UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 0-24534
MERIDIAN SPORTS INCORPORATED
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3776096
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
212-527-4413
- - -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - -------------------------------------------------------------------------------
(Registrant's former address)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of
the latest practicable date.
Class Outstanding at April 30, 1996
Common Stock, $0.01 par 8,000,000
As of April 30, 1996, 5,200,000 shares of the Registrant's
outstanding common stock were held by an indirect
wholly-owned subsidiary of Mafco Holdings Inc.
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
----
Item 1. Consolidated Financial Statements:
Consolidated Condensed Statements of Operations
Three Months Ended March 31, 1996 and 1995.......................3
Consolidated Condensed Balance Sheets
March 31, 1996 and December 31, 1995.............................4
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995.......................5
Notes to Consolidated Financial Statements.......................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........ ...............................10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................14
Exhibit Index....................................................15
Signatures.......................................................16
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1996 1995
------------- ------------
<S> <C> <C>
Net sales:
Marine and Equipment $19,481 $24,595
Businesses sold and to be sold 14,150 24,548
Personal watercraft 0 10,021
------------- ------------
33,631 59,164
------------- ------------
Costs and expenses:
Cost of sales:
Marine and Equipment 15,214 18,322
Businesses sold and to be sold 11,110 18,575
Personal watercraft (1996 amount reflects $2,500
related to restructuring) 2,500 8,207
------------- ------------
28,824 45,104
------------- ------------
Selling, general and administrative expenses:
Marine and Equipment 4,878 4,710
Businesses sold and to be sold 3,611 4,117
Personal watercraft 500 1,173
Headquarters expenses (including fees to affiliates) 1,086 1,190
------------- ------------
10,075 11,190
------------- ------------
Interest and related amortization expense (781) (801)
Gain on sale of Skeeter and unusual item 11,950
------------- ------------
Income before income taxes and extraordinary charge 5,901 2,069
Provision for income taxes 4,867 718
------------- ------------
Income before extraordinary charge 1,034 1,351
Extraordinary charge 713
============= ============
Net income $321 $1,351
============= ============
Earnings per common share:
Income before extraordinary charge $0.13 $0.17
Extraordinary charge (0.09)
============= ============
Net income $0.04 $0.17
============= ============
Weighted average shares outstanding (000s) 8,000 8,000
============= ============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
---------------- ------------------
<S> <C> <C>
Current assets:
Cash $1,285 $1,937
Accounts receivable, net of allowances 20,656 20,943
Inventories 22,252 27,533
Prepaid expenses and other 5,802 7,836
----------------
------------------
Total current assets 49,995 58,249
Property, plant and equipment, net 26,781 29,797
Intangible and other assets, net 4,177 15,781
----------------
==================
$80,953 $103,827
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $21,200 $42,400
Accounts payable 10,177 18,479
Accrued expenses and other current liabilities 29,171 25,594
----------------
------------------
Total current liabilities 60,548 86,473
Affiliate Debt 3,025
Other liabilities 2,911 3,096
Stockholders' equity:
Preferred stock, par value $0.01 per share
Common stock, par value $0.01 per share 80 80
Additional paid-in capital 131,951 131,951
Accumulated deficit (117,538) (117,859)
Cumulative translation adjustment (24) 86
----------------
------------------
Total stockholders' equity 14,469 14,258
----------------
================ ==================
$80,953 $103,827
================ ==================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $321 $1,351
-------------- --------------
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation and amortization 1,166 1,293
Gain on sale of Skeeter, restructuring and other, net of income taxes (3,870)
Change in assets and liabilities:
Increase in receivables (5,388) (6,302)
Increase in inventories (1,653) (343)
(Decrease) increase in accounts payable and accrued expenses (1,761) 237
Payment of restructuring liabilities (4,742)
Other, net 520 1,478
--------------
--------------
(15,728) (3,637)
-------------- --------------
Net cash flows from operating activities (15,407) (2,286)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business 34,800
Capital expenditures, net (950) (1,314)
Acquisition of businesses and payment of related obligations (20) (23)
-------------- --------------
Net cash flows from investing activities 33,830 (1,337)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings, net of fees (19,075) 1,321
-------------- --------------
Net cash flows from financing activities (19,075) 1,321
-------------- --------------
Net decrease in cash (652) (2,302)
Cash at beginning of period 1,937 4,614
-------------- --------------
Cash at end of period $1,285 $2,312
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries after elimination of all material intercompany
accounts and transactions. The consolidated financial statements are unaudited.
In management's opinion, all adjustments (consisting only of normal recurring
accruals and the restructuring charges (see Note 3)) considered necessary for a
fair presentation have been included. Operating results for the first three
months of 1996 are not necessarily indicative of the results that may be
expected for a full year. These interim financial statements should be read in
conjunction with the consolidated financial statements and related notes thereto
which are included on pages F-1 through F-22 of the Company's annual report on
Form 10-K for the year ended December 31, 1995. All terms used but not defined
elsewhere herein have the meanings ascribed to them in the Company's Form 10-K.
Certain reclassifications have been made to conform to the current period's
presentation. The Company is an enthusiast-based sport and active recreation
company.
2. DISPOSAL OF BUSINESSES AND UNUSUAL ITEM
On January 31, 1996, the Company sold Skeeter to Yamaha for $37,500, of
which $2,700 was deposited into escrow, pending a final determination of the net
assets sold to Yamaha. The final determination is expected to result in an
adjustment in favor of Yamaha in an amount at least equal to the escrow amount.
On May 3, 1996, Yamaha notified the Company of its calculation of net assets
sold pursuant to the Skeeter Sale and its request, according to such
calculation, that the Company make a payment to Yamaha in the amount of
approximately $1,380 plus the return of the escrow fund as an adjustment to the
purchase price. The Company and its auditors are in the process of reviewing
Yamaha's calculations. The Skeeter Sale resulted in a pre-tax gain of $13,289,
net of a goodwill writeoff of $10,094. The Company also recorded a valuation
adjustment of $1,339 related to its Equipment business. The proceeds of the
Skeeter Sale were used to repay indebtedness of the Company under the Company
Credit Agreement and the Subordinated Facility.
On March 29, 1996, the Company entered into an agreement with Brunswick
pursuant to which Brunswick will purchase certain assets and assume certain
liabilities of Boston Whaler for $25,300, subject to adjustment. The BW Sale is
expected to be consummated in the second quarter 1996. The proceeds of the BW
Sale will be used to repay indebtedness of Company under the Company Credit
Agreement and the Subordinated Facility. The results of operations of Skeeter
(through January 31, 1996) and Boston Whaler are included in "Businesses Sold
and to be Sold" in the accompanying consolidated condensed statements of
operations for all periods presented.
6
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
The unaudited pro forma condensed statement of operations gives effect to both
the Skeeter Sale and the BW Sale as if they had occurred as of the beginning
of the period presented. The unaudited pro forma condensed balance sheet gives
effect to the BW Sale as if it had occurred at March 31, 1996. The pro forma
adjustments are based on assumptions that the management of the Company
believes are reasonable under the circumstances. These pro forma financial
data do not purport to represent what the results of operations or financial
position would have been had the Skeeter Sale and the BW Sale occurred at the
beginning of the period or as of the date indicated, or to project the
Company's results of operations or financial position at any future date or
future period.
Unaudited Pro Forma Condensed Statement of Operations
For the three months ended March 31, 1996 (unaudited):
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
------------------------------------------------------ Skeeter
Skeeter Debt Sale and
Historical Sale BW Sale Repayment BW Sale
--------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $33,631 ($3,573)a ($10,577)d $19,481
Cost of sales 28,824 (2,924)a (8,186)d 17,714
--------------- -------------- -------------- ------------
Gross profit 4,807 (649)a (2,391)d 1,767
Selling, general and administrative expenses 10,075 (898)a,b (2,758)d 6,419
Interest and related amortization expense 781 ($781)e 0
Gain on sale of Skeeter and unusual item (11,950) 13,289 c 1,339
--------------- -------------- -------------- -------------- ------------
Income before income taxes 5,901 (13,040) 367 781 (5,991)
Provision for income taxes 4,867 (4,867)c 0 0 0
--------------- -------------- -------------- -------------- -----------
Income before extraordinary charge (f) $1,034 ($8,173) $367 $781 ($5,991)
=============== ============== ============== ============== ===========
Pro forma loss per common share ($0.75)
============
Weighted average shares outstanding (000s) 8,000
============
</TABLE>
Notes to pro forma statement of operations:
(a) Reflects the results of Skeeter for the one month ended January 31, 1996
(date of the Skeeter Sale).
(b) Reflects the elimination of amortization of goodwill which was written off
in connection with the Skeeter Sale.
(c) Reflects the elimination of the gain on the Skeeter Sale and related tax
effect.
(d) Reflects the results of Boston Whaler for the three months ended March
31, 1996.
(e) Reflects the elimination of historical interest and related amortization
expense on debt repaid with proceeds of the Skeeter Sale and the BW Sale.
(f) Does not reflect: (1) the estimated gain of approximately $2,700
arising from the BW Sale; and (2) an extraordinary charge of
approximately $600 for the writeoff of deferred financing costs due to
a permanent commitment reduction under the Company Credit Agreement in
connection with the BW Sale.
7
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
Unaudited Pro Forma Condensed Balance Sheet
As of March 31, 1996 (Unaudited):
<TABLE>
<CAPTION>
Pro Forma
Adjustments Pro Forma
ASSETS Historical BW Sale BW Sale
-------------- -------------- --------------
<S> <C> <C> <C>
Current assets:
Cash $1,285 $25,197 a $1,043 h
(24,225)b
(1,000)c
(214)d
Accounts receivable, net of allowances 20,656 (5,295)d 15,361
Inventories 22,252 (4,887)d 17,365
Prepaid expenses and other 5,802 (329)d 3,381
(2,092)e
-------------- -------------- --------------
Total current assets 49,995 (12,845) 37,150
Property, plant and equipment, net 26,781 (12,116)d 14,665
Intangible and other assets, net 4,177 1,250 a 1,855
(2,964)d
(608)f
-------------- -------------- --------------
$80,953 ($27,283) $53,670
============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $21,200 ($21,200)b $0
Accounts payable 10,177 (2,928)d 7,249
Accrued expenses and other current liabilities 29,171 (2,259)d 26,912
-------------- -------------- --------------
Total current liabilities 60,548 (26,387) 34,161
Affiliate Debt 3,025 (3,025)b 0
Other liabilities 2,911 2,911
Stockholders' equity:
Preferred stock, par value $0.01 per share
Common stock, par value $0.01 per share 80 80
Additional paid-in capital 131,951 131,951
Accumulated deficit (117,538) 2,737 g (115,409)
(608)f
Cumulative translation adjustment (24) (24)
-------------- -------------- --------------
Total stockholders' equity 14,469 2,129 16,598
-------------- -------------- --------------
$80,953 ($27,283) $53,670
============== ============== ==============
</TABLE>
Notes to pro forma balance sheet:
(a) Represents the proceeds, inclusive of a pro forma purchase price
adjustment in favor of the Company of $1,147 at March 31, 1996, from the
BW Sale, of which $1,250 is to be deposited into escrow.
(b) Represents the use of cash proceeds, net of fees and expenses, from the BW
Sale to repay indebtedness of the Company. (See footnote h.)
(c) Represents the payment of estimated fees and expenses related to the BW
Sale.
(d) Reflects the elimination of assets and liabilities as of March 31, 1996 in
connection with the BW Sale.
(e) Reflects the realization of deferred tax assets in connection with the BW
Sale.
(f) Represents an extraordinary charge for the writeoff of deferred financing
costs at March 31, 1996 due to a permanent commitment reduction under the
Company Credit Agreement in connection with the BW Sale.
(g) Represents the estimated gain, net of income taxes, realized on the BW Sale.
(h) Represents remaining cash which would be used prospectively to fund seasonal
working capital and other needs and the payment of WetJet restructuring
liabilities.
8
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
3. RESTRUCTURING CHARGE
In the three month period ended March 31, 1996, the Company revised its
estimates to execute the WetJet restructuring program to reflect increased
warranty costs and accordingly recorded a charge in cost of sales of $2,500.
There can be no assurance that the restructuring programs will succeed or that
management's estimates of the cost of the restructuring program will not be
exceeded.
4. EARNINGS PER COMMON SHARE
Earnings per common share have been computed based upon 8,000,000
shares for the three months ended March 31, 1996 and 1995,
5. INVENTORIES
Inventories are valued at the lower of cost or market. Inventory costs
are determined principally by the last-in, first-out method ("Lifo").
Inventories consisted of the following:
March 31, December 31,
1996 1995
--------- ------------
Raw materials and supplies................... $ 7,778 $ 10,564
Work-in-process.............................. 2,166 2,374
Finished goods............................... 12,975 15,447
-------- --------
22,919 28,385
Less: Lifo allowance......................... (667) (852)
-------- --------
$ 22,252 $ 27,533
======== ========
6. CASH FLOW REPORTING
The Company uses the indirect method to report cash flows from
operating activities. For the three months ended March 31, 1996 and 1995,
interest paid was $1,051 and $587, respectively; income taxes paid were $48 and
$175, respectively.
9
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto included elsewhere
herein.
Results of Operations
The following table sets forth historical statements of operations data
for the three months ended March 31, 1996 and 1995. Marine businesses includes
MasterCraft; Equipment businesses include O'Brien and Soniform; Businesses
Sold and to be Sold includes Skeeter and Boston Whaler; Personal watercraft
includes WetJet.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------
1996 1995
--------------- ----------------
(In millions, except percentages)
<S> <C> <C>
MARINE BUSINESSES:
Net sales $11.2 $14.3
Gross profit 1.9 3.3
Gross profit as a % of net sales 16.8% 23.4%
Selling, general and administrative expenses (a) 2.7 2.6
Operating unit contribution (b) (0.8) 0.7
EQUIPMENT BUSINESSES:
Net sales 8.3 10.3
Gross profit 2.4 3.0
Gross profit as a % of net sales 28.8% 28.4%
Selling, general and administrative expenses (a) 2.2 2.1
Operating unit contribution (b) 0.2 0.9
BUSINESSES SOLD AND TO BE SOLD:
Net sales 14.1 24.6
Gross profit 3.0 6.0
Gross profit as a % of net sales 21.5% 24.3%
Selling, general and administrative expenses (a) 3.6 4.1
Operating unit contribution (b) (0.6) 1.9
PERSONAL WATERCRAFT:
Net sales 0.0 10.0
Gross profit (1996 amount reflects $2.5 million
related to restructuring) (2.5) 1.8
Selling, general and administrative expenses (a) 0.5 1.2
Operating unit contribution (b) (3.0) 0.6
TOTAL:
Net sales 33.6 59.2
Gross profit (1996 amount reflects $2.5 million
related to restructuring) 4.8 14.1
Selling, general and administrative expenses (a) 9.0 10.0
Headquarters expenses (c) (1.1) (1.2)
Interest and related amortization expense (0.8) (0.8)
Gain on sale of Skeeter and unusual item 12.0 0.0
Income before income taxes and extraordinary charge 5.9 2.1
Provision for income taxes 4.9 0.7
Income before extraordinary charge 1.0 1.4
Extraordinary charge 0.7 0.0
Net income $0.3 $1.4
</TABLE>
(a) Selling, general and administrative expenses includes the provision for
doubtful accounts. See Note 3 to Consolidated Financial Statements for a
discussion of items included in restructuring.
(b) Represents gross profit less selling, general and administrative
expenses, including provision for doubtful accounts, attributable to the
operating businesses. See Note 3 to Consolidated Financial Statements
for a discussion of items included in restructuring.
(c) Represents fees to affiliates plus the portion of selling, general and
administrative expenses related to headquarters.
10
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and
results of operations should be read in conjunction with the Company's Form 10-K
for the year ended December 31, 1995.
Three months ended March 31, 1996 compared with three months ended March 31,
1995
Net sales were $33.6 million and $59.2 million for the 1996 and 1995
periods, respectively, a decrease of $25.6 million. Marine sales decreased 22%
to $11.2 million primarily because MasterCraft deliberately reduced production
to balance field inventories at dealers. Equipment sales decreased by $2.0
million, or 19%, to $8.3 million in 1996 due to delayed customer purchases as
customers are adjusting their inventory levels. Sales of Businesses Sold and to
be Sold decreased from $24.6 million in 1995 to $14.1 million in 1996,
reflecting the effect of the Skeeter Sale on January 31, 1996 and reduced
production at Boston Whaler to balance retail inventory. The personal watercraft
business continued implementing the restructuring program in the first quarter
of 1996, focusing on repairing or replacing previously manufactured inventory.
No net sales were realized in the 1996 period, compared with sales of $10.0
million in the 1995 period.
Gross profit was $4.8 million and $14.1 million for the 1996 and
1995 periods, respectively. Gross profit in 1996 is net of $2.5 million related
to the Company's restructuring of its personal watercraft business. The
restructuring charge reflects a revision of management's estimate to repair
previously manufactured inventory reflecting the cost of additional warranty
parts and labor. The Wetjet restructuring programs are currently being
implemented. Should these programs be delayed or otherwise not succeed, the
costs may exceed the current estimates. There can be no assurance that the
restructuring programs will succeed or that management's estimates of the cost
of the restructuring programs will not be exceeded. Consequently, the Company
may record additional restructuring charges related to WetJet during 1996 as it
periodically assesses the status of the WetJet restructuring programs. The
effect of the Skeeter Sale and Boston Whaler's reduced production was to reduce
gross profit of Businesses Sold and to be Sold by $3.0 million in 1996. Marine
and Equipment businesses together produced $2.0 million lower gross profit in
1996, primarily due to volume declines.
SG&A expenses, excluding headquarters expenses, were $9.0 million
and $10.0 million for the 1996 and 1995 periods, respectively, a decrease of
$1.0 million primarily related to the Skeeter Sale.
Headquarters expenses, including fees to affiliates, of $1.1 million
were decreased slightly from the 1995 period.
Interest and related amortization expense of $0.8 million in the
1996 period was approximately the same as in the 1995 period as higher Affiliate
Debt and amortization of deferred financing costs approximately offset the
effect of lower borrowings under the Company Credit Agreement.
The Skeeter Sale resulted in a pre-tax gain of $13.3 million, net of
a goodwill writeoff of $10.1 million. The Company also recorded a valuation
adjustment of $1.3 million related to its Equipment businesses.
The effective tax rates for the 1996 and 1995 periods were
approximately 82% and 35%, respectively. The effective rate in 1996 reflects the
effect of a non-deductible goodwill writeoff of $10.1 million in connection with
the Skeeter Sale included in income before income taxes and extraordinary
charge. After adjusting for such writeoff, the effective tax rate would be
approximately 30% in 1996. The provision in 1996 principally includes the
realization of a federal deferred tax asset and a state provision related to the
Skeeter Sale. In 1995, the provision includes a federal provision which reflects
the utilization of net operating loss carryfowards and state and local taxes.
11
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
For the three months ended March 31, 1996 and 1995, cash used in
operating activities was $15.4 million and $2.3 million, respectively. The
Company's cash flows from operating activities in 1996 reflect the payment of
WetJet restructuring liabilities in the amount of $4.7 million, operating losses
and interest expense. In addition, in 1995, cash flow from operating activities
included a $1.5 million reduction of inventory as a source of cash, primarily
engines, related to Skeeter.
The Company's net capital expenditures were $0.9 million and $1.3
million for the three months ended March 31, 1996 and 1995, respectively. The
decline reflected primarily the effect of the Skeeter Sale and lower capital
expenditures at MasterCraft and WetJet.
At March 31, 1996, total debt, including Affiliate Debt of $3.0
million, was approximately $24.2 million, which amount represents an $18.2
million decrease from December 31, 1995. The decrease resulted from the
repayment of debt with proceeds from the Skeeter Sale, net of payments of WetJet
restructuring liabilities and increases in working capital. The Company's
working capital and other requirements are currently funded by the Company
Credit Agreement and the Subordinated Facility.
Under the Company Credit Agreement, as amended, the Company is able
to borrow up to approximately $24.3 million on a revolving basis which may be
used for general corporate purposes, to finance working capital needs, including
payment of floor plan interest and WetJet restructuring charges, and for capital
expenditures. At April 30, 1996 the Company Credit Agreement was fully drawn,
including outstanding letters of credit of approximately $2.2 million. Loans
under the Company Credit Agreement bear interest at either of the following
rates, as selected by the Company from time to time: (i) the agent's base
lending rate or (ii) the London Interbank Offered Rate plus 300 basis points.
Loans and other extensions of credit under the Company Credit Agreement are
guaranteed by the subsidiaries of the Company. The loans, extensions of credit
and guarantees are secured by (a) a security interest in all the capital stock
of the Company's domestic subsidiaries and 66.67% of certain foreign
subsidiaries and (b) a security interest in all the material assets of the
Company and its subsidiaries. At April 30, 1996, 4,520,334 shares of the
Company's common stock owned by MacAndrews & Forbes was pledged as collateral in
support of obligations of an affiliate. The Company Credit Agreement prohibits
the payment of dividends. The Company is not in compliance with various
covenants of the Company Credit Agreement and, accordingly, has obtained from
its lenders waivers of certain financial covenants through June 30, 1996,
subject to early termination of such waivers under certain circumstances. Under
the terms of the waivers, proceeds from the BW Sale, when consummated, must
first be applied to the then outstanding balance under the Company Credit
Agreement.
In January 1996, the Company entered into the Subordinated Facility
to provide for additional liquidity. The Subordinated Facility provides for
borrowings on a revolving basis of up to approximately $6.1 million. Loans under
the Subordinated Facility bear interest at the prime rate. At May 9, 1996, there
was approximately $4.5 million of borrowings outstanding under the Subordinated
Facility.
The Company is assessing its current and longer-term liquidity
needs. The WetJet restructuring programs, after experiencing several engineering
related delays, are currently being implemented. WetJet has advised its dealers
and consumers that until the individual personal watercraft is repaired or
upgraded, it should not be used or sold. Because usage of personal watercraft
generally increases during the summer season, further delays in implementing the
restructuring programs could result in costs in excess of current estimates.
There can be no assurance that the restructuring programs will succeed or that
management's estimates of the cost of the restructuring programs will not be
exceeded. Should the restructuring programs be further delayed, otherwise not
succeed, or cost in excess of current estimates, the Company
12
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
will require additional sources of liquidity and may be required to record
additional restructuring charges. The Company intends to negotiate an amendment
to the Company Credit Agreement during the second quarter. There can be no
assurance that the Company will be able to secure such amendment or additional
sources of liquidity on satisfactory terms. Although none of the Company's
affiliates are required to provide funding to the Company other than pursuant to
the Subordinated Facility, the Company anticipates that liquidity needs, if any,
in excess of the Subordinated Facility will be met by loans from affiliates.
Notwithstanding the foregoing, after giving effect to the BW Sale
(which, after obtaining customary approvals is expected to be consummated during
the second quarter of 1996) the Company expects its remaining debt to be
primarily related to seasonal working capital needs.
Seasonality
The marine industry is seasonal, with consumer sales strongest in
the summer months. As a result of this seasonality, operating results obtained
in the first three months of the year are not necessarily indicative of results
that may be expected for the full year.
13
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
See Exhibit index on page 15.
b. Reports on Form 8-K
Form 8-K as of January 31, 1996, as amended on April 11,
1996, related to the Skeeter Sale.
14
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- - ---------- -----------
10.1 Employment Agreement, dated as of February 26, 1996, between
MasterCraft Boat Company and James Hoag
10.2 Retention Agreement, dated as of March 19, 1996, between the
Company and James Hoag
10.3 Letter Agreement, dated as of January 18, 1996, between the
Company and Barry Tait
10.4 Retention Agreement, dated as of January 29, 1996, between the
Company and Barry Tait
10.5 Retention Agreement, dated as of January 12, 1996, between the
Company and Russell Kelley
10.6 Retention Agreement, dated as January 18, 1996, between the
Company and Douglas Fonte
27 Financial Data Schedule
15
<PAGE>
MERIDIAN SPORTS INCORPORATED AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERIDIAN SPORTS INCORPORATED
(Registrant)
May 14, 1996 By:/s/ Mark L. Wilson
-------------------
Mark L. Wilson
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
Employment Agreement
EMPLOYMENT AGREEMENT, dated as of February 26, 1996, between
MasterCraft Boat Company, a Tennessee corporation, (the "Company") and James
Hoag (the "Executive").
The Company wishes to employ the Executive, and the Executive
wishes to accept such employment, on the terms and conditions set forth in this
Agreement.
Accordingly, the Company and the Executive hereby agree as
follows:
Employment, Duties and Acceptance.
1.1 Employment, Duties. The Company hereby
employs the Executive for the Term (as defined in Section 2.1), to render
exclusive and full-time services to the Company as President of MasterCraft Boat
Company or in such other executive position as may be mutually agreed upon by
the Company and the Executive, and to perform such other duties consistent with
such position as may be assigned to the Executive by the Board of Directors or
any officer of the Company senior to the Executive. The Executive agrees that in
connection with his position hereunder, Executive shall also perform such other
duties for Meridian Sports Incorporated and its subsidiaries as may reasonably
be assigned to the Executive.
1.2 Acceptance. The Executive hereby
accepts such employment and agrees to render the services described above.
During the Term, the Executive agrees to serve the Company faithfully and to the
best of the Exec- utive's ability, to devote the Executive's entire business
time, energy and skill to such employment, and to use the Executive's best
efforts, skill and ability to promote the Company's interests. The Executive
further agrees to accept election, and to serve during all or any part of the
Term, as an officer or director of the Company and of any subsidiary or
affiliate of the Company, without any compensation therefor other than that
specified in this Agreement, if elected to any such position by the shareholders
or by the Board of Directors of the Company or of any subsidiary or affiliate,
as the case may be.
1.3 Location. The duties to be performed
by the Executive hereunder shall be performed primarily at the office of the
Company in Vonore, Tennessee, subject to reasonable travel requirements on
behalf of the Company. The parties agree that the duties of the Executive may
need to be performed in other locations, subject to the consent
<PAGE>
of the Executive which consent shall not be unreasonably
withheld.
2. Term of Employment; Certain Post-Term Benefits.
2.1 The Term. The term of the Executive's
employment under this Agreement (the "Term") shall commence on February 26, 1996
and shall end on February 28, 1998 or such later date to which the Term is
extended pursuant to Section 2.2.
2.2 End-of-Term Provisions. At any time on
or after January 31, 1997 the Company shall have the right to give written
notice of non-renewal of the Term. In the event the Company gives such notice of
non-renewal, the Term automatically shall be extended so that it ends twelve
months after the last day of the month in which the Company gives such notice.
From and after February 1, 1998 unless and until the Company gives written
notice of non-renewal as provided in this Section 2.2, the Term automatically
shall be extended day-by-day; upon the giving of such notice by the Company, the
Term automatically shall be extended so that it ends twelve months after the
last day of the month in which the Company gives such notice.
2.3 Special Curtailment. The Term shall
end earlier than the original February 28, 1998 termination date provided in
Section 2.1 or any extended termination date provided in Section 2.2, in either
case if sooner terminated pursuant to Section 4. Non-extension of the Term shall
not be deemed to be a wrongful termination of the Term or this Agreement by the
Company pursuant to Section 4.4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all ser-
vices to be rendered pursuant to this Agreement, the Company agrees to pay the
Executive during the Term a base salary, payable semi-monthly in arrears, at the
annual rate of not less than $300,000, less such deductions or amounts to be
withheld as required by applicable law and regulations (the "Base Salary"). The
Executive shall be eligible for an annual salary review and in the event that
the Company, in its sole discretion, from time to time determines to increase
the Base Salary, such increased amount shall, from and after the effective date
of the increase, constitute "Base Salary" for purposes of this Agreement.
3.2 Bonus. In addition to the amounts to
be paid to the Executive pursuant to Section 3.1, the
2
<PAGE>
Executive shall participate in the Meridian Sports Incorporated Executive Bonus
Plan as applicable to the Company, a copy of which will be provided within 30
days of the execution of this Agreement. The bonus in respect of 1996 shall not,
however, be less than $50,000.
3.3 Business Expenses. The Company shall
pay or reimburse the Executive for all reasonable expenses actually incurred or
paid by the Executive during the Term in the performance of the Executive's
services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as the Company customarily may
require of its officers provided, however, that the maximum amount available for
such expenses during any period may be fixed in advance by the Chairman or Vice
Chairman of the Board of Directors, the President of the Company, or the Board
of Directors. The Executive shall be permitted to travel business class on any
overseas travel.
3.4 Vacation. During the Term, the Exec-
utive shall be entitled to a vacation period or periods of four weeks taken in
accordance with the vacation policy of the Company during each year of the Term.
Vacation time not used by the end of a year shall be forfeited.
3.5 Fringe Benefits. During the Term, the
Executive shall be entitled to all benefits for which the Executive shall be
eligible under any qualified pension plan, 401(k) plan, group insurance or other
so-called "fringe" benefit plan which the Company provides to its employees
generally, together with executive medical benefits for the Executive, the
Executive's spouse as from time to time in effect for officers of the Company
generally.
3.6 Additional Benefits. During the Term,
the Executive shall be entitled to such other benefits as are specified in
Appendix I to this Agreement.
4. Termination.
4.1 Death. If the Executive shall die
during the Term, the Term shall terminate and no further amounts or benefits
shall be payable hereunder, except that the Executive's legal representatives
shall be entitled to receive continued payments in an amount equal to 60% of the
Base Salary, in the manner specified in Section 3.1, until the end of the Term
(as in effect immediately prior to the Executive's death) or, if the Company has
not then given written notice of non-renewal pursuant to Section 2.2, for a
period of twelve months after the last day of the month in which termination
described in this Section 4.1 oc-
3
<PAGE>
curred, whichever is longer.
4.2 Disability. If during the Term the
Executive shall become physically or mentally disabled, whether totally or
partially, such that the Executive is unable to perform the Executive's services
hereunder for (i) a period of six consecutive months or (ii) for shorter periods
aggregating six months during any twelve month period, the Company may at any
time after the last day of the six consecutive months of disability or the day
on which the shorter periods of disability shall have equalled an aggregate of
six months, by written notice to the Executive (but before the Executive has
recovered from such disability), terminate the Term and no further amounts or
benefits shall be payable hereunder, except that the Executive shall be entitled
to receive continued payments in an amount equal to 60% of the Base Salary, in
the manner specified in Section 3.1, until the end of the Term (as in effect
immediately prior to such termination) or, if the Company has not then given
notice of non-renewal pursuant to Section 2.2, for a period of twelve months
after the last day of the month in which termination described in this Section
4.2 occurred, whichever is longer. If the Executive shall die before receiving
all payments to be made by the Company in accordance with the foregoing, such
payments shall be made to a beneficiary designated by the Executive on a form
prescribed for such purpose by the Company, or in the absence of such
designation to the Executive's legal representative.
4.3 Cause. In the event of gross neglect
by the Executive of the Executive's duties hereunder, conviction of the
Executive of any felony, conviction of the Executive of any lesser crime or
offense involving the property of the Company or any of its subsidiaries or
affiliates, willful misconduct by the Executive in connection with the
performance of any material portion of the Executive's duties hereunder, breach
by the Executive of any material provision of this Agreement or any other
conduct on the part of the Executive which would make the Executive's continued
employment by the Company materially prejudicial to the best interests of the
Company, the Company may at any time by written notice to the Executive
terminate the Term and, upon such termination, this Agreement shall terminate
and the Executive shall be entitled to receive no further amounts or benefits
hereunder, except any as shall have been earned to the date of such termination.
4.4 Company Breach. In the event of the
breach of any material provision of this Agreement by the Company, the Executive
shall be entitled to terminate the
4
<PAGE>
Term upon 60 days' prior written notice to the Company. Upon such termination,
or in the event the Company terminates the Term or this Agreement other than
pursuant to the provisions of Section 4.2 or 4.3, the Company shall continue to
provide the Executive (i) payments of Base Salary, in the manner and amount
specified in Section 3.1 and (ii) fringe benefits and additional benefits in the
manner and amounts specified in Sections 3.5 and 3.6 until the end of the Term
(as in effect immediately prior to such termination) or, if the Company has not
then given written notice of non-renewal pursuant to Section 2.2, for a period
of twelve months after the last day of the month in which termination described
in this Section 4.4 occurred, whichever is longer (the "Damage Period"). In
addition to the amounts payable pursuant to the preceding sentence, the
Executive shall receive a portion of the bonus to which he would have been
entitled, payable in accordance with the Company's performance bonus plan, such
portion to be equal to the bonus he would have received had the Term not been
terminated multiplied by a fraction the numerator of which is the number of
months elapsed from the beginning of the calendar year in which the termination
occurred until the termination (including partial months) and the denominator of
which is 12. The Company's obligations pursuant to this Section 4.4 are subject
to the Executive's duty to mitigate damages by seeking other employment
provided, however, that the Executive shall not be required to accept a position
of lesser importance or of substantially different character than the position
held with the Company immediately prior to the effective date of termination. To
the extent that the Executive shall earn compensation during the Damage Period
(without regard to when such compensation is paid), the Base Salary payments to
be made by the Company pursuant to this Section 4.4 shall be correspondingly
reduced.
4.5 Litigation Expenses. Except as provid-
ed for in Section 5.7, if the Company and the Executive become involved in any
action, suit or proceeding relating to the alleged breach of this Agreement by
the Company or the Executive, and if a judgment in such action, suit or
proceeding is rendered in favor of the Executive, the Company shall reimburse
the Executive for all expenses (including reasonable attorneys' fees) incurred
by the Executive in connection with such action, suit or proceeding. Such costs
shall be paid to the Executive promptly upon presentation of expense statements
or other supporting information evidencing the incurrence of such expenses.
5. Protection of Confidential Information;
Non-Competition.
5.1 In view of the fact that the
5
<PAGE>
Executive's work for the Company will bring the Executive into close contact
with many confidential affairs of the Company not readily available to the
public, and plans for future developments, the Executive agrees:
5.1.1 To keep and retain in the strictest
confidence all confidential matters of the Company, including, without
limitation, "know how", trade secrets, customer lists, pricing policies,
operational methods, technical processes, formulae, inventions and research
projects, and other business affairs of the Company, learned by the Executive
heretofore or hereafter, and not to disclose them to anyone outside of the
Company, either during or after the Executive's employment with the Company,
except in the course of performing the Executive's duties hereunder or with the
Company's express written consent. The foregoing prohibitions shall include,
without limitation, directly or indirectly publishing (or causing, participating
in, assisting or providing any statement, opinion or information in connection
with the publication of) any diary, memoir, letter, story, photograph,
interview, article, essay, account or description (whether fictionalized or not)
concerning any of the foregoing, publication being deemed to include any
presentation or reproduction of any written, verbal or visual material in any
communication medium, including any book, magazine, newspaper, theatrical
production or movie, or television or radio programming or commercial; and
5.1.2 To deliver promptly to the Company on
termination of the Executive's employment by the Company, or at any time the
Company may so request, all memoranda, notes, records, reports, manuals,
drawings, blueprints and other documents (and all copies thereof) relating to
the Company's business and all property associated therewith, which the
Executive may then possess or have under the Executive's control.
5.2 During the Term, the Executive shall
not, directly or indirectly, enter the employ of, or render any services to, any
person, firm or corporation engaged in any business competitive with the
business of the Company or of any of its subsidiaries or affiliates; the
Executive shall not engage in such business on the Executive's own account; and
the Executive shall not become interested in any such business, directly or
indirectly, as an individual, partner, shareholder, director, officer,
principal, agent, employee, trustee, consultant, or in any other relationship or
capacity provided, however, that nothing contained in this Section 5.2 shall be
deemed to prohibit the Executive from acquiring, solely as an investment, up to
five percent (5%) of the outstanding shares of capital
6
<PAGE>
stock of any public corporation.
5.3 If the Executive commits a breach, or
threatens to commit a breach, of any of the provisions of Sections 5.1 or 5.2
hereof, the Company shall have the following rights and remedies:
5.3.1 The right and remedy to have the
provisions of this Agreement specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company; and
5.3.2 The right and remedy to require the
Executive to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits (collectively "Benefits") derived
or received by the Executive as the result of any transactions constituting a
breach of any of the provisions of the preceding paragraph, and the Executive
hereby agrees to account for and pay over such Benefits to the Company.
Each of the rights and remedies enumerated above shall be independent of the
other, and shall be severally enforceable, and all of such rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
5.4 If any of the covenants contained in
Sections 5.1 or 5.2, or any part thereof, hereafter are construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants, which shall be given full effect, without regard to the invalid
portions.
5.5 If any of the covenants contained in
Sections 5.1 or 5.2, or any part thereof, are held to be unenforceable because
of the duration of such provision or the area covered thereby, the parties agree
that the court making such determination shall have the power to reduce the
duration and/or area of such provision and, in its reduced form, said provision
shall then be enforceable.
5.6 The parties hereto intend to and hereby
confer jurisdiction to enforce the covenants contained in Sections 5.1 and 5.2
upon the courts of any state within the geographical scope of such covenants. In
the event that the courts of any one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of such covenants or
otherwise, it is the intention of the parties hereto that such determination not
bar or in
7
<PAGE>
any way affect the Company's right to the relief provided above in the courts of
any other states within the geographical scope of such covenants as to breaches
of such covenants in such other respective jurisdictions, the above covenants as
they relate to each state being for this purpose severable into diverse and
independent covenants.
5.7 In the event that any action, suit or
other proceeding in law or in equity is brought to enforce the covenants
contained in Sections 5.1 and 5.2 or to obtain money damages for the breach
thereof, and such action results in the award of a judgment for money damages or
in the granting of any injunction in favor of the Company, all expenses
(including reasonable attorneys' fees) of the Company in such action, suit or
other proceeding shall (on demand of the Company) be paid by the Executive. In
the event the Company fails to obtain a judgment for money damages or an
injunction in favor of the Company, all expenses (including reasonable
attorneys' fees) of the Executive in such action, suit or other proceeding shall
(on demand of the Executive) be paid by the Company.
6. Inventions and Patents.
6.1 The Executive agrees that all process-
es, technologies and inventions (collectively, "Inventions"), including new
contributions, improvements, ideas and discoveries, whether patentable or not,
conceived, developed, invented or made by him during the Term shall belong to
the Company, provided that such Inventions grew out of the Executive's work with
the Company or any of its subsidiaries or affiliates, are related in any manner
to the business (commercial or experimental) of the Company or any of its
subsidiaries or affiliates or are conceived or made on the Company's time or
with the use of the Company's facilities or materials. The Executive shall
further: (a) promptly disclose such Inventions to the Company; (b) assign to the
Company, without additional compensation, all patent and other rights to such
Inventions for the United States and foreign countries; (c) sign all papers
necessary to carry out the foregoing; and (d) give testimony in support of the
Executive's inventorship.
6.2 If any Invention is described in a
patent application or is disclosed to third parties, directly or indirectly, by
the Executive within two years after the termination of the Executive's
employment by the Company, it is to be presumed that the Invention was conceived
or made during the Term.
6.3 The Executive agrees that the Executive
will not assert any rights to any Invention as having been
8
<PAGE>
made or acquired by the Executive prior to the date of this Agreement, except
for Inventions, if any, disclosed to the Company in writing prior to the date
hereof.
7. Intellectual Property.
The Company shall be the sole owner of all the products and
proceeds of the Executive's services hereunder, including, but not limited to,
all materials, ideas, concepts, formats, suggestions, developments,
arrangements, packages, programs and other intellectual properties that the
Executive may acquire, obtain, develop or create in connection with and during
the Term, free and clear of any claims by the Executive (or anyone claiming
under the Executive) of any kind or character whatsoever (other than the
Executive's right to receive payments hereunder). The Executive shall, at the
request of the Company, execute such assignments, certificates or other
instruments as the Company may from time to time deem necessary or desirable to
evidence, establish, maintain, perfect, protect, enforce or defend its right,
title or interest in or to any such properties.
8. Indemnification.
The Company will indemnify the Executive, to the maximum
extent permitted by applicable law, against all costs, charges and expenses
incurred or sustained by the Executive in connection with any action, suit or
proceeding to which the Executive may be made a party by reason of the Executive
being an officer, director or employee of the Company or of any subsidiary or
affiliate of the Company.
9. Notices.
All notices, requests, consents and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, sent by overnight
courier or mailed first class, postage prepaid, by registered or certified mail
(notices mailed shall be deemed to have been given on the date mailed), as
follows (or to such other address as either party shall designate by notice in
writing to the other in accordance herewith):
If to the Company, to:
Meridian Sports Incorporated
625 Madison Avenue
New York, New York 10022
Attention: George Napier
President
9
<PAGE>
If to the Executive, to:
James Hoag
13725 106th Drive, S.E.
Snohomish, Washington 98290
10. General.
10.1 This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely in New York.
10.2 The section headings contained herein
are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
10.3 This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, relating to the subject matter hereof, including the letter
agreement addressed to the Executive from George Napier dated February 20, 1996.
No representation, promise or inducement has been made by either party that is
not embodied in this Agreement, and neither party shall be bound by or liable
for any alleged representation, promise or inducement not so set forth.
10.4 This Agreement, and the Executive's
rights and obligations hereunder, may not be assigned by the Executive. The
Company may assign its rights, together with its obligations, hereunder (i) to
any affiliate or (ii) to third parties in connection with any sale, transfer or
other disposition of all or substantially all of its business or assets; in any
event the obligations of the Company hereunder shall be binding on its
successors or assigns, whether by merger, consolidation or acquisition of all or
substantially all of its business or assets.
10.5 This Agreement may be amended, modi-
fied, superseded, canceled, renewed or extended and the terms or covenants
hereof may be waived, only by a written instrument executed by both of the
parties hereto, or in the case of a waiver, by the party waiving compliance. The
failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any
10
<PAGE>
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
11. Subsidiaries and Affiliates.
11.1 As used herein, the term "subsidiary" shall mean any
corporation or other business entity controlled directly or indirectly by the
corporation or other business entity in question, and the term "affiliate" shall
mean and include any corporation or other business entity directly or indirectly
controlling, controlled by or under common control with the corporation or other
business entity in question.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MASTERCRAFT BOAT COMPANY
By: /s/ George Napier
-------------------------------
George Napier
Chairman
/s/ James Hoag
-------------------------------
James Hoag
11
<PAGE>
APPENDIX I
Additional Benefits:
1. Medical Examination. The Executive shall be reimbursed by
the Company for the reasonable cost of one annual medical examination upon
presentation of an expense statement.
2. Automobile. The Company shall afford the Executive the
right to use an automobile on a continuing basis or to be paid a monthly
allowance of $700. If the Executive chooses to use an automobile, the Company
shall pay, upon presentation of an expense statement, all reasonable expenses
associated with the operation of such automobile in the same manner as is, from
time to time, in effect with respect to executive officers of the Company
generally, including, without limitation, all reasonable maintenance and
insurance expenses. The automobile furnished by the Company shall be an
automobile with a retail value of approximately $33,000, reasonably selected by
the Executive. Upon the expiration of the Term, the Executive promptly shall
return the automobile to the Company.
3. Stock Options. The Executive shall be eligible to
participate in the Meridian Sports Incorporated Stock Option Plan. Any stock
options held by the Executive shall immediately become vested upon (i) a
termination of this Agreement by the Company without cause or by the Executive
in accordance with Section 4.4 or (ii) any going private transaction involving
Meridian Sports Incorporated or any other transaction in which Meridian Sports
Incorporated is not the surviving entity, or a sale of the Company, including a
sale of all or substantially all of its assets.
4. Relocation. The Company shall pay all of the costs and
expenses incident to the relocation of the Executive and his family to the
Vonore, Tennessee area. Such expenses shall include packing, moving, temporary
living expenses, all legal and commission costs related to the rental or
purchase of a residence in the Vonore area and of disposing of the Executive's
current residence. In addition, the Company shall pay the Executive $10,000 for
other incidental expenses upon the closing of an agreement to purchase a
residence in the Vonore area or upon the Executive leasing a residence in the
Vonore area.
12
MERIDIAN SPORTS INCORPORATED
George Napier
President
Chief Executive Officer
March 19, 1996
James Hoag
13725 106th Drive, S.E.
Snohomish, Washington 98290
Dear Jim:
Meridian Sports Incorporated (the "Company") considers it
essential to the best interests of the Company, its stockholders and MasterCraft
Boat Company ("MasterCraft") to foster the continuous employment of key
management personnel. In this connection, the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of certain employees of the Company, including
yourself, to their assigned duties without distraction in the face of
potentially disrupting circumstances arising from the possibility of a change in
control of MasterCraft ("Change in Control").
In order to induce you to remain in the employ of MasterCraft,
MasterCraft agrees that you shall receive certain benefits set forth in this
letter agreement (the "Agreement") in connection with a possible Change in
Control of MasterCraft (which is deemed to include the sale of all or
substantially all of the assets of MasterCraft).
1. Term of Agreement. This Agreement will
commence on the date hereof and will continue in effect
until the earlier of the end of the Term of your Employment
Agreement with MasterCraft or six months after the date of
a Change in Control.
2. Retention Payment. If you are employed by MasterCraft (or
its successor) on the date six months immediately following a Change in Control,
then on such date you will receive a Retention Payment of $250,000. If
MasterCraft (or its successor) terminates your employment without cause prior to
a date which is six months immediately following a Change in Control, then you
will receive the Retention Payment on the date which is six months immediately
following a Change in Control.
3. Severance Payments. In addition to the Retention
Payment, if MasterCraft (or its successor) terminates your employment without
cause prior to or following a
<PAGE>
James Hoag
March 19, 1996
Page 2
change in control, you will continue to receive the benefits to which you are
entitled under your employment contract. As you know, under your contract you
will be entitled to receive your base salary and benefits for a period of up to
12 months after any termination without cause.
4. Other Considerations. The Retention Payment will not
constitute salary or compensation for the purpose of any employee benefit plan
maintained by the Company (or its successor). Nothing in this Agreement shall
affect your rights under your employment agreement with MasterCraft nor any
right of MasterCraft or the Company (or their successors), to discharge you at
any time for any reason whatsoever, with or without cause.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
MERIDIAN SPORTS INCORPORATED
MASTERCRAFT BOAT COMPANY
By: /s/ George Napier
----------------------------
George Napier
Accepted and agreed this
day of March 20, 1996.
/s/ James Hoag
- - ----------------------------
James Hoag
MERIDIAN SPORTS INCORPORATED
George Napier
President
Chief Executive Officer
January 18, 1996
Mr. Barry T. Tait
54 The Kingsway
Toronto, Ontario M8X 2T2
Dear Barry,
I am delighted you have agreed to join O'Brien International and look forward to
seeing you there soon.
This confirms the terms of our offer:
Title: President
Salary: $160,000 per annum. You will be eligible for review within
12 months, and annually thereafter.
Bonus: Your annual bonus will be 60% of your year-end salary, for on
target EBIT performance as determined in the annual plan. This
can vary from zero to 120%, based on performance vs. Plan. The
targets associated with this range for 1996 will be set by
January 31, 1996, and must be approved by the board of
directors.
You will be eligible to participate in the bonus program
beginning the 1996 Fiscal Year which started on January 1,
1996.
Long Term Compensation:
You will be part of the senior management group at Meridian
eligible for Meridian stock options.
The terms of this important program will be provided
separately and, again, you will be eligible to participate in
the program after 12 months of employment.
Location: The company's headquarters in Redmond, Washington.
Benefits: You will be covered by the company's health, medical, life
insurance and pension program. You will also be eligible to
participate in the company's 401K plan, subject to any legal
limitations due to your status as a non-resident employee.
<PAGE>
January 18, 1996
Page 2
You will be paid a monthly car allowance of $525.
You will be eligible for three weeks vacation per year.
The company's normal travel policy is to fly economy, but you
can fly business on all overseas trips, and we will pay for
upgrade coupons in the U.S. We will also pay for one airline
club.
You will be reimbursed for a comprehensive medical exam
annually - which we encourage.
Immigration: We will pay for all legal costs up to $5,000 to secure working
papers for your employment in the U.S.
Severance: Due to the possibility of a sale of O'Brien, you will be
eligible to receive 6 months salary and benefits, mitigated by
any income you earn during the 6 month period, if the company
is sold within calendar year 1996 and, within 6 months of
acquisition by the new owner, you are terminated without good
cause. This six months mitigated severance clause will also
apply if you are terminated for any reason (other than good
cause) from January 1, 1997, for the duration of your
employment with O'Brien International.
Sale Provision: In addition to your severance provision, and if
O'Brien is sold within calendar year 1996, you will also be
entitled to receive $100,000 six months after the closing date
of the sale: if you are an employee in good standing of
O'Brien at that date or; if you are terminated without good
cause by the new owner after they take control of the business
but before the six month period elapses.
Relocation: Initially we will pay for packing and moving of personal
effects from Toronto to the Seattle area, 30 days temporary
living expenses, all legal costs related to the rental or
purchase of a new house and a $12,000 allowance for
incidentals. In the event of a sale of the business within
calendar year 1996 and if you are subsequently dismissed, as
described above, we will pay for relocation expenses back to
Toronto, to include packing and moving of personal and
household effects, and legal costs and agent's commission
relative to the sale of your home in the Seattle area.
This offer is contingent on (a) your successfully passing a medical exam which
we can help coordinate, and (b) our being able to secure working papers for you
to work legally in the U.S. Assuming both of these events take place, your start
date will coincide with the date you secure your work papers.
*******************************************************************
I am convinced that your experience, determination and skills will make O'Brien
a profitable winner, and I am personally looking forward to the opportunity of
working with you again.
Please confirm your acceptance, by signing and returning two copies of this
offer to me.
Thanks, and best regards,
/s/ George Napier
George Napier
President & Chief Executive Officer
Meridian Sports Incorporated
Agreed: /s/ Barry T. Tait
--------------------------------------------
Date: 19/1/96
----------------------------------------------
MERIDIAN SPORTS INCORPORATED
George Napier
President
Chief Executive Officer
January 29, 1996
Barry Tait
O'Brien International
14615 N.E. 91st Street
Redmond, Washington 98073
Dear Barry:
Meridian Sports Incorporated (the "Company") considers it
essential to the best interests of the Company, its stockholders and O'Brien
International ("O'Brien") to foster the continuous employment of key management
personnel. In this connection, the Company has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of certain employees of the Company, including yourself, to their
assigned duties without distraction in the face of potentially disrupting
circumstances arising from the possibility of a change in control of O'Brien
("Change in Control").
In order to induce you to remain in the employ of O'Brien,
O'Brien agrees that you shall receive certain benefits set forth in this letter
agreement (the "Agreement") in connection with a possible Change in Control of
O'Brien (which is deemed to include the sale of all or substantially all of the
assets of O'Brien).
1. Term of Agreement. This Agreement will commence on the date
hereof and will continue in effect until December 31, 1996 or, if a Change in
Control occurs prior to December 31, 1996, six months after the date of a Change
in Control.
2. Retention Payment. If you are employed by O'Brien (or its
successor) on the date six months immediately following a Change in Control,
then on such date you will receive a Retention Payment of $100,000. If O'Brien
(or its successor) terminates your employment without cause prior to a date
which is six months immediately following a Change in Control, then you will
receive the Retention Payment on the date which is six months immediately
following a Change in Control.
3. Other Considerations. The Retention Payment
will not constitute salary or compensation for the purpose
of any employee benefit plan maintained by the Company (or
<PAGE>
Barry Tait
January 29, 1996
Page 2
its successor). Nothing in this Agreement shall affect your rights as an
employee of O'Brien nor any right of O'Brien or the Company (or their
successors), to discharge you at any time for any reason whatsoever, with or
without cause.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
MERIDIAN SPORTS INCORPORATED
O'BRIEN INTERNATIONAL
By: /s/ George Napier
----------------------------
George Napier
Accepted and agreed this 31st
day of Januray 1996.
/s/ Barry Tait
- - -----------------------------
Barry Tait
MERIDIAN SPORTS INCORPORATED
George Napier
President
Chief Executive Officer
January 12, 1996
Russell P. Kelley
214 Hunter Circle
Longview, Texas 75601
Dear Rusty:
Meridian Sports Incorporated (the "Company") considers it
essential to the best interests of the Company, its stockholders and Skeeter
Products, Inc. ("Skeeter") to foster the continuous employment of key management
personnel. In this connection, the Company has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of certain employees of the Company, including yourself, to their
assigned duties without distraction in the face of potentially disrupting
circumstances arising from the possibility of a change in control of Skeeter
("Change in Control").
In order to induce you to remain in the employ of Skeeter, the
Company agrees that you shall receive certain benefits set forth in this letter
agreement (the "Agreement") in connection with a possible Change in Control of
Skeeter (which is deemed to include the sale of all or substantially all of the
assets of Skeeter).
1. Term of Agreement. This Agreement will
commence on the date hereof and will continue in effect
until the later of June 30, 1996 or six months after the
date of a Change in Control.
2. Retention Payment. If you are employed by Skeeter (or its
successor) on the date six months immediately following a Change in Control,
then on such date you will receive a Retention Payment of $100,000. If the
Company (or its successor) terminates your employment without cause prior to a
date which is six months immediately following a Change in Control, then you
will receive the Retention Payment on the date which is six months immediately
following a Change in Control.
3. Severance Payments. In addition to the Retention
Payment, if the Company (or its successor) terminates your employment without
cause prior to or following a change in control, you will continue to receive
the benefits to which you are entitled under your employment con-
<PAGE>
Russell P. Kelley
January 12, 1996
Page 2
tract. As you know, under your contract you will be entitled to receive your
base salary and benefits for a period of 12 months after any termination without
cause.
4. Other Considerations. The Retention Payment will not
constitute salary or compensation for the purpose of any employee benefit plan
maintained by the Company (or its successor). Nothing in this Agreement shall
affect your rights under your employment agreement with Skeeter nor any right of
the Company (or its successor), to discharge you at any time for any reason
whatsoever, with or without cause.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
MERIDIAN SPORTS INCORPORATED
By: /s/ George Napier
-------------------------
George Napier
President
Accepted and agreed this
day of January , 1996.
- - -----------------------------
Russell P. Kelley
MERIDIAN SPORTS INCORPORATED
George Napier
President
Chief Executive Officer
January 18, 1996
Douglas Fonte
1211 Commodore Drive
New Smyrna Beach, Florida 32168
Dear Doug:
Meridian Sports Incorporated (the "Company") considers it
essential to the best interests of the Company, its stockholders and Boston
Whaler, Inc. ("Boston Whaler") to foster the continuous employment of key
management personnel. In this connection, the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of certain employees of the Company, including
yourself, to their assigned duties without distraction in the face of
potentially disrupting circumstances arising from the possibility of a change in
control of Boston Whaler ("Change in Control").
In order to induce you to remain in the employ of Boston
Whaler, Boston Whaler agrees that you shall receive certain benefits set forth
in this letter agreement (the "Agreement") in connection with a possible Change
in Control of Boston Whaler (which is deemed to include the sale of all or
substantially all of the assets of Boston Whaler).
1. Term of Agreement. This Agreement will
commence on the date hereof and will continue in effect
until the later of June 30, 1996 or six months after the
date of a Change in Control.
2. Retention Payment. If you are employed by Boston Whaler (or
its successor) on the date six months immediately following a Change in Control,
then on such date you will receive a Retention Payment of $120,000. If Boston
Whaler (or its successor) terminates your employment without cause prior to a
date which is six months immediately following a Change in Control, then you
will receive the Retention Payment on the date which is six months immediately
following a Change in Control.
3. Severance Payments. In addition to the Retention
Payment, if Boston Whaler (or its successor) terminates your employment without
cause prior to or fol-
<PAGE>
Douglas Fonte
January 18, 1996
Page 2
lowing a change in control, you will continue to receive the benefits to which
you are entitled under your employment contract. As you know, under your
contract you will be entitled to receive your base salary and benefits for a
period of up to 12 months after any termination without cause.
4. Other Considerations. The Retention Payment will not
constitute salary or compensation for the purpose of any employee benefit plan
maintained by the Company (or its successor). Nothing in this Agreement shall
affect your rights under your employment agreement with Boston Whaler nor any
right of Boston Whaler or the Company (or their successors), to discharge you at
any time for any reason whatsoever, with or without cause.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
MERIDIAN SPORTS INCORPORATED
BOSTON WHALER, INC.
By: /s/ George Napier
-------------------------
George Napier
Accepted and agreed this
day of January , 1996.
- - -------------------------
Douglas Fonte
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Meridian Sports Incorporated Consolidated Balance Sheet and Statement of
Operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000926474
<NAME> Meridian Sports Incorporated
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<PERIOD-START> JAN-01-1996
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,285
<SECURITIES> 0
<RECEIVABLES> 20,656
<ALLOWANCES> 0
<INVENTORY> 22,252
<CURRENT-ASSETS> 49,995
<PP&E> 39,687
<DEPRECIATION> (12,906)
<TOTAL-ASSETS> 80,953
<CURRENT-LIABILITIES> 60,548
<BONDS> 0
0
0
<COMMON> 80
<OTHER-SE> 14,389
<TOTAL-LIABILITY-AND-EQUITY> 80,953
<SALES> 33,631
<TOTAL-REVENUES> 33,631
<CGS> 28,824
<TOTAL-COSTS> 28,824
<OTHER-EXPENSES> 10,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 781
<INCOME-PRETAX> 5,901
<INCOME-TAX> 4,867
<INCOME-CONTINUING> 1,034
<DISCONTINUED> 0
<EXTRAORDINARY> 713
<CHANGES> 0
<NET-INCOME> 321
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
