approximately 1,300 independent authorized dealers in all 50 states and
approximately 30 foreign countries. We have recently introduced new
manufacturing processes that allow us to produce higher quality boats more
efficiently and with substantially fewer regulated air emissions. We believe
these innovations have positioned us to enter new markets and substantially
increase our market share in the recreational boating industry.

Since 1996, when we installed our current management team, we have focused
on improving our operations and profitability. Our management team has improved
our manufacturing efficiency, refined our current products and evaluated future
product offerings. We have also increased coordination among our business units
and provided incentives to our entire management team to accomplish key
manufacturing and marketing goals. As a result of these initiatives, our net
revenues and operating profit (excluding operations we will spin off, as
discussed on page 3) have increased to $614.4 million and $35.9 million,
respectively, for the year ended June 30, 1999 from $490.3 million and
$16.9 million, respectively, for the twelve months ended June 30, 1997,
representing compound annual growth of 11.9% and 45.7%, respectively.

OUR NEW TECHNOLOGIES

Over the past several years, we have been exploring new technologies to
improve the traditional boat manufacturing process. Recently, we have acquired
and developed new technologies to reduce manufacturing and warranty costs,
improve plant working conditions, enhance product quality and potentially
establish new standards for manufacturing in the recreational boat industry.
These technologies are:

- VEC-TM-. Virtual Engineered Composites, or VEC technology, is an
innovative closed-mold fiberglass manufacturing process that improves
production efficiency and substantially reduces regulated air emissions
relative to traditional processes. We believe the VEC technology
introduces a new level of automation and quality control to boat
manufacturing. Early in 1999, we began producing boats using our VEC
technology, and we plan to integrate VEC systems into most of our
fiberglass operations over the next two years, marketing these boats as
premium products. In August 1999, we received the 1999 Minnesota
Governor's Award for Excellence in Pollution Prevention from the Minnesota
Office of Environmental Assistance for our VEC technology.

- ROPLENE-TM- CONSTRUCTION. Roplene construction is a closed rotational mold
technology, proprietary to our Logic division, that uses advanced
recyclable polyethylene materials and produces minimal regulated air
emissions in the manufacturing process. This technology allows us to
produce highly durable boats, which we market as the World's Toughest
Boats-TM- to entry-level buyers at a lower cost than comparable fiberglass
boats. This technology was awarded the New Product Award (Small Company
Category) in 1998 by the National Society of Professional Engineers and
the North Carolina Governor's New Product Award in 1997.
<PAGE>
INDUSTRY

Total U.S. retail sales of new motorized recreational boats were
approximately $7.5 billion in 1998, an increase from $4.1 billion in 1992. This
increase in sales has been fueled by the overall strength of the U.S. economy,
rapid growth in the number and wealth of consumers in the 35 to 54 years age
range, our target age group, and by demand for boats from the estimated
35 million adult anglers in the United States. Despite recent growth in the
recreational boat industry, we believe we are uniquely positioned to take
advantage of the following challenges that our industry faces:

- Labor-intensive manufacturing processes which remain largely unautomated;

- Increasingly strict environmental standards derived from governmental
regulations and customer sensitivities;

- A lack of focus on comprehensive customer service and support by many
dealers and manufacturers; and

- A high degree of fragmentation and competition among more than 3,700
domestic recreational boat manufacturers.

STRATEGY

OUR OPERATING STRATEGY emphasizes our proprietary technologies, allowing us
to:

- Deliver a superior quality product;

- Lower unit costs through increased automation in our plants;

- Realize economies of scale through our buying power;

- Exceed current environmental quality standards for manufacturers in our
industry; and

- Explore opportunities to license or apply our technologies in other marine
and non-marine industries, such as the construction, transportation and
recreation industries.

OUR MARKETING STRATEGY seeks to increase market share by enabling us to:

- Leverage our brand names through innovative programs with marketing
partners;

- Expand our international presence by continuing to build dedicated sales,
marketing and distribution systems; and

- Strengthen our dealer organization by expanding our network and providing
superior customer service and support.

From time to time we also consider and make acquisitions in order to
complement our existing product lines, expand our geographic presence and
strengthen our manufacturing and operating technologies.

2
<PAGE>
OPERATING RESULTS WITHOUT HATTERAS

Hatteras is a luxury yacht construction company that we have historically
operated as a separate division. As we have refined the focus of our business,
we have determined that Hatteras does not fit strategically with our other
operations. Accordingly, we will spin off Hatteras to our current stockholders
immediately prior to the completion of this offering. The results of our
recreational boat segment, representing our operations without Hatteras, are
summarized below.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues.................................. $490,313 $505,910 $614,406
Gross profit.................................. 81,754 98,356 121,872
Operating profit.............................. 16,930 27,601 35,948

-------------------

Backlog at August 31.......................... $145,000 $185,000 $310,000
</TABLE>

------------------------

Our principal executive offices are located at 100 South Fifth Street,
Suite 2400, Minneapolis, Minnesota 55402. Our telephone number at that location
is (612) 339-7900 and our web site address is WWW.GENMAR.COM. WE DO NOT INTEND
FOR INFORMATION CONTAINED ON OUR WEB SITE TO CONSTITUTE PART OF THIS PROSPECTUS.

3
<PAGE>
THE OFFERING

The number of shares of common stock outstanding after this offering
includes the issuance of 5,593,500 shares in exchange for outstanding warrants,
916,667 shares issued in connection with the acquisition of Pyramid Operating
Systems, Inc. and approximately 225,000 shares issued under employee stock
awards, and excludes approximately 2,562,500 shares issuable upon the exercise
of senior executive, director and employee stock options to be granted
concurrently with this offering.

<TABLE>
<S> <C>
Common stock offered......................... 6,500,000 shares

Common stock outstanding after this 28,867,897 shares
offering...................................

Use of proceeds.............................. We intend to use the net proceeds from this
offering to repay outstanding indebtedness,
to build and equip a new manufacturing
facility and for general corporate purposes.
See "Use of Proceeds."

Nasdaq National Market symbol................ GNMR
</TABLE>

4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following summary historical and pro forma consolidated financial
information should be read in conjunction with our consolidated financial
statements and the notes thereto appearing elsewhere in this prospectus and the
sections of this prospectus captioned "Unaudited Pro Forma Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The balance sheet data as of June 30, 1999 and the statement of
operations data for the years ended June 30, 1998 and June 30, 1999 have been
derived from our audited consolidated financial statements included elsewhere in
this prospectus. The unaudited statement of operations data for the twelve
months ended June 30, 1997 were derived from our unaudited consolidated
financial statements which are not included in this prospectus. The unaudited
pro forma data as of and for the year ended June 30, 1999 reflect the spin-off
of Hatteras using the $20.0 million of spin-off proceeds to repay debt, and
reduced interest expense from our debt refinancing. The pro forma as adjusted
amounts also give effect to the acquisition of Pyramid, reduced interest expense
associated with the repayment of debt and additional depreciation expense
associated with our new plant and equipment additions, using the net proceeds
from this offering. The pro forma as adjusted statement of operations amounts do
not reflect the following non-recurring charges which will be recorded
concurrently with this offering:

- A charge of approximately $5.7 million for awards under our phantom stock
plan by this offering;

- A charge of approximately $2.7 million resulting from the issuance of
225,000 shares to non-management employees; and

- An extraordinary charge of $3.6 million resulting from the early
extinguishment of debt using proceeds from this offering.

The pro forma balance sheet amounts reflect these charges, but do not reflect
interest savings. In our opinion, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the unaudited
statement of operations data for the twelve months ended June 30, 1997 have been
reflected therein. The summary pro forma as adjusted consolidated financial
information as of and for the year ended June 30, 1999 were derived from our
unaudited pro forma financial data which are included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
FOR THE TWELVE FOR THE YEAR ENDED FOR THE YEAR
MONTHS ENDED JUNE 30, ENDED
JUNE 30, 1997 ------------------- JUNE 30, 1999
(UNAUDITED) 1998 1999 (UNAUDITED)
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................... $574,802 $585,943 $704,656 $618,654
Gross profit................................... 88,526 105,292 137,409 121,336
Operating profit............................... 13,467 23,598 37,468 30,595
Income (loss) before income taxes and
extraordinary item........................... (8,764) 4,592 21,445 24,857
Income tax benefit (provision)................. (635) (550) 19,500 19,500(a)
Net income (loss).............................. $ (9,399) $ 2,858 $ 40,945 $ 44,357
Pro forma basic and diluted earnings per
share(b)..................................... $ 2.36 $ 1.54
======== ========
Pro forma basic and diluted weighted average
shares outstanding(b)........................ 17,370 28,868
======== ========
ADDITIONAL DATA:
EBITDA(c)...................................... $ 21,488 $ 32,372 $ 46,419 $ 39,183
Gross profit margin............................ 15.4% 18.0% 19.5% 19.6%
Operating profit margin........................ 2.3% 4.0% 5.3% 4.9%
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
HISTORICAL (UNAUDITED) (UNAUDITED)
---------- ----------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $ 41,544 $ 28,972 $ 17,386
Total assets............................................ 320,763 256,987 277,767
Long-term debt, net of current maturities............... 116,129 101,540 42,540
Stockholders' equity(a)(b).............................. 42,202 26,783 99,487
</TABLE>

(a) During 1999, we recorded a reduction in our valuation allowance against our
deferred tax assets, resulting in an overall tax benefit of $19.5 million.
Tax expense assuming a statutory rate of 38% would have been $9.5 million
and pro forma net income would have been $15.4 million, or $0.53 per share.

(b) Historical 1999 per share data reflects a 10-for-1 stock split, as it does
not give effect to the Hatteras spin-off which will occur immediately prior
to the closing of this offering. The pro forma as adjusted amounts reflect a
9-for-1 stock split after giving effect to the Hatteras spin-off through the
exchange by our current stockholders of one out of every ten of their Genmar
shares for one Hatteras share. The pro forma as adjusted amounts also
reflect the shares issued in this offering, the shares issued in exchange
for outstanding warrants, the shares issued to acquire Pyramid and the
shares issued under employee stock awards. Our stock split will be effected
immediately prior to this offering. For comparability purposes, all share
and per share data above reflects this split even though this split has not
been reflected in our audited financial statements included elsewhere in
this prospectus.

(c) EBITDA represents operating income plus depreciation and goodwill
amortization expense. EBITDA data, which is not a measure of financial
performance under generally accepted accounting principles, should not be
construed as a substitute for operating income, net income or cash flows
from operations in analyzing our operating performance, financial position
and cash flows. We have included EBITDA data because we believe that this
data is commonly used by certain investors to evaluate a company's
performance. Not all companies calculate non-GAAP measures in the same
manner; accordingly, the EBITDA presentation herein may not be comparable to
similarly titled measures reported by other companies.

6
<PAGE>
RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS AND OTHER INFORMATION
DESCRIBED IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THE PRINCIPAL RISKS FACING OUR
COMPANY, BUT ARE NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES
THAT WE DO NOT PRESENTLY KNOW ABOUT OR THAT WE CURRENTLY BELIEVE ARE IMMATERIAL
MAY ALSO ADVERSELY IMPACT OUR BUSINESS OPERATIONS. NEGATIVE CONSEQUENCES
ASSOCIATED WITH THE FOLLOWING RISKS WOULD LIKELY CAUSE OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS TO SUFFER. IN THAT CASE, THE TRADING PRICE OF
OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE ALL OR PART OF THE MONEY YOU
PAID TO BUY OUR COMMON STOCK.

OUR BUSINESS IS DEPENDENT ON CONSUMER DISCRETIONARY SPENDING AND MAY BE
DISPROPORTIONATELY AFFECTED BY ECONOMIC DOWNTURNS.

Our operations are highly dependent upon the health of the overall economy
and a number of cyclical economic factors relating to or affecting consumer
spending. During times of economic downturn, consumer discretionary spending
levels decrease. This may result in disproportionately large declines in the
sale of expensive items, including motorized recreational boats. Sales of our
products are also influenced by local, national and international economic
conditions, and are particularly vulnerable to increases in interest rates,
shortages or increases in the price of fuel and the imposition of or increases
in sales and excise taxes. For example, following a general economic recession
and the imposition of a luxury tax on certain recreational boats, annual boating
sales of new motorized recreational boats declined from their peak of
$8.0 billion in 1988 to a low of $4.1 billion in 1992. Since that time, sales
have increased each year and rose to $7.5 billion in 1998. See
"Business--Industry Overview."

Additionally, rising or volatile interest rates or shrinking availability of
credit could have a negative impact on consumers' or dealers' ability or
willingness to obtain financing from lenders to purchase our products. This
could also adversely affect our ability to sell our products.

IF OUR NEW TECHNOLOGIES DO NOT YIELD COMMERCIALLY VIABLE PRODUCTS OR EFFECTIVELY
COMPETE WITH OTHER NEW TECHNOLOGIES, WE MAY NOT BE ABLE TO IMPLEMENT
SUCCESSFULLY OUR BUSINESS STRATEGY.

Our business strategy depends on, among other things, our successful
development and implementation of our VEC and Roplene technologies. We have
utilized VEC technology to produce boats since March 1999. Revenues from sales
of boats produced with VEC technology represent less than one percent of our
total revenues for that period. The VEC technology and related processes will
require further development and modification to be applied successfully across
our fiberglass product lines, and we cannot be certain that boats built with the
VEC technology will achieve broad commercial acceptance in the marketplace.

The VEC technology has potential application in both marine and non-marine
industries. We cannot assure you, however, that we will be able to expand its
potential applications. We have previously experimented with other closed-mold
technologies in our manufacturing processes, but have found them to be
unacceptable for commercial production of large parts. Other closed-mold
technologies could be further developed, however, and could outperform our VEC
technology in the marketplace, in which case our profitability could suffer. In
addition, we are currently manufacturing and selling boats constructed with
Roplene technology. We cannot, however, assure you that these boats will gain
widespread acceptance among dealers and consumers.

7
<PAGE>
Our development of the VEC and Roplene technologies is subject to the risks
generally inherent in the development of new manufacturing technologies. These
risks include:

- Delays and unplanned expenditures in product development;

- Emergence of equivalent or superior competing technologies;

- High unit costs for production runs; and

- Competition between new and existing product lines.

If either the products made from, or the manufacturing processes based upon,
the VEC or Roplene technology fail to meet our expectations, we may be unable to
implement those elements of our business strategy that are dependent on these
technologies. See "Business--Technology."

WE RELY ON PROPRIETARY RIGHTS TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, THE
FAILURE OR LIMITATION OF WHICH COULD MATERIALLY HARM OUR BUSINESS.

Our success and ability to implement our business strategy is partially
dependent on our proprietary technology and processes. The loss, limitation or
infringement of any of these proprietary technologies and processes could limit
our operations or require us to incur additional costs. We rely primarily on a
combination of U.S. patents, trademarks, trade secrets, operating know-how and
license and confidentiality agreements with third parties to protect our
proprietary rights. See "Business--Patents and Trademarks." When legally
permissible and appropriate, we file applications to obtain patents and register
our trademarks and service marks in the United States and in foreign countries
where we currently sell our products or reasonably expect to sell our products
in the near future. We cannot assure you that any patents will issue as a result
of our pending or future patent applications, or that existing or future patents
will afford adequate protection against competitors. Our protective efforts may
not be sufficiently broad to exclude others from adopting and practicing our
technologies, or independently developing similar technologies. We cannot assure
you that any of our patents or trademarks will not be invalidated, or
circumvented or found to infringe the rights of others. In the event of
infringement, we may be required to modify our technology or processes, obtain
licenses or pay license fees. We may not be able to do so in a timely manner or
upon acceptable terms and conditions, which would restrict our ability
effectively to apply our technologies to compete with others.

INTENSE COMPETITION IN OUR INDUSTRY COULD ADVERSELY AFFECT OUR SALES OR PROFIT
MARGINS.

Competition within the motorized recreational boat industry is intense. We
face competition at the local, regional, national and international levels. Our
largest competitors and their principal lines include:

- Brunswick Corporation (Bayliner, Sea Ray and Boston Whaler); and

- Outboard Marine Corporation (Four Winns, Stratos and Lowe).

Brunswick may have greater financial and other resources than our company,
and both Brunswick and Outboard Marine are vertically integrated operations that
manufacture engines as well as boats. Our vertically integrated competitors may
be better positioned than our company to allocate costs and enhance the
marketing of their products because they also manufacture and sell engines along
with their boats. We also compete directly with smaller boat manufacturers and
the used boat market and indirectly with other recreational products and
activities. We cannot assure you that we can continue to increase or maintain
our current market share or profit margins. See "Business--Competition."

8
<PAGE>
PROBLEMS WITH THIRD-PARTY ENGINE SUPPLIERS COULD LIMIT OUR SUPPLY OF ENGINES.

We purchase our engines from third parties. We also pre-rig certain boats
with specified engine controls so the dealer can install the appropriate engine.
By purchasing or pre-rigging engines from third parties, including Brunswick and
Outboard Marine, we are subject to the following risks:

- Delays in shipments;

- Work stoppages; and

- Termination of supply agreements.

The occurrence of any of these events or the loss of any of these suppliers
could prevent us from meeting customer demand or require us to incur additional
costs until alternative supply arrangements are secured. We cannot assure you
that we will be able to obtain engines from other suppliers in sufficient
quantities to meet our near-term production schedules or on substantially
similar terms to our current engine purchase arrangements. In addition, engines
obtained from alternative sources may not meet customer preferences. See
"Business--Suppliers."

WE ARE VULNERABLE TO FLUCTUATIONS IN THE COST AND SUPPLY OF COMMODITY RAW
MATERIALS.

We purchase commodity raw materials, such as aluminum, fiberglass and resin,
from various suppliers. Commodity raw material prices are subject to
fluctuations in price. We generally secure our commodity raw material
requirements through fixed-price supply agreements which run for one- to
three-year periods. If the prices of our raw materials increase, we may not be
able to pass these increases along to our customers. This would reduce our
profits and could have a material adverse effect on our results of operations.
See "Business--Suppliers."

PRODUCT LIABILITY AND WARRANTY CLAIMS COULD SUBJECT US TO UNFORESEEN COSTS,
INCLUDING LITIGATION.

We are exposed to potential product liability risks inherent in the
manufacturing, marketing and use of our boats. Product failures, flaws or
defects, or inadequate disclosure of product-related risks could result in
product failure or injury to, or death of, consumers. The occurrence of any of
these conditions or events could result in product liability claims or a recall
of, or safety alerts relating to, our products, any of which could cause us to
divert financial and other resources to deal with these issues or subject us to
costly litigation. Additionally, although we maintain product liability
insurance, we cannot assure you that our insurance will be available or
sufficient to satisfy all claims that may be made against us or that we will be
able to continue to obtain insurance in the future at satisfactory rates, in
adequate amounts or at all. Future product liability claims, regardless of their
ultimate outcome, or future product recalls, could result in costly litigation
and could harm our reputation and ability to attract and retain customers.

We are also subject to warranty risks. All of our boats are subject to
standard limited warranties. We do not maintain insurance to cover warranty
claims, and we cannot assure you that future warranty claims and related costs
would not have a material adverse effect on our business, results of operations
or financial condition. See "Business--Legal Proceedings." We intend to provide
a limited lifetime warranty for boats constructed with our VEC and Roplene
technologies. If these technologies do not prove to be as successful as we
expect, these extended warranties could result in significant increases in
warranty costs and restrict our ability effectively to implement and market our
VEC and Roplene technologies.

9
<PAGE>
OUR OPERATIONS ARE SUBJECT TO NUMEROUS LOCAL, STATE AND FEDERAL REGULATIONS
RELATING TO SAFETY AND THE ENVIRONMENT.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS COULD RESTRICT OUR OPERATIONS OR
REQUIRE SIGNIFICANT EXPENDITURES. Our operations are subject to regulation,
supervision and licensing under various local, state and federal environmental
statutes, ordinances and regulations. We are required to maintain various
permits, relating principally to air emissions, which are subject to renewal,
modification and, in some instances, revocation. Our failure to satisfy those
regulations and requirements could subject us to costly litigation and
penalties. Furthermore, limitations on air emissions imposed by our current
permits may restrict our ability to expand production at certain of our existing
facilities. See "Business--Regulation and Environmental."

Certain materials used in boat manufacturing are toxic, flammable, corrosive
or reactive and classified by state and federal governments as "hazardous
materials." Control of hazardous materials is regulated by the U.S.
Environmental Protection Agency and state environmental protection agencies. If
it is ever determined that our operations have resulted in hazardous waste
contamination, the costs of cleaning up those wastes could be substantial and
could have a material adverse effect on our business, financial condition and
results of operations. We cannot predict our future regulatory compliance costs
with precision and we cannot be certain of any costs that we may be forced to
incur in connection with our historical on-site or off-site waste disposal.

In connection with our Wellcraft facilities in Florida, we have agreed to
conduct certain remedial action related to soil and groundwater contamination.
We are also subject to potentially significant remedial requirements with
respect to certain formerly owned or operated properties for which we have
retained liability for any contamination. Although it is impossible to predict
the ultimate cost of any penalties or required remedial action, we believe that
we have established adequate reserves to cover those expenses.

Laws and regulations protecting the environment may, in certain
circumstances, impose "strict liability." This means that we could be held
liable for environmental damage without regard to our negligence or fault. In
addition, changes in existing regulations or the adoption of new regulations in
the future could require us to make material capital expenditures or implement
significant changes to our manufacturing processes.

WE COULD BE ADVERSELY AFFECTED IF BOATING LICENSING REQUIREMENTS OR OTHER
RESTRICTIONS ARE IMPLEMENTED. Certain states have required or are considering
requiring a license to operate a recreational boat. These licensing requirements
are not expected to be unduly restrictive. They may, however, discourage
potential first-time buyers, which could, in turn, reduce our revenues and
profits. In addition, certain state and local governmental authorities are
contemplating regulatory efforts to restrict boating activities on certain
inland bodies of water. While the scope of these potential regulations is not
yet known, their adoption and enforcement could reduce customer demand for our
boats.

SEASONALITY IN THE MOTORIZED RECREATIONAL BOAT INDUSTRY COULD ADVERSELY AFFECT
OUR QUARTERLY OPERATING RESULTS.

The motorized recreational boat industry is seasonal, with seasonality
varying in different geographic markets. During the fiscal year ended June 30,
1999, net revenues for the quarterly periods ended September 30, December 31,
March 31 and June 30 represented 20.7%, 23.4%, 26.0% and 29.9%, respectively, of
our net revenues for the year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality and Fluctuations in
Quarterly Results of Operations."

Our business can also be affected by weather patterns. For example, drought
conditions, reduced rainfall levels or excessive rain, may force particular
boating areas to close or render boating dangerous or inconvenient in those
areas. This could curtail customer demand for our products, reduce our revenues
and profits and adversely affect our results of operations.

10
<PAGE>
THE LOSS OF ANY OF OUR KEY EXECUTIVES COULD ADVERSELY AFFECT OUR BUSINESS AND
OPERATIONS.

Our success over the past three years has been primarily the result of a
manufacturing and marketing strategy implemented by our senior management team,
particularly Irwin L. Jacobs, the Chairman of our Board of Directors, Grant E.
Oppegaard, our President and Chief Executive Officer, and Roger R. Cloutier II,
our Executive Vice President and Chief Financial Officer. Our loss of the
services of any of these individuals could hinder or prevent implementation of
our business strategy and have a material adverse effect on our results of
operations and financial condition. Mr. Jacobs is a non-executive Chairman and
devotes a significant portion of his time to other activities, including Jacobs
Management Corporation, unrelated to our company. Mr. Cloutier is also employed
by Jacobs Management, and in the past has devoted a portion of his time to the
activities of Jacobs Management. None of these individuals has an employment
agreement with our company, although Messrs. Oppegaard and Cloutier each would
be subject to non-competition restrictions if he left our employment.

CERTAIN OF OUR OFFICERS, DIRECTORS AND STOCKHOLDERS WILL EFFECTIVELY CONTROL
MANY ASPECTS OF OUR CORPORATE GOVERNANCE.

Upon completion of the offering, our directors, executive officers and
persons associated with them will own beneficially an aggregate of approximately
58.9% of the issued and outstanding shares of common stock (approximately 57.0%
if the underwriters' over-allotment option is exercised in full). As a result of
this ownership, those persons will have the power effectively to control our
company, including:

- The election of directors,

- The determination of matters requiring stockholder approval; and

- Other matters pertaining to corporate governance.

This concentration of ownership also may have the effect of delaying or
preventing a change in control of our company.

SOME OF THE TRANSACTIONS IN WHICH WE ENGAGE MAY FAVOR AFFILIATES.

In the past, we have engaged in various transactions with our stockholders
or their affiliates. For example, we sponsor certain professional bass fishing
tournaments of Operation Bass, Inc., an affiliate of Irwin L. Jacobs, our
Chairman, and certain of our executive officers. We are also party to a
management services agreement with Jacobs Management, one of our stockholders
and an affiliate of Mr. Jacobs. In addition, certain of our stockholders have
loaned money to us. We may engage in similar transactions in the future, some of
which may be with our affiliates. We have a policy requiring that all material
affiliate transactions be approved by a majority of our disinterested directors
and be conducted on terms no less favorable than could be obtained in a
transaction with an unaffiliated third party. See "Certain Transactions."

Significant bonus and other compensation, some of which has been deferred,
has and will be paid to Grant E. Oppegaard, our President and Chief Executive
Officer, and Roger R. Cloutier II, our Executive Vice President and Chief
Financial Officer, including as a result of this offering. In addition, each of
Messrs. Jacobs, Oppegaard and Cloutier will be granted a significant number of
stock options at the time of this offering. See "Management--Executive
Compensation." We cannot assure you that that we will not pay similar
compensation in the future.

11
<PAGE>
A SIGNIFICANT INCREASE IN FUEL PRICES OR TAXES COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.

Almost all of the boats sold by us are powered by diesel or gasoline
engines. A significant increase in the price or tax on the sale, or an
interruption in the supply of diesel or gasoline fuel on a regional, national or
international basis could adversely affect our sales and operating results. At
various times in the past, diesel or gasoline fuel has been difficult to obtain,
and we cannot assure you that the supply of those fuels will not be interrupted.

WE COULD LOSE REVENUES AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR SUPPLIERS
ARE NOT Y2K COMPLIANT.

As the end of the century nears, there is a widespread concern that many
existing computer programs that use only the last two digits to refer to a year
will not properly recognize a year that begins with digits "20" instead of "19."
If not corrected, many computer applications could fail, create erroneous
results, or cause unanticipated systems failures, among other problems. Our
failure, or the failure of one or more of our key suppliers, customers or
distributors, to successfully address Y2K issues could materially impair our
manufacturing, distribution and marketing operations, and adversely affect our
financial condition. For more information, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000."

WE MAY INCUR ADDITIONAL COSTS AS A RESULT OF OUR GUARANTEE OF CERTAIN
OBLIGATIONS OF HATTERAS, OUR FORMER LUXURY YACHT DIVISION.

Immediately prior to the completion of this offering, we will spin off the
operations of Hatteras to our current stockholders. Under the terms of that
transaction, we will guarantee for a period of one-year an aggregate of
$5.0 million of Hatteras' obligations under its new $25.0 million credit
facility. See "The Company" and "Certain Transactions." If Hatteras is unable to
fulfill its obligations under its credit facility, we could be required to
perform under our guarantee and have to pay out funds that would otherwise be
applied to maintaining or improving our own operations. In addition, our funds
may be insufficient for these purposes. The lenders or other parties to whom
Hatteras may now or in the future be indebted could also seek to establish
claims against us for repayment of funds owed by Hatteras. If the Hatteras
creditors were successful in their claims against us, these events could have a
material adverse effect on our business, results of operations or financial
condition.

YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT.

The initial public offering price per share will exceed our net tangible
book value per share. If you purchase shares in this offering, you will incur
immediate and substantial dilution in your investment. See "Dilution" for a
calculation of the extent to which your investment will be diluted.

FUTURE SALES BY OUR EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK.

Following this offering, we will have a large number of shares of common
stock outstanding and available for resale beginning at various points in time
in the future. The market price of our common stock could decline as a result of
sales of a large number of shares of our common stock in the market following
this offering, or the perception that these sales could occur. These sales also
might make it more difficult for us to sell equity securities in the future at a
time and at a price that we consider appropriate. Also, the shares issued to
acquire Pyramid are subject to registration rights, which become effective nine
months following this offering. In connection with this offering, our directors
and officers and certain of our stockholders, who hold a total of 18,771,948
shares of common stock, have agreed, subject to certain exceptions, not to sell
their shares for 180 days after the date of this prospectus without the consent
of Stephens Inc. See "Shares Eligible for Future Sale" and "Underwriting."

12
<PAGE>
THERE HAS BEEN NO PRIOR MARKET FOR OUR STOCK, AND OUR STOCK PRICE IS LIKELY TO
BE HIGHLY VOLATILE.

Prior to the offering, there has been no public market for our common stock.
We cannot predict the extent to which investor interest in us will lead to the
development of an active trading market in our stock or how liquid that market
might become. The initial public offering price for the shares will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in any future
trading market. Recent market conditions for newly public companies indicate
that we are likely to experience significant fluctuations in the market price of
our common stock. Future public announcements concerning our company could also
cause the market price of the common stock to fluctuate, including announcements
regarding:

- Quarterly operating results or expectations;

- Changes in earnings estimates published by analysts;

- Changes in governmental regulations;

- Events within or affecting the recreational boat industry;

- Events relating to our suppliers or competitors; or

- Acquisitions.

From time to time the stock market experiences significant price and volume
fluctuations. The volatility of the overall market could adversely affect the
market price of our common stock and our future ability to raise equity in the
public markets. These fluctuations, as well as general economic, political and
market conditions, such as recessions, could adversely affect the market price
of our stock. See "Underwriting."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus are forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, or those of our industry,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by those forward-looking statements. These risks and uncertainties are
discussed in "Risk Factors" and elsewhere in this prospectus.

In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue" or the negative of those terms
or comparable terminology.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of those
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform those statements to actual results.

13
<PAGE>
USE OF PROCEEDS

The net proceeds we will receive from the sale of the 6,500,000 shares of
common stock offered by this prospectus, assuming an initial public offering
price of $12.00 per share, are estimated to be $71.0 million ($81.9 million if
the underwriters' over-allotment option is exercised in full), after deducting
the estimated underwriting discount and offering expenses. Immediately prior to
the completion of this offering, we expect to receive $20.0 million from the
spin-off of Hatteras as repayment of intercompany indebtedness owed to us at the
time of the spin-off.

We intend to use the offering proceeds and the Hatteras spin-off proceeds,
as follows:

- $45.0 million to repay in full our new senior term loan;

- $30.0 million to repay in part our subordinated term loan;

- $12.0 million to build and equip a new manufacturing facility utilizing
our VEC technology and other new process equipment; and

- the remainder for other general corporate purposes, including working
capital and capital expenditures.

Our new senior term loan is due on June 30, 2002 and bears interest at an
annual rate based on the interbank eurodollar market rate plus 2.5%. On
September 22, 1999, the interest rate on our senior term loan was 7.9%. Our
subordinated term loan is due on October 21, 2002 and bears interest at an
alternate base rate on any particular date equal to the greater of the interbank
eurodollar market rate in effect on that date or the federal funds rate in
effect on that date plus 0.5%. On September 22, 1999, the interest rate on our
subordinated term loan, adjusted to reflect our full cash borrowing cost, was
7.5%. The weighted average interest rate on all of our borrowings outstanding as
of September 22, 1999 was 7.7%.

In August 1999, we borrowed $25.0 million under our new senior term loan to
repay a $25.0 million subordinated note held by Irwin L. Jacobs, our Chairman.
On September 7, 1999, we borrowed an additional $20.0 million under our new
senior term loan and approximately $7.0 million under our new revolving credit
facility, and redeemed the remaining $25.6 million of our 13.5% notes due 2001
at 106.5% of par.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock since
inception and we do not expect to pay any cash dividends in the foreseeable
future. We currently intend to retain any future earnings to support the growth
and development of our business and technologies. Any future declaration of
dividends will be subject to the discretion of our board of directors.

14
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of June 30, 1999:

- On a historical basis;

- On a pro forma basis to reflect our debt refinancing, including the
resulting extraordinary charge of $5.7 million from early extinguishment
of debt, and the spin-off of Hatteras with the $20.0 million of spin-off
proceeds used to repay our debt; and

- On a pro forma as adjusted basis to reflect the effects of this offering
at $12.00 per share, the mid-point of the price range set forth on the
cover of this prospectus, and the application of the estimated net
proceeds including the resulting extraordinary charge of $3.6 million from
early extinguishment of debt, and the following transactions which will
occur concurrently with this offering:

- Our acquisition of Pyramid;

- A $5.7 million charge for awards under our phantom stock plan;

- 5,593,500 shares issued in exchange for outstanding warrants; and

- Approximately 225,000 shares issued under employee stock awards,
resulting in a charge of $2.7 million.

<TABLE>
<CAPTION>
HISTORICAL
---------- PRO FORMA(
<S> <C> <C> <C>
PRO FORMA
AS
a) ADJUSTED(
- --------------------------------------------------------
b)
- --------------------------------------------------------
) (IN THOUSANDS
DEBT:
Revolving credit facility............................. $ -- $ 8,297 $ 4,297
Senior term loan...................................... -- 25,000 --
Subordinated term loan................................ 60,000 60,000 30,000
Senior subordinated notes............................. 25,584 -- --
Stockholder notes..................................... 25,406 4,104 4,104
Other debt obligations................................ 6,161 5,161 5,161
--------- --------- ---------
Total debt.......................................... 117,151 102,562 43,562
--------- --------- ---------
STOCKHOLDERS' EQUITY:
Common stock.......................................... 17 156 289
Paid-in capital....................................... 117,945 117,806 202,373
Accumulated deficit................................... (75,256) (90,675) (102,671)
Accumulated other comprehensive income (loss)......... (504) (504) (504)
--------- --------- ---------
Total stockholders' equity.......................... 42,202 26,783 99,487
--------- --------- ---------
Total capitalization.................................... $ 159,353 $ 129,345 $ 143,049
========= ========= =========
</TABLE>

- ------------------------

(a) Excludes approximately 2,562,500 shares issuable upon the exercise of senior
executive, director and employee stock options to be granted concurrently
with this offering.

(b) See "Unaudited Pro Forma Financial Data" elsewhere in this prospectus for
specific details.

15
<PAGE>
DILUTION

As of June 30, 1999, we had a net tangible book value of negative $2.5
million, or $(.14) per share of common stock. Net tangible book value represents
the amount of tangible assets less total liabilities, divided by the number of
shares of common stock outstanding. Our pro forma net tangible book value as of
June 30, 1999, would have been $49.8 million, or $1.73 per share taking into
account the sale of the shares offered by this prospectus at an assumed offering
price of $12.00 per share, the application of proceeds therefrom and the
resulting extraordinary charges from early extinguishment of debt, the Hatteras
spin-off and the exchange of shares in connection therewith, the issuance of
shares of our common stock in connection with the acquisition of Pyramid, shares
issued in exchange for outstanding warrants, shares issued under employee stock
awards and payments triggered under our phantom stock plan. The pro forma net
tangible book value assumes that the proceeds to us, net of offering expenses
and underwriting discount, will be approximately $71.0 million. This represents
an immediate net increase in pro forma net tangible book value to existing
stockholders attributable to the pro forma adjustments and new investors of
$1.87 per share and the immediate dilution of $10.27 per share to new investors.
The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 12.00
Net tangible book value per share at June 30, 1999........ $ (.14)
Decrease attributable to the pro forma adjustments
described above......................................... (.59)
Increase per share attributable to new investors.......... 2.46
-------
Pro forma net tangible book value per share after this
offering.................................................. 1.73
-------
Dilution per share to new investors......................... $ 10.27
=======
</TABLE>

16
<PAGE>
THE COMPANY

Genmar Holdings, Inc. is a Delaware corporation that was organized in
March 1994 to combine the operations of Minstar, Inc. and Miramar Marine
Corporation. Both Minstar and Miramar were private boat manufacturers under the
control of investor groups led by Irwin L. Jacobs, our Chairman. Many of our
operating divisions have been manufacturing boats under our various brand names
since the 1940s and 1950s.

In 1994, we became a reporting company under the Securities Exchange Act of
1934 as a result of a registered exchange offer on Form S-4 with respect to a
series of 13.5% Senior Subordinated Notes due 2001. We had originally offered
and sold a similar series of notes pursuant to a private placement under
Rule 144A under the Securities Act of 1933. In 1997, we purchased, by means of a
tender offer, most of the outstanding notes and terminated our ongoing reporting
requirements pursuant to Section 12(g) under the Exchange Act. We have no
current intention to pursue this course with our equity securities.

RECENT ACQUISITIONS

PYRAMID OPERATING SYSTEMS, INC. In March 1999, we acquired 8.7% of the
outstanding shares of Pyramid Operating Systems, Inc. On June 18, 1999, we
entered into an agreement to purchase the remaining shares of Pyramid for a net
purchase price of $11.0 million, payable in shares of our common stock. We will
complete the acquisition of Pyramid at the same time that we close the offering.
Assuming an initial public offering price of $12.00 per share, 916,667 shares of
our common stock will be issued to Pyramid stockholders. As a result of this
transaction, Pyramid will become our wholly-owned subsidiary and we will own all
rights to the VEC technology and process. We have also entered into a management
agreement with Pyramid under which we presently oversee the operations of
Pyramid. Since June 30, 1999, we have provided $1.4 million of short-term
working capital financing to Pyramid and expect to continue to fund
approximately $350,000 per month through the closing. Pyramid has advised us
that prior to the date of our acquisition agreement, it had invested
approximately $12.0 million in the development and commercialization of the VEC
technology.

We have granted registration rights to the Pyramid stockholders. The
purchase agreement provides that, within nine months after the closing of the
transaction, we are required to file a registration statement with the
Commission covering the shares of common stock received by Pyramid stockholders
in the acquisition. We are obligated to maintain the effectiveness of that
registration statement for two years.

For a period of 20 years after the closing of the acquisition, the purchase
agreement provides, among other things, that the former Pyramid stockholders
will have the right to participate in the non-marine application of the VEC
technology, as follows:

- If we determine to spin-out a new entity that will use non-marine
applications of the VEC technology as a core technology of its business,
the current Pyramid stockholders will have a right to acquire an aggregate
of 5% of the equity ownership of the new entity at a 25% discount from the
equity value established in the spin-out. This right will be exercisable
for 30 days from notification of the completion of the spin-out.

- If we sell or license non-marine applications of the VEC technology to
third parties instead of spinning-out a new entity, the Pyramid
stockholders will be entitled to receive an aggregate of 5% of the sales
or licensing proceeds.

LOGIC MARINE CORPORATION. On May 11, 1999, we acquired substantially all of
the assets of Logic Marine Corporation, a manufacturer of fishing and
recreational boats, for consideration consisting of $500,000 in cash at closing,
a promissory note for $500,000 payable in May 2000, $597,000 in assumed
liabilities and an earn-out of up to $450,000 over three years based on net
revenues from sales of Logic

17
<PAGE>
boats. Logic Marine has advised us that prior to this acquisition, it had
invested approximately $10.5 million in the development and commercialization of
the Roplene technology. The Logic product line is now manufactured by our
subsidiary, Genmar Logic LLC, utilizing Roplene technology. These boats are
currently produced at the Logic facilities in North Carolina. See
"Business--Technology--Roplene Construction Manufacturing."

HORIZON MARINE, L.C. On December 21, 1998, we acquired substantially all of
the assets of Horizon Marine, L.C., an aluminum boat manufacturer, for
consideration consisting of $2.3 million in cash at closing and the assumption
of approximately $3.5 million in liabilities of which $2.7 million were paid at
or immediately subsequent to closing. There is also a five-year earn-out of up
to $5.2 million, $200,000 of which was pre-paid at closing. The earn-out is
based on gross revenues from sales of products produced at this facility and can
be adjusted for the achievement of certain gross profit percentages and for the
value of warranty claims, from sales of products produced at this facility.

We manufacture and market the range of products that we acquired from
Horizon through our subsidiary, Genmar Manufacturing of Kansas, LLC, under the
brand name Nova, including fish and cruise pontoon and bass boats, as well as
trailers, and parts and accessories. We intend to centralize the production and
distribution of our aluminum products sold in the southern United States through
this subsidiary.

HATTERAS SPIN-OFF

Hatteras is a luxury yacht construction company, which we have owned since
1985. Hatteras' large custom-made luxury yachts have an average sales price of
approximately $1.6 million. Hatteras targets a narrow market of very wealthy
individuals who can afford large luxury yachts. Hatteras is fundamentally
different from our recreational boat operations which operate as production line
manufacturing companies. We believe that Hatteras does not fit strategically
with our other operations. As a result, immediately prior to the completion of
this offering, we will spin off Hatteras to our current stockholders by having
stockholders exchange one out of every ten of their Genmar shares for one
Hatteras share. Under the terms of that transaction, $21.9 million of tangible
net assets and $7.8 million of unamortized goodwill associated with Hatteras
will be distributed to our current stockholders together with substantially all
the liabilities associated with the Hatteras business. Hatteras will borrow
$20.0 million from its new $25.0 million credit facility and will pay us
$20.0 million in cash to repay intercompany debt owed to us. The Hatteras
spin-off will reduce our stockholders' equity before the offering by $9.7
million. In addition, for a period of one year, we will guarantee an aggregate
amount of $5.0 million of Hatteras' obligations under its new credit facility.
For a discussion of our plans to use these funds, see "Use of Proceeds."

18
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected historical and pro forma consolidated financial
information should be read in conjunction with our consolidated financial
statements and the notes thereto appearing elsewhere in this prospectus and the
sections of this prospectus captioned "Unaudited Pro Forma Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The balance sheet data as of December 31, 1994, 1995, 1996 and
June 30, 1997 and the statement of operations data for the years ended
December 31, 1994 and 1995 were derived from our audited consolidated financial
statements not included in this prospectus. The balance sheet data as of
June 30, 1998 and 1999 and the statement of operations data for the years ended
December 31, 1996, June 30, 1998 and June 30, 1999 and the six months ended
June 30, 1997 have been derived from our audited consolidated financial
statements included elsewhere in this prospectus. The selected pro forma as
adjusted financial information as of and for the year ended June 30, 1999 were
derived from our unaudited pro forma financial data which are included elsewhere
in this prospectus. The pro forma as adjusted data for the year ended June 30,
1999 reflects the spin-off of Hatteras, using the $20.0 million of spin-off
proceeds to repay debt, and reduced interest expense from our debt refinancing.
The pro forma as adjusted amounts also give effect to the acquisition of
Pyramid, reduced interest expense associated with the repayment of debt and
additional depreciation expense associated with our new plant and equipment
additions, using the net proceeds from this offering. The pro forma as adjusted
statement of operations amounts do not reflect the following non-recurring
charges which will be recorded concurrently with this offering:

- A charge of approximately $5.7 million for awards under our phantom stock
plan triggered by this offering;

- A charge of approximately $2.7 million resulting from the issuance of
225,000 shares to non-management employees; and

- An extraordinary charge of $3.6 million resulting from the early
extinguishment of debt using proceeds from this offering.

19
<PAGE>
The pro forma balance sheet amounts reflect these charges, but do not reflect
interest savings.

<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
FOR THE
FOR THE YEAR ENDED FOR THE YEAR ENDED YEAR ENDED
DECEMBER 31, FOR THE SIX JUNE 30, JUNE 30,
------------------------------ MONTHS ENDED --------------------------- 1999
1994 1995 1996 JUNE 30, 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................. $499,435 $548,559 $618,056 $260,848 $585,943 $704,656 $618,654
Cost of products and
services................... 417,072 468,270 521,663 222,448 480,651 567,247 497,318
-------- -------- -------- -------- -------- -------- --------
Gross profit................. 82,363 80,289 96,393 38,400 105,292 137,409 121,336
New product and technology
development................ 8,942 11,347 8,537 5,012 11,292 10,996 13,341
Selling and administrative
expenses................... 58,829 66,171 64,653 31,888 70,402 88,945 77,400
-------- -------- -------- -------- -------- -------- --------
Operating profit............. 14,592 2,771 23,203 1,500 23,598 37,468 30,595
Interest expense............. (22,674) (23,862) (22,190) (11,026) (18,702) (16,098) (5,871)
Investment and other income
(loss), net................ (8,834) 15,477 122 (176) (304) 75 133
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes and extraordinary
item....................... (16,916) (5,614) 1,135 (9,702) 4,592 21,445 24,857
Income tax benefit
(provision)................ (1,040) (2,090) (860) (246) (550) 19,500 19,500(a)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item......... (17,956) (7,704) 275 (9,948) 4,042 40,945 44,357
Extraordinary loss on
extinguishment of debt..... (6,624) -- -- -- (1,184) -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............ $(24,580) $ (7,704) $ 275 $ (9,948) $ 2,858 $ 40,945 $ 44,357
======== ======== ======== ======== ======== ======== ========
Pro forma basic and diluted
earnings (loss) per
share(b)................... $ 2.36 $ 1.54
======== ========
Pro forma basic and diluted
weighted average shares
outstanding(b)............. 17,370 28,868
======== ========
ADDITIONAL DATA:
EBITDA(c).................... $ 22,596 $ 11,036 $ 31,297 $ 5,563 $ 32,372 $ 46,419 $ 39,183
Gross profit margin.......... 16.5% 14.6% 15.6% 14.7% 18.0% 19.5% 19.6%
Operating profit margin...... 2.9% 0.5% 3.8% 0.6% 4.0% 5.3% 4.9%
BALANCE SHEET DATA:
Working capital.............. $ 73,568 $ 75,267 $ 48,418 $ 47,764 $ 29,712 $ 41,544 $ 17,386
Total assets................. 345,572 306,678 271,203 258,279 244,622 320,763 277,767
Long-term debt, net of
current maturities......... 164,161 151,445 124,552 135,238 117,778 116,129 42,540
Stockholders' equity
(deficit).................. 14,232 6,618 6,869 (3,133) 1,293 42,202 99,487(a)(b)
</TABLE>

- ------------------------------

(b) Historical 1999 per share data reflects a 10-for-1 stock split, as it does
not give effect to the Hatteras spin-off which will occur immediately prior
to the offering. The pro forma as adjusted amounts reflect a 9-for-1 stock
split after giving effect to the Hatteras spin-off through the exchange by
our current stockholders of one out of every ten of their Genmar shares for
one Hatteras share. The pro forma as adjusted amounts also reflect the
shares issued in this offering, the shares issued in exchange for
outstanding warrants, the shares issued to acquire Pyramid and the shares
issued under employee stock awards.

(c) EBITDA represents operating income plus depreciation and goodwill
amortization expense. EBITDA data, which is not a measure of financial
performance under generally accepted accounting principles, should not be
construed as a substitute for operating income, net income or cash flows
from operations in analyzing our operating performance, financial position
and cash flows. We have included EBITDA data, because we believe that this
data is commonly used by certain investors to evaluate a company's
performance. Not all companies calculate non-GAAP measures in the same
manner; accordingly, the EBITDA presentation herein may not be comparable to
similarly titled measures reported by other companies.

20
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA

The unaudited pro forma consolidated statement of operations for the year
ended June 30, 1999 and the unaudited pro forma consolidated balance sheet as of
June 30, 1999, include our historical operations. The pro forma financial
statements give effect to the spin-off of Hatteras and the effects of our debt
refinancing, as if they had occurred on July 1, 1998 for the statement of
operations and as of June 30, 1999 for the balance sheet. This information has
been prepared by our management and derived from our historical statements of
operations and balance sheets.

The pro forma as adjusted amounts reflect the effects of the offering and
include the acquisition of Pyramid which will be completed at the time of the
offering and the reduction in interest expense and increase in depreciation
expense to give effect to the application of our estimated net offering
proceeds. See "Use of Proceeds."

The unaudited pro forma consolidated statement of operations is not designed
to represent what our results of operations actually would have been had these
transactions been completed as of the dates indicated, or to project our results
of operations for any future period. This information should be read in
conjunction with "Capitalization," "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," our consolidated
financial statements and accompanying notes and other financial information
included elsewhere in this prospectus.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
---------------------------------------------------------------------
PRO FORMA EFFECTS OF PRO FORMA AS
AS REPORTED ADJUSTMENTS(A) PRO FORMA OFFERING(B) ADJUSTED
----------- -------------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues....................... $704,656 $(90,250) $614,406 $ 4,248 $618,654
Cost of products and services...... 567,247 (74,713) 492,534 4,784 497,318
-------- -------- -------- -------- --------
Gross profit....................... 137,409 (15,537) 121,872 (536) 121,336
New product and technology
development...................... 10,996 (1,404) 9,592 3,749 13,341
Selling and administrative......... 88,945 (12,613) 76,332 1,068 77,400
-------- -------- -------- -------- --------
Operating profit................... 37,468 (1,520) 35,948 (5,353) 30,595
Interest expense................... (16,098) 5,353(c) (10,745) 4,874 (5,871)
Investment and other income........ 75 58 133 -- 133
-------- -------- -------- -------- --------
Income before income taxes......... 21,445 3,891 25,336 (479) 24,857
Income tax benefit(d).............. 19,500 -- 19,500 -- 19,500
-------- -------- -------- -------- --------
Net income excluding extraordinary
charges.......................... $ 40,945 $ 3,891 $ 44,836 $ (479) $ 44,357
======== ======== ======== ======== ========
Basic and diluted earnings per
share as reported................ $ 2.36
========
Basic and diluted weighted average
shares outstanding............... 17,370
========
Basic and diluted pro forma
earnings per share(e)............ $ 1.54
========
Basic and diluted weighted average
shares outstanding(e)............ 28,868
========
</TABLE>

21
<PAGE>
(a) Reflects the spin-off of Hatteras and reduced interest expense from our debt
refinancing and repayment of debt from Hatteras' spin-off proceeds. The
adjustments do not include an extraordinary charge of $5.7 million resulting
from our debt refinancing as it is nonrecurring in nature.

(b) Includes Pyramid's operating loss of $4.5 million, including $510,000 of
additional goodwill amortization expense assuming an amortization period of
25 years, Pyramid interest expense of $198,000 and additional depreciation
expense of $857,000 related to our new plant and equipment. Reflects a
reduction of interest expense of $5.1 million related to using proceeds from
this offering to repay debt.

Excludes the following nonrecurring charges which will be recorded
concurrently with this offering:

- A charge of approximately $5.7 million for awards under our phantom stock
plan triggered by this offering;

- A charge of approximately $2.7 million resulting from the issuance of
225,000 shares to non-management employees; and

- An extraordinary charge of $3.6 million resulting from the early
extinguishment of debt using proceeds from this offering.

(c) Reflects a $1.9 million reduction in interest expense from the Hatteras
spin-off and application of the repayment of debt from Hatteras spin-off
proceeds and a $3.5 million reduction in interest expense from our debt
refinancing.

(d) During 1999, we recorded a reduction in our valuation allowance against our
deferred tax assets, resulting in an overall tax benefit of $19.5 million.
Tax expense assuming a statutory rate of 38% would have been $9.5 million
and pro forma net income would have been $15.4 million, or $0.53 per share.

(e) Weighted average shares outstanding is computed as follows:

<TABLE>
<S> <C>
Stock outstanding before offering....................... 1,737
======
Effect of 9-for-1 stock split after the Hatteras
spin-off.............................................. 15,633
Shares issued in exchange for outstanding warrants...... 5,593
Shares issued to acquire Pyramid........................ 917
Shares issued to under employee stock awards............ 225
Shares issued to public................................. 6,500
------
28,868
======
</TABLE>

22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999

(IN THOUSANDS)
<TABLE>
<CAPTION>
HATTERAS
PRO FORMA DEBT ACQUISITION EFFECTS OF
AS REPORTED ADJUSTMENTS(A) REFINANCING(B) PRO FORMA OF PYRAMID(C) OFFERING(D)
----------- --------------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents...... $ 24,856 $ -- $ $ 24,856 $(4,600) $ --
Accounts receivable, net....... 41,339 (825) -- 40,514 250 --
Inventories.................... 113,931 (45,172) -- 68,759 290 --
Prepaid expenses............... 2,939 (343) -- 2,596 (450) --
Deferred tax asset............. 8,000 -- -- 8,000 -- --
-------- -------- ------- -------- ------- -------
Total current assets......... 191,065 (46,340) 144,725 (4,510) --
Property and equipment, net.... 65,537 (10,390) -- 55,147 5,635 12,000
Other assets................... 19,454 -- 740 20,194 (1,515) (3,570)
Goodwill....................... 44,707 (7,786) -- 36,921 12,740 --
-------- -------- ------- -------- ------- -------
$320,763 $(64,516) $ 740 $256,987 $12,350 $ 8,430
======== ======== ======= ======== ======= =======

LIABILITIES AND STOCKHOLDERS'
EQUITY

Current liabilities:
Accounts payable............... $ 56,241 $(10,606) $ -- $ 45,635 $ 500 $ --
Accrued liabilities............ 80,091 (14,034) -- 66,057 850 5,726
Customer deposits.............. 9,783 (9,128) -- 655 -- --
Accrued income taxes........... 2,384 -- -- 2,384 -- --
Current maturities of long-term
debt......................... 1,022 -- -- 1,022 -- --
-------- -------- ------- -------- ------- -------
Total current liabilities.... 149,521 (33,768) -- 115,753 1,350 5,726
Long-term debt................... 116,129 (21,000) 6,411 101,540 -- (59,000)
Other noncurrent liabilities..... 12,911 -- -- 12,911 -- --
-------- -------- ------- -------- ------- -------

Stockholders' equity:
Common stock................... 17 139 -- 156 9 124
Paid-in capital................ 117,945 (139) -- 117,806 10,991 73,576
Accumulated deficit............ (75,256) (9,748) (5,671) (90,675) -- (11,996)
Cumulative translation
adjustment................... (504) -- -- (504) -- --
-------- -------- ------- -------- ------- -------
Total stockholders' equity... 42,202 (9,748) (5,671) 26,783 11,000 61,704
-------- -------- ------- -------- ------- -------
$320,763 $(64,516) $ 740 $256,987 $12,350 $ 8,430
======== ======== ======= ======== ======= =======

PRO FORMA
AS ADJUSTED
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 20,256
Accounts receivable, net....... 40,764
Inventories.................... 69,049
Prepaid expenses............... 2,146
Deferred tax asset............. 8,000
--------
Total current assets......... 140,215
Property and equipment, net.... 72,782
Other assets................... 15,109
Goodwill....................... 49,661
--------
$277,767
========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable............... $ 46,135
Accrued liabilities............ 72,633
Customer deposits.............. 655
Accrued income taxes........... 2,384
Current maturities of long-term
debt......................... 1,022
--------
Total current liabilities.... 122,829
Long-term debt................... 42,540
Other noncurrent liabilities..... 12,911
--------
Stockholders' equity:
Common stock................... 289
Paid-in capital................ 202,373
Accumulated deficit............ (102,671)
Cumulative translation
adjustment................... (504)
--------
Total stockholders' equity... 99,487
--------
$277,767
========
</TABLE>

- ------------------------------

(a) Reflects our stock split, the spin-off of Hatteras and our repayment of debt
from Hatteras' spin-off proceeds. See "The Company."

(b) Reflects our debt refinancing and the related extraordinary loss of
$5.7 million due to early extinguishment of debt.

(d) Reflects the issuance of the shares offered hereby and use of the proceeds
from this offering for our new plant and equipment additions and the
repayment of debt with the resulting extraordinary loss of $3.6 million due
to early extinguishment of debt.

Includes the following transactions which will be recorded concurrently with
this offering:

- Awards triggered under our phantom stock plan resulting in a charge $5.7
million.

- The issuance of 5,593,500 shares in exchange for outstanding warrants.

- The issuance of approximately 225,000 shares under employee stock awards
and the corresponding $2.7 million charge.

23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion of our financial condition and results of
operations should be read together with the consolidated financial statements
included in this prospectus. This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ
significantly from those anticipated in these forward-looking statements as a
result of various factors including, but not limited to, those set forth under
"Risk Factors" and included in other portions of this prospectus. Our fiscal
year ends June 30. When we refer to years it means the twelve months ended
June 30, unless otherwise indicated.

We manufacture motorized recreational boats, and sell our products through a
network of over 1,300 dealers throughout the world. We currently conduct and
report our business in two segments, the recreational boat segment and the
luxury yacht segment. Following the spin-off of Hatteras, we will operate only
in the recreational boat segment.

RECREATIONAL BOAT SEGMENT

Our recreational boat segment is comprised of our various high volume
production line manufacturing operations. We generate revenues primarily from
the sale of boats with inboard, stern drive and outboard engines. Certain of our
outboard boats are sold with engines purchased from others and installed at our
factories, and we refer to these as "packaged" sales. Certain other of our
outboard boats are sold without the engine installed, and we refer to these
sales as "non-packaged" sales. Typically these non-packaged boats are sold with
engine controls and cabling, known as rigging, pre-installed at our factories.
In exchange for equipping a boat in this manner, we receive a fee from the
engine manufacturer whose controls and cabling we have pre-installed in the
boat. For a packaged sale, our revenues and cost of products reflect the sale
and related cost of the outboard engine, while for a non-packaged sale, our
revenues reflect only the rigging fee. Consequently, comparable outboard boats
sold packaged generate higher total revenues but a lower margin as a percentage
of revenues than those sold non-packaged. Accordingly, shifts in our outboard
sales mix between packaged and non-packaged can affect our revenues and margins.

The size of the products we sell also affects our revenues and margins. Our
margins generally increase as the size of the product increases. Product sales
mix can also affect our margins in other ways. In a given size category,
outboard products generally produce higher margins than stern drive or inboard
products. In terms of revenues generated in 1999, substantially all of our
aluminum product sales, and approximately one-third of our fiberglass product
sales, were outboard products. Also, on a relative basis, certain of our models
command premium pricing in the market, and generally produce higher margins, as
compared to our other models.

We also generate revenues from the sale of parts, accessories and clothing,
and in certain circumstances from product delivery fees. Such items, however, do
not have a significant impact on changes in our revenues from year to year, nor
are revenues related to these items material to our total revenues.

Cost of products and services consists of all costs related to the
manufacture and assembly of our products, including material, labor and overhead
costs, as well as production tooling and related tooling maintenance costs for
models already in production. Also included are costs related to warranty,
customer service, transportation and engineering.

24
<PAGE>
New product and technology development consists of all costs related to
developing new product offerings, including all developmental engineering and
tooling costs. Also included are costs related to the development of new
manufacturing technologies, such as our VEC and Roplene technologies. We believe
the development of new product and manufacturing technologies is a key element
of our future business strategy, and with the acquisition of the VEC technology,
we expect to significantly increase our new product and technology development
expenses, and potentially, our expenses related to developing the non-marine
commercial aspects of our new technology.

Selling and administrative expenses consist of salaries, commissions and
other costs for our sales and marketing personnel, expenses related to the
development and execution of marketing concepts and materials and costs to
participate in various industry retail trade shows. Also included are
compensation and other expenses related to our executive, administrative,
finance and management information systems personnel, fees for professional
services and amortization of goodwill. We expect selling and administrative
expenses to change based on our sales levels and operating performance. Under
our current management incentive plan, if our operating performance exceeds
targeted operating profits, our management compensation costs can increase
significantly.

In July 1999, we refinanced our senior bank debt. With a portion of the
proceeds, we immediately repaid at its face amount a $25.0 million subordinated
note, which bore interest at 9% at the time of repayment, payable to Irwin L.
Jacobs. On September 7, 1999, we used the remaining $20.0 million of the senior
term loan and approximately $7.0 million under our new revolving credit facility
to redeem the remaining $25.6 million of our 13.5% notes at 106.5% of par. At
the time of issuance, the subordinated note payable to Irwin L. Jacobs was
deemed to have a below-market interest rate, and a debt discount of
$8.6 million was recorded at issuance to impute a market yield to maturity. In
connection with these transactions, we recorded an extraordinary loss of
$5.7 million on early extinguishment of debt, including $3.7 million of
unaccreted discount associated with the subordinated note. Upon completion of
this offering, we will incur an additional extraordinary loss of $3.6 million on
early extinguishment of debt resulting from applications of proceeds from this
offering to repay debt and charges to our operating earnings in the amounts of
$8.4 million, related to a $5.7 million payout which will be triggered under our
existing senior management phantom stock option plan and $2.7 million, related
to employee stock awards. See "Management--Executive Compensation."

LUXURY YACHT SEGMENT

The luxury yacht segment consists solely of Hatteras. Immediately prior to
the completion of this offering, we will spin off Hatteras to our current
stockholders. Hatteras builds 55 to 65 yachts per year, the average sale price
of which is approximately $1.6 million. Hatteras sells these yachts to very
wealthy customers who usually are sophisticated and experienced in yachting.
Unlike our recreational boat segment, which we view in terms of a production
line manufacturing company, we view this segment to be much like a custom
construction company. Historically, Hatteras has recognized revenue on most of
its products at the time it ships a completed luxury yacht. On larger products,
over 75 feet in length, Hatteras uses the percentage of completion method of
revenue recognition if a retail customer has specifically ordered the yacht.
Given the high cost of each yacht, the timing of product completions and
shipments can have a material impact on our periodic results of operations.

25
<PAGE>
RESULTS OF OPERATIONS

CONSOLIDATED BASIS

The following table sets forth our operating results on a consolidated basis
for the periods indicated. In early 1997, we changed our fiscal year end from
December 31 to June 30 to better correspond with the industry's model cycle.
Accordingly, the comparison of our fiscal year ended June 30, 1998 to the six
month period ended June 30, 1997 is not meaningful. Information presented for
the twelve months ended June 30, 1997 is unaudited.

<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS FOR THE YEAR ENDED JUNE 30,
ENDED JUNE 30, 1997 ----------------------------------------------
(UNAUDITED) 1998 1999
------------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
Net revenues.............................. $574,802 100.0% $585,943 100.0% $704,656 100.0%
Cost of products and services............. 486,276 84.6 480,651 82.0 567,247 80.5
-------- ----- -------- ----- -------- -----
Gross profit.......................... 88,526 15.4 105,292 18.0 137,409 19.5
New product and technology development.... 8,372 1.5 11,292 2.0 10,996 1.6
Selling and administrative expenses....... 66,687 11.6 70,402 12.0 88,945 12.6
-------- ----- -------- ----- -------- -----
Operating profit...................... 13,467 2.3 23,598 4.0 37,468 5.3
Interest expense.......................... (21,937) (3.8) (18,702) (3.2) (16,098) (2.3)
Investment and other income (loss), net... (294) -- (304) -- 75 --
-------- ----- -------- ----- -------- -----
Income (loss) before income taxes and
extraordinary item.................. (8,764) (1.5) 4,592 0.8 21,445 3.0
Income tax benefit (provision)............ (635) (0.1) (550) (0.1) 19,500 2.8
-------- ----- -------- ----- -------- -----
Income (loss) before extraordinary item... (9,399) (1.6) 4,042 0.7 40,945 5.8
Extraordinary loss on extinguishment of
debt.................................... -- -- (1,184) (0.2) -- --
-------- ----- -------- ----- -------- -----
Net income (loss)..................... $ (9,399) (1.6)% $ 2,858 0.5% $ 40,945 5.8%
======== ===== ======== ===== ======== =====
</TABLE>

REVENUES for 1999 and 1998 increased by 20.3% and 1.9%, respectively, over
prior year comparable periods. Net revenues in 1999 were favorably affected by
strong economic and industry conditions and a higher mix of packaged sales. Net
revenue growth in 1998 was lower due to the discontinuation of one of our
fiberglass brands.

GROSS PROFIT MARGIN increased to 19.5% for 1999, from 18.0% for 1998 and
15.4% for 1997. These improvements were a result of higher margins in the mix of
sales and increased manufacturing efficiencies. In addition, operating profit
for 1999 and 1998 increased by 58.8% and 75.2%, respectively, over comparable
prior year periods, and improved as a percentage of revenues to 5.3% for 1999,
from 4.0% for 1998 and 2.3% for 1997.

INTEREST EXPENSE for fiscal 1999 decreased by $2.6 million, or 13.9%, to
$16.1 million from $18.7 million for 1998. The decrease in interest expense
resulted from reduced average borrowings outstanding under our revolving credit
facility, and the full year impact of the October 1997 refinancing of
$74.4 million of our 13.5% notes. Interest expense for fiscal 1998 decreased by
$3.2 million, or 14.7%, to $18.7 million from $21.9 million for 1997. This
decrease in interest expense resulted from the October 1997 refinancing of
$74.4 million of our 13.5% notes, and reduced debt discount accretion costs,
partially offset by increased average borrowings outstanding under our revolving
credit facility.

INCOME TAX for 1999 reflects a benefit of $19.5 million. Excluding our
$22.0 million reduction in the deferred tax asset valuation allowance, we would
have had a tax provision of $2.5 million, resulting in an effective tax rate of
11.7%. Based on 1999 and projected future operating results, we determined it
more likely than not that a portion of our deferred tax assets would be
realized, and therefore reduced the related valuation allowance by $22.0
million, which is reflected in our statement of operations as an income tax
benefit. We recorded no such valuation adjustments in prior periods presented.
The effective tax rates for 1998 and 1997 were 12.0% and 7.3%, respectively. The
effective rates differed

26
<PAGE>
from the statutory rates primarily as a result of net operating loss
carryforwards available as offsets to otherwise due federal income tax
obligations.

NET INCOME for 1999 increased by $38.0 million to $40.9 million, from income
of $2.9 million for 1998 and a net loss of $9.4 million for 1997. The
improvements in our net income were primarily attributable to the recorded tax
benefits for 1999 along with the increase in operating profits. Net income
excluding the impact of the tax benefit would have been $18.9 million.

RECREATIONAL BOAT SEGMENT

The following table sets forth operating results of our recreational boat
segment for the periods indicated.

<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS FOR THE YEAR ENDED JUNE 30,
ENDED JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1998 1999
--------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
Net revenues.................... $490,313 100.0% $505,910 100.0% $614,406 100.0%
Cost of products and services... 408,559 83.3 407,554 80.6 492,534 80.2
-------- ----- -------- ----- -------- -----
Gross profit................ 81,754 16.7 98,356 19.4 121,872 19.8
New product and technology
development................... 7,607 1.5 9,224 1.8 9,592 1.5
Selling and administrative
expenses...................... 57,217 11.7 61,531 12.1 76,332 12.4
-------- ----- -------- ----- -------- -----
Operating profit............ $ 16,930 3.5% $ 27,601 5.5% $ 35,948 5.9%
======== ===== ======== ===== ======== =====
</TABLE>

YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998

REVENUES for 1999 increased by $108.5 million, or 21.4%, to $614.4 million
from $505.9 million for 1998, reflecting solid increases across all of our
brands both in terms of boats sold and average price per boat sold. Revenues in
1999 from sales of fiberglass products increased 17.9% from 1998, while revenues
from sales of aluminum products increased 36.1%. The increase in our average
price per boat sold was primarily the result of an increase in sales of products
greater than 30 feet in length. In addition, our overall increase in the number
of boats sold included a greater percentage of packaged outboard boats being
sold compared to 1998, a trend which also contributed to our revenue increase
for 1999.

COST OF PRODUCTS AND SERVICES for 1999 increased by $84.9 million, or 20.9%,
to $492.5 million from $407.6 million for 1998, but decreased as a percentage of
revenues to 80.2% for 1999 from 80.6% for 1998. The increase in dollars was a
direct result of increased sales as well as a higher percentage of sales of
packaged outboard boats. The improvement in the percentage resulted primarily
from improved margins related to a more favorable product mix, partially offset
by the effect of our increased sales of packaged outboard boats.

NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1999 increased by $400,000,
or 4.0%, to $9.6 million from $9.2 million for 1998, and were 1.5% of revenues
for 1999, a decrease from 1.8% for 1998. This decrease in percentage was
attributable to particularly high expenses in 1998 related to development of new
product offerings over 30 feet in length. These costs in 1999 related primarily
to various new product development initiatives, and to the development of our
VEC technology. We expect product and technology development costs to increase
further in 2000 as we continue our development of the VEC and Roplene
technologies.

SELLING AND ADMINISTRATIVE EXPENSES for 1999 increased by $14.8 million, or
24.1%, to $76.3 million from $61.5 million for 1998, and increased as a
percentage of revenues to 12.4% for 1999, from 12.1% for 1998. This increase was
attributable primarily to management incentive compensation and bonus

27
<PAGE>
awards that increased by $14.5 million over the prior year, as a result of
significantly exceeding our operating performance goals for the year.

OPERATING PROFIT for 1999 increased by $8.3 million, or 30.2%, to
$35.9 million from $27.6 million for 1998, and increased as a percentage of
revenues to 5.9% for 1999, from 5.5% for 1998. This increase was attributable to
a 21.4% increase in sales, favorable product mix and improved margins, offset by
increased management compensation costs.

YEAR ENDED JUNE 30, 1998 COMPARED TO UNAUDITED TWELVE MONTHS ENDED JUNE 30, 1997

Effective June 2, 1997, we changed our fiscal year end from December 31 to
June 30, and reported a transitional audited fiscal year covering the six month
period from January 1 to June 30, 1997. As a result, the comparison of our
fiscal year ended June 30, 1998 to the six month period ended June 30, 1997 is
not meaningful. For purposes of the following discussion, we will compare our
results of operations for 1998 to our unaudited results of operations for the
twelve months ended June 30, 1997.

REVENUES for 1998 increased by $15.6 million, or 3.2%, to $505.9 million
from $490.3 million for 1997. The increase in revenues was attributable to an
increase in the average price per boat sold. Excluding net revenues of
$10.3 million of a fiberglass product line which we closed in 1997, the increase
in revenues for 1998 would have been 5.4%.

COST OF PRODUCTS AND SERVICES for 1998 decreased by $1.0 million, or 0.2%,
to $407.6 million from $408.6 million for 1997, and decreased as a percentage of
revenues to 80.6% for 1998 as compared to 83.3% for 1997. This decrease resulted
primarily from improved margins related to product mix. Excluding costs
associated with the discontinued fiberglass product line, the costs would have
increased by $11.5 million and would have compared to costs as a percentage of
revenues of 82.5% for 1997.

NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1998 increased by
$1.6 million, or 21.3%, to $9.2 million from $7.6 million for 1997, and at 1.8%
of revenues for 1998, were increased from 1.5% for 1997. This increase was
attributable to particularly high expenses in 1998 related to increased
development of new products over 30 feet in length.

SELLING AND ADMINISTRATIVE EXPENSES for 1998 increased by $4.3 million, or
7.5%, to $61.5 million from $57.2 million for 1997, and at 12.1% of revenues for
1998, were increased from 11.7% for 1997. This increase was attributable to
increased variable selling and marketing expenses and increased management
incentive compensation. Excluding costs associated with the discontinued
fiberglass product line, these costs would have increased by $6.3 million and
would have compared to costs as a percentage of revenues of 11.5% for 1997.

OPERATING PROFIT for 1998 increased by $10.7 million, or 63.0%, to
$27.6 million from $16.9 million for 1997, and increased as a percentage of
revenues to 5.5% for 1998, from 3.5% for 1997. Excluding the impact of the
product line discontinuation, operating profit would have increased by
$6.5 million and would have compared to operating profit as a percentage of
revenues of 4.4% for 1997. This increase was attributable to increased sales and
improved product margins.

SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS

Various factors, including seasonality, can contribute to fluctuations in
our revenues and costs for our recreational boat segment and in our operating
earnings by quarter.

As is typical in the boating industry, we undergo a model year changeover
during the period from June to August, during which time we convert our
manufacturing facilities to production of new models. Margins during our first
fiscal quarter are adversely affected by the additional costs and

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<PAGE>
production inefficiencies associated with this model year changeover. We have
begun to introduce certain new models throughout the year to minimize the impact
of model year changeover costs.

On a relative basis, our revenues reach their highest levels during the
third and fourth quarters of the year, due primarily to the onset of the peak
retail selling season for our products. However, we attempt to smooth our
production levels by offering financial incentives to our dealers to take
delivery of our product at a relatively constant rate throughout the year. Costs
related to such dealer incentives are generally heaviest during the first and
second quarters of our fiscal year.

We host various dealer conferences during the period from July to August to
introduce our new product offerings. In addition, we provide financial
assistance, in the form of cooperative marketing incentives earned on their
purchases of our product, to our dealers who participate in various retail trade
shows throughout the year. These retail trade shows are most heavily
concentrated in the months of January to March, or directly preceding the peak
spring retail season. Selling and marketing expenses related to these efforts
are more significant during our first and third fiscal quarters.

Under a program we operated on a limited basis from 1992 to 1996, we
provided direct floor plan financing to certain dealers who were unable to
secure such financing on favorable terms from conventional third party sources.
During 1996, we decided to discontinue this program. In winding down and
disengaging from this program, we incurred larger than normal levels of
receivable write-offs, which were charged to operating earnings in the fiscal
years 1996, 1997 and 1998. With completion of the wind-down process, and based
on our historical trends, provisions and write-offs for fiscal year 1999
represent a more normal level of activity in this area.

The following table sets forth certain quarterly historical financial
information for the past three fiscal years. Operating results achieved for any
quarter do not necessarily indicate what operating results for any future period
may be.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED,
------------------------------------------------
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30
------------ ----------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
1997
Net revenues..................................... $128,419 $126,075 $114,085 $121,734
Percent of total annual segment revenues......... 26.2% 25.7% 23.3% 24.8%
Gross profit..................................... 19,343 21,179 18,016 23,216
Operating profit................................. 3,452 4,331 1,551 7,596

1998
Net revenues..................................... $115,203 $118,284 $132,354 $140,069
Percent of total annual segment revenues......... 22.8% 23.4% 26.2% 27.6%
Gross profit..................................... 19,795 20,610 25,915 32,036
Operating profit................................. 4,793 4,552 6,484 11,772

1999
Net revenues..................................... $127,115 $143,571 $159,670 $184,050
Percent of total annual segment revenues......... 20.7% 23.4% 26.0% 29.9%
Gross profit..................................... 21,994 26,529 30,760 42,589
Operating profit................................. 3,428 9,727 9,134 13,659
</TABLE>

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<PAGE>
LUXURY YACHT SEGMENT

The following table sets forth operating results for the periods indicated
of our luxury yacht segment, which we will spin-off to our current stockholders
immediately prior to the consummation of this offering.

<TABLE>
<CAPTION>
FOR THE TWELVE
MONTHS ENDED FOR THE YEAR ENDED JUNE 30,
JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1998 1999
------------------- ------------------- -------------------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............................... $84,489 100.0% $80,033 100.0% $90,250 100.0%
Cost of products and services.............. 77,717 92.0 73,097 91.3 74,713 82.8
------- ----- ------- ----- ------- -----
Gross profit............................. 6,772 8.0 6,936 8.7 15,537 17.2
New product and technology development..... 765 0.9 2,068 2.6 1,404 1.5
Selling and administrative expenses........ 9,470 11.2 8,871 11.1 12,613 14.0
------- ----- ------- ----- ------- -----
Operating profit (loss).................. $(3,463) (4.1)% $(4,003) (5.0)% $ 1,520 1.7%
======= ===== ======= ===== ======= =====
</TABLE>

YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998

REVENUES for 1999 increased by $10.3 million, or 12.8%, to $90.3 million
from $80.0 million for 1998. The increase in revenues was primarily attributable
to an increase in the average price per boat, due largely to the elimination of
product offerings in this segment under 50 feet in length.

COST OF PRODUCTS AND SERVICES for 1999 increased by $1.6 million, or 2.2%,
to $74.7 million from $73.1 million for 1998, but decreased as a percentage of
revenues to 82.8% for 1999 from 91.3% for 1998. The improvement over 1998 was
attributable to reduced overhead, improved efficiencies and less product
discounting.

NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1999 decreased by $700,000,
or 32.1%, to $1.4 million from $2.1 million for 1998, and at 1.5% of revenues
for 1999, were decreased from 2.6% for 1998. This decrease was attributable to a
narrowing of our product offerings resulting in lower expenditures.

SELLING AND ADMINISTRATIVE EXPENSES for 1999 increased by $3.7 million, or
42.2%, to $12.6 million from $8.9 million for 1998, and increased as a
percentage of revenues to 14.0% for 1999, from 11.1% for 1998. This increase was
attributable primarily to increased costs related to the testing of a new
marketing initiative for luxury yacht ownership, incentive compensation
resulting from exceeding our operating performance goals for 1999, increased
legal expenses, expenses related to Y2K preparation efforts and increased
variable selling and marketing costs.

OPERATING PROFIT for 1999 increased by $5.5 million, to $1.5 million from a
loss of $4.0 million for 1998. The improvement resulted from increased revenues
and improved margins, partially offset by increased selling and administrative
expenses.

YEAR ENDED JUNE 30, 1998 COMPARED TO UNAUDITED TWELVE MONTHS ENDED JUNE 30, 1997

REVENUES for 1998 decreased by $4.5 million, or 5.3%, to $80.0 million from
$84.5 million for 1997. The decrease in revenues, on unit sales that were
essentially even between years, was primarily attributable to increased dealer
incentives intended to reduce product in our dealer pipeline.

COST OF PRODUCTS AND SERVICES for 1998 decreased by $4.6 million, or 5.9%,
to $73.1 million from $77.7 million for 1997, and decreased as a percentage of
revenues to 91.3% for 1998 as compared to 92.0% for 1997. This decrease resulted
primarily from improved margins related to product mix.

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<PAGE>
NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1998 increased by
$1.3 million, to $2.1 million from $800,000 for 1997, and at 2.6% of revenues
for 1998, were increased from 0.9% for 1997. This increase was attributable to
particularly high expenses in 1998 related to increased development of new
products, and to the capitalization of certain of these expenditures in 1997.

SELLING AND ADMINISTRATIVE EXPENSES for 1998 decreased by $600,000, or 6.3%,
to $8.9 million from $9.5 million for 1997, and at 11.1% of revenues for 1998,
were decreased from 11.2% for 1997. The decrease was attributable to decreased
variable selling and marketing expenses and decreased incentive compensation
costs.

OPERATING PROFIT for 1998 decreased by $500,000, or 15.6%, to a loss of
$4.0 million from a loss of $3.5 million for 1997. The change between years was
primarily attributable to increased dealer incentive costs as mentioned above.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities for 1999 increased by $35.2 million,
to $50.7 million from $15.5 million for 1998. Total cash provided by operating
activities for 1999 consisted of $28.2 million generated by our operating
results, net of non-cash charges and other items, and $22.5 million generated
from changes in working capital items. Working capital at June 30, 1999 totaled
$41.5 million, including cash and cash equivalents of $24.9 million, as compared
to working capital of $29.7 million at June 30, 1998, including cash and cash
equivalents of $2.7 million. The change in working capital, excluding cash,
represented a decrease of $10.4 million for fiscal 1999, and resulted primarily
from increased accounts payable and accrued liabilities.

Cash used in investing activities for 1999 increased by $16.5 million, to
$20.3 million from $3.8 million for 1998. The increase for 1999 was primarily
attributable to the cash component of the total consideration paid for
acquisitions and increased capital expenditures. We used $500,000 for Logic
Marine, $5.2 million for Horizon, and $2.2 million for our initial investment in
Pyramid. In addition, we realized $900,000 from the sale of a closed
manufacturing facility and certain other equipment in 1999, and in 1998 we
realized $4.2 million from the sale of a note receivable.

Capital expenditures for 1999 increased by $4.8 million, to $12.9 million,
from $8.1 million for 1998. This increase was primarily attributable to
incremental expenditures related to manufacturing facility and equipment
improvements, certain capitalized tooling projects and purchases of
transportation equipment used to deliver our products. We anticipate that
capital expenditures for 2000 will be approximately $25.0 million, including
approximately $12.0 million to construct and equip our new manufacturing
facility, including the purchase of certain robotic equipment and computerized
tooling and design equipment related to our VEC technology. The remaining
expenditures will be principally for the purchase of manufacturing and
transportation equipment. We expect to fund these expenditures through
operations and available bank borrowings.

Cash used in financing activities for 1999 decreased by $5.1 million, to
$8.3 million from $13.4 million for 1998. We repaid $12.0 million under our old
senior bank term loan during 1999, $6.0 million of which was a voluntary
pre-payment under that agreement. In addition, we completed a $4.0 million
industrial development bond financing arrangement in connection with our
acquisition of and certain planned improvements for our newly acquired Nova
facility.

During 1999, our old senior bank credit facility, which was due to expire in
June 2000, consisted of a $35.0 million revolving credit facility, a
$15.0 million term loan facility and a $23.0 million letter of credit facility.
Weighted average borrowings outstanding under the old revolving credit facility
during 1999 were approximately $14.5 million. At June 30, 1999, we had
$35.0 million of availability under the old revolving credit facility,
approximately $3.6 million of availability under the old letter of credit
facility and we had prepaid and terminated the old term loan facility in its
entirety. As of June 30, 1999, we were in compliance with all covenants under
our credit facility, except the capital expenditure

31
<PAGE>
requirement, with such non-compliance effectively being waived upon our
arrangement of our new senior bank credit facility. See Note 5 to our
Consolidated Financial Statements.

On July 30, 1999, we arranged a new senior bank credit facility, which
expires in June 2002, consisting of a $29.0 million revolving credit facility, a
$45.0 million term loan facility and a $21.0 million letter of credit facility,
secured by substantially all of our assets. Borrowings under the new revolving
credit facility are intended for general corporate and working capital purposes
and to redeem $5.6 million of our remaining 13.5% notes. We borrowed
$25.0 million under our new senior term loan and immediately repaid at its face
amount a $25.0 million subordinated note held by Irwin L. Jacobs, our Chairman.
On September 7, 1999, we borrowed an additional $20.0 million under our new
senior term loan and approximately $7.0 million under our new revolving credit
facility, and redeemed the remaining $25.6 million of our 13.5% notes due 2001
at 106.5%. Amounts under our new senior term loan and revolving credit facility
bear interest at 2.5% over the interbank eurodollar market rate. As of September
22, 1999, the weighted average interest rate under the senior credit facility
was 7.9%. Aggregate borrowings and outstanding letters of credit under the new
senior credit facility are limited to eligible receivables, eligible inventories
and eligible property, plant and equipment.

Our new senior credit facility contains covenants which, among other things,
restrict or limit our ability to incur other indebtedness, engage in
transactions with affiliates, incur liens, make certain restricted payments, and
enter into certain business combinations and asset sale transactions. The new
senior credit facility also requires that we satisfy certain financial tests and
ratios and restricts capital expenditures. In addition, the new senior credit
facility contains provisions which may require accelerated repayment of our
borrowings and/or limit our access to the facility upon the incurrence of
specific events or significant changes in our financial condition, business,
properties, prospects or operations.

We also have $60.0 million currently outstanding under our subordinated term
loan facility, which expires in October 2002. We used borrowings under this
facility to repurchase $60.0 million aggregate principal amount of our 13.5%
notes in October 1997. Borrowings under the subordinated term loan facility are
secured by a second interest in our assets, and by letters of credit backed by
certain of our stockholders. In consideration for providing these letters of
credit, we issued warrants to the stockholders providing the letters of credit.
We issued warrants to purchase a total of 6,580,638 shares with a fair value at
the date of issuance of approximately $1.7 million. This has been reflected as
debt issuance costs and as additional paid-in capital in the accompanying
balance sheets. This debt issuance cost is being amortized over a period
extending through October 2002. These warrants will be exchanged for an
aggregate of 5,593,500 shares of common stock at the time of the offering. In
addition, we reimburse these stockholders for the costs they incur in
maintaining these letters of credit. Such amount was approximately $1.0 million
in 1999.

Immediately prior to the completion of this offering, we plan to divest
Hatteras through a spin-off to our current stockholders. Hatteras will borrow
$20.0 million under a separate bank credit facility to repay its intercompany
debt to us. We will use such proceeds to repay $20.0 million of the
$45.0 million outstanding under our new senior term loan. In connection with
this transaction, we will provide a one-year guarantee, in the amount of
$5.0 million, in support of Hatteras' credit facility.

We anticipate net proceeds from this offering to be approximately $71.0
million. Among other uses, we plan to use such proceeds to repay the remaining
$25.0 million outstanding under our new senior term loan and $30.0 million
outstanding under our subordinated term loan facility. These repayments will
substantially reduce our leverage, decrease our interest expense and reduce our
risk related to future increases in interest rates.

As a result of our historical operating losses, we have net operating loss
carry-forwards of approximately $146.0 million available as of June 30, 1999 to
offset against future income tax obligations. We believe that the Hatteras
spin-off will be tax free to the Company and its current stockholders under
Section 355 of the Internal Revenue Code of 1986, as amended. We do not intend

32
<PAGE>

to seek a ruling from the IRS with respect to the spin-off. If the spin-off
transaction were deemed to be taxable, we believe the fair market value of our
equity in Hatteras is less than our tax basis in the Hatteras assets, and we
would not recognize a taxable gain on the spin-off. However, if the IRS
determined that the fair market value of our equity in Hatteras exceeded our tax
basis in the underlying assets, we could be required to recognize a taxable
gain, which would result in our utilizing a portion of our net operating loss
tax carry forward, the amount of which is not presently determinable.

We participate in certain dealer inventory floor plan financing arrangements
with various financial institutions pursuant to which we may be required to
repurchase products previously sold to a particular dealer in the event of
default by that dealer. Repurchased inventory totaled $1.4 million during the
six months ended June 30, 1997, $4.5 million in the year ended June 30, 1998 and
$3.4 million in the year ended June 30, 1999. As of June 30, 1999, we were
contingently liable under these agreements to repurchase products in the
aggregate amount of $13.8 million. Historically we have been successful in
reselling substantially all repurchased products at a slight discount to our
repurchase costs.

We attempt to comply with existing and/or new regulations and requirements
regarding environmental matters prior to mandated dates of compliance. We are
currently conducting site remediation and site investigations, where necessary.
We have provided reserves, where appropriate, in amounts we believe to be
adequate to cover estimated costs related to such regulatory compliance.

We continuously evaluate our existing operations and investigate possible
strategic acquisitions to complement existing product lines, expand geographic
penetration in the marketplace and strengthen technological capabilities.
Accordingly, while we do not have any arrangement, commitment or understanding
with respect to any particular transaction, future acquisitions, investments and
changes in operations are possible.

We require substantial cash flow to fund our seasonal working capital and
capital spending requirements, and the repayment of our various debt
obligations. Our operating performance continues to be critical in meeting these
cash flow requirements. We believe that cash flow generated from operations,
borrowing capacity under our senior revolving credit facility and proceeds from
this offering will provide sufficient liquidity to fund these obligations in the
foreseeable future.

YEAR 2000

We initiated a project in early 1998 to identify and remediate potential
Year 2000 problems. The project included an extensive review of our operations,
encompassing both information technology and non-IT systems, as well as our
vendor, supplier and customer/dealer networks. The purpose of the project was to
safeguard us from any potential, material adverse impact caused by Y2K,
including any significant disruption of our operations or any failure or
malfunction of our products due to Y2K-related defects.

Our manufacturing facilities utilize various IT systems to provide and
process data to operate and manage our business. We have nine manufacturing IT
operations (excluding Hatteras) in addition to our corporate office system.
Within each manufacturing IT operation, there are generally six IT functions:

- the operating system;

- the manufacturing system;

- general ledger/financial system;

- engineer-related systems;

- payroll and related systems; and

- desk top/personal computer systems.

33
<PAGE>
Within each of these individual systems, our manufacturing facilities use
several varieties of programs including internally developed programs,
over-the-counter programs and more sophisticated programs such as Data Pro, IFS,
Industri Os, MacPac and Mapics. In addition, we have non-IT systems which are
integral to the mechanical operation of equipment in our manufacturing
facilities. Examples of our non-IT systems include the computer chips used to
operate CNC machines, overhead cranes, utility vehicles and elevators.

Although there can be no assurance that a currently unforeseen Y2K-related
issue will not arise and generate a material adverse impact on our operations or
products, we believe that we have identified all potential, significant Y2K
issues and have implemented appropriate remedial action. We further believe that
our internal operating systems, including both IT and non-IT systems, are either
currently Y2K compliant or that the corrective actions remaining to bring such
systems into compliance will be completed appropriately in advance of
January 1, 2000. We believe that the only substantive corrective action
necessary relates to our newly acquired Logic operations. We are evaluating
various alternatives for new systems in our Logic operations, and intend to
complete installation and testing of the system prior to January 1, 2000.

Like most manufacturing companies, we depend on an extensive network of
third parties for critical supplies, raw materials and services. Similarly, our
products are sold through an extensive network of third party dealers. We have
contacted our most important vendors and dealers, specifically those vendors and
dealers which could exert a material adverse impact on us if they were to have
Y2K-related problems. Although there can be no assurance that these vendors and
dealers have adequately assessed all of their potential Y2K issues, we have
received assurance from all of our engine suppliers and most of our other major
vendors that Y2K does not present a significant risk. In those instances where
we have not received reasonable assurance that a particular vendor or dealer
will be Y2K compliant, contingency plans, including alternative sources or
stockpiling in anticipation of future requirements, have been or are being
developed.

At the inception of our Y2K project in 1998, we engaged the services of an
outside consulting firm specializing in Y2K compliance efforts to review and
assess our Y2K efforts. We have upgraded or replaced hardware and software
systems, including non-IT systems with embedded chip technology, where
necessary. Additional costs have been incurred to test both existing and newly
installed or upgraded systems. We estimate that the cost of our Y2K-related
activities, beginning in early 1998 and extending into the current year, will be
approximately $3.3 million. Of the total estimated cost, approximately
$2.6 million has been spent to date.

We believe that we have identified and corrected potential Y2K problems
throughout our key operating systems and that we will not experience any
material adverse impact as a result of Y2K. We further believe that our most
likely worst case Y2K scenario is a temporary disruption (defined as ranging
from several hours to less than one week) of our production capability. The
economic consequences of such a temporary production disruption, while
undesirable, would not be material. However, because of the complexity and
potential unforeseen ramifications of the Y2K issue, and our necessary reliance
on third party vendors and dealers, there can be no assurance that the actual
consequences of Y2K-related problems will not be material to our operations.

34
<PAGE>
MARKET RISK

We are exposed to various market risks, including changes in interest rates
and pricing on certain commodity raw materials. We do not enter into derivatives
contracts or other financial instruments for trading or speculative purposes.

INTEREST RATES

We rely on long-term variable and fixed rate debt in our capital structure.
We do not currently have in place interest rate caps in connection with the
floating-rate balance of our interest-sensitive liabilities. Our outstanding
interest-sensitive financial instruments as of June 30, 1999, are reflected in
Note 5 of the Notes to the Consolidated Financial Statements.

At June 30, 1999, the carrying value of our fixed rate debt was
approximately $5.8 million less than its fair value. Market risk related to our
fixed rate debt is estimated as the potential increase in fair value resulting
from a hypothetical one-half percent decrease in interest rates, and amounts to
approximately $1.5 million. Market risk related to our variable rate debt is
estimated as the potential decrease in pre-tax earnings resulting from a
hypothetical one-half percent increase in interest rates. If interest rates rise
immediately by one-half percent, pre-tax earnings will decrease by approximately
$500,000 in 2000.

MATERIALS

Certain commodity raw materials, such as aluminum, fiberglass and resin,
used in the manufacture of our products are subject to pricing volatility. We do
not engage in hedging activities, and generally secure our commodity raw
material requirements through one- to three-year supply agreements. Most of
these agreements contain fixed price provisions although some are subject to
quarterly price adjustments.

35
<PAGE>
BUSINESS

OVERVIEW

We are the second largest manufacturer of motorized recreational boats in
the United States. We produce boats under the leading brand names of Aquasport,
Carver, Crestliner, Glastron, Larson, Logic, Lund, Nova, Ranger, Scarab, Trojan
and Wellcraft. We sell our products through an established network of
approximately 1,300 independent authorized dealers in all 50 states and
approximately 30 foreign countries. We have recently introduced new technologies
to our manufacturing processes that allow us to produce higher quality boats
more efficiently and with fewer regulated air emissions. We believe our
innovations have positioned us to enter new markets and substantially increase
our market share in the recreational boating industry.

INDUSTRY OVERVIEW

Total U.S. retail sales of new motorized recreational boats were
approximately $7.5 billion in 1998 increasing from $4.1 billion in 1992. We
believe that sales of recreational power boats have grown steadily since 1971,
except for the 1989 to 1992 time frame. During that four-year period, the
effects of a recession, the imposition of a luxury tax, and other adverse
political and economic events had a material adverse impact on sales of all
boats, but particularly in the upper end of the segment including cruisers and
luxury yachts.

Sales trends in the recreational boating industry are influenced by several
factors, including general economic growth, consumer confidence, spending habits
and household income and net worth levels. Interest rates and fuel prices also
have a direct impact on boat sales, as well as demographic trends at the local,
regional and national level. Competition from other leisure and recreational
activities, such as vacation properties and travel, can also affect sales of
recreational boats.

We believe the upturn in the industry from 1992 to 1998 has been fueled by
the overall strength of the U.S. economy and the rapid growth in the wealth and
number of consumers from the baby-boomer generation, as well as demand for boats
from the estimated 35 million adult anglers in the U.S. Our target market is the
35 to 54 age group, which overlaps with the baby-boomer population. Although
individuals in our target age group account for only 36% of the U.S. population
over age 16, they account for over 50% of the discretionary income and represent
the fastest growing segment of the U.S. population, growing at a 2.5% annual
rate.

STRATEGY

Our operating strategy emphasizes our new proprietary technologies, allowing
us to:

- DELIVER A SUPERIOR QUALITY PRODUCT. Our commitment to building high
quality boats has resulted in our acquiring new manufacturing technologies
that we believe will yield boats of increased durability, structural
integrity and consistency. We began producing VEC boats on a limited basis
in early 1999, and we expect to integrate VEC systems into all our
fiberglass operations for boats under 30 feet over the next two years. We
plan to use our VEC process to produce premium quality boats carrying a
limited lifetime warranty. Our Roplene construction technology has enabled
us to produce high quality recyclable polyethylene boats, which also carry
a limited lifetime warranty. We market these boats as the World's Toughest
Boat-TM-, at a discount to the typical sales price of comparable
entry-level fiberglass boats.

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<PAGE>
- LOWER UNIT COSTS THROUGH INCREASED AUTOMATION IN OUR PLANTS. Based on our
experience to date, we expect the increased automation and process
controls associated with our new manufacturing processes to significantly
reduce our labor, quality control and warranty costs. We also hope to
reduce costs by shortening our product changeover and new product
development time frames.

- REALIZE ECONOMIES OF SCALE THROUGH OUR BUYING POWER. We are the largest
motorized recreational boat manufacturer that does not manufacture its own
engines. We believe this positions us as the largest third party customer
of our major engine suppliers. We intend to continue seeking the most
advantageous purchasing arrangements from these suppliers, while also
continuing to expand and maintain strong relationships with other engine
suppliers from whom we purchase engines. We are also a significant
consumer of fiberglass materials, and we intend to capitalize on our
relationships with fiberglass suppliers to help us commercialize the VEC
technology in areas outside our own uses.

- EXCEED CURRENT ENVIRONMENTAL QUALITY STANDARDS FOR MANUFACTURERS IN OUR
INDUSTRY. Our new VEC and Roplene technologies enable us to produce boats
with significantly less regulated air emissions than traditional
processes. Traditional open-mold processes produce air emissions,
particularly styrene, whose levels are regulated by the government. Boat
production can be limited by these regulations. Our new technologies
eliminate a substantial amount of these emissions, thereby producing a
cleaner and safer work environment, allowing us to produce more boats at
existing facilities. We believe that consumers and governmental regulators
alike will react positively toward these advances in manufacturing, and
that our facilities which operate with these technologies will be among
the leaders in creating cleaner and safer work environments in our
industry.

- EXPLORE OPPORTUNITIES TO LICENSE OR APPLY OUR TECHNOLOGIES IN OTHER MARINE
AND NON-MARINE INDUSTRIES. We believe the VEC technology has broad
potential for commercial application in areas other than fiberglass boat
construction. We intend to market the technology for application to other
marine products that do not compete with our business, and to develop its
use, through licensing arrangements or with other partners, in areas
outside the marine industry, including the construction, transportation
and recreation industries. We estimate that the potential total global
market for VEC-produced products could be approximately $10.0 billion.

Our marketing strategy seeks to increase market share by enabling us to:

- LEVERAGE OUR BRAND NAMES THROUGH INNOVATIVE PROGRAMS WITH MARKETING
PARTNERS. We have developed unique programs with marketing partners to
increase our exposure in the boating industry. These programs are designed
to assist our dealers and each of our manufacturing facilities by
promoting our products, and cross-marketing products of other companies
that market to a similar customer base. Our Ranger boats, for example,
serve as the manufacturer sponsor for the Wal-Mart FLW Tournament, a
leading professional bass fishing tour that is televised nationally on
ESPN. We are also sponsoring the Ranger Boats Millenium Tournament
(M1)(SM), scheduled for a live nationwide broadcast on the Fox Television
Network in November 1999. We believe our participation in these
tournaments has helped establish Ranger as the premier bass fishing boat
product. We intend to apply the Ranger strategy to certain other boat
products such as Lund and Crestliner. Accordingly, we will sponsor the RCL
(Ranger, Crestliner, Lund) tournament in June 2000. We also partner with
others, including CITGO, various engine manufacturers, dealer finance
companies and other organizations, to supplement our sales efforts through
cross-marketing efforts and promotions.

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<PAGE>
- EXPAND OUR INTERNATIONAL PRESENCE BY CONTINUING TO BUILD DEDICATED SALES,
MARKETING AND DISTRIBUTION SYSTEMS. Historically, our international sales
have not been significant in relation to our overall sales, and we have
traditionally relied on independent sales representatives to market our
products. In 1998, recognizing the opportunity for international growth,
we appointed a director of international sales and added a dedicated
international sales and support department. We currently have
relationships with more than 200 international dealers. We have arranged
for floor plan financing agreements or credit insurance in most of the
foreign markets we serve. We believe that our dedicated sales force, a
stronger international dealer network and our increased commitment to the
international market for motorized recreational boats will enable us to
substantially increase our presence in the international market place.

- STRENGTHEN OUR DEALER ORGANIZATION THROUGH EXPANDING OUR NETWORK AND
PROVIDING SUPERIOR CUSTOMER SERVICE AND SUPPORT. We have a distribution
network of over 1,300 dealers located throughout the United States and
internationally. We also seek to capitalize on our strong dealer network
by educating our dealers on the sales and servicing of our products and
helping them provide more comprehensive customer service, with the goal of
increasing customer satisfaction, customer retention and future sales. We
provide promotional and incentive programs to help our dealers increase
product sales. We intend to continue to strengthen our dealer network and
build brand loyalty with both dealers and customers.

As part of our overall strategy, we will also consider and make acquisitions
in order to:

- COMPLEMENT OUR EXISTING PRODUCT LINES, EXPAND OUR GEOGRAPHIC PRESENCE IN
THE MARKETPLACE AND STRENGTHEN OUR MANUFACTURING AND OPERATING
TECHNOLOGIES. Historically, we have expanded our business and product
lines through acquisitions, including three during the past year. As a
result of our recent acquisitions, we have expanded into a new market for
entry-level boats with our Roplene technology, positioned our company to
exploit the VEC technology in the fiberglass business, and gained the
opportunity to expand our aluminum boat manufacturing presence in the
southern United States with our Horizon acquisition. We will continue to
evaluate acquisition opportunities that allow us to expand our geographic
reach, improve our technology, or strengthen our brand offerings.

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<PAGE>
PRODUCTS

We believe that we offer the most comprehensive range of motorized
recreational boats in the industry. In particular, we seek to distinguish
ourselves by offering a wide range of products to the fishing boat market and
the family recreational market, as well as many smaller niche markets.

The following table provides a brief description of each of our brands and
its particular market focus:

<TABLE>
<CAPTION>
BRAND NUMBER
AND YEAR OF OVERALL APPROXIMATE RETAIL PRICE
ESTABLISHED MODELS LENGTH RANGE DESCRIPTION
- --------------------- -------- -------- ------------------------ -----------------------------------------
<S> <C> <C> <C> <C>
Aquasport (1964) 12 16'-27' $12,700 to $93,000 Fiberglass offshore fishing boats.
Designed for offshore and big-inland
water use by dedicated experienced
fishermen and promoted through our
sponsorship of professional offshore
fishing teams.

Carver (1954) 13 32'-53' $125,000 to $750,000 Fiberglass, wide-beam, accommodation-
focused cruisers. Marketed to experienced
boat owners through trade magazines and
boat show exhibitions.

Crestliner (1946) 43 12'-24' $500 to $35,000 Aluminum fish'n ski, narrow-beam
sportfishing cruisers, utility, bass and
fishing boats, pontoons and deckboats.
Marketed to entry-level family fishing
and boating enthusiasts with
industry-leading warranty.

Glastron (1956) 21 16'-24' $6,000 to $49,000 Fiberglass runabouts, narrow-beam
cruisers and performance boats.
Encompasses affordable, entry-level to
mid-range sportboats. Marketed as high
value runabouts for family groups.

Larson (1913) 23 16'-33' $6,000 to $150,000 Fiberglass runabouts, wide-beam and
narrow-beam cruisers and deckboats.
Marketed to the high-end of the largest
segment of the powerboat market.

Logic (1994) 16 12'-21' $1,800 to $25,000 Low-cost, entry-level polyethylene
fishing and utility boats. Marketed as
the World's Toughest Boats-TM- to
entry-level boat buyers.

Lund (1948) 60 12'-22' $1,000 to $35,000 Premium aluminum fishing boats ranging
from basic utility models to tournament
models. Marketed through alliances with
professional fishing community.

Nova (1999) 45 10'-25' $500 to $22,000 Aluminum utility boats, bass boats,
pontoons and deck boats. Marketed to
price-conscious and first-time boat
buyers.
</TABLE>

39
<PAGE>

<TABLE>
<CAPTION>
BRAND NUMBER
AND YEAR OF OVERALL APPROXIMATE RETAIL PRICE
ESTABLISHED MODELS LENGTH RANGE DESCRIPTION
- --------------------- -------- -------- ------------------------ -----------------------------------------
<S> <C> <C> <C> <C>
Ranger (1968) 47 16'-25' $10,000 to $60,000 Fiberglass and aluminum bass,
multi-species and saltwater fishing
boats. Marketed to professional and other
experienced fishermen through sponsorship
of fishing tournaments and alliances with
professional fishing circuits.

Trojan (1961) 4 32'-44' $100,000 to $450,000 Fiberglass express cruisers. Marketed to
youthful, affluent boaters.

Wellcraft (1955) 38 16'-45' $11,500 to $395,000 Fiberglass runabouts, wide-beam sport and
performance cruisers, Scarab performance
boats and fiberglass offshore fishing
boats. Promoted through sponsorship of
professional offshore racing competitions
and drivers.
</TABLE>

TECHNOLOGY

FIBERGLASS MANUFACTURING TECHNOLOGY AND PROCESSES

For the past 50 years, essentially the same technologies and processes have
been used to produce fiberglass boats. The most common method is open-face
molding which is usually a labor-intensive, manual process whereby employees
hand spray and apply fiberglass and resin in layers on open molds to create boat
hulls, decks, stringers and other smaller fiberglass components. This process
can result in inconsistencies in the size and weight of parts, which may lead to
high warranty costs. Open-face molding is typically capable of producing one
hull per mold during a work day.

The hand spraying of the resin and fiberglass in the open-face molding
method creates styrene emissions and is subject to regulation by OSHA and the
U.S. EPA and its state counterparts. OSHA standards limit the amount of styrene
emissions to which an employee may be exposed without the need for respiratory
protection or upgraded plant ventilation systems. The EPA and its state
counterparts restrict the approved levels of styrene emissions in a particular
plant's air emissions facility permit.

Since the early 1990s, we have been exploring new technologies to improve
labor efficiencies, product quality and plant working conditions. Eighteen
months ago, we combined efforts with Pyramid Operating Systems, Inc. to continue
the development of a new injection molding manufacturing process, called Virtual
Engineered Composites or VEC-TM-. Pyramid has advised us that prior to the date
of our acquisition agreement, it had invested approximately $12.0 million in the
development and commercialization of the VEC technology. We have spent an
additional $1.7 million to help develop the VEC technology. We currently own a
minority interest in Pyramid and will acquire the remaining shares of Pyramid
when we complete this offering.

The VEC technology is designed to improve all major aspects of the existing
fiberglass open-faced molding process currently used by numerous industries,
including the boat manufacturing industry. In the VEC process, the production of
the fiberglass parts is accomplished through a closed-mold process which
substantially reduces styrene emissions. The VEC manufacturing process provides
a high degree of automated manufacturing of fiberglass products with relatively
low capital investment. We believe that the VEC technology has the potential to
become the standard for fiberglass manufacturing in both marine and non-marine
industries.

40
<PAGE>
The VEC operating system consists of integrated software and hardware that
manage the entire lamination process, including equipment, resins and process.
Each facility that contains a VEC cell will be connected by dedicated digital
phone lines to a remote monitoring facility where our technical experts will be
available 24 hours a day, seven days a week to provide advice and technical
assistance as necessary. The VEC operating process also includes a patented
low-cost flexible mold system enabling us to produce a variety of parts
economically. This mold system utilizes a thin composite skin in the shape of
the part mounted on a water-filled pressure vessel. This composite skin can be
rapidly fabricated and is readily changeable, thereby significantly improving
the speed and cost of prototyping new parts. The essential advantages of the VEC
operating system are that it enables the manufacturer to control the key
elements of the molding process, lower unit manufacturing costs through labor
savings, eliminate structural inconsistencies and variances, produce stronger
products, and substantially reduce styrene emissions inherent in the open-faced
lamination process.

The following table illustrates the potential advantages of the new VEC
technology compared to a typical open-faced molding process:

<TABLE>
<CAPTION>
VEC-TM- VERSUS
CHARACTERISTIC OPEN-FACE MOLDING IMPLICATION
- -------------- ----------------- ------------------------------------
<S> <C> <C>
Tensile Modulus (overall 15% Stronger(1) Stronger composite, allowing for
strength)(psi).................... lower weight parts and reduced
warranty costs; uses less resin
reducing materials cost

Part Weight Variability (lbs.)...... 80% Less(2) Increased product consistency,
easier to assemble, helps reduce
warranty costs

Designed Part Weight (lbs.)......... 20% Lighter(3) Lower weight parts, less resin so
lower materials costs

Styrene Emissions--Lamination Only 75% Less(4) More capacity in plant throughput
(lb. Styrene per lb. Laminate).... because of greater capacity in air
emissions permits, better work
environment

Factory Floor Space (ft.)(2)........ 75% Less(2) Reduces overhead and need for
additional plant capacity

Cycle Time (minutes)................ 75% Less(2) Increases production efficiency and
plant throughput capacity
</TABLE>

- ------------------------

(1) Tested at Product Design Center, Westerville, Ohio.

(2) Substantiated at our manufacturing/test site.

(3) Internal calculation for engineering-designed part.

(4) Compilation from U.S. Environmental Protection Agency Air Pollutant
Emissions Factors AP-42 Section 4.4 "Polyester Resin Plastic Products
Fabrication."

We have conducted extensive testing of the VEC-produced boat hulls. These
tests include on-water endurance testing in a variety of conditions and
aggressive operations for 200 hours per hull. At various stages in the design
process, VEC-produced hulls or panel samples have been tested by independent
third parties for blister resistance and ultra-violet resistance (Cook
Composites); thermoshock (Enviro Lab); and tensile, flexural and impact strength
(Reichhold Chemical and Product Design Center). The results of these tests
validate our confidence in the quality of VEC-produced boats, enabling us to
provide our customers with a limited lifetime warranty instead of the more
traditional five-year structural warranty.

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<PAGE>
We believe that closed-molding technology for fiberglass manufacturing, such
as the VEC technology, is likely to become the new standard for the fiberglass
boat building industry. For us, we expect it will:

- Reduce manufacturing costs and increase efficiency;

- Substantially reduce fiberglass warranty issues while allowing us to issue
limited lifetime structural warranties on VEC-produced hulls;

- Improve our ability to produce lower cost tooling in less time than with
conventional methods;

- Dramatically reduce our styrene emissions associated with the traditional
fiberglass lamination process; and

- Provide products of a uniform interior and exterior quality.

EXPANSION OF VEC

We are building an estimated $12.0 million manufacturing facility that will
utilize our VEC technology and other new process equipment. This facility will
be located adjacent to our current Larson/Glastron facility in Little Falls,
Minnesota. We expect to complete this facility by June 2000. Over the next two
years, we plan to expand the use of the VEC process in our fiberglass
manufacturing activities to include hulls, decking, stringers (internal
structural supports) and smaller fiberglass components.

OTHER VEC OPPORTUNITIES

Based on fiberglass manufacturing industry research, we believe that the VEC
technology and processes offer significant opportunities to both marine and
non-marine industries. As we develop this technology, we plan to expand its
application to other marine products that do not compete with our business, such
as ski boats and sail boats. We plan to fully optimize the structural and
financial benefits of the VEC process in marine applications by licensing the
technology to other boat manufacturers. We plan to expand the VEC technology to
non-marine applications and explore licensing opportunities with third parties
in non-marine industries. We believe potential markets for VEC technology
outside of the marine industry include transportation, building and construction
and recreation. Target markets in transportation include truck, bus, heavy
equipment and automotive after market parts. The target markets in building and
construction include exterior doors, tubs and showers. The target markets in
recreation include golf carts, RV components and water slides. We estimate the
potential total global market for VEC-produced products could be approximately
$10.0 billion.

ROPLENE CONSTRUCTION MANUFACTURING

Our newly-acquired subsidiary, Genmar Logic, LLC, employs Roplene
construction using polyethylene and patented rotational molding manufacturing
technology to produce our highly-durable line of Logic boats at low cost. This
technology was awarded the New Product Award (Small Company Category) in 1998 by
the National Society of Professional Engineers and the North Carolina Governor's
New Product Award in 1997. Logic Marine has advised us that prior to our
acquisition of Logic Marine, it had invested approximately $10.5 million in the
development and commercialization of the technology.

Polyethylene is stronger than fiberglass and significantly less expensive.
This material in similar form has received broad acceptance in the manufacture
of products such as canoes and kayaks. Rotational molding involves loading
pre-measured polyethylene into a mold. The mold can be configured to form
internal structural parts that connect the upper and lower surfaces of the
molded item. The mold is then placed into an oven where it is rotated about both
its vertical and horizontal axes. The melting polyethylene adheres to the hot
mold and selectively coats the inner surface of the mold. The mold continues to
rotate during the cooling cycle so that the part retains an even thickness

42
<PAGE>
throughout the process. Once the parts are cooled, they are released from the
mold. The rotational speed and heating and cooling times are all controlled
throughout the process. In addition to being stronger and less expensive than
fiberglass, the polyethylene materials used in making Logic boats are
recyclable.

MARKETING AND DISTRIBUTION

MARKETING

Our products are marketed worldwide through independent dealer networks. In
our industry, independent dealers are the primary means by which motorized
recreational boats are marketed to retail consumers. Because the boating
industry is highly competitive, we are continually focused on developing unique
marketing programs to assist our dealers and their sales efforts. Our internal
sales force supplements our dealers' marketing efforts with various initiatives
and strategies, including:

- Advertising in regional, national and international boating and other
recreation magazines;

- Furnishing promotional assistance at regional, national or international
boat shows;

- Working with dealers to identify new design features for our products;

- Participating in special promotional programs with other producers of
consumer goods and certain retailers; and

- Providing company-sponsored retail finance and other programs designed to
assist our dealers in selling and marketing our products.

Internationally, all brands are positioned as Genmar products under a
super-brand concept to maximize leverage, expand sales for our less-established
brands, and distinguish ourselves from competitors.

RETAILER ALLIANCES. We use marketing programs across the United States with
gas stations, marinas and high-traffic retail locations to achieve successful
marketing results. We have developed exclusive or preferential relationships
with CITGO, Wal-Mart Stores, Inc. (Sam's Club), Amway and Boater's World to
offer complimentary or discounted items to customers and/or employees of these
organizations who purchase our boats through authorized dealers. CITGO, a
leading convenience store operator with over 15,000 U.S. locations, promotes our
products with banners, posters and other point-of-sale items for one month each
spring. We have developed a marketing partnership with the Sam's Club division
of Wal-Mart Stores, Inc., which has afforded our dealers the preferential right
to display and sell boats from Sam's Club locations. The Amway and Boater's
World relationships provide specific benefits to purchasers of our boats when
the sale results from a joint promotion.

TOURNAMENT SPONSORSHIP. We believe one of our primary strengths is the
manufacturing and marketing of fishing boats. Approximately 35 million adult
Americans participate in recreational fishing. Ranger fiberglass fishing boats
and Lund and Crestliner aluminum fishing boats are leaders in their respective
market niches. Historically, these brand names have gained visibility through
the sponsorship of fishing tournaments. However, beginning in 1996, through
Operation Bass, Inc., an entity owned and controlled by some of our stockholders
and officers, Ranger became the exclusive boat manufacturer sponsor of the
Wal-Mart FLW Tournament. Broadcast on ESPN and ESPN2, this tournament is the
mostly widely televised fishing tournament in the world. The tournament is also
supported by other sponsors such as VISA, Coca-Cola, Chevrolet, Wal-Mart
Stores, Inc., Coleman Outdoor Recreation, Fuji Photo USA, Black & Decker and
Timex. We believe the tournament has generated significant media attention and
has further established our Ranger boats as the leading bass-fishing product. We
see this growth in fishing and tournaments as an important opportunity for
marketing our fishing boat products. We are sponsoring the Ranger Boats
Millennium Tournament (M1)(SM), a bi-annual event scheduled for a live
nationwide broadcast on the Fox Television Network in November 1999, and the RCL
(Ranger, Crestliner, Lund) Tournament in June 2000, with money payouts of
approximately

43
<PAGE>
$3.5 million and $1.4 million, respectively. In order to qualify for these
events, a participant is required to own the appropriate Genmar fishing boat and
be in the highest winning position of the various qualifying tournaments. We
plan to continue expanding our tournament sponsorship, including those for
salt-water fishing.

DISTRIBUTION

Our sales are made through more than 1,300 independent authorized dealers.
Our boat brand success can be directly associated with the quality of our dealer
organizations. Many of these dealers carry only one or two of our product lines
and most are not exclusive to us.

Although we have long-standing relationships with many of our dealers,
dealer agreements generally are non-exclusive and for a term of one year. No
single dealer accounted for more than 5% of our net revenues in the fiscal year
ended June 30, 1999.

We sponsor various programs to provide our dealers with marketing and
financial assistance and to encourage them to offer broader lines of our
products. Under these programs, we offer dealers marketing discounts for early
delivery and bulk sales, as well as interest-free floor plan inventory financing
for certain periods. In most cases, our boats are sold to dealers under
third-party floor plan financing arrangements or cash on delivery. Foreign sales
are financed primarily under letter of credit terms or with credit insurance. In
a typical floor plan financing arrangement, an institutional lender agrees to
provide a dealer with a line of credit in a specified amount for the purchase of
inventory that secures that credit. We, in turn, agree to indemnify the lender
against loss up to a specified aggregate amount arising from defaults by dealers
financed by that lender. This indemnification is generally made through our
repurchase of boats that have been repossessed by the lender. For the fiscal
year ended June 30, 1999, 67.3% of our net revenues were financed through these
floor plan financing arrangements. We do not provide financing to retail
consumers.

Through the use of special incentive programs, we encourage dealers to place
orders for products on a consistent and continuous basis throughout the year.
These programs facilitate earlier movement of our inventory into distribution,
enable our plants to manufacture at a relatively constant rate throughout the
year and eliminate the need to maintain a large stock of products in inventory.
This reduces the impact of seasonal factors on our operations. We hold various
annual dealer meetings, at which we promote our new product offerings for the
new model year, which commences on July 1. We have ongoing programs aimed at
maintaining inventories at the lowest possible levels. Sales are made to dealers
by our own sales personnel and by independent manufacturers' representatives.

Over the last two years, dealers have begun to consolidate and bring more
sophistication to the sales, customer service and management areas. Throughout
our organization, we have taken the opportunity to strengthen existing
dealership arrangements and secure new dealer relationships.

Beginning in 1998, we revised our approach to conducting our international
business. Historically, we used outside organizations to manage our
international distribution activities. Sales outside the United States and
Canada during 1999 accounted for only 5.1% of our total revenues. Our strategy
for expanding international sales combines a centralized approach to sales of
individual brands, a shift in branding philosophy and the development of sales
support programs customized to foreign markets. We have established a dedicated
and experienced staff to conduct sales and initiate dealer relationships
throughout the world. A corporate international department is responsible for
sales of our individual brands, providing dealers a single, cost-efficient
source of products across our entire range of offerings.

We are seeking to build long-term partnerships with international dealers
through in-market specialists, a multi-lingual staff and a customized approach
to finance, credit, marketing and dealer support.

44
<PAGE>
MANUFACTURING OPERATIONS

Our motorized recreational boats are manufactured at nine principal
locations in Arkansas, Florida, Kansas, Minnesota, North Carolina, Wisconsin and
Manitoba, Canada. We intend to increase operating efficiency and improve product
quality by maximizing our manufacturing capacity and by utilizing our new
manufacturing technologies. We also seek further cost-savings and improved plant
capacity utilization by having certain of our plants manufacture boats under
several different brand names. Our recent acquisitions of operations such as
Logic and Nova have increased our manufacturing capacity.

MANUFACTURING PROCESSES

Our fiberglass and aluminum manufacturing processes are designed to ensure
the quality and durability of our products. All of our boats undergo continuous
quality control inspection during assembly and again at the end of the
production line. When the boat has been completed, it is loaded on our company
trucks, or a common carrier's vehicle, and delivered to the dealer.

FIBERGLASS. The fiberglass manufacturing process begins with the
establishment of design parameters. Boats are then designed and a plug, or
reverse mold, is constructed. Molds used in the boatbuilding process are cast
from the plug. Prototype boats are built in the initial mold. If the prototype
performs to established test criteria, additional molds are created for
production. The manufacturing process begins with the application of the outside
finish, or gelcoat, directly into the mold. Layers of fiberglass and resin are
then applied during the lamination process over the gelcoat. After curing, the
hulls and decks are removed from the molds and are trimmed and ready for final
assembly which will include the installation of electrical and plumbing systems,
engines, upholstery, accessories and graphics. In some operations, some items
like vinyl upholstery may be outsourced to outside vendors. Our VEC technology
manufacturing processes are discussed in "--Technology."

ALUMINUM. In our aluminum operations, we cut the aluminum into various part
patterns, bend the aluminum in accordance with design specifications, then
assemble the parts by riveting or welding. We then install the electrical and
plumbing systems, engines, upholstery, accessories and graphics.

ROPLENE CONSTRUCTION. The Roplene construction technology offers many
advantages in the boat manufacturing process. The entire hull, deck and stringer
system is manufactured in a single manufacturing operation resulting in low
manufacturing costs and low floor space requirements. A number of the attachment
fittings for components and accessories are also assembled in this single
manufacturing step. The attachment of the various components and accessories
during the final stages of completion requires minimal operations. The
computerized rotational molding operation minimizes the need for significant
amounts of highly skilled labor. The plant contains computer control of the
rotational molding operation and finishing operations, maximizing product flow
and minimizing unnecessary movement of components and product.

ENVIRONMENTAL ASPECTS

Since the early 1990's we have been aggressive in our efforts to employ
technologies to reduce regulated air emissions and the historical dependence on
regulated chemicals in the manufacturing process. We have led the industry in
the incorporation of low-emission resins and gelcoats into our open-face molding
processes. We also employ a variety of closed-molding techniques in our
operations

45
<PAGE>
to produce small parts. In addition, we have tested other technologies for large
parts. In the past, we have not been able to convert these technologies to a
production scale for large parts because of high cost, labor inefficiencies and
sub-standard part quality. We believe that our new VEC and Roplene technologies
will address many of these problems.

We have been aggressive in removing flammable and other regulated substances
from the workplace, such as cleaners and adhesives, and replacing them with
environmentally friendly materials that are not regulated.

AUTOMATION

We currently use robotic cutters and welders in some of our fiberglass and
aluminum boat manufacturing operations. We have been exploring the use of
robotics in our remaining facilities to further automate our manufacturing
process. Many aspects of the VEC operating system are particularly well-suited
to automation, which we plan to introduce to our operations as we increase
production of VEC boats. Our new manufacturing facility will feature four VEC
cells capable of operating around the clock. These cells will use robotics to
spray gelcoat and remove parts from the mold. The parts will then move to the
cut-and-trim area where robotic water jet cutters will trim the parts and make
the necessary borings for the assembly process. The assembly area will feature a
conveyor system designed to facilitate engine installation and advanced work
aids for final boat assembly, and to minimize materials.

MANAGEMENT INFORMATION SYSTEMS

We use computer systems to help schedule production, manage our inventory
and order supplies. Seven of our ten manufacturing facilities are supported by
purchased or internally developed integrated enterprise resource planning
systems. Our two newly acquired and our Canadian manufacturing facilities
utilize certain limited systems to support their manufacturing and financial
operations.

BACKLOG

We work closely with our dealers to monitor their monthly inventory levels
and retail sales, in order to allow us to better manage our production and
shipping requirements. Dealer sales are made pursuant to purchase orders rather
than long-term contracts. Our backlog consists of purchase orders on hand,
generally having delivery dates scheduled over the following six months. Our
backlog for the recreational boat segment increased 67.6% to $310.0 million at
August 31, 1999, compared to $185.0 million at August 31, 1998. Although
customers may cancel or reschedule deliveries without penalty until the
production of the order is started, we believe our backlog has historically been
a reliable indicator of future revenue results.

SUPPLIERS

We do not manufacture the engines installed on our boats. Engines are
generally specified by dealers at the time of ordering, usually on the basis of
anticipated customer preference or actual customer orders. We have entered into
outboard supply, pre-rig or package agreements with Mercury Marine, a division
of Brunswick Corp., and Outboard Marine Corporation, as well as Yamaha, Honda
and Suzuki. We believe we are the largest third-party customer of both Mercury
Marine and Outboard Marine Corporation. We have also entered into gasoline
inboard and sterndrive supply agreements with Mercury Marine as well as a diesel
and gasoline inboard and sterndrive supply agreement with Volvo Penta of the
Americas. Each of these long-term supply agreements contain incentive and/or
discount provisions, effectively reducing the cost of our engine purchases if we
achieve specified unit or dollar volumes. If we fail to achieve certain unit or
dollar volumes as specified in these agreements, we may lose certain such
discounts or incur penalties.

46
<PAGE>
Although inboard, inboard/outdrive and outboard engines of comparable
quality and cost are available from other manufacturers, in the event of a
sudden interruption in the supply of engines from our principal suppliers, we
could be unable to obtain engines from other suppliers in sufficient quantities
to meet our near-term production schedules and customer preferences.

We have agreements with suppliers of raw materials, including glass,
fiberglass resin and aluminum, electronics and other parts and accessories.
Although we contract for raw material supplies on a bid basis, numerous
alternative raw materials suppliers exist. However, commodity raw material
prices are subject to price fluctuations. If we are not able to pass along price
increases to our customers, these fluctuations could have a material adverse
effect on our results of operations.

COMPETITION

Competition within the recreational boat industry is intense, with more than
3,700 boat manufacturers operating at the national and regional levels. Our
nationally recognized domestic competitors include, among others,

- Brunswick, including its Bayliner, Sea Ray and Boston Whaler operations;
and

- Outboard Marine, including its Four Winns, Stratos and Lowe operations.

Boat manufacturers also compete directly with the used boat market and
indirectly with other recreational products and activities. Our boats currently
compete with those of other manufacturers primarily on the basis of their
reputation for performance, durability and stability, as well as for their
styling and price. Pricing of boats at retail is determined solely by the
dealer.

PATENTS AND TRADEMARKS

Historically, patents have not been significant in the motorized
recreational boat industry. Trademarks and trade names do carry importance, but
are generally associated with the name of a particular company or product. We
own trademarks for each of our brand names, all of which have received federal
registration, except Logic, for which our application is pending. Other
registered trademarks, such as Scarab, together with certain styling features
associated with them are licensed exclusively to us by their owners. We are also
a licensee of certain hull designs developed and/or patented by others.

We have applied for patent protection of certain aspects of our VEC
technology. Notices of allowance have been received from the United States
Patent and Trademark Office for applications covering a specific version of a
mold for use in the VEC operating system and a method of forming a molded
article having a marbleized appearance. There are currently three pending United
States patent applications seeking broader protection of the overall VEC
process, on the mold used in the process and on the remote control and
monitoring aspects of the VEC operating system. We also own nine United States
patents covering various aspects of the Roplene construction. These patents
cover various molded boat hull and internal structure and reinforcement
configurations, methods for making such structures and tooling for the Roplene
construction.

REGULATION AND ENVIRONMENTAL

Our operations are subject to numerous federal, state and local laws and
regulations related to the safety and protection of the environment. Certain
materials used in boat manufacturing are toxic, flammable, corrosive or reactive
and are classified by federal and state governments as "hazardous materials."
Control of these substances is regulated by the U.S. Environmental Protection
Agency and state environmental protection agencies, which require reports and
inspect facilities to monitor compliance. In addition, under CERCLA, any
generator of hazardous waste sent to a particular disposal site is potentially
responsible for the cleanup, remediation and response costs required for the

47
<PAGE>
site if the site is not properly closed by the owner or operator, irrespective
of the amount of waste the generator actually sent to the site.

We believe that we are in substantial compliance with all existing
environmental laws and regulations. In 1995, we signed a final consent order
with the Florida Department of Environmental Protection to settle all
outstanding issues with respect to an acetone release at our Wellcraft plant in
Sarasota, Florida. The remaining estimated cost of remediation activities
required at this site ranges from $1.7 million to $2.0 million. Based on
available information, we believe that our reserves as of June 30, 1999 are
adequate to cover these costs.

Historically, our facilities have used underground storage tanks for storing
certain materials associated with our operations, including petroleum, acetone
and resins. We have removed or closed in place all underground storage tanks
according to applicable laws. No material issues related to soil or groundwater
contamination were encountered.

In addition to our current regulatory obligations, we face the risk that the
past practices of some of our current and divested operations may have created
conditions that give rise to liability under CERCLA and comparable state laws.
With respect to these potential liabilities, we have been identified as a
potentially responsible party at approximately 12 active sites. In certain
instances, we also have a duty to indemnify the current owners for environmental
matters related to divested operations, including those of AMF Incorporated.
Excluding the matters with Wellcraft discussed above, we currently anticipate
total environmental-related costs associated with our current and divested
operations at approximately $2.3 million, which include CERCLA-type liabilities.
These costs are likely to be incurred over a period of up to ten years. As of
June 30, 1999, based on available information, we have adequate reserves to
account for any potential exposure with respect to current and divested
operations, and we believe that these reserves are adequate to cover any
potential costs. Nevertheless, the nature and extent of CERCLA proceedings is
that cleanup estimates, the allocated financial responsibilities of potentially
responsible parties and the degree of regulatory scrutiny may change over time
and therefore we are not certain that these estimates will ultimately reflect
our exposure.

Although capital expenditures related to compliance with environmental laws
are expected to increase in the coming years, we do not currently anticipate
that any material expenditures will be required to continue to comply with
existing environmental or safety laws or regulations in connection with our
ongoing operations. However, we cannot predict future costs for compliance with
certainty with respect to any costs we may be forced to incur in connection with
our historical on-site or off-site waste disposal. In certain circumstances laws
and regulations impose "strict liability," rendering a person liable for
environmental damage regardless of negligence or fault on the part of that
person. In addition, modifications of existing regulations or the adoption of
new regulations in the future, particularly with respect to environmental
standards, could require material capital expenditures or otherwise have a
material adverse effect on our operations.

Motorized recreational boats must be certified by their manufacturer as
meeting U.S. Coast Guard specifications. In addition, boat safety is subject to
federal regulation under the Federal Boat Safety Act of 1971. The Boat Safety
Act requires boat manufacturers to recall products for replacement of parts or
components that have demonstrated defects affecting safety. We have conducted
product recalls in the past to correct safety-related defects. None of the
recalls has had a material adverse effect on us and we believe that our recall
experience is consistent with prevailing industry experience.

Certain states have required or are considering requiring a license to
operate a recreational boat. These licensing requirements are not expected to be
unduly restrictive. They may, however, discourage potential first-time buyers,
which could affect our business. In addition, certain state and local
governmental authorities are contemplating regulatory efforts to restrict
boating activities on certain inland bodies of water. While we cannot assess the
impact that these regulations would have on our

48
<PAGE>
business until we know the scope of the regulations, they may have a material
adverse effect on our business.

EMPLOYEES

At June 30, 1999, we had approximately 4,600 employees, none of whom were
subject to a collective bargaining agreement. Approximately 4,100 of these
employees were engaged in our manufacturing operations. We consider our employee
relations to be good. We do not conduct significant manufacturing operations
outside the United States.

PROPERTIES

Our corporate headquarters are located in Minneapolis, Minnesota in leased
facilities. We lease or own the following manufacturing facilities:

<TABLE>
<CAPTION>
BRAND LOCATION PLANT SIZE (SQ. FT.) OWNED/LEASED
- ------------------- ------------------------- -------------------- ------------
<S> <C> <C> <C>
Carver/Trojan Pulaski, Wisconsin 468,000 Owned
Crestliner Little Falls, Minnesota 217,000 Owned
Larson/Glastron Little Falls, Minnesota 361,000 Owned
Logic Durham, North Carolina 69,000 Leased
Lund New York Mills, Minnesota 183,000 Owned
Lund Steinbach, Manitoba 87,000 Owned
Nova Junction City, Kansas 21,000 Leased
Nova Junction City, Kansas 106,000 Owned
Ranger Flippin, Arkansas 422,000 Owned
Wellcraft/Aquasport Sarasota, Florida 766,000 Owned
Wellcraft Avon Park, Florida 157,000 Leased
---------
2,857,000
=========
</TABLE>

In connection with our acquisition of Pyramid, we will acquire an additional
56,000 square foot manufacturing facility located in Greenville, Pennsylvania.

We believe that our properties are well maintained and in good operating
condition. Generally, our plants are of reasonably modern, single-story
construction providing for efficient manufacturing and distribution operations.

LEGAL PROCEEDINGS

We and our subsidiaries are parties to legal proceedings, including product
liability and other claims that are considered to be incidental to our business.
In light of insurance coverage and established reserves, such litigation is not,
in the opinion of management, likely to have a material adverse effect on our
financial position or results of operations. We and our Aquasport, Wellcraft and
Genmar Industries subsidiaries have been named as defendants in COUGLAN V.
AQUASPORT, ET AL., a class action suit filed in the U.S. District Court for the
Southern District of Texas on June 17, 1999. The suit alleged certain claims in
connection with the marketing of Aquasport boats from 1996 to 1999, and sought
monetary damages. On October 8, 1999, the U.S. District Court dismissed the suit
without prejudice for failure to state a claim. See "--Regulation and
Environmental" for a discussion of administrative proceedings involving
environmental laws and regulations.

49
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our board of directors currently consists of eight members. We plan to add
an additional independent director in the near future. Our executive officers
and directors, and their ages, positions and brief biographies, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Irwin L. Jacobs......... 58 Chairman of the Board and Director
Grant E. Oppegaard...... 56 President, Chief Executive Officer and Director
Roger R. Cloutier II.... 46 Executive Vice President, Chief Financial Officer and
Director
Steven J. Kubisen....... 47 Senior Vice President--Technology and Corporate Development
Mary P. McConnell....... 47 Senior Vice President, General Counsel and Secretary
John S. Rosendahl....... 35 Senior Vice President--Business Development
George E. Sullivan...... 55 Senior Vice President--Marketing
David H. Vigdal......... 57 Senior Vice President--Operations
Mark W. Peters.......... 37 Vice President and Controller
Ronald V. Purgiel....... 45 Vice President--Purchasing
Daniel W. Schuette...... 52 Vice President--Information Systems
Bjorn Ahlstrom.......... 65 Director
Daniel G. DeVos......... 41 Director
Daniel T. Lindsay....... 55 Director
William W. Nicholson.... 56 Director
Carl R. Pohlad.......... 83 Director
</TABLE>

IRWIN L. JACOBS has served as Chairman and a director of Genmar and its
predecessor entities since 1982. Mr. Jacobs was also Chief Executive Officer of
Genmar from April 1994 through December 1995. Mr. Jacobs served as President and
Chief Executive Officer of Minstar and our other predecessor entities from 1982
to 1994. Mr. Jacobs also holds the following positions: President and a director
of Jacobs Management Corporation, a management company, since 1981; Chairman of
Watkins, a company engaged in direct marketing of household and health products,
since 1978; Chairman of Jacobs Trading Company, a company engaged in wholesale
and retail sale of close-out merchandise, since 1989; and Chairman of Operation
Bass, Inc., a tournament fishing management company, since July 1996. Since
March 1997, Mr. Jacobs has been Director of IPI, Inc., a public company engaged
in the franchising of business printing centers. Mr. Jacobs will serve on the
board of directors of Hatteras. Mr. Jacobs served as a principal of IMR Fund,
L.P., a private equity fund, from 1992 through 1999. Mr. Jacobs was a director
of MEI Diversified Inc., a company associated with the management of
professional beauty salons from August 1986 until November 1992.

GRANT E. OPPEGAARD has served as President and Chief Executive Officer of
Genmar since January 1996 and as a director since 1997. Prior to that time,
Mr. Oppegaard served our company in various capacities, including as a
consultant, President of Sam's Club Boat Buying Program and as Vice Chairman of
Genmar. Prior to 1995, Mr. Oppegaard was Executive Vice President and Senior
Operations Officer of Fingerhut, Inc., a direct marketing company. Mr. Oppegaard
was hired as a business consultant by MEI Salon, a subsidiary of MEI
Diversified, in December 1992. In January 1993, Mr. Oppegaard was named Chief
Operating Officer of MEI Salon. Mr. Oppegaard resigned from MEI Salon in July
1993. Mr. Oppegaard's background includes general management experience in
retailing, television and direct mail marketing, and manufacturing.
Mr. Oppegaard will serve on the board of directors of Hatteras.

50
<PAGE>
ROGER R. CLOUTIER II has served as Executive Vice President and Chief
Financial Officer of Genmar since February 1996 and as a director since 1997. In
addition, since April 1990, Mr. Cloutier has been employed by and served as
Senior Vice President of Jacobs Management Corporation. Mr. Cloutier has
provided and intends to continue to provide his services primarily to us and, to
a much lesser extent, to Jacobs Management. From 1992 through 1999,
Mr. Cloutier actively served as a Vice President of Jacobs Investors, Inc. and
with the general partner to IMR Fund, L.P. Mr. Cloutier was principally
responsible for the overall management of IMR Fund's investments in portfolio
companies, as well as due diligence and negotiation activities relative to
potential acquisitions. Mr. Cloutier was also actively involved in the
management of certain of these portfolio companies. From May 1994 through
October 1996, Mr. Cloutier served as a director, and eventually, Chairman of
Accent Software International Ltd., a company that designed and developed
multilingual word processing and intelligent agent software products.
Mr. Cloutier will serve on the board of directors of Hatteras. Mr. Cloutier
began his career with Arthur Andersen & Co., and is a certified public
accountant.

DR. STEVEN J. KUBISEN has served as Senior Vice President--Technology and
Corporate Development of Genmar since July 1999. Prior to joining Genmar,
Dr. Kubisen was Director of Marketing for Alcoa's Corporate Technical Center
from 1997 to 1999. From 1994 to 1996, Dr. Kubisen was Vice President--New
Business Development for the management-consulting firm Werner--Gershon
Associates. From 1987 to 1994, Dr. Kubisen held a number of senior management
positions with GE Plastics including General Manager of GE Electromaterials and
General Manager--Technology of GE Silicones. Dr. Kubisen has a Ph.D. in Organic
Chemistry from Harvard University and a B.A. from Cornell University.

MARY P. MCCONNELL has served as Senior Vice President, Secretary and General
Counsel of Genmar since November 1996 and as Vice President, Secretary and
General Counsel from December 1995 through October 1996. From January to
December 1995, Ms. McConnell was Vice President, Director of Environmental and
Regulatory Affairs and Assistant General Counsel of Genmar. Prior to joining
Genmar in 1995, Ms. McConnell was a partner with the law firm of Lindquist &
Vennum, where she practiced since 1988.

JOHN S. ROSENDAHL has served as Senior Vice President--Business Development
of Genmar since August 1998. Mr. Rosendahl served as our Vice
President--Operations from July 1997 to July 1998, Vice President--Finance from
December 1995 to July 1997, and Vice President and Controller from March 1995 to
December 1995. Prior to joining Genmar in December 1994, Mr. Rosendahl worked
for ADC Telecommunications, Inc., a telecommunication equipment company, from
1991 to December 1994, and as a certified public accountant with Arthur
Andersen & Co. from 1986 until 1991.

GEORGE E. SULLIVAN has served as Senior Vice President--Marketing of Genmar
since November 1996. From May 1995 to November 1996, Mr. Sullivan served as Vice
President and General Manager of Genmar's Sam's Club Boat Buying Program. From
June 1990 to May 1995, Mr. Sullivan served in various capacities at an indirect
subsidiary of Genmar, Wellcraft Marine Corp., most recently as Senior Vice
President of Marketing and Planning. Prior to joining Genmar, Mr. Sullivan
served as Vice President of Marketing and Communications of Brunswick's Bayliner
division.

DAVID H. VIGDAL has served as Senior Vice President of Operations of Genmar
since July 1997. Mr. Vigdal served in various positions with Fingerhut
Corporation during a 23-year period, including Vice President of Administration.
From 1993 to 1996, Mr. Vigdal was Executive Vice President of Administration for
Premier Salons, prior to which he served as Vice President of Administration for
CVN Companies, Inc. From May 1993 to December 1993, he served as Vice
President-Administration of MEI Salon, a subsidiary of MEI Diversified Inc.

51
<PAGE>
MARK W. PETERS has served as Vice President and Controller of Genmar since
July 1997. From December 1995 to July 1997, Mr. Peters served as our Corporate
Controller. Prior to December 1995, Mr. Peters served our company in a variety
of financial management capacities, commencing in 1984.

RONALD V. PURGIEL has served as Vice President--Purchasing of Genmar since
1996. Prior to joining Genmar in 1996, Mr. Purgiel was Joint Procurement Manager
for Outboard Marine Corporation Boat Group from 1985 to April 1996.

DANIEL W. SCHUETTE has served as Vice President--Information Systems of
Genmar since February 1997 and as Director of Information Systems from December
1995 to February 1997. Prior to joining Genmar in 1995, Mr. Schuette was Manager
of Operations at Burlington Northern Railroad from September 1992 to December
1995 and Manager of Strategic Planning for Grand Metropolitan--Pillsbury from
June 1990 to September 1992.

BJORN AHLSTROM has served as a director of Genmar and its predecessor
entities since 1987. Mr. Ahlstrom has been a director of United Jersey Bank
since 1980, director of Volvo GM Heavy Truck Corporation since 1981, director of
Nederman Corporation since 1990, a director of Summit Bank since 1980 and a
director of CTC Industries, Inc. since 1998. Mr. Ahlstrom serves as an
independent consultant to various companies, and is a special limited partner of
IMR Management Partners, L.P. and IMR Fund L.P. Mr. Ahlstrom is a former
President of Volvo North America Corporation, serving in that capacity from 1970
to 1991.

DANIEL G. DEVOS has served as a director of Genmar since April 1994.
Mr. DeVos also holds the following positions: Chairman and Chief Executive
Officer of the Georgian International Group of Companies Ltd., the holding
company for Ontario Regional Airline, a regional passenger shuttle company;
President/CEO of Capital DP Fox Ventures, a real estate development and sports
management firm; Vice President-Corporate Affairs, since 1993, member of the
Policy Board, since 1989 and Executive Committee, since 1992 of Amway
Corporation, a company engaged in the direct sale of consumer products; and
trustee of First Union Real Estate Investments, a real estate investment trust.
Mr. DeVos previously held other vice president positions at Amway Corporation.

DANIEL T. LINDSAY has served as a director of Genmar and its predecessor
entities since April 1982. Mr. Lindsay has served as Secretary and director of
Jacobs Industries, Inc. since 1977; Secretary and director of Watkins since
1979; Executive Vice President, Secretary and director of Jacobs Management
Corporation since 1981; and as Secretary and director of Jacobs Investors, Inc.
and IMR General, Inc. since 1992. Mr. Lindsay has been a director of IPI, Inc.
since March 1997 and was a director of Mountain Parks Financial Corporation, a
company engaged in banking services, from 1980 to 1996.

WILLIAM W. NICHOLSON has served as a director of Genmar since April 1996.
Mr. Nicholson is a private investor and served as a consultant to Amway
Corporation. Mr. Nicholson is also a limited partner of IMR Fund, L.P.
Mr. Nicholson also serves as director of the following public companies: INTL
Isotopes Inc., a manufacturer of radio chemistry and pharmaceutical isotopes,
since 1997 and Colorado Prime Inc., a direct seller of meat products, since
1996.

CARL R. POHLAD has served as a director of Genmar and its predecessor
entities since April 1988. Mr. Pohlad has been President and a director of
Marquette Bancshares, Inc., a multi-bank holding company, since 1993. Prior to
1993, Mr. Pohlad was President and Chief Executive Officer of Marquette Bank
Minneapolis and Bank Shares Incorporated. Mr. Pohlad is currently a director and
chairman of Mesaba Holdings, Inc., a regional airline, and owner, director and
president of CRP Sports, Inc.; the managing general partner of the Minnesota
Twins, a major league baseball franchise. Mr. Pohlad formerly served as Chairman
of MEI Corporation from 1972 to 1986, and of MEI Diversified Inc. from 1986 to
1994.

52
<PAGE>
MEI Diversified Inc., a company in which Messrs. Jacobs and Pohlad served as
directors, and its subsidiaries, including MEI Salon, a company in which
Messrs. Oppegaard and Vigdal served as officers, commenced voluntary cases under
Chapter 11 of the United States Bankruptcy Code in February 1993.

BOARD COMPOSITION

Upon completion of this offering, our board of directors will consist of
three classes that serve staggered three-year terms as follows:

<TABLE>
<CAPTION>
CLASS EXPIRATION MEMBERS
- ----- ---------- ----------------------------------------------------------
<S> <C> <C>
Class I.................. 2000 Daniel T. Lindsay, Carl R. Pohlad
Class II................. 2001 Daniel G. DeVos, William W. Nicholson, Grant E. Oppegaard
Class III................ 2002 Irwin L. Jacobs, Bjorn Ahlstrom, Roger R. Cloutier II
</TABLE>

BOARD COMMITTEES

There is no nominating committee of the board. Nominees for director are
selected by the board of directors.

EXECUTIVE COMMITTEE. The executive committee provides oversight to our
operations and has all the authority of the board of directors, except with
respect to items requiring stockholder approval or submission. The executive
committee members are Bjorn Ahlstrom, Daniel G. DeVos, William W. Nicholson and
Irwin L. Jacobs.

COMPENSATION COMMITTEE. The compensation committee makes recommendations to
the board of directors regarding the various incentive programs and benefit
plans, and determines salaries and incentive compensation for the executive
officers. The compensation committee members are Daniel T. Lindsay, William W.
Nicholson and Carl R. Pohlad.

AUDIT COMMITTEE. The audit committee recommends to the board of directors
the engagement of independent public accountants, reviews the scope and results
of our audits, reviews our internal accounting controls and reviews the
professional services furnished to us by our independent public accountants. The
audit committee members are Bjorn Ahlstrom, Daniel G. DeVos and William W.
Nicholson.

STOCK OPTIONS COMMITTEE. The stock options committee administers the
issuance of stock options under our stock option plans. The stock options
committee members are William W. Nicholson and Carl R. Pohlad.

DIRECTOR COMPENSATION

In fiscal year 1999, we paid each of our outside directors annual
compensation of $15,000 in addition to $2,500 for each committee meeting
attended in person.

Under our 1999 Director Stock Option Plan, we will grant stock options to
our outside directors annually in lieu of cash fees. Initially, each director
will receive a grant of 12,500 options at the offering price, and following each
subsequent annual meeting will receive an automatic grant of 5,000 options at
fair market value. Messrs. Jacobs, Cloutier and Oppegaard do not receive any
director compensation.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee is responsible for establishing our policies
relating to and the components of executive officer compensation. None of our
executive officers has served as a director or member of the compensation
committee of another entity that had any executive officer who served on any of
our committees or as a director of our company.

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<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the compensation paid for services rendered
in all capacities to our company during each of our last three fiscal years to
the Chief Executive Officer of Genmar and to the four most highly compensated
executive officers.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
--------------------------------
BONUS PAID
NAME AND PRINCIPAL POSITION YEAR SALARY OR EARNED
- --------------------------- ---- ------ ----------
<S> <C> <C> <C>
Grant E. Oppegaard.......................................... 1999 $459,000 $4,270,299
Chief Executive Officer and President 1998 425,000 474,030
1997 350,000 275,917

Roger R. Cloutier II(2)..................................... 1999 286,000 3,519,948
Executive Vice President and Chief 1998 260,000 221,214
Financial Officer 1997 220,000 126,462

Mary P. McConnell........................................... 1999 189,250 301,346
Senior Vice President, Secretary and 1998 174,250 94,016
General Counsel 1997 155,000 64,381

David H. Vigdal(3).......................................... 1999 186,750 293,812
Senior Vice President--Operations 1998 168,474 94,016
1997 -- --

George Sullivan............................................. 1999 181,750 280,252
Senior Vice President--Marketing 1998 174,250 94,016
1997 165,000 73,578
</TABLE>

- ------------------------

(1) Compensation totals represent amounts paid or earned for the twelve months
ended June 30, 1999, 1998 and 1997.

(2) Compensation amounts reflect amounts paid by Jacobs Management Corporation
to Mr. Cloutier, for which we reimburse Jacobs Management.

(3) Mr. Vigdal joined our company in July 1997.

In July 1999, we hired Steven J. Kubisen as our Senior Vice President--
Technology and Corporate Development. Dr. Kubisen's base salary is currently
$200,000 per annum. Dr. Kubisen also participates in our Management Incentive
Plan.

CERTAIN STOCK-BASED COMPENSATION

On the date of the offering, we will grant stock options or awards to
certain of our officers, directors and employees:

- Options to purchase an aggregate of up to 3,000,000 shares will be granted
to Messrs. Jacobs, Oppegaard and Cloutier of which the grant of 2,000,000
shares will be subject to meeting certain stock price performance targets.
See "--Senior Executive Option Grants" below.

- Options to purchase an aggregate of approximately 1,500,000 shares will be
granted to our other officers and key employees. See "--Stock Awards and
Plans--1999 Stock Incentive Plan" below.

- Options to purchase an aggregate of 62,500 shares will be granted to our
outside directors. See "--Director Compensation" above.

- An aggregate of approximately 225,000 shares of stock will be issued to
all other employees who are not eligible to participate in our option
plan. See "--Stock Awards and Plans--Employee Stock Award" below.

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<PAGE>
RETENTION BONUS AGREEMENTS

On October 31, 1998, Messrs. Oppegaard and Cloutier entered into
substantially identical retention bonus agreements with Jacobs Management
Corporation. Under the retention bonus agreements, each individual agreed to
remain employed by us in his current capacity until at least August 4, 1999, in
return for which Jacobs Management agreed to fund a retention bonus for each
individual in the amount of $2.9 million. The retention bonus agreements also
provide that the retention bonus payments were to be instead of any benefits
that these individuals would be entitled to receive under our executive
severance plan unless the individual remains employed by us for at least one
year after August 4, 1999. Each of these individuals has also agreed that upon
receipt of the retention bonus payment, he will not participate in the
recreational boat industry for a period of three years following the termination
of his employment with our company, nor divulge or use any proprietary
information related to us which has been obtained during his employment with our
company. On August 3, 1999, our board of directors approved our assumption of
these agreements from Jacobs Management and on August 4, 1999 we made the
retention bonus payments described above.

MANAGEMENT INCENTIVE PLAN

Under our Management Incentive Plan, certain key employees receive a cash
bonus up to a designated percentage of their annual base salary. The amount of
the bonus is tied to a budgeted operating performance and average assets to be
utilized in the business, subject to approval by our board of directors. A
minimum bonus is paid out only upon achievement of the target budget. The amount
of the bonus accelerates according to a scale of performance milestones, which
are established annually. We measure our performance levels on an annual basis.
We pay bonuses at the end of this annual period, after completion of the year
end audit and approval of our board of directors. Approximately $14.2 million
was paid under this plan during the fiscal year ended June 30, 1999, including
an aggregate of $2.9 million to Messrs. Oppegaard, Cloutier, Vigdal and
Sullivan, and Ms. McConnell.

SENIOR EXECUTIVE OPTION GRANTS

On the date of this offering, we will make the option grants described below
to each of Messrs. Jacobs, Oppegaard and Cloutier.

- A grant of options to purchase 500,000 shares to Mr. Jacobs and 250,000
shares to each of Messrs. Oppegaard and Cloutier, all exercisable at the
offering price. These options will be exercisable for a period of five
years from the date of grant and will vest over a two-year period with
half vesting on the first anniversary of the date of grant and the
remaining amount vesting on the second anniversary of the date of grant.

- A second grant of options to purchase 500,000 shares to Mr. Jacobs and
250,000 shares to each of Messrs. Oppegaard and Cloutier, all exercisable
at 150% of the offering price. These options will begin to vest over a
two-year period if our common stock trades at an average of 150% of the
offering price over a period of 30 consecutive trading days at any time
within three years of the date of the offering and will be exercisable for
a period of five years from the time they begin to vest.

- A third grant of options to purchase 500,000 shares to Mr. Jacobs and
250,000 shares to each of Messrs. Oppegaard and Cloutier, all exercisable
at 225% of the offering price if our common stock trades at 150% of the
price on the date of the grant described immediately above over a period
of 30 consecutive trading days at any time within three years of the date
of the offering and will be exercisable for a period of five years from
the time they begin to vest.

If the options underlying either the second or third grants do not vest as a
result of our stock failing to trade at the price targets described above, those
options will vest in their entirety on the day prior to the end of the ten year
period and will expire at the end of ten years from the date of grant.

55
<PAGE>
STOCK AWARDS AND PLANS

1999 STOCK INCENTIVE PLAN

Prior to this offering our board of directors will adopt and submit for
approval of our stockholders the 1999 Stock Incentive Plan. A copy of the plan
has been filed as an exhibit to this registration statement. We intend for the
plan to provide incentives which will attract, retain and motivate highly
competent persons as officers, key employees and consultants of our company. The
maximum number of shares of common stock that may be delivered under the plan is
an aggregate of 2,000,000 shares.

The plan is administered by the stock options committee. The stock options
committee is authorized, subject to the provisions of the plan, to interpret the
provisions and supervise the administration of the plan. This includes
determining, subject to the provisions of the plan, to whom options or other
awards will be granted and the terms of each option grant or award.

Our officers, key employees and consultants are eligible to participate in
the plan. The selection of participants from eligible persons is within the
discretion of the committee. The estimated number of officers and key employees
who are eligible to participate in the plan is approximately 200.

Stock options may be granted under the plan on the terms and conditions as
the stock options committee approves, and generally may be exercised for a
period of up to ten years from the date of grant. Generally, stock options will
be granted with an exercise price equal to the fair market value on the date of
grant and will vest ratably over a three-year period on each anniversary of the
date of grant. At the stock options committee's discretion, however, options may
be made exercisable at any other time or upon the occurrence of certain events
or the achievement of certain performance targets. The plan also provides for
stock appreciation rights, stock awards, performance awards and stock units.

Stock options granted under the plan may be "incentive stock options" within
the meaning of the Internal Revenue Code or non-qualified options. The benefits
listed above may be granted singly, in combination or in tandem as determined by
the committee.

In connection with the offering, we granted stock options under this plan
representing an aggregate of approximately 1,500,000 shares to our officers and
other employees at exercise prices equal to the initial public offering price.
Messrs. Vigdal and Sullivan, Dr. Kubisen and Ms. McConnell were each granted
options to purchase 50,000 shares of common stock at the offering price.

PHANTOM STOCK PLAN

We adopted the Phantom Stock Plan in December 1997 for the benefit of
members of our senior management. As of August 13, 1999, 103,000 phantom stock
units were outstanding, and 95% of those had vested. The initial value was
determined at the time of issuance by assigning a gross valuation to each of our
subsidiaries, reducing that amount by a pro rata share of our company's net
liabilities, then dividing that total by the number of outstanding shares of
common stock of our company.

The compensation committee of the board of directors administers and
interprets the plan. In the event of certain triggering events, awards are made
to the employee's account representing either an increase or decrease in the
value of the employee's phantom stock units. An increase in value results in a
credit to the employee's account, whereas a decrease results in a debit to the
employee's account. No awards will be made for a triggering event that occurs
after December 31, 2001.

This offering is a triggering event under the plan. Assuming an initial per
share offering price of $12.00, approximately $5.7 million will be awarded, of
which approximately $1.8 million is expected to be paid upon completion of the
offering with payment of the $3.9 million balance to be deferred under the plan
to a date not later than December 31, 2001. No further awards will be made under
this plan, and following the distribution of all award amounts this plan will
cease to exist.

56
<PAGE>
EMPLOYEE STOCK AWARD

In connection with this offering, we will issue 50 shares of our common
stock to each of our permanent full-time employees who is not eligible to
participate in our 1999 Stock Incentive Plan. We anticipate an aggregate of
approximately 225,000 shares of our common stock will be granted to
approximately 4,500 employees upon completion of the offering.

RETIREMENT PLANS AND INSURANCE

We have a retirement plan, qualified under Section 401(k) of the Internal
Revenue Code of 1954, that consists of a deferred savings program which allows
employees to contribute up to 15% of their pre-tax earnings and up to 10% of
their after-tax earnings to the retirement plan. At the discretion of our board
of directors, we may make matching contributions of up to one half of the first
6% of each participant's pre-tax contribution, subject to certain limits. The
retirement plan also contains a profit sharing program whereby we, based on our
profits, are permitted to make an annual contribution for the benefit of
eligible employees. In addition, other retirement plans are maintained by Ranger
and Carver for the benefit of their respective employees. Substantially all of
our salaried and hourly employees in the United States are eligible to
participate in the retirement plan. Our contributions to the deferred savings
program and the profit sharing programs are vested over a five-year period.

EXECUTIVE SEVERANCE PLAN

We have a severance pay plan under which we make severance payments to our
former executive employees according to a formula based on the job title and
length of service to our company of each former employee. Our employees become
eligible for payments under the plan upon completing 12 continuous months of
full-time employment with us. Under our severance plan, upon termination each of
our Senior Vice Presidents would be entitled to receive one year of
compensation. Messrs. Oppegaard and Cloutier are not currently eligible to
participate in this plan. Subsequent to August 4, 2000, they will be eligible to
participate, and determination of severance to each of Messrs. Oppegaard and
Cloutier would be at the discretion of our board of directors.

CERTAIN TRANSACTIONS

We are a party to numerous transactions with Irwin L. Jacobs and his
affiliates. Our board of directors has adopted a policy, effective upon
completion of this offering, requiring that all material affiliate transactions
be approved by a majority of disinterested directors, and that these affiliate
transactions be conducted on terms no less favorable than could be obtained from
an unaffiliated third party. We believe that each of the transactions described
below between Mr. Jacobs and his affiliates and ourselves has been conducted on
terms no less favorable than could have been obtained from an unaffiliated third
party.

We are a party to a management services agreement with Jacobs Management,
one of our stockholders and an affiliate of Irwin L. Jacobs. Our director,
Daniel T. Lindsay, is also an Executive Vice President and director of Jacobs
Management. Under the management services agreement Jacobs Management provides
us with general management, financial management, employee benefit and human
resource services, insurance and risk management services, acquisition
evaluation and support and other financial and administrative services for an
annual fee currently set at $1.95 million. In addition, we reimburse Jacobs
Management the annual compensation of Roger R. Cloutier II and bonus earned in
connection with his services to us. Jacobs Management has agreed to direct its
employees, and its employees have agreed to continue providing such management
services as currently provided by such employees to us, or as are customary for
executives serving in such positions, as well as such services as our board of
directors may determine are necessary from time to time. The management services
agreement also provides for the payment of an additional special fee for any

57
<PAGE>
business opportunities presented to us by Jacobs Management. No additional
special fees have ever been paid under the management services agreement.

On July 21, 1986, we entered into a sublease arrangement with Jacobs
Management Corporation for office and storage space located at our headquarters
in Minneapolis, Minnesota. During the fiscal year ended June 30, 1999, Jacobs
Management Corporation made lease payments to us in the amount of $478,000 which
equaled the proportionate share of our cost of the leased space based on the
amount of square feet occupied by Jacobs Management Corporation.

Roger R. Cloutier II, our Executive Vice President, Chief Financial Officer
and one of our directors, also performs services for Jacobs Management
Corporation, by whom he has been employed since 1990. Mr. Cloutier's duties and
functions for Jacobs Management involve his participation in certain
executive-level matters. Mr. Cloutier has provided and intends to continue to
provide his services primarily to us and, to a much lesser extent, to Jacobs
Management.

In October 1997, we repurchased a portion of our outstanding 13.5% notes
with the proceeds of our subordinated term loan credit facility. To assist us in
obtaining this financing, three of our stockholders, Irwin L. Jacobs, Daniel T.
Lindsay and RDV Capital Management L.P. II, an affiliate of Daniel G. DeVos, one
of our directors, obtained letters of credit, aggregating $63.1 million; each of
which guarantees a portion of our obligations under the subordinated term loan
credit facility. We reimburse those stockholders for the costs they incur in
maintaining these letters of credit. During the fiscal year ended June 30, 1999,
we reimbursed an aggregate of $1.0 million of these costs. In addition, in
consideration of the commitment by those stockholders to provide letters of
credit in the aggregate amount of $78.8 million, including the $63.1 million of
letters of credit that were ultimately issued, we issued the following warrants
to purchase our common stock at $7.78 per share:

- A warrant to purchase 3,453,705 shares issued to Irwin L. Jacobs;

- A warrant to purchase 2,605,779 shares issued to RDV Capital Management
L.P. II; and

- A warrant to purchase 521,154 shares issued to Daniel T. Lindsay.

Subsequent to the issuance of these warrants, Mr. Jacobs transferred
warrants to purchase an aggregate of 1,379,772 shares to certain other persons.
Also subsequent to the issuance of these warrants, RDV Capital Management
L.P. II transferred warrants to purchase an aggregate of 260,577 shares to Grand
Bank, Trustee of the RDV Corporation Supplemental Executive Retirement Plan, and
warrants to purchase an aggregate of 2,345,202 shares to RDV Corporation.
Simultaneous with this offering, we have agreed to exchange .85 of a share of
our common stock for each share of common stock issuable under the warrants, or
an aggregate of 5,593,500 shares in exchange for all outstanding warrants.

Pursuant to a First Amended and Restated Note and Stock Purchase Agreement,
dated August 31, 1998, between Mr. Jacobs and the State of Wisconsin Investment
Board (SWIB), SWIB purchased at face value a $25.0 million demand promissory
note originally issued by us at par to Mr. Jacobs in 1994. On June 17, 1999,
Mr. Jacobs repurchased that note at face value from SWIB. We used a portion of
the proceeds of our new senior credit facility to repay this note in full in
August 1999. Mr. Jacobs did not make any profit on the original sale of this
note or on its subsequent repurchase by Mr. Jacobs and repayment by us.

On November 24, 1993, Irwin L. Jacobs loaned to Minstar, Inc., one of our
wholly-owned subsidiaries, approximately $4.1 million pursuant to a subordinated
promissory note. Under the terms of the note, as amended, principal and any
outstanding interest, calculated at the prime rate plus 1.5% per annum are due
on August 3, 2000.

58
<PAGE>
We and Irwin L. Jacobs are parties to a split-dollar insurance agreement
dated April 15, 1996. Under the agreement, we pay that portion of premium
amounts not paid by the owner of the policy, the Irwin L. Jacobs 1996
Irrevocable Trust. We are to be reimbursed for all premiums paid under this
policy upon Mr. Jacobs' death. We are also to be reimbursed for our premiums
paid if the policy were terminated and the cash value of the policy at that time
were sufficient to cover all or a portion of the premiums paid. Cumulative
premiums paid by us under this agreement, from July 1, 1995 to June 30, 1999,
totaled $332,000. Cumulative premiums paid by the Jacobs Trust over the same
period totaled $83,000. The beneficiaries under this agreement are Irwin L.
Jacob's five children, with 20% of the premium amounts paid to date attributable
to each child.

Immediately prior to the consummation of this offering, we will spin off
Hatteras to our current stockholders. Under the terms of that transaction, we
will guarantee the obligations of Hatteras under its new credit facility in the
aggregate amount of $5.0 million. Subsequent to completion of the transaction
and until Hatteras retains additional professional employees, we and Jacobs
Management Corporation will provide corporate services to Hatteras for up to one
year, including legal and other management services, for which we will receive
$100,000 and Jacobs Management Corporation will receive $100,000.
Messrs. Jacobs, Oppegaard and Cloutier will serve on the board of directors of
Hatteras.

We sponsor certain professional bass fishing tournaments of Operation
Bass, Inc., an affiliate of Mr. Jacobs and certain of our executive management
and directors. These fishing tournaments include the Wal-Mart FLW Tour,
Operation Bass EverStart Series and Red Man Tournament Trail and are televised
on ESPN and ESPN2. Our agreement with Operation Bass calls for Ranger to make
cash payments and provide a specified number of boats to Operation Bass. We
incurred net sponsorship costs related to these activities, including cash paid
or accrued and product provided, of approximately $432,000 for the year ended
June 30, 1999.

In November 1999, Operation Bass will conduct the Ranger Boats M1
Tournament. This event will be limited to Ranger owners and will be televised
live on the Fox Television Network. In fiscal year 1999, we accrued $300,000
towards an estimated total of $600,000 we will contribute to the $3.5 million
purse. We are also obligated to pay Operation Bass certain per unit amounts
based upon incremental sales improvements for certain Ranger boats. We expect to
conduct similar events with Operation Bass in future years, but specific terms
have yet to be determined.

From time to time, we record revenues from boat sales to affiliates. We
believe that the terms of those sales are consistent with the terms of sales to
dealers. For the year ended June 30, 1999, we recorded revenues of approximately
$500,000 in connection with sales to affiliates.

Under the Genmar Employee Boat Purchase Program, we offer certain of our
employees the opportunity to purchase our boats and accessories at discounted
prices. Under the terms of the program, full-time employees who we have employed
continuously for a minimum of six months may purchase one of our boats every two
years. The program is subject to change at any time at the discretion of our
Chief Executive Officer.

59
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table provides information regarding beneficial ownership of
our common stock as of September 27, 1999, and as adjusted to reflect the sale
of shares offered by this prospectus, by:

- Each of our directors;

- Each person (or group of affiliated persons) known by us to beneficially
own more than 5% of our common stock; and

- All directors and executive officers as a group.

Unless otherwise indicated, each person named in the table has sole voting
power and investment power or shares that power with his or her spouse with
respect to all shares of capital stock listed as owned by that person.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The number of shares of common stock outstanding used
in calculating the percentage for each listed person includes any shares the
person has the right to acquire within 60 days. Unless otherwise indicated, the
address for each person is 100 South Fifth Street, Minneapolis, Minnesota 55402.

Irwin L. Jacobs beneficially owns approximately 67% of the issued and
outstanding capital shares of Jacobs Industries, Inc., while members of the
Pohlad Group beneficially own the remaining shares. Watkins Incorporated is a
wholly-owned subsidiary of Jacobs Industries. Irwin L. Jacobs, Carl R. Pohlad,
as trustee of Revocable Trust No. 2, Jacobs Industries, PEP-SQ Limited
Partnership and Watkins have entered into an agreement that grants Carl R.
Pohlad the effective right to vote the percentage of shares of our common stock
held by Jacobs Industries and Watkins as is equal to the percentage of equity
interest in Jacobs Industries and Watkins held by all members of the Pohlad
Group. Accordingly, of the 2,219,931 shares owned by Jacobs Industries,
ownership of 1,479,960 shares has been attributed to Mr. Jacobs and ownership of
739,971 shares has been attributed to the Pohlad Group. Of the 75,699 shares
owned by Watkins, ownership of 50,463 shares has been attributed to Mr. Jacobs
and ownership of 25,236 shares has been attributed to the Pohlad Group.

Mr. Daniel G. DeVos disclaims beneficial ownership of the common stock owned
by RDV Capital Management L.P. II. Mr. DeVos is a stockholder of an affiliate of
RDV Capital Management L.P. II.

<TABLE>
<CAPTION>
PERCENT OF COMMON
STOCK OWNED
AMOUNT -------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
GROUP CONSISTING OF: ..................................... 7,970,301(1) 37.6% 27.6%
Irwin L. Jacobs
Jacobs Industries, Inc.
Jacobs Management Corporation
Watkins Incorporated

GROUP CONSISTING OF: ..................................... 5,463,324 25.7% 18.9%
RDV Capital Management L.P. II
RDV Corporation
Grand Bank, Trustees of the RDV Corporation Supplemental
Executive Retirement Plan
126 Ottawa, N.W.
Grand Rapids, Michigan 49503
</TABLE>

60
<PAGE>

<TABLE>
<CAPTION>
PERCENT OF COMMON
STOCK OWNED
AMOUNT -------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
GROUP CONSISTING OF: ..................................... 2,699,585(2)(3) 12.7% 9.3%
Carl R. Pohlad, individually and as Trustee of Revocable
Trust No. 2
Robert C. Pohlad
William M. Pohlad
James O. Pohlad
PEP-SQ Limited Partnership
Jacobs Industries, Inc.
Watkins Incorporated
3880 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402

State of Wisconsin Investment Board ...................... 1,785,249 8.4% 6.2%
121 East Wilson Street
Madison, Wisconsin 53702

AB Volvo Penta ........................................... 1,126,485 5.3% 3.9%
SE-40508
Goteberg
Sweden

Bjorn Ahlstrom............................................ 12,500(3) * *
Roger R. Cloutier II...................................... 88,848 * *
Daniel G. DeVos........................................... 12,500(3) * *
Daniel T. Lindsay......................................... 590,480(3)(4) 2.8 2.0
William W. Nicholson...................................... 139,958(3) * *
Grant E. Oppegaard........................................ 71,703 * *

ALL OFFICERS AND DIRECTORS AS A GROUP (16 PERSONS)........ 11,585,875(5) 54.4% 40.0%
</TABLE>

- ------------------------

* Less than 1%.

(1) Includes 734,805 shares which Mr. Jacobs has agreed to purchase, see
"Underwriting."

(2) Includes 684,162 shares of common stock beneficially owned by a trust, of
which Carl R. Pohlad is the trustee.

(3) Includes options to purchase 12,500 shares of our common stock.

(4) Daniel T. Lindsay is Executive Vice President and a director of Jacobs
Management and Secretary and a director of Jacobs Industries. Mr. Lindsay
disclaims beneficial ownership of the common stock owned by these entities.

(5) Includes options to purchase 62,500 shares of our common stock.

61
<PAGE>
DESCRIPTION OF CAPITAL STOCK

THE FOLLOWING IS A SUMMARY DESCRIPTION OF OUR CAPITAL STOCK. FOR FURTHER
INFORMATION, PLEASE REFER TO OUR AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, A COPY OF WHICH HAS BEEN INCLUDED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. ALL CAPITALIZED TERMS
USED AND NOT DEFINED BELOW HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.

COMMON STOCK

We are authorized to issue up to 200,000,000 shares of common stock, $0.01
par value per share. As of the date of this prospectus, there were 21,226,230
shares of common stock issued and outstanding.

Holders of common stock are entitled to one vote for each share held, are
not entitled to cumulative voting for the purpose of electing directors and have
no preemptive or similar right to subscribe for, or to purchase, any shares of
common stock or other securities to be issued by us in the future. Accordingly,
the holders of more than a majority of the voting power of the shares of common
stock voting generally for the election of directors will be able to elect all
of our directors.

Holders of shares of common stock have no exchange or conversion rights and
those shares are not subject to redemption. All outstanding shares of common
stock are, and upon issuance the shares of common stock offered by this
prospectus will be, duly authorized, validly issued, fully paid and
nonassessable. Subject to the prior rights, if any, of holders of any
outstanding class or series of capital stock having a preference in relation to
the common stock as to distributions upon the dissolution, liquidation and
winding-up of our company and as to dividends, holders of common stock are
entitled to share ratably in all of our assets which remain after payment in
full of all of our debts and liabilities, and to receive ratably dividends, if
any, as may be declared by our board of directors from time to time out of funds
and other assets legally available for the payment of dividends. See "Dividend
Policy" and "Capitalization."

PREFERRED STOCK

Our board of directors is authorized, without action by the holders of
common stock, to issue up to 2,000,000 shares of preferred stock, $0.01 par
value, in one or more series, to establish the number of shares to be included
in each series and to fix the designations, preferences, relative,
participating, optional and other special rights of the shares of each series
and the qualifications, limitations and restrictions of those shares. These
rights may include, among others, voting rights, conversion and exchange
privileges, dividend rates, redemption rights, sinking fund provisions and
liquidation rights that could be superior and prior to the common stock.

The issuance of one or more series of the preferred stock could, under
certain circumstances, adversely affect the voting power of the holders of the
common stock and could have the effect of discouraging or making more difficult
any attempt by a person or group to effect a change in control of our company.

REGISTRATION RIGHTS

For a discussion of certain registration rights we have granted to the
former stockholders of Pyramid Operating Systems, see "The Company--Recent
Acquisitions--Pyramid Operating Systems, Inc."

62
<PAGE>
DELAWARE BUSINESS COMBINATION STATUTE

We are a Delaware corporation and are subject to Section 203 of the Delaware
General Corporation Law. In general, Section 203 prevents any "interested
stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as therein defined) with a Delaware corporation for three years
following the time that such person became an interested stockholder, unless:

- Before such person became an interested stockholder, the board of
directors of the corporation approved the business combination in question
or the transaction which resulted in such person becoming an interested
stockholder;

- Upon consummation of the transaction that resulted in the interested
stockholder's becoming such, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time such
transaction commenced (excluding stock held by directors who are also
officers of the corporation and by employee stock plans that do not
provide employees with rights to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer);
or

- At or following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of not less than 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder.

Under Section 203, the restrictions described above do not apply to certain
business combinations proposed by an interested stockholder following the
announcement (or notification) of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the preceding three years or who became an interested
stockholder with the approval of the corporation's directors or at a time when
the restrictions imposed by Section 203 did not apply in accordance with the
terms thereof, and which transactions are approved or not opposed by a majority
of the members of the board of directors then in office who were directors prior
to any person becoming an interested stockholder during the previous three years
or were recommended for election or elected to succeed such directors by a
majority of such directors.

CLASSIFIED BOARD OF DIRECTORS

Our amended and restated certificate of incorporation divides our board of
directors into three classes, with regular three-year staggered terms and
initial terms of one year for the class I directors, two years for the class II
directors and three years for the class III directors. This could prevent a
party who acquires control of a majority of our outstanding voting stock from
immediately obtaining control of the board of directors.

Our stockholders do not have the right to cumulative voting in the election
of directors.

AMENDMENTS TO OUR CERTIFICATE AND BYLAWS

Our amended and restated certificate of incorporation may be amended only by
the affirmative vote of the holders of at least a majority of the shares of our
common stock, except for provisions relating to stockholder action by written
consent and the staggered board, which may only be amended by an affirmative
vote of two-thirds of the shares of our common stock. Our bylaws may be amended
only by either the affirmative vote of the holders of at least a majority of the
shares of our common stock or the affirmative vote of at least a majority of the
board of directors.

63
<PAGE>
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

Our amended and restated certificate of incorporation provides that
stockholders may not take action by written consent, but only at duly called
annual or special meetings of stockholders. The bylaws further provide that
special meetings of our stockholders may be called only by the board of
directors or by stockholders holding a majority of the shares entitled to vote
at the meeting.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

Our bylaws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide advance notice to
us in writing. These provisions may preclude stockholders from bringing matters
before or from making nominations for directors at an annual meeting of
stockholders.

LIMITATION ON LIABILITY

Our amended and restated certificate of incorporation provides that none of
our directors will be personally liable to us or our stockholders for monetary
damages for any breach of fiduciary duty as a director except for liability for
breach of the director's duty of loyalty to us or our stockholders, for acts or
omissions which are not in good faith or which involve intentional misconduct or
knowing violations of law and for actions leading to improper personal benefit
to the director. This provision does not affect the directors' responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.

INDEMNIFICATION

Section 145 of the Delaware General Corporation Law provides for the power
to indemnify any directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers.
The indemnification provisions are not exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of the stockholders or otherwise.

Our amended and restated certificate of incorporation provides a right to
indemnification to the maximum extent permitted by Delaware law to all persons
whom we may indemnify pursuant thereto.

At present, there is no pending litigation or proceeding, and we are not
aware of any threatened litigation or proceeding, that may result in a claim for
such indemnification involving any director, officer, employee or agent as to
which indemnification will be required or permitted under the amended and
restated certificate of incorporation.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is Norwest Bank
Minnesota N.A.

64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been any public market for our common
stock. Future sales of substantial amounts of common stock in the public market,
or the prospect of such sales, could adversely affect prevailing market prices.

Upon completion of this offering, 28,867,897 shares of common stock will be
outstanding, assuming no exercise of the underwriters' over-allotment option. Of
these shares, all of the shares sold in this offering will be freely tradeable
without restriction under the Securities Act, unless purchased by an "affiliate"
of ours, as that term is defined in Rule 144. The remaining 22,367,897 shares
outstanding after completion of this offering are "restricted securities" as
defined in Rule 144 and may be sold in the public market only in accordance with
Rule 144. The following table sets forth the resale restrictions on the
currently outstanding shares of our common stock other than those set forth
under "Underwriting--Lock Up Agreements."

<TABLE>
<CAPTION>
NUMBER OF SHARES MANNER OF HOLDING
- ---------------- --------------------------------------------
<C> <S>
4,239,531 Held by non-affiliates

16,986,699 Held by affiliates

916,667 Held by current Pyramid stockholders

225,000 Held by grantees under employee stock awards
</TABLE>

In general, under Rule 144, a person, including an "affiliate" of ours, who
has beneficially owned restricted shares for at least one year is entitled to
sell within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of common stock (approximately
289,000 shares immediately following this offering) or the average weekly
trading volume of the common stock during the four calendar weeks preceding the
sale. Sales under Rule 144 are subject to certain manner of sale limitations,
notice requirements and the availability of current public information about us.
Rule 144(k) provides that a person who is not an "affiliate" of the issuer at
any time during the three months preceding a sale and who has beneficially owned
shares for at least two years is entitled to sell those shares at any time
without compliance with the public information, volume limitation, manner of
sale and notice provisions of Rule 144.

Additionally, in general, under Rule 701 of the Securities Act as currently
in effect, any of our employees, consultants or advisors who purchase shares
from us in connection with a compensatory stock or option plan or other written
agreement is eligible to resell such shares 90 days after the effective date of
this offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period, contained in Rule 144.

65
<PAGE>
UNDERWRITING

GENERAL

We are offering the shares of common stock described in this prospectus
through a number of underwriters. Stephens Inc. and U.S. Bancorp Piper
Jaffray Inc. are the representatives of the underwriters. We have entered into
an underwriting agreement with the representatives dated the date of this
prospectus. Each underwriter has agreed to purchase the number of shares of
common stock opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Stephens Inc................................................
U.S. Bancorp Piper Jaffray Inc..............................
---------
Total................................................... 6,500,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to take and to pay for all shares of common stock
offered by this prospectus (other than those covered by the over-allotment
option described below) if any of those shares are taken.

On September 21, 1999, U.S. Bancorp and a bank subsidiary agreed to sell to
Irwin L. Jacobs 490,005 shares of our common stock and a warrant to purchase an
additional 288,000 shares of our common stock. U.S. Bancorp is the parent of
U.S. Bancorp Piper Jaffray. Part of the sale of shares related to a put
agreement originally entered into in 1995, entitling U.S. Bancorp to put 382,005
shares to Mr. Jacobs at any time prior to a public offering of our common stock,
at a formula-derived price which is currently approximately $14.6 million.
Mr. Jacobs also agreed to purchase for an aggregate of approximately
$3.9 million the remaining 108,000 shares and the warrants, which will be
exchanged for 244,800 shares by Mr. Jacobs on the same basis as other warrant
holders. The purchase of shares and warrants is scheduled to close prior to our
public offering. Mr. Jacobs will borrow the full purchase price for all of the
shares and the warrants from the sellers, which loans will bear interest at a
market rate, be secured by a pledge of all the shares, and be due on various
dates through December 2000.

U.S. Bank, N.A., a subsidiary of U.S. Bancorp, participates as a lender in
connection with our new senior term loan and our subordinated term loan. U.S.
Bank also provides one of the letters of credit discussed in "Certain
Transactions." Further, it is anticipated that U.S. Bank or one of its
affiliates will be the lead lender for the new Hatteras credit facility
discussed in "The Company--Hatteras Spin-Off." All of these banking arrangements
have been on an arms-length basis and on market terms.

Under Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc., U.S. Bancorp Piper Jaffray may be deemed to have a
"conflict of interest" with us by reason of our expected use of more than 10% of
the net proceeds of this offering to repay a portion of the subordinated term
loan, in which U.S. Bank has a 50% participation, and the entire new senior term
loan, in which U.S. Bank has an approximate 37% participation. This offering is
being conducted in accordance with Rule 2720, which provides that under these
circumstances, the initial public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
Stephens Inc., as lead manager in this offering, meets the standards for and is
acting as a qualified independent underwriter, and has recommended a price in
compliance with the requirements of Rule 2720 and has performed due diligence
investigations relating to this offering.

COMMISSIONS AND EXPENSES

The underwriters propose to offer part of the shares directly to the public
at the public offering price stated on the cover page of this prospectus and
part of the shares to certain dealers at a price

66
<PAGE>
that represents a concession not in excess of $ per share under the public
offering price. The underwriters may allow, and those dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
offering, the public offering price and any concessions may be changed by the
underwriters. The representatives have advised us that the underwriters do not
intend to confirm any shares to any accounts over which they exercise
discretionary authority.

The following summarizes the underwriting discounts we will pay:

<TABLE>
<CAPTION>
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts.......... $ $ $
------ ---------- ----------
</TABLE>

We estimate that our share of the total expenses of the offering, excluding
underwriting discounts, will be approximately $1.5 million.

OVER-ALLOTMENT OPTION

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 975,000 additional shares of
common stock at the price to the public stated on the cover page of this
prospectus minus the underwriting discounts and commissions. The underwriters
may exercise this option solely for the purpose of covering over-allotments, if
any, in connection with the offering. If the underwriters exercise the option,
each underwriter will purchase additional shares approximately in proportion to
the amounts specified in the table above.

STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

In connection with the offering, the underwriters may purchase and sell the
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the shares of common stock. Syndicate short positions
involve the sale by the underwriters of a greater number of shares of common
stock than they are required to purchase from us in the offering.

The underwriters may also impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.

These activities may stabilize, maintain or otherwise affect the market
price of the shares of common stock, which may be higher than the price that
might otherwise prevail in the open market and may be discontinued at any time.
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

LOCK-UP AGREEMENTS

We, and our officers, directors and certain stockholders have entered into
lock-up agreements with the underwriters. Under those agreements, we and those
holders may not offer, sell, contract to sell or otherwise dispose of any shares
of common stock or any securities convertible into any class of common stock for
a period of 180 days after the date of this prospectus, except with the prior
consent of Stephens Inc. In considering any request to waive the lock-up,
Stephens Inc. has informed us that it will likely consider a number of factors,
including the then current trading price of our stock compared to the offering
price, the recent trading volume of the stock relative to the number of shares
sought to be sold, the identity of the potential seller, the potential seller's
reason for the sale and the percentage of holdings to be sold.

67
<PAGE>

DIRECTED SHARE PROGRAM

At our request, the underwriters have reserved up to eight percent of the
shares offered for sale to our employees and their family members and to our
business associates at the initial public offering price set forth on the cover
page of this prospectus. These persons must commit to purchase at the same time
as the general public. The number of shares available for sale to the general
public will be reduced to the extent these persons purchase the reserved shares.

OFFERING PRICE DETERMINATION

Prior to the offering, there was no public market for our common stock.
Consequently, the initial public offering price for the shares of common stock
included in the offering has been determined by negotiations between us and the
underwriters. Among the factors considered were:

- The history of and prospects for our business and our industry;

- An assessment of our management and the present state of our company's
development;

- Our past and present revenues and earnings;

- The prospects for growth of our revenues and earnings;

- The current state of the United States economy;

- The current level of economic activity in the industry in which we compete
and in related or comparable industries; and

- Currently prevailing conditions in the United States securities markets,
including current market valuations of comparable publicly traded
companies.

INDEMNIFICATION

Pursuant to the underwriting agreement, we and the underwriters have agreed
to indemnify each other against certain liabilities, including liabilities under
the Securities Act.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for Genmar Holdings, Inc. by Weil, Gotshal & Manges LLP, New
York, New York. Certain members of Weil, Gotshal & Manges own an aggregate of
150,147 shares of common stock of Genmar Holdings, Inc. Giroir, Gregory,
Holmes & Hoover, PLC, Little Rock, Arkansas is serving as counsel to the
underwriters.

EXPERTS

The consolidated balance sheets as of June 30, 1998 and 1999, and the
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 31, 1996, the six months ended June 30, 1997 and the
years ended June 30, 1998 and June 30, 1999 of Genmar Holdings, Inc. included in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.

68
<PAGE>
ADDITIONAL INFORMATION

We have filed with the Commission a registration statement on Form S-1 under
the Securities Act with respect to the common stock offered by this prospectus.
This prospectus, which constitutes part of the registration statement, does not
contain all of the information set forth in the registration statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information about us and the common stock offered
hereby, reference is made to the registration statement, which includes as
exhibits certain of the contracts and other documents referred to in this
prospectus. The registration statement and all amendments, exhibits and
schedules thereto may be obtained as follows:

- Copies may be inspected without charge at the principal office of the
Commission in Washington, D.C. and copies of all or any part thereof may
be inspected and copied at the public reference facilities maintained by
the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549 (1-800-SEC-0330), and
at the Securities and Exchange Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048;

- Copies of such material can also be obtained at prescribed rates by mail
from the Public Reference Section of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and

- Our filings may be viewed over the Internet at HTTP://WWW.SEC.GOV, a web
site which that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission.

69
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants.................... F-1
Consolidated Balance Sheets as of June 30, 1998 and 1999.... F-2
Consolidated Statements of Operations for the Year Ended
December 31, 1996;
Six Months Ended June 30, 1997 and Years Ended June 30,
1998 and 1999............................................. F-3
Consolidated Statements of Stockholders' Equity for the Year
Ended December 31, 1996;
Six Months Ended June 30, 1997 and Years Ended June 30,
1998 and 1999............................................. F-4
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1996; Six Months Ended June 30, 1997 and
Years Ended June 30, 1998 and 1999........................ F-5
Notes to Consolidated Financial Statements.................. F-7
Supplemental Schedule....................................... F-22
</TABLE>

70
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Genmar Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Genmar
Holdings, Inc. (a Delaware corporation) and Subsidiaries as of June 30, 1998 and
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for the year ended December 31, 1996, the six months ended
June 30, 1997 and the years ended June 30, 1998 and June 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Genmar
Holdings, Inc. and Subsidiaries as of June 30, 1998 and 1999, and the results of
their operations and their cash flows for the year ended December 31, 1996, the
six months ended June 30, 1997 and the years ended June 30, 1998 and June 30,
1999, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index of consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
August 2, 1999

F-1
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1998 1999
--------- --------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 2,736 $ 24,856
Accounts receivable, net of allowances of $1,460 and
$1,647.................................................. 35,914 41,339
Inventories, net.......................................... 97,570 113,931
Prepaid expenses.......................................... 3,327 2,939
Deferred tax assets....................................... -- 8,000
--------- --------
Total current assets.................................... 139,547 191,065
Property and equipment:
Land...................................................... 8,088 7,218
Buildings................................................. 62,941 68,059
Operating equipment....................................... 56,304 65,883
Accumulated depreciation.................................. (72,759) (75,623)
--------- --------
Net property and equipment................................ 54,574 65,537

Other assets................................................ 6,407 19,454
Goodwill.................................................... 44,094 44,707
--------- --------
$ 244,622 $320,763
========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 36,931 $ 56,241
Accrued liabilities....................................... 66,117 89,874
Accrued income taxes...................................... 761 2,384
Current maturities of long-term debt...................... 6,026 1,022
--------- --------
Total current liabilities............................... 109,835 149,521
Long-term debt.............................................. 117,778 116,129
Other noncurrent liabilities................................ 15,716 12,911
--------- --------

Commitments and contingencies (Note 8)

Stockholders' equity:
Common stock, $.01 par, 2,000 shares authorized;
1,737 issued and outstanding............................ 17 17
Additional paid-in capital................................ 117,945 117,945
Accumulated deficit....................................... (116,201) (75,256)
Accumulated other comprehensive loss...................... (468) (504)
--------- --------
Total stockholders' equity.............................. 1,293 42,202
--------- --------
$ 244,622 $320,763
========= ========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-2
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE
FOR THE SIX MONTHS FOR THE YEAR ENDED
YEAR ENDED ENDED JUNE 30,
DECEMBER 31, JUNE 30, -------------------
1996 1997 1998 1999
------------ ---------- -------- --------
<S> <C> <C> <C> <C>
Net revenues...................................... $618,056 $260,848 $585,943 $704,656
Cost of products and services..................... 521,663 222,448 480,651 567,247
-------- -------- -------- --------
Gross profit.................................... 96,393 38,400 105,292 137,409
New product and technology development............ 8,537 5,012 11,292 10,996
Selling and administrative expenses............... 64,653 31,888 70,402 88,945
-------- -------- -------- --------
Operating profit................................ 23,203 1,500 23,598 37,468
Interest expense.................................. (22,190) (11,026) (18,702) (16,098)
Investment and other income (loss), net........... 122 (176) (304) 75
-------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item............................ 1,135 (9,702) 4,592 21,445
Income tax benefit (provision).................... (860) (246) (550) 19,500
-------- -------- -------- --------
Income (loss) before extraordinary item........... 275 (9,948) 4,042 40,945
Extraordinary loss on extinguishment of debt (Note
5).............................................. -- -- (1,184) --
-------- -------- -------- --------
Net income (loss)............................... $ 275 $ (9,948) $ 2,858 $ 40,945
======== ======== ======== ========

Basic and diluted net income (loss) per share--
Income (loss) per share before extraordinary
item............................................ $ 0.16 $ (5.73) $ 2.33 $ 23.57
Extraordinary loss per share...................... -- -- (0.68) --
-------- -------- -------- --------
Net income (loss) per share....................... $ 0.16 $ (5.73) $ 1.65 $ 23.57
======== ======== ======== ========
Basic and diluted weighted average shares
outstanding................................... 1,737 1,737 1,737 1,737
======== ======== ======== ========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-3
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1996;
SIX MONTHS ENDED JUNE 30, 1997 AND YEARS ENDED JUNE 30, 1998 AND 1999

(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
------------------- PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT LOSS TOTAL
-------- -------- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995............... 1,737 $17 $116,234 $(109,386) $(247) $ 6,618

Net income............................. -- -- -- 275 -- 275
Translation adjustment................. -- -- -- -- (24) (24)
----- --- -------- --------- ----- -------

Balance, December 31, 1996............... 1,737 17 116,234 (109,111) (271) 6,869
----- --- -------- --------- ----- -------

Net loss............................... -- -- -- (9,948) -- (9,948)
Translation adjustment................. -- -- -- -- (54) (54)
----- --- -------- --------- ----- -------

Balance, June 30, 1997................... 1,737 17 116,234 (119,059) (325) (3,133)
----- --- -------- --------- ----- -------

Net income............................. -- -- -- 2,858 -- 2,858
Issuance of warrants (Note 5).......... -- -- 1,711 -- -- 1,711
Translation adjustment................. -- -- -- -- (143) (143)
----- --- -------- --------- ----- -------

Balance, June 30, 1998................... 1,737 17 117,945 (116,201) (468) 1,293
----- --- -------- --------- ----- -------

Net income............................. -- -- -- 40,945 -- 40,945
Translation adjustment................. -- -- -- -- (36) (36)
----- --- -------- --------- ----- -------

Balance, June 30, 1999................... 1,737 $17 $117,945 $ (75,256) $(504) $42,202
===== === ======== ========= ===== =======
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-4
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED
MONTHS JUNE 30,
FOR THE YEAR ENDED ENDED -------------------
DECEMBER 31, 1996 JUNE 30, 1997 1998 1999
------------------- --------------- -------- --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................. $ 275 $ (9,948) $ 2,858 $ 40,945
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities,
net of acquisitions:
Depreciation and amortization................... 11,618 6,211 11,470 11,565
Write-down of property and trademark............ -- 1,124 -- --
Extraordinary loss on extinguishment of debt.... -- -- 1,354 --
Deferred tax valuation adjustment............... -- -- -- (22,000)
Net changes in operating assets and liabilities,
per accompanying schedule..................... 27,707 (19,025) 2,884 22,529
Payment of noncurrent liabilities............... (3,900) (1,326) (4,110) (3,205)
Other, net...................................... 398 88 1,032 897
-------- -------- ------- --------

Net cash provided by (used in) operating
activities, net of acquisitions............. 36,098 (22,876) 15,488 50,731
-------- -------- ------- --------

INVESTING ACTIVITIES:
Property and equipment additions.................. (5,511) (5,088) (8,118) (12,858)
Proceeds from sales of property................... 3,966 306 111 933
Proceeds from the sale of a note receivable....... -- -- 4,208 --
Acquisitions, net of cash acquired................ -- -- -- (6,142)
Investment in Pyramid Operating Systems, Inc...... -- -- -- (2,203)
-------- -------- ------- --------

Net cash used in investing activities......... (1,545) (4,782) (3,799) (20,270)
-------- -------- ------- --------

FINANCING ACTIVITIES:
Proceeds (repayments) under revolving credit
facility........................................ (28,231) 10,000 (10,000) --
Proceeds from senior term loan.................... -- -- 15,000 --
Repayments of senior term loan.................... -- -- (3,000) (12,000)
Proceeds from subordinated term loan.............. -- -- 60,000 --
Repayments of senior subordinated notes........... -- -- (72,149) --
Proceeds from IRB financing....................... -- -- -- 4,000
Repayments of other long-term debt................ (916) (221) (358) (38)
Financing and option costs........................ (360) (825) (2,879) (303)
-------- -------- ------- --------

Net cash provided by (used in) financing
activities.................................. (29,507) 8,954 (13,386) (8,341)
-------- -------- ------- --------

Increase (decrease) in cash and cash
equivalents................................... 5,046 (18,704) (1,697) 22,120
-------- -------- ------- --------

CASH AND CASH EQUIVALENTS:
Balance, beginning of period...................... 18,091 23,137 4,433 2,736
-------- -------- ------- --------
Balance, end of period............................ $ 23,137 $ 4,433 $ 2,736 $ 24,856
======== ======== ======= ========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-5
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED
MONTHS JUNE 30,
FOR THE YEAR ENDED ENDED -------------------
DECEMBER 31, 1996 JUNE 30, 1997 1998 1999
------------------- --------------- -------- --------
<S> <C> <C> <C> <C>
Changes in operating assets and liabilities, net of
acquisitions, consist of:
Accounts receivable............................... $ 5,742 $ (689) $ 723 $ (5,179)
Inventories....................................... 20,895 (6,296) 6,211 (14,952)
Prepaid expenses.................................. 1,806 417 (592) 878
Accounts payable, accrued liabilities and accrued
income taxes.................................... (736) (12,457) (3,458) 41,782
-------- -------- ------- --------

Net changes................................... $ 27,707 $(19,025) $ 2,884 $ 22,529
======== ======== ======= ========

Supplemental cash flow information:
Interest paid during the period................... $ 18,608 $ 8,315 $19,406 $ 14,547
Income taxes paid during the period............... 1,108 587 67 864
======== ======== ======= ========

Schedule of noncash financing and investing
activities:
Property and equipment additions from capital
leases.......................................... $ 362 $ -- $ -- $ --
Sale of property in exchange for notes
receivable...................................... -- 4,594 -- --
======== ======== ======= ========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-6
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BACKGROUND

Genmar Holdings, Inc. (the "Company") was organized in March 1994 to combine
the operations of IJ Holdings Corp. ("IJ Holdings") including its wholly-owned
subsidiary, Minstar, Inc. ("Minstar"), and Miramar Marine Corporation
("Miramar"), each of which had been under the control of investor groups led by
Irwin L. Jacobs, principal stockholder and Chairman of the Board of the Company.

The Company is the second largest manufacturer of motorized recreational
boats in the United States. The Company is focused on using innovative
technologies and marketing strategies to produce and sell boats under leading
brand names such as Aquasport, Carver, Crestliner, Glastron, Larson, Logic,
Lund, Nova, Ranger, Scarab, Trojan and Wellcraft. The Company sells its products
through an established network of independent authorized dealers in the United
States and internationally.

The Company operates in the recreational powerboat industry which has been
subject to periodic cyclical industry downturns. The Company's ability to meet
its debt service and other obligations depends on its future performance, which,
in turn, is subject to general economic conditions, financial performance and
business factors, including factors beyond the Company's control.

2. UNAUDITED STATEMENT OF OPERATIONS

Effective June 2, 1997, the Company changed its fiscal year end from
December 31 to June 30. In order to provide a meaningful comparison of current
year results to a comparable prior year period, set forth below are the
Company's unaudited comparative results of operations for the twelve months
ended June 30, 1997 as compared to the Company's audited results of operations
for the years ended June 30, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
FOR THE 12 FOR THE YEAR
MONTHS ENDED ENDED JUNE 30,
JUNE 30, 1997 -----------------------
(UNAUDITED) 1998 1999
------------- ---------- ----------
<S> <C> <C> <C>
Net revenues........................................... $574,802 $585,943 $704,656
Cost of products and services.......................... 486,276 480,651 567,247
-------- -------- --------
Gross profit......................................... 88,526 105,292 137,409
New product and technology development................. 8,372 11,292 10,996
Selling and administrative expenses.................... 66,687 70,402 88,945
-------- -------- --------
Operating profit..................................... 13,467 23,598 37,468
Interest expense....................................... (21,937) (18,702) (16,098)
Investment and other income (loss), net................ (294) (304) 75
-------- -------- --------
Income (loss) before income taxes and extraordinary
item............................................... (8,764) 4,592 21,445
Income tax benefit (provision)......................... (635) (550) 19,500
-------- -------- --------
Income (loss) before extraordinary item.............. (9,399) 4,042 40,945
Extraordinary loss on extinguishment of debt........... -- (1,184) --
-------- -------- --------
Net income (loss).................................... $ (9,399) $ 2,858 $ 40,945
======== ======== ========
</TABLE>

F-7
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated.

FISCAL YEAR:

Effective June 2, 1997, the Company changed its fiscal year end from
December 31 to June 30. Accordingly, all general references to years relate to
fiscal years, unless otherwise noted.

RECLASSIFICATIONS:

Certain amounts for the year ended December 31, 1996, the six months ended
June 30, 1997 and the year ended June 30, 1998 in the accompanying consolidated
financial statements have been reclassified to conform to the year ended
June 30, 1999 presentation. Such reclassifications had no effect on previously
reported net income (loss) or stockholders' equity.

REVENUE RECOGNITION AND WARRANTY ACCRUALS:

Revenue for products and services, reported net of dealer and other
discounts, is recognized at the time of shipment, or when services have been
performed.

Through its dealers, the Company warrants its products under normal use and
maintains warranty reserves pursuant to this policy. Major components, including
engines, drive units and appliances, are warranted by their suppliers and not
the Company.

USE OF ESTIMATES:

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Estimates are used for such items as depreciable lives,
uncollectible accounts, environmental and legal loss contingencies, the
valuation of deferred income tax assets, self-insurance reserves and future
warranty costs. As better information becomes available or actual amounts are
determinable, the recorded estimates are revised. Consequently, operating
results can be affected by revisions to prior accounting estimates.

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS:

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS No. 133"). SFAS No. 133 is effective for financial
statements for fiscal years beginning after June 15, 2000. The Company
anticipates implementing the reporting provisions required under SFAS No. 133
for the fiscal year beginning July 1, 2000. Management does not expect
implementation of these reporting provisions to have a material impact on the
Company's disclosures or results of operations.

F-8
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS:

Cash includes cash equivalents consisting principally of short-term
investments in commercial paper with original maturities of three months or less
and are recorded at cost, which approximates fair value.

INVENTORIES:

Inventories are stated at the lower of cost or market and include materials,
labor and overhead costs. The Company uses the first-in, first-out cost method
in determining cost for substantially all of its inventories. Inventories
consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
-------- --------
<S> <C> <C>
Raw materials............................................ $34,124 $ 38,813
Work in process.......................................... 42,315 59,460
Finished goods........................................... 25,173 19,181
Reserves................................................. (4,042) (3,523)
------- --------
$97,570 $113,931
======= ========
</TABLE>

PRODUCTION TOOLING:

The costs associated with the development of certain large-scale molds and
processes are capitalized as operating equipment and amortized over three years
using the straight-line method. The costs associated with mold maintenance and
the development of all other molds and production tooling are charged to cost of
products and services as incurred.

PROPERTY AND EQUIPMENT:

Property and equipment are stated at cost. Depreciation and amortization for
financial reporting purposes are generally provided on the straight-line method
over the estimated useful lives. Useful lives of buildings are estimated at 32
to 40 years, while land improvements and building improvements are estimated at
10 to 15 years. Leasehold improvements are depreciated at the lesser of
10 years or the remaining lease term. Operating equipment has a useful life of 3
to 10 years with computer hardware and software at 3 years and certain machinery
at 10 years. Major repairs and improvements are capitalized and depreciated.
Maintenance, supplies and accessories are charged to expense as incurred. The
cost and accumulated depreciation of property and equipment retired or otherwise
disposed of are removed from the related accounts, with any residual balances
charged or credited to earnings.

OTHER ASSETS:

Other assets, as of June 30, 1999 consist primarily of long-term deferred
tax assets, deferred debt financing costs and the Company's investment in
Pyramid Operating Systems, Inc. ("Pyramid").

GOODWILL:

Goodwill is amortized on a straight-line basis over various periods not
exceeding 40 years. The Company periodically evaluates whether events and
circumstances have occurred that indicate the

F-9
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
remaining estimated useful life of goodwill may warrant revision or that the
remaining balance of goodwill may not be recoverable. This evaluation utilizes
an undiscounted future operating cash flows computation method and compares such
anticipated future cash flows to the related carrying value of goodwill.
Weighted average remaining amortization period is 26 years as of June 30, 1999.
Accumulated amortization was $20.1 million and $21.8 million at June 30, 1998
and 1999, respectively.

ACCRUED LIABILITIES:

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
-------- --------
<S> <C> <C>
Payroll and incentive related............................. $13,313 $33,884
Sales incentives.......................................... 10,683 15,065
Insurance................................................. 9,265 10,697
Warranty.................................................. 12,238 12,004
Interest.................................................. 3,013 2,015
Customer deposits......................................... 11,108 9,783
Other..................................................... 6,497 6,426
------- -------
$66,117 $89,874
======= =======
</TABLE>

ENVIRONMENTAL MATTERS:

Environmental expenditures which relate to the Company's boat manufacturing
operations are charged to expense or capitalized in accordance with generally
accepted accounting principles. Environmental matters that relate to conditions
arising from previously divested businesses were generally recorded as
liabilities prior to or at the time of divestiture and are periodically
reassessed for adequacy based on current information. Liabilities relating to
environmental matters are generally recorded when environmental assessments
and/or remedial efforts are probable and the related costs can be reasonably
estimated. Generally, the timing of these accruals coincides with the completion
of a feasibility study or the Company's commitment to a formal plan of action.

NET EARNINGS (LOSS) PER COMMON SHARE:

Basic net earnings (loss) per common share is computed by dividing net
earnings (loss) applicable to common stockholders by the weighted-average number
of common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares which might be issued upon exercise of common
stock warrants. In periods where losses are reported, the weighted-average
number of common shares outstanding excludes common stock equivalents, since
their inclusion would be anti-dilutive.

COMPREHENSIVE INCOME(LOSS):

Comprehensive income and its components is reported in the Consolidated
Statements of Stockholders' Equity. Comprehensive income (loss) is defined as
changes in the equity excluding

F-10
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
changes resulting from investments by and distributions to the stockholders. The
Company's only component of comprehensive loss is its cumulative translation
adjustment for foreign currencies.

4. ACQUISITIONS

PYRAMID OPERATING SYSTEMS, INC.:

On June 18, 1999, the Company entered into an agreement to purchase the
remaining shares of Pyramid for a net purchase price of $11.0 million, payable
either in shares of the Company's common stock upon completion of a public
offering of common stock, or on April 30, 2000 in the form of a subordinated
note payable. Under this agreement, the Company has agreed to provide short-term
financing to fund Pyramid's interim working capital requirements until the
acquisition date. The Company has also entered into a management agreement with
Pyramid under which the Company oversees the management of Pyramid until the
closing of the transaction.

LOGIC MARINE CORPORATION:

On May 11, 1999, the Company acquired substantially all of the assets of
Logic Marine Corporation ("Logic"), a manufacturer of fishing and recreational
boats, for consideration consisting of $500,000 in cash at closing, a promissory
note for $500,000 due in May 2000, $597,000 in assumed liabilities, and an
earn-out of up to $450,000 over three years based on net sales revenues from
sales of Logic boats. The acquisition was accounted for as a purchase and
resulted in goodwill in the amount of $1.6 million, which represented the
purchase price plus net liabilities acquired. Goodwill will be amortized over a
25-year period. Logic's results of operations since the date of acquisition are
included in the accompanying consolidated financial statements.

HORIZON MARINE, L.C.:

On December 3, 1998, the Company acquired substantially all of the assets
and certain liabilities of Horizon Marine, L.C. ("Nova"), a Kansas aluminum boat
manufacturer, for consideration consisting of $2.3 million in cash at closing
and the assumption of approximately $3.5 million in liabilities of which
$2.7 million were paid at or immediately subsequent to closing. There is also a
five-year earn-out of up to $5.2 million of which $200,000 were pre-paid at
closing. The earn-out is based on gross revenues from sales of products produced
at this facility and can be adjusted for the achievement of certain gross profit
percentages and for the value of warranty claims, from sales of products
produced at this facility. The acquisition was accounted for as a purchase and
resulted in goodwill in the amount of $700,000, which represented the purchase
price in excess of net assets acquired. Goodwill will be amortized over a
25-year period. Nova's results of operations since the date of acquisition are
included in the accompanying consolidated financial statements.

F-11
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEBT

At the year end dates indicated below, long-term debt, net of related
discounts, consisted of the following (in thousands):

<TABLE>
<CAPTION>
INTEREST RATE,
AS OF
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999
-------------- -------- --------
<S> <C> <C> <C>
Revolving credit facility, variable rate................. n/a $ -- $ --
Senior term loan, variable rate.......................... n/a 12,000 --
Subordinated term loan, variable rate.................... 7.3% 60,000 60,000
Senior subordinated notes, fixed rate.................... 13.5% 25,584 25,584
Stockholder notes, net of unamortized discount of $3.7
million as of June 30, 1999, variable rate............. 8.8% to 9.3% 4,104 25,406
Note payable to State of Wisconsin Investment Board, net
of unamortized discount of $5.1 million as of June 30,
1998, variable rate.................................... n/a 19,917 --
Other debt obligations, due in varying installments
through 2005, fixed rate............................... 3.4% to 12.4% 2,199 6,161
-------- --------
Total debt........................................... 123,804 117,151
Less-current maturities.................................. (6,026) (1,022)
-------- --------
Total long-term debt................................. $117,778 $116,129
======== ========
</TABLE>

Aggregate maturities of long-term debt are approximately $4.1 million in the
year ending June 30, 2001, $25.6 million in the year ending June 30, 2002,
$81.4 million in the year ending June 30, 2003, none in the year ending
June 30, 2004 and $5.0 million thereafter. At June 30, 1999, the carrying value
of long-term debt was approximately $5.8 million less than its fair value.

In July 1994, the Company issued $100.0 million aggregate principal amount
of 13.5% Senior Subordinated Notes due 2001 (the "13.5% Notes").

F-12
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEBT (CONTINUED)

During fiscal year 1999, the Company's old credit facility (the "Old Credit
Facility"), which would have expired in June 2000, consisted of a $35.0 million
revolving credit facility, a $15.0 million term loan facility and a
$23.0 million letter of credit facility. At June 30, 1999, the Old Credit
Facility, as amended, consisted of a $35.0 million revolving credit facility and
a $23.0 million letter of credit facility. Weighted average borrowings
outstanding under the revolving credit facility during 1999 were $14.5 million.
Aggregate borrowings and outstanding letters of credit under the Old Credit
Facility were limited to eligible receivables and eligible inventories, as
defined. Borrowings under the revolving credit facility were intended for
general corporate and working capital purposes. At June 30, 1999, the Company
had $35.0 million of availability under the revolving credit facility,
$3.6 million of availability under letter of credit facility and had prepaid the
term loan facility in its entirety. In addition, as of June 30, 1999, the
Company was in compliance with all covenants under the Old Credit Facility,
except the capital expenditure requirement. Such non-compliance was effectively
waived upon the arrangement of the Company's new credit facility.

Effective July 30, 1999, the Company arranged a new credit facility (the
"New Credit Facility"), which expires in June 2002, consisting of a
$29.0 million revolving credit facility, a $45.0 million term loan facility and
a $21.0 million letter of credit facility. Aggregate borrowings and outstanding
letters of credit under the new Credit Facility are limited to eligible
receivables, eligible inventories and eligible property, plant and equipment, as
defined. Borrowings under the revolving credit facility are intended for general
corporate and working capital purposes and for the purchase of approximately
$5.6 million aggregate principal amount of the Notes. Borrowings under the term
loan facility are designated solely for the purchase of a stockholder note in
the amount of $25.0 million, which was repaid on August 13, 1999, and for the
purchase of approximately $20.0 million aggregate principal amount of the 13.5%
Notes, which were repurchased on September 7, 1999. At the time of original
issuance the stockholder note was deemed to have a below-market interest rate,
and a debt discount was recorded to impute a market yield to maturity. The
repayment of the stockholder note and the remaining 13.5% Notes resulted in an
extraordinary loss of $5.7 million, including $3.7 million of unaccreted
discount associated with the stockholder note.

The New Credit Facility contains restrictive covenants which, among other
things, limit the ability of the Company to incur other indebtedness, engage in
transactions with affiliates, incur liens, make certain restricted payments, and
enter into certain business combination and asset sale transactions. The New
Credit Facility also requires the Company to satisfy certain financial tests and
ratios and restricts capital expenditures. In addition, the New Credit Facility
contains provisions which may require accelerated repayment of amounts
outstanding thereunder and/or limit the Company's access to borrowings
thereunder upon the incurrence of specific obligations or significant changes in
the financial condition, business, properties, prospects or operations of the
Company.

On January 21, 1997, the Company paid $800,000 for an option agreement (the
"Option"), with an affiliate of RDV Holdings, Inc., a stockholder of the
Company, pursuant to which the Company was granted an option to purchase up to
$25.0 million aggregate principal amount of the 13.5% Notes at par. The Option
was exercisable at any time or from time to time, in whole or in part, through
January 19, 1998.

On July 1, 1997, the Company entered into an agreement (the "Tender
Agreement"), with an unrelated third party, pursuant to which the third party
agreed to tender certain of the 13.5% Notes held by such party, with an
aggregate face value of $32.0 million, for purchase by the Company at a

F-13
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEBT (CONTINUED)
price equal to 99.0% of par. In consideration of entering into the Tender
Agreement, the Company paid the third party a fee of $960,000 (3% of par). As a
condition to the Tender Agreement, the holder also agreed to consent to certain
proposed amendments to the indenture governing the 13.5% Notes ("Indenture").

On July 10, 1997, the Company commenced an offer to purchase and a consent
solicitation (the "Tender Offer and Consent"), for to up to $75.0 million
aggregate principal amount of the 13.5% Notes, including those subject to the
Tender Agreement, but excluding those subject to the Option. Terms of the Tender
Offer and Consent provided for the purchase of all validly tendered 13.5% Notes,
as defined and subject to certain conditions, at a price equal to 99.0% of par.
In addition, holders submitting valid tenders of 13.5% Notes would have, as a
condition to tendering, provided their consent with respect to certain proposed
amendments to the Indenture, for which consent the holder would receive a fee
equal to 3.0% of par (the "Consent Fee") of the 13.5% Notes tendered by such
holder.

On October 20, 1997, the Company arranged a $60.0 million subordinated bank
credit facility (the "Subordinated Facility"), expiring in October 2002,
consisting of a $60.0 million term loan facility. These proceeds were designated
solely for the purchase of up to $60.0 million aggregate principal amount of the
13.5% Notes. Borrowings under the Subordinated Facility are collateralized by a
second security interest in the Company's assets and by letters of credit issued
by certain stockholders of the Company.

On October 20, 1997, the Company accepted for purchase $49.4 million
aggregate principal amount of the 13.5% Notes tendered by holders in connection
with the Tender Offer and Consent. In addition, the Company exercised the Option
and purchased an additional $25.0 million aggregate principal amount of the
13.5% Notes. The purchase of the 13.5% Notes and the payment of the related
Consent Fee was funded through proceeds from the Credit Facility and the
Subordinated Facility. In connection with the purchase of these 13.5% Notes, the
Company incurred an extraordinary loss on early extinguishment of debt of
approximately $1.2 million.

Pursuant to the First Amended and Restated Note and Stock Purchase
Agreement, dated August 31, 1998, by and between Irwin L. Jacobs and the State
of Wisconsin Investment Board (SWIB), SWIB purchased a $25.0 million demand
promissory note payable by the Company to Mr. Jacobs. On June 17, 1999,
Mr. Jacobs repurchased that note from SWIB. The Company used a portion of the
proceeds of its new credit facility to repay this note in full in August 1999.

In consideration of providing letters of credit to collateralize the
Company's Subordinated Facility, the Company issued warrants to certain existing
stockholders providing such letters of credit. A total of 731,182 warrants were
issued in connection therewith. The fair value of the warrants issued
approximated $1.7 million and has been reflected as debt issuance costs and an
addition to equity in the accompanying June 30, 1998 balance sheet. This debt
issuance cost is being amortized over a period extending through October 2002.
In addition, the Company reimburses the stockholders for their costs incurred in
maintaining these letters of credit.

F-14
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES

The Company utilizes the liability method to account for income taxes. The
liability method requires that deferred assets and liabilities be recognized for
the expected future tax effects of the temporary differences between the tax and
book bases of the assets and liabilities.

Components of the provision for income taxes were as follows for the year
ended December 31, 1996, the six months ended June 30, 1997 and the years ended
June 30, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
FOR THE FOR THE YEAR ENDED
FOR THE YEAR SIX MONTHS JUNE 30,
ENDED ENDED -----------------------
DECEMBER 31, 1996 JUNE 30, 1997 1998 1999
------------------ -------------- ---------- ----------
<S> <C> <C> <C> <C>
Current:
Federal................. $ -- $ -- $ 60 $ 470
State and foreign....... 860 246 490 2,030
---- ---- ---- --------
Total current......... 860 246 550 2,500
Change in valuation
allowance............. -- -- -- (22,000)
---- ---- ---- --------

Total................... $860 $246 $550 $(19,500)
==== ==== ==== ========
</TABLE>

At June 30, 1999, the Company had total net operating loss carryforwards of
approximately $146.0 million. Net operating losses of $58.0 million,
$53.0 million, $23.0 million and $12.0 million expire in the years ended
June 30, 2006, June 30, 2007, June 30, 2008 and June 30, 2012, respectively.
Realization of $16.0 million of certain net operating loss carryforwards is
limited annually under Section 382 of the Internal Revenue Code, as amended. The
Company also had unused alternative minimum tax credits of approximately
$5.0 million that may be available to offset future federal income tax
liabilities.

Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities consist of the following as of June 30, 1998 and 1999 (in
thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
-------- --------
<S> <C> <C>
Loss carryforwards...................................... $ 62,545 $ 56,090
Liabilities retained related to previously divested
businesses............................................ 3,202 2,194
Warranty reserves....................................... 4,670 4,709
Insurance reserves...................................... 4,091 4,027
Accrued rebates......................................... 2,902 3,995
Inventory reserves...................................... 1,294 2,207
Other................................................... 10,007 9,343
-------- --------
Total deferred tax assets............................. 88,711 82,565
Valuation allowance..................................... (86,725) (58,523)
-------- --------
Deferred tax liability--depreciation.................... (1,986) (2,042)
-------- --------
Net deferred tax assets................................. 1,986 24,042

Net deferred taxes.................................... $ -- $ 22,000
======== ========
</TABLE>

F-15
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES (CONTINUED)
Prior to 1999 the Company had determined that the realization of the loss
carryforwards and net deferred tax assets did not meet the recognition criteria
under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109") and, accordingly, valuation allowances had been
established for the entire tax benefit of these loss carryforwards and the net
deferred tax assets. During 1999, the Company determined it more likely than not
that a portion of the deferred tax assets would be realizable because the
Company had two consecutive years of profits and future projected profits. As a
result, in accordance with SFAS 109, the Company recorded a reduction in the
valuation allowance of $22.0 million.

The differences between income taxes computed using the federal statutory
rate and the effective tax rate were as follows for the year ended December 31,
1996, the six months ended June 30, 1997 and the years ended June 30, 1998 and
1999:

<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEAR MONTHS FOR THE YEAR ENDED
ENDED ENDED JUNE 30,
DECEMBER 31, JUNE 30, -------------------
1996 1997 1998 1999
------------- ----------- -------- --------
<S> <C> <C> <C> <C>
Federal statutory rate............... 34% 34% 34% 35%
State income taxes, net of federal
tax benefits....................... (76) 3 3 5
Nondeductible amortization & other... 0 0 22 5
Current utilization of NOL's......... (34) (34) (43) (31)
Change in valuation allowance........ 0 0 0 (105)
---- ---- ---- ----

Effective tax rate................... (76)% 3% 16% (91)%
==== ==== ==== ====
</TABLE>

7. EMPLOYEE BENEFIT PLANS

The Company and certain of its subsidiaries maintain defined contribution
retirement plans covering substantially all full-time employees. Under certain
of these plans, eligible participants may make voluntary contributions up to 25%
of their compensation, as permitted by plan provisions. The plans provide for
the Company to make matching and other contributions to eligible participants at
the Company's discretion. The Company made contributions to these plans
aggregating $1.1 million for the year ended December 31, 1996, $400,000 for the
six months ended June 30, 1997, $1.2 million for the year ended June 30, 1998
and $1.4 million for the year ended June 30, 1999.

8. COMMITMENTS AND CONTINGENCIES

DEALER INVENTORY FLOOR PLAN FINANCING:

The Company and its subsidiaries are parties to certain dealer inventory
floor plan financing arrangements with various financial institutions pursuant
to which the Company may be required, in the event of default by a financed
dealer, to repurchase products previously sold to such dealer. The Company
repurchased $3.2 million of such dealer inventory in the year ended
December 31, 1996, $1.4 million in the six months ended June 30, 1997,
$4.5 million in the year ended June 30, 1998 and $3.4 million in the year ended
June 30, 1999. As of June 30, 1999, the Company and certain

F-16
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
subsidiaries were contingently liable under these agreements for repurchase in
the amount of $13.8 million.

The Company generally has not provided reserves, other than immaterial
reserves at certain subsidiaries, for losses and costs which may result should
the Company be required to repurchase product from a defaulting dealer. Although
the ultimate loss which may be incurred as a result of such contractual
obligation is uncertain, the Company believes that any such losses that may be
incurred would not have a material effect on its consolidated operating results
or financial position.

INSURANCE MATTERS:

The Company and its subsidiaries have insurance for workers' compensation,
employee health, general and auto liability losses in excess of predetermined
loss limits. A provision has been made in the consolidated financial statements
for estimated losses resulting from claims incurred prior to the balance sheet
date, which were below the amounts of the predetermined loss limits.

LEASES AND COMMITMENTS:

The Company, through its subsidiaries, leases certain facilities and
equipment under operating lease arrangements which expire at various dates
through 2004. These leases generally contain renewal options and require the
Company to pay the maintenance, insurance, taxes and other expenses in addition
to the minimum annual rentals. Rent expense related to operating leases was
$2.2 million for the year ended December 31, 1996, $1.0 million for the six
months ended June 30, 1997, $2.5 million for the year ended June 30, 1998 and
$3.1 million for the year ended June 30, 1999. The Company has future lease
commitments of approximately $3.6 million in 2000, $2.6 million in 2001,
$1.6 million in 2002 and $600,000 thereafter.

LEGAL AND ENVIRONMENTAL:

The Company and its subsidiaries are defendants in legal proceedings arising
in the ordinary course of business. Although the outcome of these matters cannot
be determined, in the opinion of management and outside counsel, disposition of
these proceedings will not have a material effect on the Company's consolidated
financial position or results of operations.

Historically, the Company's facilities have used underground storage tanks
for storing certain materials associated with its operations, including
petroleum, acetone and resins. The Company has removed or closed in place all
underground storage tanks according to applicable laws. No material issues
related to soil or groundwater contamination were encountered.

CURRENT AND DIVESTED BUSINESSES:

The Company believes it is in substantial compliance with all existing
environmental laws and regulations. In 1995, The Company signed a final consent
order with the Florida Department of Environmental Protection to settle all
outstanding issues with respect to an acetone release at our Wellcraft plant in
Sarasota, Florida. The remaining estimated cost of remediation activities
required at this site ranges from $1.7 million to $2.0 million. Based on
available information, reserves as of June 30, 1999 are adequate to cover these
costs.

F-17
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)

In addition, the past practices of some of the Company's current and
divested operations may have created conditions that give rise to liability
under CERCLA and comparable state laws. With respect to these potential
liabilities, the Company has been identified as a potentially responsible party
at approximately 12 active sites. In certain instances, the Company has a duty
to indemnify the current owners for environmental matters related to divested
operations including AMF Incorporated. Excluding the matters with Wellcraft
discussed above, the Company currently anticipates total environmental-related
costs associated with current and divested operations at approximately
$2.3 million, which include CERCLA-type liabilities. These costs are likely to
be incurred over a period of up to ten years. Payments relating to environmental
matters in connection with current and divested businesses were approximately
$2.7 million for the year ended December 31, 1996, $500,000 for the six months
ended June 30, 1997, $1.0 million for the year ended June 30, 1998 and $900,000
for the year ended June 30, 1999. The balance of the reduction in our legal and
environmental reserve balance between years was attributable to a reduction of
$1.3 million in our estimated requirement on a particular EPA matter, due to a
change in facts surrounding the case, and to adjustments between our current and
non-current classification of amounts accrued for all such cases. The site to
which the $1.3 million adjustment related is located in Muskegon, Michigan. The
overall costs to remediate the site were reduced from $50 million to a range of
$18 to $30 million following a review in late 1998 by the site's technical
consultant and technical committee, which showed favorable conditions for
groundwater remediation to occur by natural attenuation. Thus, AMF's remaining
share ranges from $167,000 to $622,000. Prior to this reduction, AMF's remaining
share was $1,900,000. The $1.3 million was credited to income and reflected as a
component of our selling and administrative expenses for the year ended
June 30, 1999. As of June 30, 1999, based on available information, reserves to
account for any potential exposure with respect to current and divested
operations are adequate to cover any potential costs. Nevertheless, the nature
and extent of CERCLA proceedings is that cleanup estimates, the allocated
financial responsibilities of potentially responsible parties and the degree of
regulatory scrutiny may change over time and therefore the Company is not
certain that these estimates will ultimately reflect its actual exposure.

Other non-current liabilities consist of the following (in thousands):

Post-retirement benefits.................................. $ 1,525 $ 1,440
Insurance................................................. 3,286 2,042
Legal and environmental................................... 5,230 2,554
Other..................................................... 5,675 6,875
------- -------

Total other noncurrent liabilities...................... $15,716 $12,911
======= =======
</TABLE>

LETTERS OF CREDIT:

At June 30, 1999, the Company had outstanding letters of credit aggregating
$19.4 million for which approximately $13.7 million collateralized various
Company insurance programs. The remainder principally related to an industrial
development revenue bond financing arrangement and to liabilities retained by
the Company in connection with divested operations.

F-18
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. SEGMENT REPORTING

The Company conducts and reports its business in two segments, the
recreational boat segment and the luxury yachts segment, which consists solely
of the Hatteras Yachts division. The segments are managed and reported
separately because the recreational boats are manufactured in a high-volume
assembly line environment whereas Hatteras is a custom yacht builder, similar to
a construction company environment. The Company measures the success of segments
by monitoring operating profit. The Company does not allocate nonoperating gains
and losses, interest expense and taxes to the segments.

Both segments follow accounting policies described in Note 3, and no
transactions occur between the segments.

The following table illustrates information about the Company's reported
operating profit or loss and segment assets. The Company does not allocate
income taxes or unusual items to segments.

Segment information as of and for the year ended December 31, 1996, the six
months ended June 30, 1997 and the years ended June 30, 1998 and 1999 consisted
of the following (in thousands):

<TABLE>
<CAPTION>
RECREATIONAL RECREATIONAL
BOATS LUXURY YACHTS TOTALS BOATS LUXURY YACHTS TOTALS
------------ ------------- -------- ------------ ------------- --------
YEAR ENDED DECEMBER 31, 1996 SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues......................... $521,199 $96,857 $618,056 $235,819 $25,029 $260,848
Depreciation and goodwill
amortization....................... 6,747 1,347 8,094 3,360 703 4,063
Operating profit (loss).............. 19,573 3,630 23,203 9,147 (7,647) 1,500
Other significant noncash items...... 3,524 -- 3,524 3,272 -- 3,272
Segment assets....................... 223,645 47,558 271,203 203,584 54,695 258,279
Expenditures for segment assets...... 3,730 1,781 5,511 3,781 1,307 5,088
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998 YEAR ENDED JUNE 30, 1999
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues......................... $505,910 $80,033 $585,943 $614,406 $90,250 $704,656
Depreciation and goodwill
amortization....................... 7,138 1,636 8,774 7,221 1,730 8,951
Operating profit (loss).............. 27,601 (4,003) 23,598 35,948 1,520 37,468
Other significant noncash items...... -- -- -- 2,614 -- 2,614
Segment assets....................... 192,346 52,276 244,622 265,379 55,384 320,763
Expenditures for segment assets...... 6,773 1,345 8,118 11,270 1,588 12,858
</TABLE>

F-19
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. SEGMENT REPORTING (CONTINUED)
The following table reconciles operating profit to net income for the year
ended December 31, 1996, the six months ended June 30, 1997 and the years ended
June 30, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1996 1997 1998 1999
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total operating profit for
reportable segments.............. $ 23,203 $ 1,500 $ 23,598 $ 37,468
Interest expense................... (22,190) (11,026) (18,702) (16,098)
Other income (loss)................ 122 (176) (304) 75
Income tax benefit (provision)..... (860) (246) (505) 19,500
Extraordinary loss on
extinguishment of debt........... -- -- (1,134) --
-------- -------- -------- --------
Net income (loss).................. $ 275 $ (9,948) $ 2,853 $ 40,495
======== ======== ======== ========
</TABLE>

10. RELATED-PARTY TRANSACTIONS

In addition to the matters discussed in Note 5, the Company pays a
management fee to Jacobs Management Corporation ("JMC"), a stockholder of the
Company and an affiliate of Irwin L. Jacobs, for certain consulting and
management services and subleases certain office facilities to JMC. Net payments
under these arrangements aggregated approximately $1.5 million for the year
ended December 31, 1996, $700,000 for the six months ended June 30, 1997,
$1.4 million for the year ended June 30, 1998 and $1.3 million for the year
ended June 30, 1999.

The Company pays interest in connection with two stockholder notes payable
to Irwin L. Jacobs. These notes bear interest at the published prime rate, plus
1.0% and plus 1.5%, respectively. Payments of interest under these note
agreements aggregated approximately $400,000 for the year ended December 31,
1996, $200,000 for the six months ended June 30, 1997, $400,000 for each of the
years ended June 30, 1998 and 1999.

From time to time the Company has recorded revenues from boat sales to
affiliates. Management believes the terms of such sales were consistent with
terms of sales to non-affiliated parties. Revenues recorded in connection with
such sales aggregated approximately $1.3 million for the year ended
December 31, 1996, none for the six months ended June 30, 1997, $700,000 for the
year ended June 30, 1998, and $500,000 for the year ended June 30, 1999.

The Company sponsors certain professional bass fishing tournament activities
of Operation Bass, Inc., an affiliate of Irwin L. Jacobs and certain executive
management of the Company. Net sponsorship costs incurred by the Company,
including cash paid or accrued and product provided, related to these activities
approximated $116,000 for the year ended December 31, 1996, $58,000 for the six
months ended June 30, 1997, $116,000 for the year ended June 30, 1998 and
$432,000 for the year ended June 30, 1999.

F-20
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED)

The Company has filed an initial registration statement with the SEC to
offer shares of its common stock to the public. In connection with this
offering, the Company has committed to: (1) splitting the Company's common
stock, (2) spinning off Hatteras, the Company's luxury yacht segment through
stockholders exchanging one out of every ten of their Genmar shares for one
Hatteras share, (3) acquiring Pyramid, (4) issuing shares of common stock in
exchange for outstanding warrants, (5) issuing shares of common stock to
nonmanagement employees, and (6) recording expense under the Company's phantom
stock plan.

12. SUPPLEMENTAL STATEMENTS OF OPERATIONS INFORMATION (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- -------- -------- -------- --------
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues.............................. $150,492 $153,610 $145,562 $168,392 $618,056
Gross profit.............................. 22,419 23,848 21,386 28,740 96,393
Operating profit.......................... 3,711 7,525 3,256 8,711 23,203
Net income (loss)......................... (1,966) 1,692 (2,252) 2,801 275
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues.............................. $120,023 $140,825 n/a n/a $260,848
Gross profit.............................. 16,557 21,843 n/a n/a 38,400
Operating profit (loss)................... (2,799) 4,299 n/a n/a 1,500
Net loss.................................. (9,220) (728) n/a n/a (9,948)
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues.............................. $132,739 $140,389 $145,986 $166,829 $585,943
Gross profit.............................. 20,257 21,830 27,616 35,589 105,292
Operating profit.......................... 3,060 2,830 5,277 12,431 23,598
Extraordinary loss........................ -- (1,184) -- -- (1,184)
Net income (loss)......................... (2,593) (3,270) 796 7,925 2,858
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues.............................. $142,754 $169,822 $181,838 $210,242 $704,656
Gross profit.............................. 23,291 29,577 35,997 48,544 137,409
Operating profit.......................... 1,644 9,925 10,942 14,957 37,468
Net income (loss)......................... (2,607) 4,911 6,031 32,610 40,945
</TABLE>

F-21
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

<TABLE>
<CAPTION>
CHARGE FOR
BALANCE PROVISION PURPOSE THAT BALANCE
BEGINNING OF CHARGED TO RESERVE WAS END OF
YEAR OPERATIONS ESTABLISHED YEAR
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Reserve for doubtful accounts

For the year ended December 31, 1996........... $3,488 $2,297 $(1,677) $4,108
====== ====== ======= ======

For the six months ended June 30, 1997......... $4,108 $ 166 $ (25) $4,249
====== ====== ======= ======

For the year ended June 30, 1998............... $4,249 $2,489 $(5,278) $1,460
====== ====== ======= ======

For the year ended June 30, 1999............... $1,460 $1,180 $ (993) $1,647
====== ====== ======= ======
</TABLE>

F-22
<PAGE>

[INSIDE BACK COVER]

[PICTURE OF RANGER BOAT BEING
USED IN WAL*MART TOURNAMENT]

Ranger is the exclusive boat manufacturer

sponsor of the Wal*Mart FLW Tournaments,

which are broadcast on ESPN and ESPN2.

Also, Fox Television Network will

broadcast the $3.5 million payout Ranger

Millennium Tournament (MI)-SM- event in

November 1999.

The 1999 Wal*Mart FLW Tour

Angler of the Year, David

[PICTURE OF Walker, was featured on the
WHEATIES
BOX] Wheaties box. David is a

Ranger Boat Company

pro-angler.

Unique sponsorship boats are being

manufactured for industry and

non-industry consumer product

companies to also enhance the

sponsor's marketing efforts.

[PICTURE OF LUND BOAT SPONSORED BY MERCURY]

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

6,500,000 SHARES

[LOGO]

COMMON STOCK

------------

PROSPECTUS

------------------

STEPHENS INC.
U.S. BANCORP PIPER JAFFRAY

OCTOBER , 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 27,800
NASD filing fee............................................. 10,500
Nasdaq National Market listing fee.......................... 95,000
Legal fees and expenses..................................... 700,000
Accounting fees and expenses................................ 250,000
Printing and engraving...................................... 250,000
Transfer agent fees......................................... 10,500
Miscellaneous............................................... 196,200
----------
Total................................................. $1,540,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our amended and restated certificate of incorporation in effect as of the
date hereof provides that, except to the extent prohibited by the Delaware
General Corporation Law, as amended, our directors shall not be personally
liable to our company or our stockholders for monetary damages for any breach of
fiduciary duty. Under the DGCL, the directors have a fiduciary duty to our
company which is not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to our company for acts or omissions which are found by a court
of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. We have
applied for liability insurance for its officers and directors.

Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The amended and restated certificate eliminates
the personal liability of directors to the fullest extent permitted by
Section 102(b)(7) of the DGCL and provides that we may fully indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer, or is or was serving at our request as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against

II-1
<PAGE>
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the amended and restated certificate. We are not
aware of any threatened litigation or proceeding that may result in a claim for
such indemnification.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Simultaneously with the consummation of this offering, we will issue 916,667
shares of our common stock in exchange for all the remaining outstanding common
stock of Pyramid Operating Systems, Inc. pursuant to Section 4(2) of the
Securities Act of 1933.

In October 1997, in connection with our subordinated term loan credit
facility, we issued warrants to purchase 6,580,638 shares of our common stock.
Simultaneously with the completion of this offering, we will exchange .85 of a
share of our common stock for each share issuable under these warrants, or
5,593,500 shares in the aggregate for all outstanding warrants, pursuant to
Section 4(2) of the Securities Act of 1933.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ ------------------------------------------------------------
<C> <S>
**1.1 Form of Underwriting Agreement.
**3.1 Amended and Restated Certificate of Incorporation.
**3.2 Amended and Restated Bylaws.
**4.1 Specimen Common Stock Certificate.
*5.1 Opinion of Weil, Gotshal & Manges LLP.
**10.1 Agreement of Purchase and Sale of Assets by and among
Horizon Marine, LC, Genmar Manufacturing of Kansas, L.L.C.
and the Sole Member of Horizon Marine, LC, dated
December 3, 1998.
**10.2 Agreement of Purchase and Sale of Assets by and among Logic
Marine Corporation, Genmar Logic LLC and the parents and
stockholders of Logic Marine Corporation, dated as of
May 11, 1998.
**10.3 Agreement and Plan of Reorganization by and among Genmar
Holdings, Inc., POS Acquisition Corporation, Pyramid
Operating Systems, Inc. and the Stockholders of Pyramid
Operating Systems, Inc., dated as of June 18, 1999.
**10.4 Third Amended and Restated Credit Agreement among Genmar
Holdings, Inc., the financial institutions named therein,
The Bank of New York, as Agent and BNY Capital Markets,
Inc., dated as of July 30, 1999.
**10.5 Subordinated Term Loan Credit Agreement among Genmar
Holdings, Inc., the financial institutions named therein,
The Bank of New York, as Agent, and BNY Capital Markets,
Inc. dated as of October 20, 1997.
*10.6 Genmar Holdings, Inc. Fiscal 1999 Stock Incentive Plan.
*10.7 Genmar Holdings, Inc. 1999 Stock Option Plan for
Non-Employee Directors.
**10.8 Management Services Agreement by and between Genmar
Holdings, Inc. and Jacobs Management Corporation, dated
April 1, 1995.
**10.9 Amendment No. 1 to Management Services Agreement by and
between Jacobs Management Corporation and Genmar Holdings,
Inc. dated as of August 3, 1999.
**10.10 Retention Bonus Agreement, dated as of October 31, 1998, by
and between Jacobs Management Corporation and
Grant E. Oppegaard.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ ------------------------------------------------------------
<C> <S>
**10.11 Retention Bonus Agreement, dated as of October 31, 1998, by
and between Jacobs Management Corporation and
Roger R. Cloutier II.
**10.12 Capital Contribution Agreement, dated , 1999, by and
between Genmar Industries, Inc. and Hatteras Yachts, Inc.
**10.13 Exchange and Distribution Agreement, dated , 1999,
by and among Genmar Holdings, Inc., Minstar, Inc., Genmar
Industries, Inc. and Hatteras Yachts, Inc.
*10.14 Form of Grant for Senior Executive Officers.
**21.1 Subsidiaries of the Registrant.
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1).
**24.1 Powers of Attorney (included on signature page to the
Registration Statement).
**27.1 Financial Data Schedule.
</TABLE>

- ------------------------

* Filed herewith.

** Previously filed.

(b) Financial Statement Schedules.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person of the registrant in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to rule 424(b)(1) or (4), or 497(h)
under the Act, shall be deemed to be part of this registration statement as of
the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.

(3) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in Minneapolis, Minnesota, on this
28th day of September 1999.

<TABLE>
<S> <C> <C>
GENMAR HOLDINGS, INC.

By: /s/ ROGER R. CLOUTIER, II
-----------------------------------------
Name: Roger R. Cloutier, II
Title: Executive Vice President and Chief
Financial Officer
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Chairman of the Board of October 18, 1999
Irwin L. Jacobs Directors

President, Chief Executive
* Officer and Director
------------------------------------------- (principal executive October 18, 1999
Grant E. Oppegaard officer)

Executive Vice President,
/s/ ROGER R. CLOUTIER II Chief Financial Officer
------------------------------------------- and Director (principal October 18, 1999
Roger R. Cloutier II financial officer)

* Vice President and
------------------------------------------- Controller (principal October 18, 1999
Mark W. Peters accounting officer)

*
------------------------------------------- Director October 18, 1999
Bjorn Ahlstrom

*
------------------------------------------- Director October 18, 1999
Daniel G. DeVos

*
------------------------------------------- Director October 18, 1999
Daniel T. Lindsay
</TABLE>

S-1
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Director October 18, 1999
William W. Nicholson

*
------------------------------------------- Director October 18, 1999
Carl R. Pohlad

*
------------------------------------------- Director October 18, 1999
James O. Pohlad

*
------------------------------------------- Director October 18, 1999
Jerry L. Tubergen

*By: /s/ ROGER R. CLOUTIER II
--------------------------------------
Name: Roger R. Cloutier II
Title: Attorney-in-fact
</TABLE>

S-2
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<C> <S>
**1.1 Form of Underwriting Agreement.
**3.1 Amended and Restated Certificate of Incorporation.
**3.2 Amended and Restated Bylaws
**4.1 Specimen Common Stock Certificate.
*5.1 Opinion of Weil, Gotshal & Manges LLP.
**10.1 Agreement of Purchase and Sale of Assets by and among
Horizon Marine, LC, Genmar Manufacturing of Kansas, L.L.C.
and the Sole Member of Horizon Marine, LC, dated
December 3, 1998.
**10.2 Agreement of Purchase and Sale of Assets by and among Logic
Marine Corporation, Genmar Logic LLC and the parents and
stockholders of Logic Marine Corporation, dated as of
May 11, 1998.
**10.3 Agreement and Plan of Reorganization by and among Genmar
Holdings, Inc., POS Acquisition Corporation, Pyramid
Operating Systems, Inc. and the Stockholders of Pyramid
Operating Systems, Inc., dated as of June 18, 1999.
**10.4 Third Amended and Restated Credit Agreement among Genmar
Holdings, Inc., the financial institutions named therein,
The Bank of New York, as Agent and BNY Capital Markets,
Inc., dated as of July 30, 1999.
**10.5 Subordinated Term Loan Credit Agreement among Genmar
Holdings, Inc., the financial institutions named therein,
The Bank of New York, as Agent, and BNY Capital Markets,
Inc. dated as of October 20, 1997.
*10.6 Genmar Holdings, Inc. Fiscal 1999 Stock Incentive Plan
*10.7 Genmar Holdings, Inc. 1999 Stock Option Plan for
Non-Employee Directors
**10.8 Management Services Agreement by and between Genmar
Holdings, Inc. and Jacobs Management Corporation, dated
April 1, 1995
**10.9 Amendment No. 1 to Management Services Agreement by and
between Jacobs Management Corporation and Genmar Holdings,
Inc., dated as of August 3, 1999.
**10.10 Retention Bonus Agreement, dated as of October 31, 1998, by
and between Jacobs Management Corporation and Grant E.
Oppegaard.
**10.11 Retention Bonus Agreement, dated as of October 31, 1998, by
and between Jacobs Management Corporation and Roger R.
Cloutier II.
**10.12 Capital Contribution Agreement, dated , 1999, by
and between Genmar Industries, Inc. and Halteras Yachts,
Inc.
**10.13 Exchange and Distribution Agreement, dated , 1999,
by and among Genmar Holdings, Inc., Minstar, Inc., Genmar
Industries, Inc. and Halteras Yachts, Inc.
*10.14 Form of Grant for Senior Executive Officers.
**21.1 Subsidiaries of the Registrant.
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1).
**24.1 Powers of Attorney (included on signature page to the
Registration Statement).
**27.1 Financial Data Schedule.
</TABLE>

- ------------------------

* Filed herewith.

** Previously filed.

S-3

<PAGE>

October 18, 1999

Genmar Holdings, Inc.
100 South Fifth Street
Suite 2400
Minneapolis, Minnesota 55402

Ladies and Gentlemen:

We have acted as counsel to Genmar Holdings, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission of the Company's Registration Statement
on Form S-1, Registration No. 333-85447 (as amended, the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the registration of 6,500,000 shares of Common Stock, $.01
par value, of the Company (the "Common Stock").

In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Amended and Restated
Certificate of Incorporation of the Company, as amended to date, the By-laws of
the Company, as amended to date, the Registration Statement, the Prospectus, the
Underwriting Agreement, dated as of October __, 1999 (the "Underwriting
Agreement"), by and among the Company and the several Underwriters named
therein, and such corporate records, agreements, documents and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such inquiries
of such officers and representatives, as we have deemed relevant and necessary
as a basis for the opinion hereinafter set forth.

In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. As to all questions
of fact material to this opinion that have not been independently established,
we have relied upon certificates or comparable documents of officers and
representatives of the Company. We have assumed the validity and binding effect
of the Underwriting Agreement, including the choice of law provisions, under the
law of the State of Arkansas.

Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that the Common Stock has been duly
authorized, and, when issued and paid for in accordance with the terms of the
Underwriting Agreement and as contemplated by the Registration Statement, will
be validly issued, fully paid and non-assessable.

<PAGE>

Weil, Gotshal & Manges LLP

October 18, 1999
Page 2

The opinions expressed herein are limited to the laws of the
State of New York, the corporate laws of the State of Delaware and the federal
laws of the United States, and we express no opinion as to the effect on the
matters covered by this letter of the laws of any other jurisdiction.

We hereby consent to all references to our firm included in
the Registration Statement and to any and all references to our firm in the
Prospectus which is a part of the Registration Statement.

Very truly yours,

<PAGE>

GENMAR HOLDINGS, INC.

FISCAL 1999 STOCK INCENTIVE PLAN

1. PURPOSE. The Genmar Holdings, Inc. Fiscal 1999 Stock
Incentive Plan (the "Plan") is intended to provide incentives which will
attract, retain and motivate highly competent persons as officers and key
employees of, and consultants to, Genmar Holdings, Inc. (the "Company") and its
subsidiaries and affiliates, by providing them opportunities to acquire shares
of the Company's common stock, par value $.01 per share (the "Common Stock"), or
to receive monetary payments based on the value of such shares pursuant to the
Benefits (as defined below) described herein. Additionally, the Plan is intended
to assist in further aligning the interests of the Company's officers, key
employees and consultants to those of its other stockholders.

2. ADMINISTRATION.

(a) The Plan will be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company from among its
members (which may be the Compensation Committee) and shall be comprised, unless
otherwise determined by the Board of Directors, solely of not less than two
members who shall be (i) "Non-Employee Directors" within the meaning of Rule
16b-3(b)(3) (or any successor rule) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and (ii) "outside directors" within
the meaning of Treasury Regulation Section 1.162-27(e)(3) under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make such determinations and interpretations and to take such action in
connection with the Plan and any Benefits granted hereunder as it deems
necessary or advisable. All determinations and interpretations made by the
Committee shall be binding and conclusive on all participants and their legal
representatives. No member of the Committee and no employee of the Company shall
be liable for any act or failure to act hereunder, except in circumstances
involving his or her bad faith, gross negligence or willful misconduct, or for
any act or failure to act hereunder by any other member or employee or by any
agent to whom duties in connection with the administration of this Plan have
been delegated. The Company shall indemnify members of the Committee and any
agent of the Committee who is an employee of the Company, a subsidiary or an
affiliate against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's bad faith,
gross negligence or willful misconduct.

(b) The Committee may delegate to one or more of its members,
or to one or more agents, such administrative duties as it may deem advisable,
and the Committee, or any person to whom it has delegated duties as aforesaid,
may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. The
Committee may employ such legal or other counsel, consultants and agents as it
may deem desirable for the administration of the

<PAGE>

Plan and may rely upon any opinion or computation received from any such
counsel, consultant or agent. Expenses incurred by the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company, or
the subsidiary or affiliate whose employees have benefited from the Plan, as
determined by the Committee.

3. PARTICIPANTS. Participants will consist of such officers
and key employees of, and such consultants to, the Company and its subsidiaries
and affiliates as the Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and whom the Committee may designate from time to time to receive
Benefits under the Plan. Designation of a participant in any year shall not
require the Committee to designate such person to receive a Benefit in any other
year or, once designated, to receive the same type or amount of Benefit as
granted to the participant in any other year. The Committee shall consider such
factors as it deems pertinent in selecting participants and in determining the
type and amount of their respective Benefits.

4. TYPE OF BENEFITS. Benefits under the Plan may be granted in
any one or a combination of (a) Stock Options, (b) Stock Appreciation Rights,
(c) Stock Awards, (d) Performance Awards and (e) Stock Units (each as described
below, and collectively, the "Benefits"). Stock Awards, Performance Awards, and
Stock Units may, as determined by the Committee in its discretion, constitute
Performance-Based Awards, as described in Section 11 hereof. Benefits shall be
evidenced by agreements (which need not be identical) in such forms as the
Committee may from time to time approve; PROVIDED, HOWEVER, that in the event of
any conflict between the provisions of the Plan and any such agreements, the
provisions of the Plan shall prevail.

5. COMMON STOCK AVAILABLE UNDER THE PLAN. The aggregate number of
shares of Common Stock that may be subject to Benefits, including Stock Options,
granted under this Plan shall be 2,000,000 shares of Common Stock, which may be
authorized and unissued or treasury shares, subject to any adjustments made in
accordance with Section 13 hereof. The maximum number of shares of Common Stock
with respect to which Benefits may be granted or measured to any individual
participant under the Plan during the term of the Plan shall not exceed 200,000,
provided, however, that the maximum number of shares of Common Stock with
respect to which Stock Options and Stock Appreciation Rights may be granted to
an individual participant under the Plan during the term of the Plan shall not
exceed 200,000 (in each case, subject to adjustments made in accordance with
Section 13 hereof). Any shares of Common Stock subject to a Stock Option or
Stock Appreciation Right which for any reason is cancelled or terminated without
having been exercised, any shares subject to Stock Awards, Performance Awards or
Stock Units which are forfeited, any shares subject to Performance Awards
settled in cash or any shares delivered to the Company as part or full payment
for the exercise of a Stock Option or Stock Appreciation Right shall again be
available for Benefits under the Plan. The preceding sentence shall apply only
for purposes of determining the aggregate number of shares of Common Stock
subject to Benefits but shall not apply for purposes of determining the maximum
number of shares of Common Stock with respect to which Benefits (including the
maximum number of

2
<PAGE>

shares of Common Stock subject to Stock Options and Stock Appreciation Rights)
that may be granted to any individual participant under the Plan.

6. STOCK OPTIONS. Stock Options will consist of awards from
the Company that will enable the holder to purchase a number of shares of Common
Stock, at set terms. Stock Options may be "incentive stock options" ("Incentive
Stock Options"), within the meaning of Section 422 of the Code, or Stock Options
which do not constitute Incentive Stock Options ("Nonqualified Stock Options").
The Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each Stock
Option shall be subject to such terms and conditions consistent with the Plan as
the Committee may impose from time to time, subject to the following
limitations:

(a) EXERCISE PRICE. Each Stock Option granted
hereunder shall have such per-share exercise price as the
Committee may determine at the date of grant; PROVIDED,
HOWEVER, subject to subsection (d) below, that the per-share
exercise price shall not be less than 100% of the Fair Market
Value (as defined below) of the Common Stock on the date the
Stock Option is granted.

(b) PAYMENT OF EXERCISE PRICE. The option exercise
price may be paid in cash or, in the discretion of the
Committee, by the delivery of shares of Common Stock of the
Company then owned by the participant, or by delivery to the
Company of (x) irrevocable instructions to deliver directly to
a broker the stock certificates representing the shares for
which the Option is being exercised, and (y) irrevocable
instructions to such broker to sell such shares for which the
Option is being exercised, and promptly deliver to the Company
the portion of the proceeds equal to the Option exercise price
and any amount necessary to satisfy the Company's obligation
for withholding taxes, or any combination thereof. For
purposes of making payment in shares of Common Stock, such
shares shall be valued at their Fair Market Value on the date
of exercise of the Option and shall have been held by the
Participant for at least six months. To facilitate the
foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms. The
Committee may prescribe any other method of paying the
exercise price that it determines to be consistent with
applicable law and the purpose of the Plan, including, without
limitation, in lieu of the exercise of a Stock Option by
delivery of shares of Common Stock of the Company then owned
by a participant, providing the Company with a notarized
statement attesting to the number of shares owned, where upon
verification by the Company, the Company would issue to the
participant only the number of incremental shares to which the
participant is entitled upon exercise of the Stock Option. The
Committee may, at the time of grant, provide for the grant of
a subsequent Restoration Stock Option if the exercise price is
paid for by delivering previously owned shares of Common Stock
of the

3
<PAGE>

Company. Restoration Stock Options (i) may be granted
in respect of no more than the number of shares of Common
Stock tendered in exercising the predecessor Stock Option,
(ii) shall have an exercise price equal to the Fair Market
Value on the date the Restoration Stock Option is granted, and
(iii) may have an exercise period that does not extend beyond
the remaining term of the predecessor Stock Option. In
determining which methods a participant may utilize to pay the
exercise price, the Committee may consider such factors as it
determines are appropriate.

(c) EXERCISE PERIOD. Stock Options granted under the
Plan shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the
Committee; PROVIDED, HOWEVER, that no Stock Option shall be
exercisable later than ten years after the date it is granted
except in the event of a participant's death, in which case,
the exercise period of such participant's Stock Options may be
extended beyond such period but no later than one year after
the participant's death. All Stock Options shall terminate at
such earlier times and upon such conditions or circumstances
as the Committee shall in its discretion set forth in such
option agreement at the date of grant; PROVIDED, HOWEVER, the
Committee may, in its sole discretion, later waive any such
condition.

(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive
Stock Options may be granted only to participants who are
employees of the Company or one of its subsidiaries (within
the meaning of Section 424(f) of the Code) at the date of
grant. The aggregate Fair Market Value (determined as of the
time the Stock Option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for
the first time by a participant during any calendar year
(under all option plans of the Company and of any parent
corporation or subsidiary corporation (as defined in Sections
424(e) and (f) of the Code, respectively)) shall not exceed
$100,000. For purposes of the preceding sentence, Incentive
Stock Options will be taken into account in the order in which
they are granted. The per-share exercise price of an Incentive
Stock Option shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of grant, and no
Incentive Stock Option may be exercised later than ten years
after the date it is granted; PROVIDED, HOWEVER, Incentive
Stock Options may not be granted to any participant who, at
the time of grant, owns stock possessing (after the
application of the attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary
corporation of the Company, unless the exercise price is fixed
at not less than 110% of the Fair Market Value of the Common
Stock on the date of grant and the exercise of such option is
prohibited by its terms after the expiration of five years
from the date of grant of such option. In addition, no
Incentive Stock Option may be issued to a participant in
tandem with a Nonqualified Stock Option.

4
<PAGE>

(e) POST-EMPLOYMENT EXERCISES. The exercise of any
Stock Option after termination of employment of a participant
with the Company, a subsidiary of the Company or with any
company providing consulting services to the Company shall be
subject to such conditions as imposed by the Committee at the
time of the grant and satisfaction of the conditions precedent
that the participant neither (i) competes with, or takes other
employment with or renders services to a competitor of, the
Company, its subsidiaries or affiliates without the written
consent of the Company; provided that this clause (i) shall
not apply to consultants of the Company, nor (ii) conducts
himself or herself in a manner adversely affecting the
Company; PROVIDED, HOWEVER, that the Committee, in its sole
discretion, may waive any conditions imposed in the grant
letter or as set forth in (i) and (ii) above relating to the
exercise of options after the date of termination of
employment during the term of the option.

7. STOCK APPRECIATION RIGHTS.

(a) The Committee may, in its discretion, grant Stock
Appreciation Rights to the holders of any Stock Options
granted hereunder. In addition, Stock Appreciation Rights may
be granted independently of, and without relation to, Stock
Options. A Stock Appreciation Right means a right to receive a
payment in cash, Common Stock or a combination thereof, in an
amount equal to the excess of (x) the Fair Market Value, or
other specified valuation, of a specified number of shares of
Common Stock on the date the right is exercised over (y) the
Fair Market Value, or other specified valuation (which shall
be no less than the Fair Market Value) of such shares of
Common Stock on the date the right is granted, all as
determined by the Committee; PROVIDED, HOWEVER, that if a
Stock Appreciation Right is granted in tandem with or in
substitution for a Stock Option, the designated Fair Market
Value in the award agreement may be the Fair Market Value on
the date such Stock Option was granted. Each Stock
Appreciation Right shall be subject to such terms and
conditions as the Committee shall impose from time to time.

(b) Stock Appreciation Rights granted under the Plan
shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee;
PROVIDED, HOWEVER, that no Stock Appreciation Rights shall be
exercisable later than ten years after the date it is granted
except in the event of a participant's death, in which case,
the exercise period of such participant's Stock Appreciation
Rights may be extended beyond such period but no later than
one year after the participant's death. All Stock Appreciation
Rights shall terminate at such earlier times and upon such
conditions or circumstances as the Committee shall in its
discretion set forth in such right at the date of grant.

5
<PAGE>

(c) The exercise of any Stock Appreciation Right
after termination of employment of a participant with the
Company, a subsidiary of the Company or with any company
providing consulting services to the Company shall be subject
to satisfaction of the conditions precedent that the
participant neither (i) competes with, or takes other
employment with or renders services to a competitor of, the
Company, its subsidiaries or affiliates without the written
consent of the Company; provided that this clause (i) shall
not apply to consultants of the Company, nor (ii) conducts
himself or herself in a manner adversely affecting the
Company; PROVIDED, HOWEVER, that the Committee, in its sole
discretion, may waive any conditions imposed in the grant
letter or as set forth in (i) and (ii) above relating to the
exercise of options after the date of termination of
employment during the term of the option.

8. STOCK AWARDS. The Committee may, in its discretion, grant
Stock Awards (which may include mandatory payment of bonus incentive
compensation in stock) consisting of Common Stock issued or transferred to
participants with or without other payments therefor. Stock Awards may be
subject to such terms and conditions as the Committee determines appropriate,
including, without limitation, restrictions on the sale or other disposition of
such shares, the right of the Company to reacquire such shares for no
consideration upon termination of the participant's employment within specified
periods, and may constitute Performance-Based Awards, as described in Section 11
hereof. The Committee may require the participant to deliver a duly signed stock
power, endorsed in blank, relating to the Common Stock covered by such an Award.
The Committee may also require that the stock certificates evidencing such
shares be held in custody or bear restrictive legends until the restrictions
thereon shall have lapsed. The Stock Award shall specify whether the participant
shall have, with respect to the shares of Common Stock subject to a Stock Award,
all of the rights of a holder of shares of Common Stock of the Company,
including the right to receive dividends and to vote the shares.

9. PERFORMANCE AWARDS.

(a) Performance Awards may be granted to participants at any
time and from time to time, as shall be determined by the Committee. Performance
Awards may constitute Performance-Based Awards, as described in Section 11
hereof. The Committee shall have complete discretion in determining the number,
amount and timing of awards granted to each participant. Such Performance Awards
may be in the form of shares of Common Stock or Stock Units. Performance Awards
may be awarded as short-term or long-term incentives. Performance targets may be
based upon, without limitation, Company-wide, divisional and/or individual
performance.

(b) With respect to those Performance Awards that are not
intended to constitute Performance-Based Awards, the Committee shall have the
authority at any time to make adjustments to performance targets for any
outstanding Performance Awards which the Committee deems necessary or desirable
unless at the time of

6
<PAGE>

establishment of such targets the Committee shall have precluded its authority
to make such adjustments.

(c) Payment of earned Performance Awards shall be made in
accordance with terms and conditions prescribed or authorized by the Committee.
The participant may elect to defer, or the Committee may require or permit the
deferral of, the receipt of Performance Awards upon such terms as the Committee
deems appropriate.

10. STOCK UNITS.

(a) The Committee may, in its discretion, grant Stock Units to
participants hereunder. The Committee shall determine the criteria for the
vesting of Stock Units. Stock Units may constitute Performance-Based Awards, as
described in Section 11 hereof. A Stock Unit granted by the Committee shall
provide payment in shares of Common Stock at such time as the award agreement
shall specify. Shares of Common Stock issued pursuant to this Section 10 may be
issued with or without other payments therefor as may be required by applicable
law or such other consideration as may be determined by the Committee. The
Committee shall determine whether a participant granted a Stock Unit shall be
entitled to a Dividend Equivalent Right (as defined below).

(b) Upon vesting of a Stock Unit, unless the Committee has
determined to defer payment with respect to such unit or a participant has
elected to defer payment under subsection (c) below, shares of Common Stock
representing the Stock Units shall be distributed to the participant unless the
Committee provides for the payment of the Stock Units in cash or partly in cash
and partly in shares of Common Stock equal to the value of the shares of Common
Stock which would otherwise be distributed to the participant.

(c) Prior to the year with respect to which a Stock Unit may
vest, the participant may elect not to receive a distribution upon the vesting
of such Stock Unit and for the Company to continue to maintain the Stock Unit on
its books of account. In such event, the value of a Stock Unit shall be payable
in shares of Common Stock pursuant to the agreement of deferral.

(d) A "Stock Unit" means a notional account representing one
share of Common Stock. A "Dividend Equivalent Right" means the right to receive
the amount of any dividend paid on the share of Common Stock underlying a Stock
Unit, which shall be payable in cash or in the form of additional Stock Units.

11. PERFORMANCE-BASED AWARDS. Certain Benefits granted under
the Plan may be granted in a manner such that the Benefits qualify for the
performance-based compensation exemption of Section 162(m) of the Code
("Performance-Based Awards"). As determined by the Committee in its sole
discretion, either the granting or vesting of such Performance-Based Awards
shall be based on achievement of hurdle rates and/or growth rates in one or more
business criteria that apply to the individual participant, one or more business
units or the Company as a whole. The business criteria shall be as

7
<PAGE>

follows, individually or in combination: (i) net earnings; (ii) earnings per
share; (iii) net sales growth; (iv) market share; (v) net operating profit; (vi)
expense targets; (vii) working capital targets relating to inventory and/or
accounts receivable; (viii) operating margin; (ix) return on equity; (x) return
on assets; (xi) planning accuracy (as measured by comparing planned results to
actual results); (xii) market price per share; and (xiii) total return to
stockholders. In addition, Performance-Based Awards may include comparisons to
the performance of other companies, such performance to be measured by one or
more of the foregoing business criteria. With respect to Performance-Based
Awards, (i) the Committee shall establish in writing (x) the performance goals
applicable to a given period, and such performance goals shall state, in terms
of an objective formula or standard, the method for computing the amount of
compensation payable to the participant if such performance goals are obtained
and (y) the individual employees or class of employees to which such performance
goals apply no later than 90 days after the commencement of such period (but in
no event after 25% of such period has elapsed) and (ii) no Performance-Based
Awards shall be payable to or vest with respect to, as the case may be, any
participant for a given period until the Committee certifies in writing that the
objective performance goals (and any other material terms) applicable to such
period have been satisfied. With respect to any Benefits intended to qualify as
Performance-Based Awards, after establishment of a performance goal, the
Committee shall not revise such performance goal or increase the amount of
compensation payable thereunder (as determined in accordance with Section 162(m)
of the Code) upon the attainment of such performance goal. Notwithstanding the
preceding sentence, the Committee may reduce or eliminate Benefits payable upon
the attainment of such performance goal.

12. FOREIGN LAWS. The Committee may grant Benefits to
individual participants who are subject to the tax laws of nations other than
the United States, which Benefits may have terms and conditions as determined by
the Committee as necessary to comply with applicable foreign laws. The Committee
may take any action which it deems advisable to obtain approval of such Benefits
by the appropriate foreign governmental entity; PROVIDED, HOWEVER, that no such
Benefits may be granted pursuant to this Section 12 and no action may be taken
which would result in a violation of the Exchange Act, the Code or any other
applicable law.

13. ADJUSTMENT PROVISIONS; CHANGE IN CONTROL.

(a) If there shall be any change in the Common Stock of the
Company or the capitalization of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, split up, spin-off, combination of shares, exchange of shares, dividend
in kind or other like change in capital structure or distribution (other than
normal cash dividends) to stockholders of the Company in order to prevent
dilution or enlargement of participants' rights under the Plan, the Committee,
in its sole discretion, shall adjust, in an equitable manner, as applicable, the
number and kind of shares that may be issued under the Plan, the number and kind
of shares subject to outstanding Benefits, the exercise price applicable to
outstanding Benefits, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Benefits; provided, however, that
any such

8
<PAGE>

arithmetic adjustment to a Performance-Based Award shall not cause the amount of
compensation payable thereunder to be increased from what otherwise would have
been due upon attainment of the unadjusted award. Appropriate adjustments may
also be made by the Committee in the terms of any Benefits under the Plan to
reflect such changes or distributions and to modify any other terms of
outstanding Benefits on an equitable basis, including modifications of
performance targets and changes in the length of performance periods; provided,
however, that any such arithmetic adjustment to a Performance-Based Award shall
not cause the amount of compensation payable thereunder to be increased from
what otherwise would have been due upon attainment of the unadjusted award. In
addition, other than with respect to Stock Options, Stock Appreciation Rights,
and other awards intended to constitute Performance-Based Awards, the Committee
is authorized to make adjustments to the terms and conditions of, and the
criteria included in, Benefits in recognition of unusual or nonrecurring events
affecting the Company or the financial statements of the Company, or in response
to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section 424(a) of the
Code, and (ii) in no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder other than an incentive stock option
for purposes of Section 422 of the Code. The determination of the Committee as
to the foregoing adjustments, if any, shall be conclusive and binding on
participants under the Plan.

(b) Notwithstanding any other provision of this Plan, if there
is a Change in Control of the Company, all then outstanding Stock Options and
Stock Appreciation Rights shall immediately vest and become exercisable. For
purposes of this Section 14(b), a "Change in Control" of the Company shall be
deemed to have occurred upon any of the following events:

(i) a change in control of the Company that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act; or

(ii) during any period of two (2) consecutive years,
the individuals who at the beginning of such period constitute
the Company's Board of Directors or any individuals who would
be "Continuing Directors" (as hereinafter defined) cease for
any reason to constitute at least a majority thereof; or

(iii) the Company's Common Stock shall cease to be
publicly traded after initially being publicly traded; or

(iv) the Company's Board of Directors shall approve a
sale of all or substantially all of the assets of the Company,
and such transaction shall have been consummated; or

(v) the Company's Board of Directors shall approve
any merger, consolidation, or like business combination or
reorganization of

9
<PAGE>

the Company, the consummation of which would result in the
occurrence of any event described in Section 13(b)(i) above,
and such transaction shall have been consummated.

For purposes of this Section 13(b), "Continuing Directors"
shall mean (x) the directors of the Company in office on the Effective Date (as
defined below) and (y) any successor to any such director and any additional
director who after the Effective Date was nominated or selected by a majority of
the Continuing Directors (or the Nominating Committee of the Board of Directors
of the Company) in office at the time of his or her nomination or selection.

The Committee, in its discretion, may determine that, upon the
occurrence of a Change in Control of the Company or the other events specified
in Section 13(a), each Stock Option and Stock Appreciation Right outstanding
hereunder shall terminate within a specified number of days after notice to the
holder, and such holder shall receive, with respect to each share of Common
Stock subject to such Stock Option or Stock Appreciation Right, an amount equal
to the excess of the Fair Market Value of such shares of Common Stock
immediately prior to the occurrence of such Change in Control over the exercise
price per share of such Stock Option or Stock Appreciation Right; such amount to
be payable in cash, in one or more kinds of property (including the property, if
any, payable in the transaction) or in a combination thereof, as the Committee,
in its discretion, shall determine. The provisions contained in the preceding
sentence shall be inapplicable to a Stock Option or Stock Appreciation Right
granted within six (6) months before the occurrence of a Change in Control if
the holder of such Stock Option or Stock Appreciation Right is subject to the
reporting requirements of Section 16(a) of the Exchange Act and no exception
from liability under Section 16(b) of the Exchange Act is otherwise available to
such holder.

14. NONTRANSFERABILITY. Each Benefit granted under the Plan to
a participant shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the participant's
lifetime, only by the participant. In the event of the death of a participant,
each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Committee
shall in its discretion set forth in such option or right at the date of grant
and then only by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Stock Option or Stock Appreciation Right shall pass by will or the
laws of descent and distribution. Notwithstanding the foregoing, at the
discretion of the Committee, an award of a Benefit other than an Incentive Stock
Option may permit the transferability of a Benefit by a participant solely to
the participant's spouse, siblings, parents, children and grandchildren or
trusts for the benefit of such persons or partnerships, corporations, limited
liability companies or other entities owned solely by such persons, including
trusts for such persons, subject to any restriction included in the award of the
Benefit.

15. OTHER PROVISIONS. The award of any Benefit under the Plan
may also be subject to such other provisions (whether or not applicable to the
Benefit awarded

10
<PAGE>

to any other participant) as the Committee determines appropriate, including,
without limitation, for the installment purchase of Common Stock under Stock
Options, for the installment exercise of Stock Appreciation Rights, to assist
the participant in financing the acquisition of Common Stock, for the forfeiture
of, or restrictions on resale or other disposition of, Common Stock acquired
under any form of Benefit, for the acceleration of exercisability or vesting of
Benefits in the event of a change in control of the Company, for the payment of
the value of Benefits to participants in the event of a change in control of the
Company, or to comply with federal and state securities laws, or understandings
or conditions as to the participant's employment in addition to those
specifically provided for under the Plan. The Committee shall have full
discretion to interpret and administer the Plan.

16. FAIR MARKET VALUE. For purposes of this Plan and any
Benefits awarded hereunder, Fair Market Value shall be (i) the closing price of
the Company's Common Stock on the date of calculation (or on the last preceding
trading date if Common Stock was not traded on such date) if the Company's
Common Stock is readily tradeable on a national securities exchange or other
market system, (ii) if the Company's Common Stock is not readily tradeable, Fair
Market Value shall mean the amount determined in good faith by the Committee as
the fair market value of the Common Stock of the Company and (iii) in connection
with a Change in Control of the Company or an event specified in Section 13(a),
the value of the consideration paid to stockholders in connection with such
Change in Control or event or if no consideration is paid in respect thereof,
the amount determined pursuant to clause (i) above.

17. WITHHOLDING. All payments or distributions of Benefits
made pursuant to the Plan shall be net of any amounts required to be withheld
pursuant to applicable federal, state and local tax withholding requirements. If
the Company proposes or is required to distribute Common Stock pursuant to the
Plan, it may require the recipient to remit to it or to the corporation that
employs such recipient an amount sufficient to satisfy such tax withholding
requirements prior to the delivery of any certificates for such Common Stock. In
lieu thereof, the Company or the employing corporation shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the Committee shall prescribe. The
Committee may, in its discretion and subject to such rules as it may adopt
(including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements), permit an optionee or award or right holder to pay all
or a portion of the federal, state and local withholding taxes arising in
connection with any Benefit consisting of shares of Common Stock by electing to
have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of tax to be withheld, such tax calculated at rates required
by statute or regulation.

18. TENURE. A participant's right, if any, to continue to
serve the Company or any of its subsidiaries or affiliates as an officer,
employee, or otherwise, shall not be enlarged or otherwise affected by his or
her designation as a participant under the Plan.

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<PAGE>

19. UNFUNDED PLAN. Participants shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations under the Plan. Nothing contained in the Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.

20. NO FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued or delivered pursuant to the Plan or any Benefit. The Committee
shall determine whether cash, or Benefits, or other property shall be issued or
paid in lieu of fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

21. DURATION, AMENDMENT AND TERMINATION. No Benefit shall be
granted more than ten years after the Effective Date. The Committee may amend
the Plan from time to time or suspend or terminate the Plan at any time. No
amendment of the Plan may be made without approval of the stockholders of the
Company if the amendment will: (i) disqualify any Incentive Stock Options
granted under the Plan; (ii) increase the aggregate number of shares of Common
Stock that may be delivered through Stock Options under the Plan; (iii) increase
either of the maximum amounts which can be paid to an individual participant
under the Plan as set forth in Section 5 hereof; (iv) change the types of
business criteria on which Performance-Based Awards are to be based under the
Plan; or (v) modify the requirements as to eligibility for participation in the
Plan.

22. GOVERNING LAW. This Plan, Benefits granted hereunder and
actions taken in connection herewith shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).

23. EFFECTIVE DATE.

(a) The Plan shall be effective as of October ___, 1999, the
date on which the Plan was adopted by the Committee (the "Effective Date"),
provided that the Plan is approved by the stockholders of the Company at an
annual meeting, any special meeting or by written consent of stockholders of the
Company within 12 months of the Effective Date, and such approval of
stockholders shall be a condition to the right of each participant to receive
any Benefits hereunder. Any Benefits granted under the Plan prior to such
approval of stockholders shall be effective as of the date of grant (unless,
with respect to any Benefit, the Committee specifies otherwise at the time of
grant), but no such Benefit may be exercised or settled and no restrictions
relating to any Benefit may

12
<PAGE>

lapse prior to such stockholder approval, and if stockholders fail to approve
the Plan as specified hereunder, any such Benefit shall be cancelled.

(b) This Plan shall terminate on October __, 2009 (unless
sooner terminated by the Committee).

<PAGE>

GENMAR HOLDINGS, INC.

1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

1. PURPOSES.

Genmar Holdings, Inc. (the "Company") desires to attract and
retain the services of outstanding non-employee directors by affording them an
opportunity to acquire a proprietary interest in the Company through automatic,
non-discretionary awards of options ("Options") exercisable to purchase shares
of Common Stock (as defined below), and thus to create in such directors an
increased interest in and a greater concern for the welfare of the Company and
its subsidiaries.

The Options offered pursuant to this Genmar Holdings, Inc.
1999 Stock Option Plan for Non-Employee Directors (the "Plan") are a matter of
separate inducement and are not in lieu of any other compensation for the
services of any director.

The Options granted under the Plan are intended to be options
that do not meet the requirements for incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

As used in the Plan, the term "parent corporation" and
"subsidiary corporation" shall mean a corporation coming within the definition
of such terms contained in Sections 424(e) and 424(f) of the Code, respectively.

2. AMOUNT OF STOCK SUBJECT TO THE PLAN.

Options granted under the Plan shall be exercisable for shares
of the Company's common stock, par value $0.01 per share (the "Common Stock").

The total number of shares of Common Stock authorized for
issuance under the Plan upon the exercise of Options (the "Shares"), shall not
exceed, in the aggregate, 150,000 of the currently authorized shares of Common
Stock of the Company, such number to be subject to adjustment in accordance with
Section 13 of the Plan.

Shares which may be acquired under the Plan may be either
authorized but unissued Shares, Shares of issued stock held in the Company's
treasury, or both. If and to the extent that Options granted under the Plan
expire or terminate without having been exercised, the Shares covered by such
expired or terminated Options may again be subject to a later-granted Option
under the Plan.

3. EFFECTIVE DATE AND TERM OF THE PLAN

The Plan shall become effective on October __, 1999 (the
"Effective Date"); PROVIDED, HOWEVER, that if the Plan is not approved by a vote
of the stockholders of the Company at an annual meeting, any special meeting or
by written consent of stockholders within 12 months after the Effective Date,
the Plan and any Options granted under the Plan shall terminate. The Plan shall
terminate at the close of business on

<PAGE>

October ___, 2009 (the "Termination Date"), unless sooner terminated in
accordance with its terms.

4. ADMINISTRATION

The Plan shall be administered by the Board of Directors of
the Company (the "Board of Directors"), which may designate from among its
members a committee to exercise all power and authority of the Board of
Directors at any time and from time to time to administer the Plan. (References
herein to the Board of Directors shall be deemed to include references to any
such committee, except as the context otherwise requires.) Subject to the
express provisions of the Plan, the Board of Directors shall have authority to
construe the Plan and the Options granted hereunder, to prescribe, amend and
rescind rules and regulations relating to the Plan and to make all other
ministerial determinations necessary or advisable for administering the Plan.
However, the timing of grants of Options under the Plan and the determination of
the amounts and prices of such Options shall be effected automatically in
accordance with the terms and provisions of the Plan without further action by
the Board of Directors.

The determination of the Board of Directors on matters
referred to in this Section 4 shall be conclusive.

5. ELIGIBILITY.

Each member of the Board of Directors who is not an employee
of the Company or any subsidiary corporation or parent corporation of the
Company (or of any management company providing management services for the
Company) shall be eligible to be granted Options under the Plan (the "Eligible
Directors").

The Plan does not create a right in any person to participate
in, or be granted Options under, the Plan.

6. OPTION GRANTS.

On the Effective Date, each Eligible Director then in office
shall automatically be granted an Option to purchase 12,500 Shares (subject to
adjustment as provided in Section 13). Thereafter, following each subsequent
annual meeting of stockholders of the Company during the term of the Plan, each
Eligible Director then in office shall automatically be granted an Option to
purchase 5,000 Shares (subject to adjustment as provided in Section 13). Each
Option granted to an Eligible Director pursuant to the Plan shall be evidenced
by a written agreement between the Company and such Eligible Director. Any
Eligible Director entitled to receive an Option grant pursuant to the Plan may
elect to decline the Option.

7. NO VESTING

All Options granted hereunder shall be fully vested and
immediately exercisable as of the date of the grant.

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<PAGE>

8. OPTION PRICE AND PAYMENT.

The price for each Share purchasable upon exercise of any
Option granted hereunder shall be an amount equal to the fair market value per
Share on the date of grant. For purposes of the Plan, fair market value per
Share shall be the closing price for Common Stock on the date of determination
(or the last preceding trading date if Common Stock was not traded on such date)
if the Common Stock is readily tradeable on a national securities exchange or
other market system, and if the Common Stock is not readily tradeable, fair
market value per Share shall be determined in good faith by the Board of
Directors.

The option exercise price may be paid in cash or, in the
discretion of the Board of Directors, by the delivery of shares of Common Stock
of the Company then owned by the option holder or by delivery to the Company of
(x) irrevocable instructions to deliver directly to a broker the stock
certificates representing the shares for which the Option is being exercised,
and (y) irrevocable instructions to such broker to sell such shares for which
the Option is being exercised, and promptly deliver to the Company the portion
of the proceeds equal to the Option exercise price and any amount necessary to
satisfy the Company's obligation for withholding taxes, or any combination
thereof. For purposes of making payment in shares of Common Stock, such shares
shall be valued at their Fair Market Value on the date of exercise of the Option
and shall have been held by the Participant for at least six months. To
facilitate the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms. The Committee may prescribe any
other method of paying the exercise price that it determines to be consistent
with applicable law and the purpose of the Plan, including, without limitation,
in lieu of the exercise of a Stock Option by delivery of shares of Common Stock
of the Company then owned by a participant, providing the Company with a
notarized statement attesting to the number of shares owned, where upon
verification by the Company, the Company would issue to the participant only the
number of incremental shares to which the participant is entitled upon exercise
of the Stock Option.

9. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE.

To the extent that an Option is not exercised within the
exercise period specified therein, it shall expire as to the then unexercised
part.

In no event shall an Option granted hereunder be exercised for
a fraction of a Share or for less than one hundred Shares (unless the number
purchased is the total balance for which the Option is then exercisable).

A person entitled to receive Shares upon the exercise of an
Option shall not have the rights of a stockholder with respect to such Shares
until the date of issuance of a stock certificate to him or her for such Shares;
PROVIDED, HOWEVER, that until such stock certificate is issued, any holder of an
Option using previously acquired shares of Common Stock in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired shares of Common Stock.

3
<PAGE>

10. OPTION PERIOD AND EXERCISE OF OPTIONS.

Any Option granted to an Eligible Director shall be
exercisable for a period beginning on the date of grant and ending ten (10)
years from the date of grant of such Option, except to the extent such exercise
is further limited or restricted pursuant to the provisions hereof.

Each Eligible Director shall agree not to sell or otherwise
dispose of Shares acquired pursuant to an Option for a period of six (6) months
following the date of grant of such Option; PROVIDED, HOWEVER, that for purposes
of this sentence only, any Option granted to an Eligible Director on the
Effective Date shall be deemed to have been granted on the date the Plan is
approved by the shareholders of the Company.

Subject to the express provisions of the Plan, Options granted
under the Plan shall be exercised by the optionee as to all or part of the
Shares covered thereby by the giving of written notice of the exercise thereof
to the Corporate Secretary of the Company at the principal business office of
the Company, specifying the number of Shares to be purchased, the proposed form
of payment and specifying a business day not more than ten (10) days from the
date such notice is given for the payment of the purchase price against delivery
of the Shares being purchased. Subject to the terms of Sections 16, 17 and 18
hereof, the Company shall cause certificates for the Shares so purchased to be
delivered at the principal business office of the Company, against payment of
the full purchase price, on the date specified in the notice of exercise.

11. NON-TRANSFERABILITY OF OPTIONS.

An Option granted hereunder shall not be transferable, whether
by operation of law or otherwise, other than by will or the laws of descent and
distribution. Except to the extent provided above, Options also may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.

12. ANTI-DILUTION; ADJUSTMENT OF SHARES.

(a) Notwithstanding any other provision contained herein, in the event
of any change in the Shares subject to the Plan or the capitalization of the
Company through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, reverse stock split, split up, spin-off, combination of
shares, exchange of shares, dividend in kind or other like change in capital
structure of the Company, or distribution (other than normal cash dividends) to
stockholders of the Company in order to prevent dilution or enlargement of
participants' rights under the Plan, the Board of Directors shall adjust, in its
sole discretion, in an equitable manner as applicable, the form of and the
maximum number of Shares which may be acquired under the Plan pursuant to the
exercise of Options, the maximum number of Shares for which Options may be
granted to any one Eligible Director and the number of Shares and price per
Share subject to outstanding Options. The determination of the Board of
Directors as to these matters shall be conclusive and binding on the optionee.

4
<PAGE>

(b) The Board of Directors, in its discretion, may determine
that, upon the occurrence of an event specified in Section 12(a), each Option
outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each share
of Common Stock subject to such Option, an amount equal to the excess of the
value of the consideration paid to stockholders of the Company in connection
with such event over the exercise price per share of such Option, such amount to
be payable in cash, in one or more kinds of property (including the property, if
any, payable in the transaction) or in a combination thereof, as the Board of
Directors, in its discretion, shall determine. The provisions contained in the
preceding sentence shall be inapplicable to an Option granted within six (6)
months before the occurrence of a Change in Control if the holder of such Option
is subject to the reporting requirements of Section 16(a) of the Exchange Act
and no exception from liability under Section 16(b) of the Exchange Act is
otherwise available to such holder.

13. RIGHT TO TERMINATE SERVICE

The Plan shall not impose any obligation on the Company or on
any subsidiary corporation or parent corporation thereof to continue the service
of any Eligible Directors holding Options and shall not impose any obligation on
the part of any Eligible Director holding Options to remain in the service of
the Company or of any subsidiary corporation or parent corporation thereof.

14. PURCHASE FOR INVESTMENT

Except as hereinafter provided, the Board of Directors may
require the holder of an Option granted hereunder, as a condition to the
exercise of such Option in the event the Shares subject to such Option are not
registered pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and applicable state securities laws, to execute and deliver to the
Company a written statement, in form satisfactory to the Board of Directors, in
which such holder (a) represents and warrants that such holder is purchasing or
acquiring the Shares acquired thereunder for such holder's own account for
investment only and not with a view to the resale or distribution thereof in
violation of any federal or state securities laws and (b) agrees that any
subsequent resale or distribution of any of such Shares shall be made only
pursuant to either (1) an effective registration statement covering such Shares
under the Securities Act and applicable state securities laws or (2) specific
exemptions from the registration requirements of the Securities Act and any
applicable state securities laws, based on a written opinion of counsel, in form
and substance satisfactory to counsel for the Company, as to the application
thereto of any such exemptions.

Nothing herein shall be construed as requiring the Company to
register Shares subject to any Option under the Securities Act or any state
securities law and, to the extent deemed necessary by the Company, Shares issued
upon exercise of an Option may contain a legend to the effect that registration
rights have not been granted with respect to such Shares.

5
<PAGE>

15. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES

The Company may endorse such legend or legends upon the
certificates for Shares issued upon exercise of Options granted pursuant to the
Plan and may issue such "stop transfer" instructions to its transfer agent in
respect of such Shares as the Board of Directors in its discretion, determines
to be necessary or appropriate to (a) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act or (b)
implement the provisions of the Plan and any agreement between the Company and
the optionee or grantee with respect to such Shares.

The Company shall pay all issue or transfer taxes with respect
to the issuance or transfer of Shares, as well as all fees and expenses
necessarily incurred by the Company in connection with such issuance or
transfer, except fees and expenses that may be necessitated by the filing or
amending of a registration statement under the Securities Act, which fees and
expenses shall be borne by the recipient of the Shares unless such registration
statement has been filed by the Company for its own corporate purpose (and the
Company so states) in which event the recipient of the Shares shall bear only
such fees and expenses as are attributable solely to the inclusion of the Shares
an optionee receives in the registration statement.

All Shares issued as provided herein shall be fully paid and
nonassessable to the extent permitted by law.

16. LISTING OF SHARES AND RELATED MATTERS

If at any time the listing, registration or qualification of
the Shares subject to such Option on any securities exchange or under any
applicable law, or the consent or approval of any governmental regulatory body,
is necessary as a condition of, or in connection with, the granting of an
Option, or the issuance of Shares thereunder, such Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained.

17. AMENDMENT OF THE PLAN

The Board of Directors may, from time to time, amend the Plan.

18. TERMINATION OR SUSPENSION OF THE PLAN

The Board of Directors may at any time suspend or terminate
the Plan. Options may not be granted while the Plan is suspended or after it is
terminated. Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except upon the consent of the person to whom the Option was granted. The
ministerial power of the Board of Directors to construe and administer any
Options under Section 4 that are granted prior to the termination or the
suspension of the Plan shall continue after such termination or during such
suspension.

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<PAGE>

19. SAVINGS PROVISION

With respect to all participants in the Plan, transaction
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 (or any successor provision) under the Exchange Act. To the extent any
provision of the Plan or action by the Board of Directors fails to so comply, it
shall be deemed null and void to the extent permitted by law and deemed
advisable by the Board of Directors.

20. GOVERNING LAW

The Plan, such Options as may be granted hereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware from time to time in effect.

21. PARTIAL INVALIDITY

The invalidity or illegality of any provision herein shall not
be deemed to affect the validity of any other provision.

<PAGE>

GENMAR HOLDINGS, INC.
100 SOUTH FIFTH STREET, SUITE 2400
MINNEAPOLIS, MINNESOTA 55402

October __, 1999

Re: GRANT OF STOCK OPTIONS

Dear ___________:

1. GRANT. As partial consideration for your agreeing to continue to be a
senior executive officer or Chairman of the Board of Directors of Genmar
Holdings, Inc. (the "Company"), the Board of Directors of the Company (the
"Board") hereby grants to you:

(a) an option (the "Initial Option") to purchase _____ shares of
common stock, par value $0.01, of the Company (the "Common
Stock") at an exercise price of $____ per share (the
"Initial Exercise Price").

(b) a second option (the "Second Option") to purchase _______
shares of Common Stock at an exercise price of $____ per
share [150% of Initial Exercise Price] (the "Subsequent
Exercise Price"); and

(c) a third option (the "Third Option," and together with the
Initial Option and the Second Option, the "Options") to
purchase _______ shares of Common Stock at an exercise price
of $____ PER SHARE [150% OF THE SUBSEQUENT EXERCISE PRICE].

2. VESTING OF OPTIONS.

(a) Your right to exercise the Initial Option shall vest and
become exercisable as follows:

(i) one-half shall vest and become fully exercisable on the
first anniversary of the date of grant of such Option;
and

(ii) one-half shall vest and become fully exercisable on the
second anniversary of the date of grant of such Option.

<PAGE>

(b) Your right to exercise the Second Option shall vest and
become exercisable as follows:

(i) if the Common Stock trades at an average of 150% of the
Initial Exercise Price over a period of 30 consecutive
trading days at any time within three years after the
date hereof (the "Second Option Measurement Period"),
one half shall vest and become exercisable on the first
anniversary of the first day after the end of the
Second Option Measurement Period and one-half shall
vest and become exercisable on the second anniversary
of the first day after the end of the Second Option
Measurement Period;

(ii) to the extent not vested pursuant to clause (i) above,
the Second Option shall vest and become exercisable in
its entirety on October __, 2009.

(i) if the Common Stock trades at an average of 150% of the
Subsequent Exercise Price over a period of 30
consecutive trading days at any time within three years
after the date hereof (the "Third Option Measurement
Period"), one half shall vest and become exercisable on
the first anniversary of the first day after the end of
the Third Option Measurement Period and one-half shall
vest and become exercisable on the second anniversary
of the first day after the end of the Third Option
Measurement Period;

(ii) to the extent not vested pursuant to clause (i) above,
the Third Option shall vest and become exercisable in
its entirety on October __, 2009.

3. TERM.

(a) Subject to the provisions of this paragraph, the unexercised
portion of the Initial Option, unless sooner terminated as
provided herein, shall expire on October __, 2004 and,
notwithstanding anything contained herein to the contrary,
no portion of the Initial Option may be exercised after such
date.

(b) Subject to the provisions of this paragraph, the unexercised
portion of the Second Option, unless sooner terminated as
provided herein, shall expire on October __, 2009; PROVIDED,
HOWEVER, that in the event the Second Option vests pursuant
to paragraph 2(b)(i), it shall expire on the fifth
anniversary of the first day after the end of

2
<PAGE>

the Second Option Measurement Period, unless sooner
terminated as provided herein.

(c) Subject to the provisions of this paragraph, the unexercised
portion of the Third Option, unless sooner terminated as
provided herein, shall expire on October __, 2009; PROVIDED,
HOWEVER, that in the event the Third Option vests pursuant
to paragraph 2(c)(i), it shall expire on the fifth
anniversary of the first day after the end of the Third
Option Measurement Period, unless sooner terminated as
provided herein.

(d) The date an Option expires pursuant to this paragraph 3
shall be referred to herein as the "Expiration Date."

4. TIME AND METHOD FOR EXERCISING AN OPTION.

(a) TIME. You may exercise a vested Option in one or more
installments from time to time prior to its Expiration Date,
subject to the provisions of subparagraph (b), below.

(b) TERMINATION. If prior to the Expiration Date, you have a
Termination of Employment (as defined below), any
outstanding Options will terminate on the applicable date as
described below; provided, however, that none of the events
described below shall extend the period of exercisability
beyond its Expiration Date:

(i) if you have a Termination of Employment by reason of
your death, the Options shall fully vest and become
immediately exercisable, shall remain exercisable for
six (6) months after your death and shall be
exercisable by the executor or administrator of your
estate or the person or persons to whom your rights
under the Options shall pass by will or the laws of
descent or distribution;

(ii) if you have a Termination of Employment by reason of
your "permanent disability" (as defined below), the
Options shall fully vest and become immediately
exercisable, and shall remain exercisable for six (6)
months after you became permanently disabled; PROVIDED,
HOWEVER, that if you die within six (6) months
following such disability and you have not
exercised the Options, the Options shall remain
exercisable for an additional six (6) months after your
death and shall be exercisable by the executor or
administrator of your estate or the person or persons
to whom your rights under the Options shall pass by
will or the laws of descent or distribution;

3
<PAGE>

(iii) if you have a Termination of Employment for any reason
other than for "Cause" (as defined below), death or
permanent disability, your non-vested Options shall
immediately become null and void and your vested
Options shall remain exercisable for three (3) months
after the Termination of Employment; and

(iv) if you have a Termination of Employment for "Cause,"
the Options, to the extent not theretofore exercised,
shall immediately become null and void.

In the case of subparagraph (b)(i), (ii) and (iii), Options not
exercised by the revised expiration date for the Options shall become null and
void.

(d) DEFINITIONS. The following definitions shall be applicable
for purposes of this Agreement.

(i) "Cause" shall mean: (a) your violation of any
non-competition and/or confidentiality provisions
agreed to at any time between you and the Company or
its affiliates; (b) your commission of an intentional
act of fraud, embezzlement, theft or dishonesty against
the Company or its affiliates; (c) your conviction of,
or pleading of NOLO CONTENDERE to, any crime which
constitutes a felony or misdemeanor involving moral
turpitude or which might, in the reasonable opinion of
the Company, cause embarrassment to the Company; or (d)
the gross neglect or willful failure by you to perform
your duties and responsibilities in all material
respects with respect to services rendered to the
Company, if such breach of duty is not cured within 30
days after written notice thereof to you by the Board.
For purposes of clause (d), no act, or failure to act,
on your part shall be deemed "willful" unless done,
or omitted to be done, by you not in good faith and
without reasonable belief that such act, or failure to
act, was in the best interest of the Company.

(ii) A "Change of Control" shall mean:

(1) A change of control of the Company that would be
required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under
the Securities Exchange Act of 1934; or

4
<PAGE>

(2) During any period of two (2) consecutive years, the
individuals who at the beginning of such period
constitute the Company's Board of Directors or any
individuals who would be "Continuing Directors" (as
hereinafter defined) cease for any reason to
constitute at least a majority thereof; or

(3) The Company's Common Stock shall cease to be
publicly traded after initially being publicly
traded; or

(4) The Company's Board of Directors shall approve a
sale of all or substantially all of the assets of
the Company, and such transaction shall have been
consummated; or

(5) The Company's Board of Directors shall approve any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation
of which would result in the occurrence of any
event described in Section 4(d)(ii)(1) above, and
such transaction shall have been consummated.

For purposes of this Section 4(c)(ii), "Continuing Directors"
shall mean (x) the directors of the Company in office on the date of grant of
the Initial Option (the "Effective Date") and any successor to any such director
and any additional director who after the Effective Date was nominated or
selected by a majority of the Continuing Directors in office (or by the
Nominating Committee of the Board of Directors of the Company) at the time of
his or her nomination or selection.

(iii) "Permanent Disability" shall mean any physical or
mental disability or incapacity which, in the sole
determination of the Board of Directors, renders you
incapable of fully performing the services required of
you in accordance with your obligations with respect to
the Company or a subsidiary of the Company for a period
of 180 consecutive days or for shorter periods
aggregating 180 days during any period of twelve (12)
consecutive months.

(iv) "Termination of Employment" shall mean the earlier of
(i) your termination of employment with the Company or
Jacobs Management Corporation, unless you are
immediately thereafter employed by the Company, or a
subsidiary, (ii) the termination of the management
contract between the Company and Jacobs Management
Corporation, unless you are immediately thereafter

5
<PAGE>

employed by the Company or a subsidiary, (iii) in the
event (i) or (ii) would be applicable but for your
employment with the Company or a subsidiary, your
termination of employment with the Company or the
subsidiary, as applicable, (iv) your permanent
disability or (v) your death.

(e) METHOD.

(i) NOTICE AND PAYMENT. An Option shall be deemed to be
exercised when written notice of such exercise has been
given to the Company in accordance with the terms of
such Option by the person entitled to exercise such
Option and full payment for the shares of Common Stock
with respect to which the Option is exercised has been
received by the Company. The consideration to be paid
for the Common Stock to be issued upon exercise of the
Option shall be payment in cash, by check, or with
shares of the Company's Common Stock, as provided in
Section (e)(ii) below. As soon as administratively
practicable following the exercise of an Option in the
manner set forth above, the Company shall issue or
cause its transfer agent to issue stock certificates
representing the shares of Common Stock purchased (as
evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the
Company).

(ii) ALTERNATIVE METHODS FOR EXERCISE OF OPTION. You may
elect to exercise an Option in whole or in part by (a)
delivering whole shares of the Company's Common Stock
previously owned by you (whether or not acquired
through the prior exercise of a stock option) having a
fair market value equal to the aggregate Option price;
or (b) by delivery to the Company of (x) irrevocable
instructions to deliver directly to a broker the stock
certificates representing the shares for which the
Option is being exercised, and (y) irrevocable
instructions to such broker to sell such shares and
promptly deliver to the Company the portion of the
proceeds equal to the Option price and any amount
necessary to satisfy the Company's obligation for
withholding taxes, or any combination thereof. For
purposes of making payment in shares of Common Stock,
such shares shall be valued at their fair market value
on the date of exercise of the Option and shall have
been held by you for at least six months.

(iii) VOTING AND DIVIDEND RIGHTS. Until the issuance of such
stock certificates (as evidenced by the appropriate
entry on

6
<PAGE>

the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder
shall exist with respect to the shares underlying the
Option notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other rights
for which the record date occurs prior to the date the
stock certificates are issued.

5. ANTI-DILUTION PROTECTION.

(a) In the event of any change in the shares subject to the
Options granted hereunder or to the capitalization of the
Company through merger, consolidation, reorganization,
recapitalization, stock dividends, stock split, reverse
stock split, split up, spin off, combination of shares,
exchange of shares, dividends in kind or other like change
in the capital structure of the Company or distribution
(other than normal cash dividends) to shareholders of the
Company, in order to prevent dilution or enlargement of your
rights under the Options, the Board of Directors shall
adjust, in its sole discretion, in an equitable manner as
applicable, the form of and number of shares which may be
acquired pursuant to the exercise of Options and the
exercise price of shares of such Options. The determination
of the Board of Directors as to these matters shall be
conclusive and binding.

(b) The Board of Directors, in its discretion, may determine
that, upon the occurrence of a Change in Control of the
Company or the events specified in paragraph 5(a), each
Option outstanding hereunder shall terminate within a
specified number of days after notice to the holder, and
such holder shall receive, with respect to each share of
Common Stock subject to such Option, an amount equal to the
excess of the value of the consideration paid to
stockholders of the Company in connection with such Change
of Control or other event over the exercise price per share
of such Option, such amount to be payable in cash, in one or
more kinds of property (including the property, if any,
payable in the transaction) or in a combination thereof, as
the Board of Directors, in its discretion, shall determine.
The provisions contained in the preceding sentence shall be
inapplicable to a Option granted within six (6) months
before the occurrence of a Change in Control if the holder
of such Option is subject to the reporting requirements of
Section 16(a) of the Exchange Act and no exception from
liability under Section 16(b) of the Exchange Act is
otherwise available to such holder.

7
<PAGE>

6. NON-TRANSFERABILITY. The Options may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution, and shall be exercisable, during your
lifetime only by you.

7. WITHHOLDING. The Company may withhold from sums due or to become due to
you from the Company an amount necessary to satisfy its obligation to withhold
taxes incurred by reason of the issuance or disposition of such shares pursuant
to the Options, or may require you to reimburse the Company in such amount. The
Company is not required to issue any shares until you have satisfied withholding
requirements, to the extent applicable.

8. NOTICES. All notices to the Company under this agreement shall be in
writing and shall be delivered by personal service , facsimile or registered or
certified mail (if such service is not available, then by first class mail),
postage pre-paid, to such address as may be designated from time to time by the
Company, and which shall initially be:

Genmar Holdings, Inc.
100 South Fifth Street, Suite 2400
Minneapolis, Minnesota 55402
Attention: General Counsel

All notices shall be deemed given when received.

9. NO EFFECT ON TERMS OF EMPLOYMENT. This Agreement is not a contract of
employment and the terms of your employment shall not be affected hereby or by
any agreement referred to herein except to the extent specifically so provided.
Nothing herein shall be construed to impose any obligation on the Company to
continue your employment and it shall not impose any obligation on your part to
remain in the employ of the Company.

10. TRANSFER RESTRICTIONS. The Company agrees that at the time of exercise
of an Option, it will use reasonable best efforts to have an effective
Registration Statement on Form S-8 under the Securities Act of 1933, as amended
(the "Act"), which includes a prospectus that is current with respect to the
shares subject to such Option. You covenant and agree with the Company that if,
at the time of exercise of such Option, there does not exist a Registration
Statement on an appropriate form under the Act, which Registration Statement
shall have become effective and shall include a prospectus that is current with
respect to the shares subject to such Option,

(a) that you are purchasing the shares for your own account and
not with a view to the resale or distribution thereof;

(b) that any subsequent offer for sale or sale of any such
shares shall be made either:

(i) pursuant to a Registration Statement on an appropriate
form under the Act, which Registration Statement shall
have

8
<PAGE>

become effective and shall be current with respect
to the shares being offered and sold, or

(ii) a specific exemption from the registration requirements
of the Act, but in claiming such exemption, you shall,
prior to any offer for sale or sale of such shares,
obtain a favorable written opinion from counsel for or
approved by the Company as to the applicability of such
exemption and

11. SEVERABILITY OF PROVISIONS. If any provision of this agreement shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof and this agreement shall be construed and
enforced as if it did not include such provision.

12. AMENDMENT. This agreement cannot be amended except by a writing
executed by the Company and you.

13. APPLICABLE LAW; HEADINGS. This agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to the conflicts of laws principles thereof. The headings
in this agreement are solely for convenience of reference and shall not affect
its meaning or interpretation.

Very truly yours,

GENMAR HOLDINGS, INC.

By:
------------------------------
ACCEPTED:

- ---------------------------------------------
Signature of Senior Executive

- ---------------------------------------------
Name of Senior Executive

Dated:
--------------------- , ------

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
dated August 2, 1999 and to all references to our Firm included in Genmar
Holdings, Inc.'s registration statement, on Form S-1.

/s/ ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
October 18, 1999