-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UpkxpnnsOBijB0wUNe35yqxr5H2dmC4FEYR0ML8AKPWTs7NJeVvllDRsornfOSok kCU0zNv4dOFq/AFvKIKNYQ== 0000075149-96-000006.txt : 19960517 0000075149-96-000006.hdr.sgml : 19960517 ACCESSION NUMBER: 0000075149-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OUTBOARD MARINE CORP CENTRAL INDEX KEY: 0000075149 STANDARD INDUSTRIAL CLASSIFICATION: ENGINES & TURBINES [3510] IRS NUMBER: 361589715 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02883 FILM NUMBER: 96566738 BUSINESS ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 BUSINESS PHONE: 7086896200 MAIL ADDRESS: STREET 1: 100 SEA HORSE DRIVE CITY: WAUKEGAN STATE: IL ZIP: 60085 EX-27 1 EXHIBIT 27 (FDS) FILED WITH FORM 10-Q
5 1,000 3-MOS SEP-30-1996 MAR-31-1996 35,100 0 180,900 12,800 217,600 470,400 567,200 343,400 877,300 230,700 177,500 3,000 0 0 238,500 877,300 285,500 285,500 224,200 224,200 54,300 0 4,100 2,900 1,800 1,100 0 0 0 1,100 .05 .05
10-Q 2 EDGAR OMC 10-Q FILING 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) (X) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1996. or ( ) Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-2883 OUTBOARD MARINE CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-1589715 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 100 Sea Horse Drive Waukegan, Illinois 60085 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 847-689-6200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- Number of shares of Common Stock of $0.15 par value outstanding at April 30, 1996 were 20,146,077 shares (not including 129,716 treasury shares). Exhibit Index Page 14. -1- 2 OUTBOARD MARINE CORPORATION FORM 10-Q PART I, ITEM 1 FINANCIAL INFORMATION FINANCIAL STATEMENTS March 31, 1996 Financial statements required by this form: Page ---- Statements of Consolidated Earnings 3 Condensed Statements of Consolidated Financial Position 4 Statements of Consolidated Cash Flows 6 Notes to Consolidated Financial Statements 7 -2- 3 OUTBOARD MARINE CORPORATION Statements of Consolidated Earnings (Unaudited)
Three Months Ended Six Months Ended Mar. 31 Mar. 31 (In millions except amounts per share) 1996 1995 1996 1995 - -------------------------------------- ---- ---- ---- ---- Net Sales $ 285.5 $ 318.8 $ 517.6 $ 561.4 Cost of Goods Sold 224.2 233.0 416.9 424.4 --------------------- --------------------- Gross Earnings 61.3 85.8 100.7 137.0 Selling, General & Administrative Expenses 54.5 60.9 100.2 111.0 --------------------- --------------------- Earnings from Operations 6.8 24.9 .5 26.0 Non-Operating Expense (Income) Interest 4.1 5.4 9.5 10.4 Other, Net (.2) (.8) (.5) (2.4) --------------------- --------------------- 3.9 4.6 9.0 8.0 --------------------- --------------------- Earnings (Loss) Before Provision for Income Taxes 2.9 20.3 (8.5) 18.0 Provision for Income Taxes 1.8 2.3 2.8 3.1 --------------------- --------------------- Net Earnings (Loss) $ 1.1 $ 18.0 $ (11.3) $ 14.9 ===================== ===================== Net Earnings (Loss) Per Share of Common Stock Primary $ .05 $ .90 $ (.56) $ .74 ===================== ===================== Fully Diluted $ .05 $ .81 $ (.56) $ .71 ===================== ===================== Dividends Paid Per Share $ .10 $ .10 $ .20 $ .20 ===================== ===================== Average Shares of Common Stock and Common Stock Equivalents Outstanding 20.2 20.1 20.1 20.1
The accompanying notes are an integral part of these statements. -3- 4 OUTBOARD MARINE CORPORATION Condensed Statements of Consolidated Financial Position
(Unaudited) ------------------- Mar. 31 Mar. 31 Sept. 30 Sept. 30 (In Millions) 1996 1995 1995* 1994* - ------------- ---- ---- ---- ---- Assets - ------ Current Assets Cash & Cash Equivalents $ 35.1 $ 37.1 $ 58.3 $ 80.3 Receivables 168.1 211.0 200.9 150.5 Inventories Finished Products 92.1 90.5 69.9 58.7 Raw Material, Work In Process & Service Parts 125.5 143.9 124.2 105.0 --------------------- -------------------- Total Inventories 217.6 234.4 194.1 163.7 Other Current Assets 49.6 37.2 48.9 35.3 --------------------- --------------------- Total Current Assets 470.4 519.7 502.2 429.8 Product Tooling, Net 53.0 52.4 52.0 48.3 Intangibles 39.4 31.5 40.6 32.1 Other Assets 90.7 95.4 87.9 89.8 Plant & Equipment 567.2 548.0 558.9 535.6 Accumulated Depreciation (343.4) (326.5) (334.6) (318.5) --------------------- --------------------- Plant & Equipment, Net 223.8 221.5 224.3 217.1 --------------------- --------------------- Total Assets $ 877.3 $ 920.5 $ 907.0 $ 817.1 ===================== ===================== -4- 5 Liabilities and Shareholders' Investment - ---------------------------------------- Current Liabilities Notes Payable $ - $ 90.0 $ - $ - Accounts Payable 86.7 101.7 99.6 102.9 Accrued and Other 144.0 132.3 149.2 130.7 --------------------- --------------------- Total Current Liabilities 230.7 324.0 248.8 233.6 Long-Term Debt 177.5 177.3 177.4 178.2 Postretirement Benefits Other Than Pensions 101.0 100.8 102.6 102.3 Other Non-Current Liabilities 126.6 96.1 122.4 94.0 Shareholders' Investment Common Stock & Capital Surplus 113.8 110.9 111.6 109.3 Retained Earnings 134.4 117.2 149.7 106.3 Cumulative Translation Adjustments (6.7) (5.8) (5.5) (6.6) --------------------- --------------------- Total Shareholders' Investment 241.5 222.3 255.8 209.0 --------------------- --------------------- Total Liabilities and Shareholders' Investment $ 877.3 $ 920.5 $ 907.0 $ 817.1 ===================== ===================== Shares of Common Stock Outstanding 20.1 20.0 20.0 20.0
The accompanying notes are an integral part of these statements. * Condensed from audited financial statements. -5- 6 OUTBOARD MARINE CORPORATION Statements of Consolidated Cash Flows (Unaudited)
Six Months Ended March 31 (In millions) 1996 1995 - ------------- ---- ---- Cash Cash Flows from Operating Activities Net earnings (loss) $ (11.3) $ 14.9 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 25.4 21.8 Changes in current accounts excluding the effects of noncash transactions: Decrease (Increase) in receivables 32.1 (58.0) (Increase) in inventories (23.5) (68.8) (Increase) in other current assets (.9) (1.4) (Decrease) in accounts payable and accrued liabilities (17.7) (1.6) Other, net 2.5 (3.0) ------------------- Net cash provided by (used for) operating activities 6.6 (96.1) Cash Flows from Investing Activities Expenditures for plant and equipment, and tooling (28.2) (31.9) Other, net .4 (1.5) ------------------- Net cash used for investing activities (27.8) (33.4) Cash Flows from Financing Activities Net increase in short-term debt - 90.0 Cash dividends paid (4.0) (4.0) Other, net 2.2 .7 ------------------- Net cash provided by (used for) financing activities (1.8) 86.7 Exchange Rate Effect on Cash (.2) (.4) ------------------- Net Decrease in Cash and Cash Equivalents (23.2) (43.2) Cash and Cash Equivalents at Beginning of Period 58.3 80.3 ------------------- Cash and Cash Equivalents at End of Period $ 35.1 $ 37.1 =================== Supplemental Cash Flow Disclosures Interest paid $ 8.4 $ 3.6 Income taxes paid 7.0 1.4
The accompanying notes are an integral part of these statements. -6- 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION - ------------------------- The accompanying unaudited consolidated condensed financial statements present information in accordance with generally accepted accounting principles for interim financial information and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information or footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the information furnished reflects all adjustments necessary for a fair statement of the results of the interim periods and all such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the company's Annual Report on Form 10-K for the year ended September 30, 1995. The 1996 interim results are not necessarily indicative of the results which may be expected for the remainder of the year. 2. SHORT-TERM BORROWINGS AND ACCOUNTS RECEIVABLE - ------------------------------------------------- The company's Second Amended and Restated Revolving Credit Agreement, dated as of March 29, 1996, provides for loans of up to $200 million and terminates December 31, 1998. Also in December 1995, the company entered into receivables sales agreements amended as of March 31, 1996 and expiring December 20, 1996 whereby the company agreed to sell an ownership interest in a designated pool of domestic trade accounts receivable ("Receivables"). In order to maintain the balance in the designated pool of Receivables sold, the company is obligated to sell undivided percentage interests in new Receivables as existing Receivables are collected. The company retains a residual interest in the Receivables sold, thus receivables in the accompanying Condensed Statement of Consolidated Financial Position at March 31, 1996 are only reduced by the net outstanding proceeds from the sales. At March 31, 1996, the company had net outstanding proceeds of $51 million and may receive up to $4 million of additional proceeds on a revolving basis. The company has retained substantially the same credit risk as if the Receivables had not been sold. The costs associated with the receivables sales agreements are included in non-operating expense - other, net in the Statement of Consolidated Earnings for the three and six months ended March 31, 1996. Under both the revolving credit agreement and the receivable sales agreements, as amended, the company is required to meet certain financial covenants throughout the year. At March 31, 1996, the company is in compliance with these financial covenants. 3. CONTINGENT LIABILITIES - -------------------------- As a normal business practice, the company has made arrangements with financial institutions by which qualified retail dealers may obtain inventory financing. Under these arrangements, the company will repurchase its products in the event of repossession upon a retail dealer's default. These arrangements contain provisions which limit the company's repurchase obligation to $30 million per model year for a period not to exceed 30 months from the date of invoice. The company resells any repurchased products. Losses incurred under this program have not been material. The company accrues for losses which are anticipated in connection with expected repurchases. -7- 8 The company is engaged in a substantial number of legal proceedings arising in the ordinary course of business. While the result of these proceedings, as well as those discussed below, cannot be predicted with any certainty, based upon the information presently available, management is of the opinion that the final outcome of all such proceedings should not have a material effect upon the company's Consolidated Financial Position or the Consolidated Earnings of the company. Under the requirements of Superfund and certain other laws, the company is potentially liable for the cost of clean-up at various contaminated sites identified by the United States Environmental Protection Agency and other agencies. The company has been notified that it is named a potentially responsible party ("PRP") at various sites for study and clean-up costs which the company does not believe to be material. In some cases there are several named PRPs and in others there are hundreds. The company generally participates in the investigation or clean-up of these sites through cost sharing agreements with terms which vary from site to site. Costs are typically allocated based upon the volume and nature of the materials sent to the site. However, under Superfund, and certain other laws, as a PRP the company can be held jointly and severally liable for all environmental costs associated with a site. The company has experience in the remediation of contaminated sites. Once the company becomes aware of its potential liability at a particular site, it uses this experience to determine if it is probable that a liability has been incurred and whether or not the amount of the loss can be reasonably estimated. Once the company has sufficient information necessary to support a reasonable estimate or range of loss for a particular site, an amount is added to the company's aggregate environmental contingent liability accrual. The amount added to the accrual for the particular site is determined by analyzing the site as a whole and reviewing the probable outcome for the remediation of the site. This is not necessarily the minimum or maximum liability at the site but, based upon the company's experience, most accurately reflects the company's liability based on the information currently available. The company takes into account the number of other participants involved in the site, their experience in the remediation of sites, and the company's knowledge of their ability to pay. As a general rule, the company accrues remediation costs for continuing operations on an undiscounted basis and does not accrue for normal operating and maintenance costs for site monitoring and compliance requirements. However, the company does accrue for environmental close-down costs associated with discontinued operations or facilities, including the environmental costs of operation and maintenance until disposition. At March 31, 1996, the company has accrued approximately $11 million for costs related to remediation at contaminated sites including continuing and closed-down operations. The possible recovery of insurance proceeds has not been considered in estimating contingent environmental liabilities. Each site, whether or not remediation studies have commenced, is reviewed on a quarterly basis and the aggregate environmental contingent liability accrual is adjusted accordingly. Because the sites are reviewed and the accrual adjusted quarterly, the company is confident the accrual accurately reflects the company's liability based upon the information available at the time. 4. STOCKHOLDER RIGHTS PLAN - --------------------------- On April 24, 1996, the company adopted a stockholder rights plan to replace -8- 9 the one which will expire on June 23, 1996. The rights associated with the new plan will expire on June 23, 2006. All shareholders of record today continue to have one right per share of the company's common stock held. The new plan, like the existing plan, is intended to promote continuity and stability, deter coercive or partial offers which will not provide fair value to all shareholders and enhance the board of director's ability to represent all shareholders and thereby maximize shareholder value. Each right will entitle its holder to buy 1/1,000 of a newly-issued share of the company's preferred stock at an exercise price of $115. The rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the company's common stock, commences a tender or exchange offer that would, if successful, result in such person or group owning beneficially 15% or more of the company's common stock, or the board of directors determines that any person owning beneficially 10% or more of the company's common-stock is an adverse person. If a 15%-or-more shareholder or adverse person (an "Acquiring Person") engages in certain transactions in which the company survives, each right not owned by the Acquiring Person or related parties will entitle its holder to purchase, at the right's then current exercise price, shares of the company's common stock having a value of twice the right's then current exercise price. In addition, if after any person has become an Acquiring Person, the company is involved in certain transactions with another person, after which the company ceases to exist, each right will entitle its holder to purchase, at the right's then current exercise price, shares of common stock of such other person having a value of twice the right's then current exercise price. The company will generally be entitled to redeem the rights at $.01 per right at any time until 10 days (subject to extension) following a public announcement that a 15% position has been acquired or that an adverse person has acquired 10%. Under the new stockholder rights plan, there have been reserved for issuance 90,000 shares of the company's preferred stock. -9- 10 OUTBOARD MARINE CORPORATION FORM 10-Q PART I, ITEM 2 FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 1996 RESULTS OF OPERATIONS - --------------------- The second quarter of fiscal 1996 was one in which the company's performance fell below expectations. The company achieved net earnings of $1.1 million, or five cents per share (primary and fully diluted), on sales of $285.5 million for the quarter, compared with net earnings of $18 million, or 90 cents per share (81 cents, fully diluted), on sales of $318.8 million for last year's second quarter. U.S. sales declined 14.4 percent, while sales outside the U.S. increased 1.3 percent. U.S. sales declined in the second quarter because of a drop in market demand for marine products, exacerbated by higher dealer field inventories of outboards. Additionally, the year-to-year sales comparison was made more difficult by the fact that last year's second quarter benefitted from as much as $15 million in sales from engine backorders carried into the period. Sales in all of the company's U.S. product lines were down, with the exception of the Recreational Boat Group, which achieved a small sales gain. This reduced sales performance was similar to the overall U.S. marine industry's performance in the quarter. Unusually cold weather early this spring may have negatively impacted industry sales. Some short-term softness in employment and consumer confidence in the quarter also may have played a role. Second quarter earnings this year were depressed by lower sales and also by lower manufacturing efficiencies which resulted from reduced production schedules in engine plants. The company reduced manufacturing schedules because of reduced market demand and a commitment to better manage factory inventories. By comparison, last year's second quarter benefitted from higher manufacturing efficiencies due to increased production levels which resulted from the engine order backlog carried into the quarter. The lower manufacturing efficiencies in this year's second quarter accounted for the reduction in our gross margin to 21.5 percent from 26.9 percent in the second quarter last year. Although the company reduced operating expense by 10.5 percent, or $6.4 million, in the past quarter, operating earnings still declined to $6.8 million from $24.9 million, and pre-tax earnings fell to $2.9 million from $20.3 million in the second quarter of 1995. For the first six months of fiscal 1996, the company incurred a net loss of $11.3 million, or 56 cents per share (primary and fully-diluted), on sales of $517.6 million compared with net earnings of $14.9 million, or 74 cents per share (71 cents, fully diluted), on sales of $561.4 million for the first half of 1995. The company also limited production in the first quarter to control factory inventories. That further contributed to the reduction in gross margin to 19.5 percent in the first half of 1996, down from 24.4 percent in the first half of last year. Operating expense was reduced by almost 11 percent in the first half, as well; however, operating earnings fell to $.5 million from $26 million in the first half of 1995. On a pre-tax basis, -10- 11 the company incurred a loss of $8.5 million for this year's first half compared with pre-tax earnings of $18 million for the first half last year. The provision for income taxes for the three and six months ended March 31, 1996 and 1995, resulted from expected taxes payable relating to certain international subsidiaries. It is not appropriate to compare the results of operations for the current quarter with those of the preceding quarter because of the seasonal nature of the company's business. FINANCIAL CONDITION - ------------------- Due to the seasonal nature of the company's business, it is more appropriate to compare the March 31, 1996 Condensed Statement of Financial Position with March 31, 1995. The company's ratio of current assets to current liabilities was 2.0 at March 31, 1996 compared to 1.6 at March 31, 1995. Current assets of $470.4 million at March 31, 1996 decreased $49.3 million as compared to current assets of $519.7 million at March 31, 1995. Receivables were $42.9 million lower at March 31, 1996 after deducting $51.0 million sold in the current fiscal year through a receivables sales agreement (see Note 2 of Notes to Consolidated Financial Statements). Without this receivables sale, receivables would have been $8.1 million higher due primarily to extended credit terms offered as part of specific marketing programs. Inventories decreased $16.8 million to $217.6 million at March 31, 1996 as compared to $234.4 million at March 31, 1995 due primarily to reduced production in engine plants to bring inventories more in line with sales. Other current assets increased $12.4 million due primarily to deferred income tax benefits. Other assets decreased $4.7 million due primarily to redemption of the company's investment in I.J. Holdings, Inc. offset by increases in deferred income tax benefits and increased pension assets. Current liabilities decreased by $93.3 million to $230.7 million as of March 31, 1996 compared to $324.0 million at March 31, 1995. Notes payable decreased $90.0 million at March 31, 1996. The $15.0 million decrease in accounts payable resulted primarily from decreased manufacturing activity. Accrued liabilities increased $11.7 million due primarily to increased participation levels in dealer programs and increased warranty accruals partially offset by lower restructuring accrual balances. Other non-current liabilities increased $30.5 million due primarily to an increase in tax liabilities. The company's total debt to total capitalization at March 31, 1996 was 42 percent compared to 56 percent at March 31, 1995. Based on the company's performance since the 1993 restructuring, improved operating results, an improved balance sheet, a $200 million revolving credit agreement and other available sources of capital, the company believes it has available sufficient internal and external financial resources to invest in low emission engines and to continue making long term investments for future growth through the next few years. TRENDS AND FORWARD-LOOKING DATA - ------------------------------- The company's current level of performance is not acceptable, and it is taking action to improve that performance. Immediate cost-cutting measures have been implemented to improve earnings for the balance of fiscal 1996. Additionally, the company is taking steps to improve earnings and returns -11- 12 in future years. Last fall the company combined its U.S. Marine Power Products Group and its former International Group and began a study of how to achieve efficiencies and improve service to its customers through a strategic consolidation of the two units. That work is nearly complete, and the company is beginning to implement its plans. The first step is the re-engineering of the U.S. and Canadian sales and marketing operations into one streamlined, North American unit. The company will gain the benefits of superior coordination and consistent brand positioning by unifying its marketing efforts for both countries. It will also gain efficiencies by consolidating back-room operations: functions such as warehousing, order processing and warranty administration. This North American and European re-engineering effort should result in costs of $8 million to $12 million and annualized savings, beginning in fiscal 1997, of a like amount. The company is studying similar initiatives in its markets around the globe. The company also has begun a study of its boat operations to determine whether it can increase efficiencies by consolidating its boat groups in order to streamline both manufacturing and support functions. The plan which grows out of that effort will be implemented in fiscal 1997. Additionally, the company is conducting a study of its corporate staff organization to determine the most effective structure for the staff group and to reduce its corporate overhead cost. And, it is evaluating critical issues in the areas of sales, manufacturing and information systems with the aim of improving sales margins, reducing product costs and increasing competitiveness. The company intends to establish its base operational costs at levels which will support the achievement of consistently higher returns on the assets invested in the business. In addition to those activities which are focused on consolidation and cost cutting, the company is also introducing new products. In the third quarter, it will begin to ship the first models of a new generation of outboards -- the FICHT Fuel Injection engines. The first model it will introduce will be a 150-horsepower engine designed primarily for the high-volume bass boat market. These engines incorporate a revolutionary computerized fuel injection technology which will be unique to its outboards. Supported by high quality manufacturing and effective marketing, the company believes FICHT Fuel Injection can establish important product differentiation for its engines and boat packages. The company is also making progress on its visioning effort, which it will be reviewing with its employees and fine-tuning in the third quarter. This effort is helping the company clarify its direction and its areas of opportunity. Some of the information contained herein may be forward looking in nature. You are encouraged to review the risk factors associated therewith contained in Exhibit 99 to this 10-Q. -12- 13 OUTBOARD MARINE CORPORATION FORM 10-Q PART II - OTHER INFORMATION Item 5. Other information. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the company is hereby filing, as Exhibit 99, cautionary statements identifying important factors which could cause the company's actual results to differ materially from those projected in forward looking statements. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits reference is made to the Exhibit Index on Page 14. (b) Reports on Form 8-K. The Registrant did not file any reports on Form 8-K for the fiscal quarter ended March 31, 1996. S I G N A T U R E Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OUTBOARD MARINE CORPORATION Signature Title Date _________________________ ___________________________ ________________ By: /s/: JAMES R. MAURICE Vice President & Controller May 15, 1996 _________________________ ___________________________ ________________ James R. Maurice -13- 14 OUTBOARD MARINE CORPORATION EXHIBIT INDEX Exhibit 3: Articles of Incorporation and By-Laws: (A) With respect to the Registrant's Certificate of Incorporation, reference is made to Exhibit 4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1984; to Exhibit 4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1987 and to Exhibit 4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1988, all of which are incorporated herein by reference. (B) With respect to the Registrant's By-Laws as amended September 20, 1995, reference is made to Exhibit 3(B) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, which is incorporated herein by reference. Exhibit 4: Instruments defining the rights of security holders including indentures: (A) With respect to the Agreement of Outboard Marine Corporation, reference is made to Exhibit 4(A) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, which is incorporated herein by reference. (B) With respect to rights of Series A Junior Participating Preferred Stock, reference is made to the Registrant's report on Form 8-K filed on October 17, 1990, which is incorporated herein by reference. (C) With respect to rights of holders of the Registrant's 9-1/8% Sinking Fund Debentures due 2017, reference is made to Exhibit 4(A) in the Registrant's Registration Statement Number 33-12759 filed on March 20, 1987, which is incorporated herein by reference. (D) With respect to rights of holders of Registrant's 7% Convertible Subordinated Debentures due 2002, reference is made to Registrant's Registration Statement Number 33-47354 filed on April 28, 1992, which is incorporated herein by reference. (E) With respect to Rights Agreement dated April 24, 1996, to be effective June 23, 1996, a copy is attached hereto as Exhibit 4 (E). Exhibit 10: Material contracts: (A) With respect to the Registrant's 1987 Stock Option and Performance Unit Plan, reference is made to Exhibit 10(D) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1987, which is incorporated herein by reference. (B) With respect to the OMC Executive Bonus Plan, reference is made to Exhibit 10(C) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1990, which is incorporated herein by reference. -14- 15 (C) With respect to the OMC Executive Equity Incentive Plan, reference is made to Exhibit 10(D) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1990, which is incorporated herein by reference. (D) With respect to the OMC 1994 Long-Term Incentive Plan, reference is made to Exhibit C, to Outboard Marine Corporation's Notice of Annual Meeting and Proxy Statement prepared in connection with the January 20, 1994 Annual Meeting of Shareholders, which is incorporated herein by reference. (E) With respect to Severance Agreements for all elected officers of the Registrant (except Mr. Bowman), reference is made to Exhibit 10(E) of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1988, which is incorporated herein by reference. (F) With respect to the Employment Agreement for Mr. Bowman, reference is made to Exhibit 10(F) of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, which is incorporated herein by reference. (G) With respect to the Severance Agreement for Mr. Bowman, reference is made to Exhibit 10(G) of the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, which is incorporated herein by reference. (H) With respect to the Second Amended and Restated Revolving Credit Agreement dated as of March 29, 1996, a copy is attached hereto as Exhibit 10(H). (I) With respect to the Registrant's Receivables Purchase Agreement dated as of December 22, 1995, reference is made to Exhibit 10(I) of the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995, which is incorporated herein by reference. Exhibit 11: Statements regarding computation of per share earnings: A statement regarding the computation of per share earnings is attached hereto as Exhibit 11. Exhibit 19: Report furnished to security holders: A copy of the Registrant's Shareholders Report for the fiscal quarter ended March 31, 1996, is attached hereto as Exhibit 19. Exhibit 27: Financial data schedules: This information is filed only in the electronic filing. Exhibit 99: Additional Exhibits: "Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995. -15- 16 EXHIBIT 4 (E) OUTBOARD MARINE CORPORATION and FIRST CHICAGO TRUST COMPANY OF NEW YORK Rights Agent Rights Agreement Dated as of April 24, 1996 Table of Contents ----------------- Section ------- 1. Certain Definitions. . . . . . . . . . . . . . . 2. Appointment of Rights Agent. . . . . . . . . . . 3. Issue of Rights Certificates . . . . . . . . . . 4. Form of Rights Certificates. . . . . . . . . . . 5. Countersignature and Registration. . . . . . . . 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates . . . . . . . 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. . . . . . . . . . . . . . . . . . 8. Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . 9. Reservation and Availability of Capital Stock . . 10. Preferred Stock Record Date. . . . . . . . . . . 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights . . . . . . . . . . . 12. Certificate of Adjusted Purchase Price or Number of Shares. . . . . . . . . . . . . . . . . . . . 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . 14. Fractional Rights and Fractional Shares. . . . . 15. Rights of Action . . . . . . . . . . . . . . . . 16. Agreement of Rights Holders. . . . . . . . . . . 17. Rights Certificate Holder Not Deemed a Stockholder. . . . . . . . . . . . . . . . . . . -16- 17 18. Concerning the Rights Agent. . . . . . . . . . . 19. Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . 20. Duties of Rights Agent . . . . . . . . . . . . . 21. Change of Rights Agent . . . . . . . . . . . . . 22. Issuance of New Rights Certificates. . . . . . . 23. Redemption and Termination . . . . . . . . . . . 24. Exchange . . . . . . . . . . . . . . . . . . . . 25. Notice of Certain Events . . . . . . . . . . . . 26. Notices. . . . . . . . . . . . . . . . . . . . . 27. Supplements and Amendments . . . . . . . . . . . 28. Successors . . . . . . . . . . . . . . . . . . . 29. Determinations and Actions by the Board of Directors, etc.. . . . . . . . . . . . . . . . . 30. Benefits of This Agreement . . . . . . . . . . . 31. Severability . . . . . . . . . . . . . . . . . . 32. Governing Law. . . . . . . . . . . . . . . . . . 33. Counterparts . . . . . . . . . . . . . . . . . . 34. Descriptive Headings . . . . . . . . . . . . . . Exhibit A -- Certificate of Designation, Preferences and Rights Exhibit B -- Form of Rights Certificate -17- 18 RIGHTS AGREEMENT ---------------- RIGHTS AGREEMENT, dated as of April 24, 1996 (the "Agreement"), between Outboard Marine Corporation, a Delaware corporation (the "Company"), and First Chicago Trust Company of New York, a New York corporation (the "Rights Agent"). W I T N E S S E T H WHEREAS, on April 24, 1996 (the "Rights Dividend Declaration Date"), the Board of Directors of the Company authorized and declared a dividend distribution of one Right for each share of common stock, par value $0.15 per share, of the Company (the "Common Stock") outstanding at the close of business on June 23, 1996 (the "Record Date"), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursu- ant to the provisions of Section 11(p) hereof) for each share of Common Stock of the Company issued between the Record Date (whether originally issued or delivered from the Company's treasury) and the Distribution Date, each Right initially representing the right to purchase one one-thousandth (1/1000th) of a share of Series A Junior Participating Preferred Stock (the "Preferred Stock") of the Company having the rights, powers and preferences set forth in the form of Certificate of Designation, Preferences and Rights attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth (the "Rights"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company, (iv) any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan or (v) any such Person who has reported or is required to report such ownership (but less than 25%) on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such Schedule (other than the disposition of the Common Stock) and, within 10 Business Days of being requested by the Company to advise it regarding the same, certifies to the Company that such Person acquired shares of Common Stock representing in excess of 14.9% of the outstanding Common Stock inadvertently or without knowledge of the terms of the Rights and who, together with all Affiliates and Associates, thereafter does not acquire additional shares of Common Stock while the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding; provided, however, that if the Person requested to so certify fails to do so within 10 Business Days, then such Person shall become an Acquiring Person immediately after such 10 Business Day Period. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" solely as the result of an acquisition of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by a Person to 15% or more of the Common Stock of the Company then outstanding as determined above; provided, however, that if a Person becomes the Beneficial Owner of 15% -18- 19 or more of the Common Stock of the Company then outstanding (as determined above) solely by reason of purchases of Common Stock by the Company and shall, after such purchases by the Company, become the Beneficial Owner of any additional shares of Common Stock by any means whatsoever, then such Person shall be deemed to be an "Acquiring Person." (b) "Adverse Person" shall mean any Person declared to be an Adverse Person by the Board of Directors upon determination that the criteria set forth in Section 11(a)(ii)(B) apply to such Person; provided, however, that the Board of Directors shall not declare any Person who is the Beneficial Owner of 10% or more of the outstanding Common Stock of the Company to be an Adverse Person if such Person has reported or is required to report such ownership on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such Schedule (other than the disposition of the Common Stock) so long as such Person neither reports nor is required to report such ownership other than as described in this paragraph (b). (c) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"). (d) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own," any securities: (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, or (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) -19- 20 arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (c)) or disposing of any voting securities of the Company; provided, however, that nothing in this paragraph (c) shall cause a person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (e) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (f) "Close of business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day. (g) "Common Stock" shall mean the common stock, par value $0.15 per share, of the Company, except that "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person. (h) "Person" shall mean any individual, firm, corporation, partnership or other entity. (i) "Preferred Stock" shall mean shares of Series A Junior Participating Preferred Stock, par value $10.00 per share, of the Company, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of Preferred Stock of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock. (j) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) hereof. (k) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof. (l) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. -20- 21 (m) "Subsidiary" shall mean, with reference to any Person, any corporation of which an amount of voting securities sufficient to elect at least a majority of the directors of such corporation is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such Person. (n) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. Section 3. Issue of Rights Certificates. (a) Until the earliest of (i) the close of business on the tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date), (ii) the close of business on the tenth business day (or such later date as the Board shall determine) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding or (iii) the close of business on the tenth Business Day after the Board of Directors determines, pursuant to the criteria set forth in Section 11(a)(ii)(B) hereof, that a Person is an Adverse Person (the earliest of (i), (ii) and (iii) being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more right certificates, in substantially the form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. (b) With respect to certificates for the Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates for the Common Stock and the registered -21- 22 holders of the Common Stock shall also be the registered holders of the associated Rights. Until the earlier of the Distribution Date or the Expiration Date (as such term is defined in Section 7 hereof), the transfer of any certificates representing shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock. (c) Rights shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date or in certain circumstances provided in Section 22 hereof, after the Distribution Date. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Outboard Marine Corporation (the "Company") and First Chicago Trust Company of New York (the "Rights Agent") dated as of April 24, 1996, as amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or an Adverse Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of one one-thousandths (1/1000ths) of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth (1/1000th) of a share, the "Purchase Price"), but the amount and type of securities purchasable upon the exercise of each -22- 23 Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or Adverse Person or any Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person or Adverse Person becomes such, or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person or Adverse Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person or Adverse Person to holders of equity interests in such Acquiring Person or Adverse Person or to any Person with whom such Acquiring Person or Adverse Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement. Section 5. Countersignature and Registration. (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the -23- 24 number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Certificates (other than Rights Certificates representing Rights that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-thousandths (1/1000ths) of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with -24- 25 respect to the total number of one one-thousandths (1/1000ths) of a share (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the close of business on June 23, 2006 (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof or (iii) the time at which such Rights are exchanged pursuant to Section 24 hereof (the earliest of (i), (ii) and (iii) being herein referred to as the "Expiration Date"). (b) The Purchase Price for each one one-thousandth (1/1000th) of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $115, and shall be subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph (c) below. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-thousandth (1/1000th) of a share of Preferred Stock (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-thousandths (1/1000ths) of a share of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths (1/1000ths) of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, -25- 26 registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or Adverse Person or an Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person or Adverse Person becomes such, or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person or Adverse Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person or Adverse Person to holders of equity interests in such Acquiring Person or Adverse Person or to any Person with whom the Acquiring Person or Adverse Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or Adverse Person or any of their respective Affiliates, Associates or transferees hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. -26- 27 Section 9. Reservation and Availability of Capital Stock. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights. (b) So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, a registration statement under the Securities Act of 1933 (the "Act"), with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law or a registration statement shall not have been declared effective. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-thousandths (1/1000ths) of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable. -27- 28 (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-thousandths (1/1000ths) of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-thousandths (1/1000ths) of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-thousandths (1/1000ths) of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Preferred Stock Record Date. Each person in whose name any certificate for a number of one one-thousandths (1/1000ths) of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be -28- 29 proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he or she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event that: (A) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan), alone or together with its Af- filiates and Associates, shall, at any time after the Rights Dividend Declaration Date, become an Acquiring Person, unless the event causing the Person to become an Acquiring Person is (1) a transaction set forth in Section 13(a) hereof or (2) an acquisition of shares of Common Stock pursuant to a tender offer or an exchange offer for all outstanding shares of Common Stock at a price and on terms determined by at least a majority of the members of the Board of Directors who are not officers of the Company and who are not representatives, nominees, Affiliates or Associates of an Acquiring Person, after receiving advice from one or more investment banking firms, to be (a) at a price which is fair to stockholders (taking into account all factors which such members of the Board deem relevant including, without limitation, prices which could reasonably be achieved if the Company or its assets were sold on an orderly basis designed to realize maximum value) and (b) otherwise in the best interests of the Company and its stockholders (a "Qualifying Offer") or (B) The Board of Directors of the Company shall declare any Person to be an Adverse Person, upon a determination that such Person, alone or together with its Affiliates and Associates, has, at any time after this Agreement has been filed with the Securities and Exchange Commission as an exhibit to a filing under the Exchange Act, become the Beneficial Owner of a number of shares of Common Stock which the Board of Directors of the Company determines to be substantial (which number of shares shall in no event represent less than 10% of the outstanding shares of Common Stock) and a determination by the Board of Directors of the Company, after reasonable inquiry and investigation, including consultation with such persons as such directors shall deem appropriate and consideration of such factors as are permitted by applicable law, that (a) such Beneficial Ownership by such Person is intended to cause the Company to repurchase the shares of Common Stock beneficially owned by such Person or to cause pressure on the Company to take action or enter into a transaction or series of transactions intended to provide such Person with short-term financial gain under circumstances where the Board of Directors determines that the best long-term interests of the Company would not be served by taking such action or entering into such transaction or series of transactions at the time or (b) such Beneficial Ownership is causing or reasonably likely to cause a -29- 30 material adverse impact (including, but not limited to, impairment of relationships with customers or impairment of the Company's ability to maintain its competitive position) on the business or prospects of the Company; then, promptly following the occurrence of any event described in Section 11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-thousandths (1/1000ths) of a share of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths (1/1000ths) of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by 50% of the current market price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the date of such first occurrence (such number of shares, the "Adjustment Shares"). (iii) In the event that the number of shares of Common Stock which are authorized by the Company's Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall (A) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value"), and (B) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock, such as the Preferred Stock, which the Board has deemed to have essentially the same value or economic rights as shares of Common Stock (such shares of preferred stock being referred to as "Common Stock Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. For purposes of the preceding sentence, the term "Spread" shall mean the excess of (i) the Current Value over (ii) the Purchase Price. If the Board determines in good faith that it is likely that sufficient -30- 31 additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is herein called the "Substitution Period"). To the extent that action is to be taken pursuant to the first and/or third sentences of this Section 11(a) (iii), the Company (1) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (2) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such shareholder approval for such authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of the Common Stock on such date. (b) In case the Company shall fix a record date for the issuance of rights (other than the Rights), options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock ("equivalent preferred stock")) or securities convertible into Preferred Stock or equivalent preferred stock at a price per share of Preferred Stock or per share of equivalent preferred stock (or having a conversion price per share, if a security convertible into Preferred Stock or equivalent preferred stock) less than the current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or equivalent preferred stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or equivalent preferred stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date -31- 32 had not been fixed. (c) In case the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock and the denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the Current Market Price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification shall not have occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so -32- 33 quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, Current Market Price per share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (ii) For the purpose of any computation hereunder, the Current Market Price per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the Current Market Price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per share of Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Market Price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current Market Price per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the Current Market Price of a Unit shall be equal to the Current Market Price of one share of Preferred Stock divided by 1,000. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other share or one-millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date. (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on -33- 34 terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths (1/1000ths) of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths (1/1000ths) of a share of Preferred Stock (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one-thousandths (1/1000ths) of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-thousandths (1/1000ths) of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-thousandths (1/1000ths) of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. -34- 35 (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths (1/1000ths) of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandths (1/1000ths) of a share and the number of one one-thousandths (1/1000ths) of a share which were expressed in the initial Rights Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then stated value, if any, of the number of one one-thousandths (1/1000ths) of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one one-thousandths (1/1000ths) of a share of Preferred Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-thousandths (1/1000ths) of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths (1/1000ths) of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the current market price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders. (n) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) -35- 36 prior to, simultaneously with or immediately after such consolidation, merger or sale, the shareholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii combine the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event. (q) The failure of the Board of Directors to declare a Person to be an Adverse Person following such Person becoming the Beneficial Owner of shares of Common Stock representing 10% or more of the outstanding shares of Common Stock shall not imply that such Person is not an Adverse Person or limit the Board of Directors' right at any time in the future to declare such Person to be an Adverse Person. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or -36- 37 merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case (except as may be contemplated by Section 13(d) hereof), proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-thousandths (1/1000ths) of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-thousandths (1/1000ths) of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by (2) 50% of the current market price (determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; -37- 38 provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value. (c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will (i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the re- quirements of the Act) until the Expiration Date; and (ii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). (d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is consummated with a Person or Persons who acquired shares of Common Stock pursuant to a Qualifying Offer (or a wholly owned subsidiary of any such Person or Persons), (ii) the price per share of Common Stock offered in such transaction is not less than the price per share of Common Stock paid to all holders of shares of Common Stock whose shares were purchased pursuant to such tender offer or exchange offer and (iii) the form of consideration being offered to the remaining holders of shares of Common Stock pursuant to such transaction is the same as the form of consideration paid pursuant to such tender offer or exchange offer. Upon consummation of any such transaction contemplated by this Section 13(d), all Rights hereunder shall expire. Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) -38- 39 hereof, or to distribute Rights Certificates which evidence frac- tional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth (1/1000th) of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth (1/1000th) of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth (1/1000th) of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-thousandth (1/1000th) of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one one-thousandth (1/1000th) of a share of Preferred Stock shall be one one-thousandth (1/1000th) of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) share of Common Stock. For purposes of this Section 14(c), the current market value of one share of Common Stock shall be the closing price of one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. (d) The holder of a Right by the acceptance of the Rights expressly waives his or her right to receive any fractional Rights or any -39- 40 fractional shares upon exercise of a Right, except as permitted by this Section 14. Section 15. Rights of Action. All rights of action in respect of this Agreement are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Cer- tificate (or, prior to the Distribution Date, of the Common Stock), may, in his or her own behalf and for his or her own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his or her right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunc- tive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of -40- 41 one one-thousandths (1/1000ths) of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 19. Merger or Consolidation or Change of Name of Rights Agent. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any succes- sor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed -41- 42 and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Cer- tificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person or Adverse Person and the determination of "current market price") be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, the Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11, Section 13 or Section 24 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock will, when so issued, be validly -42- 43 authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the Chief Executive Officer, the President, the Secretary, any Assistant Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct; provided, however, reasonable care was exercised in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment -43- 44 within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of the State of New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of New York), in good standing, which is authorized under such laws to exercise corporate trust powers or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capi- tal and surplus of at least $100,000,000 or (b) an affiliate of such corporation as described in (a). After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent with- out further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. Redemption and Termination. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day following the Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth day following the Record Date), or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a -44- 45 redemption price of $0.01 per Right, as such amount may be appro- priately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The Board of Directors may not redeem any Rights following a determination pursuant to Section 11(a)(ii)(B) that any Person is an Adverse Person. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the "current market price", as defined in Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any other form of con- sideration deemed appropriate by the Board of Directors. (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person or is determined to be an Adverse Person pursuant to Section 11(a)(ii)(B), exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty percent (50%) or more of the Common Stock then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights -45- 46 at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute shares of Preferred Stock (or equivalent preferred stock, as such term is defined in paragraph (b) of Section 11 hereof) for shares of Common Stock exchangeable for Rights, at the initial rate of one one-thousandth (1/1000th) of a share of Preferred Stock (or equivalent preferred stock) for each share of Common Stock, as appropriately adjusted to reflect adjustments in the voting rights of the Preferred Stock pursuant to the terms thereof, so that the fraction of a share of Preferred Stock delivered in lieu of each share of Common Stock shall have the same voting rights as one share of Common Stock. (d) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. (e) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional share of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this subsection (e), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. Notice of Certain Events. (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclas- sification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other -46- 47 Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock whichever shall be the earlier. (b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Outboard Marine Corporation 100 Sea-Horse Drive Waukegan, Illinois 60085 Attention: Corporate Secretary Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: First Chicago Trust Company of New York 525 Washington Boulevard, Suite 4660 Jersey City, New Jersey 07310 Attention: Tenders and Exchanges Administration Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. Prior to the Distribution Date and subject to the penultimate sentence of this Section 27, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any -47- 48 holders of certificates representing shares of Common Stock. From and after the Distribution Date and subject to the penultimate sentence of this Section 27, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse Person); provided this Agreement may not be sup- plemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring Person or Adverse Person and its Affiliates and Associates). Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board to any liability to the holders of the Rights. Section 30. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock). Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other -48- 49 authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth day following the date of such determination by the Board of Directors. Without limiting the foregoing, if any provision requiring a majority of the members of the Board of Directors who are not officers of the Company and who are not representatives, nominees, Affiliates or Associates of an Acquiring Person to act is held by any court of competent jurisdiction or other authority to be invalid, void or unenforceable, such determination shall be made by the Board of Directors of the Company in accordance with applicable law and the Company's Certificate of Incorporation and bylaws. Section 32. Governing Law. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State. Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: OUTBOARD MARINE CORPORATION By HOWARD MALOVANY By HARRY W. BOWMAN --------------- --------------- Name: Howard Malovany Name: Harry W. Bowman Title: Secretary and Title: President and Chief Senior Counsel Executive Officer Attest: FIRST CHICAGO TRUST COMPANY OF NEW YORK By JOANNE GOROSTILA By RALPH P. PERSICO ---------------- ---------------- Name: Joanne Gorostila Name: Ralph P. Persico Title: Title: Customer Service Officer -49- 50 Exhibit A FORM OF CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of OUTBOARD MARINE CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware The undersigned officers of Outboard Marine Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation, as amended, of the said Corporation, the said Board of Directors on April 24, 1996 adopted the following resolution creating a series of 90,000 shares of Preferred Stock designated as Series A Junior Participating Preferred Stock: BE IT FURTHER RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Restated Certificate of Incorporation, as amended, a series of Preferred Stock of the Corporation be and it is hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" and the number of shares constituting such series shall be 90,000. Section 2. Dividends and Distributions. (A) The holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of [March, June, September and December] in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.01 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $0.15 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating -50- 51 Preferred Stock. In the event the Corporation shall at any time after April 24, 1996 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in Paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the -51- 52 denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that such voting right shall not be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him or her at his or her last address as the same appears -52- 53 on the books of the Corporation. Such meeting shall be called for a time not earlier than 10 days and not later than 50 days after such order or request or in default of the calling of such meeting within 50 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no such special meeting shall be called during the period within 50 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this Paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or by-laws irrespective of any increase made pursuant to the provisions of Paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or by-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on -53- 54 any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount equal to 1,000 times the Exercise Price, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) -54- 55 (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. Section 9. Amendment. The Amended and Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. -55- 56 Section 10. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this ____ day of , 1996. OUTBOARD MARINE CORPORATION ___________________________ Name: Title: Attest: ____________________________ Secretary -56- 57 Exhibit B [Form of Rights Certificate] Certificate No. R- ________ Rights NOT EXERCISABLE AFTER JUNE 23, 2006 OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENE- FICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.] Rights Certificate OUTBOARD MARINE CORPORATION This certifies that _____________________________ , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of April 24, 1996 (the "Rights Agreement"), between Outboard Marine Corporation, a Delaware corporation (the "Company"), and [Name and place of Incorporation of Rights Agent] (the "Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M. (New York City time) on June 23, 2006 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth (1/1000th) of a fully paid, non-assessable share of Series A Junior Participating Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of $ per one one-thousandth (1/1000th) of a share (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of , based on the Pre- ferred Stock as constituted at such date. The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock will be issued. Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or Adverse Person or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person or Adverse Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person or Adverse Person, or an Affiliate or Associate of an Acquiring Person or Adverse Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event. -57- 58 As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Preferred Stock or other securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events. This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent. This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-thousandths (1/1000ths) of a share of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.01 per Right at any time prior to the earlier of the close of business on (i) the tenth day following the Stock Acquisition Date (as such time period may be extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date. In addition, the Rights may be exchanged, in whole or in part, for shares of the Common Stock, or shares of preferred stock of the Company having essentially the same value or economic rights as such shares. Immediately upon the action of the Board of Directors of the Company authorizing any such exchange, and without any further action or any notice, the Rights (other than Rights which are not subject to such exchange) will terminate and the Rights will only enable holders to receive the shares issuable upon such ex- change. No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-thousandth (1/1000th) of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or, to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right -58- 59 or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ----------- ---, ----- ATTEST: OUTBOARD MARINE CORPORATION _____________________ By ________________________ Secretary Title: Countersigned: FIRST CHICAGO TRUST COMPANY OF NEW YORK By______________________ Authorized Signature -59- 60 [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT ------------------ (To be executed by the registered holder if such holder desires to transfer the Rights Certificate.) FOR VALUE RECEIVED ______________________________________ hereby sells, assigns and transfer unto ____________________________________________ ______________________________________________________________________ (Please print name and address of transferee) this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _________________ Attorney, to transfer the within Rights Certificate on the books of the within named Company, with full power of substitution. Dated:_______________ , ______ ___________________________ Signature Signature Guaranteed: Certificate ----------- The undersigned hereby certifies by checking the appropriate boxes that: (1) this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or Adverse Person or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as such terms are defined pursuant to the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse Person. Dated:_______________ , ______ ______________________ Signature Signature Guaranteed: NOTICE The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. -60- 61 FORM OF ELECTION TO PURCHASE ---------------------------- (To be executed if holder desires to exercise Rights represented by the Rights Certificate.) To: OUTBOARD MARINE CORPORATION The undersigned hereby irrevocably elects to exercise __________ Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to: Please insert social security or other identifying number ______________________________________________________________________ (Please print name and address) ______________________________________________________________________ If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number ______________________________________________________________________ (Please print name and address) ______________________________________________________________________ Dated:_______________ , ______ ______________________ Signature Signature Guaranteed: Certificate ----------- The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or Adverse Person or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as such terms are defined pursuant to the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse Person. Dated:_______________ , ______ ______________________ Signature Signature Guaranteed: -61- 62 NOTICE ------ The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. -62- 63 EXHIBIT 10(H) SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT Among OUTBOARD MARINE CORPORATION THE BANKS, and THE FIRST NATIONAL BANK OF CHICAGO ("Agent") and BANK OF AMERICA ILLINOIS ("Co-Agent") Dated as of March 29,1996 -63- 64 TABLE OF CONTENTS ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . 1.02. Financial Standards . . . . . . . . . . . . . . . . . . . . ARTICLE II. THE CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . 2.01. Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02. Requests for Advances. . . . . . . . . . . . . . . . . . . . 2.03. Evidence of Credit Extensions . . . . . . . . . . . . . . . 2.04. Computation of and Payment of Interest . . . . . . . . . . . 2.05. Payment of Principal . . . . . . . . . . . . . . . . . . . . 2.06. Notification of LIBOR for Eurodollar Advances. . . . . . . . 2.07. Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 2.08. Agent's and Co-Agent's Fees . . . . . . . . . . . . . . . . 2.09. Computations of Interest and Fees; Banking Day . . . . . . . 2.10. Late Payment; Date of Receipt of Notices . . . . . . . . . . 2.11. Method of Payment; Mistakes. . . . . . . . . . . . . . . . . 2.12. Optional Prepayment; Funding Losses on Any Prepayment. . . . 2.13. Reduction or Termination of Commitments. . . . . . . . . . . 2.14. Taxes' . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.15. Reserves, Etc. . . . . . . . . . . . . . . . . . . . . . . . 2.16. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . 2.17. Unavailability . . . . . . . . . . . . . . . . . . . . . . 2.18. The Bid Facility . . . . . . . . . . . . . . . . . . . . . . 2.19. Telephone Notice, Indemnity . . . . . . . . . . . . . . . . 2.20. Facility Letters of Credit . . . . . . . . . . .. . . . . . 2.21. Extension of Termination Date . . . . . . . . . . . . . . . ARTICLE III. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 3.01. Conditions Precedent to Closing Date . . . . . . . . . . . . 3.02. Conditions Precedent to Each Borrowing . . . . . . . . . . . 3.03. Termination of Existing Agreement. . . . . . . . . . . . . . 3.04. Advances under Existing Agreement. . . . . . . . . . . . . . ARTICLE IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 4.01. The Company's Existence. . . . . . . . . . . . . . . . . . . 4.02. Subsidiaries' Existence. . . . . . . . . . . . . . . . . . . 4.03. Company's Powers . . . . . . . . . . . . . . . . . . . . . . 4.04. Power of Company Officers. . . . . . . . . . . . . . . . . . 4.05. Government and Other Approvals . . . . . . . . . . . . . . . 4.06. Compliance With Laws . . . . . . . . . . . . . . . . . . . . 4.07. Enforceability of Agreement. . . . . . . . . . . . . . . . . 4.08. Title to Property. . . . . . . . . . . . . . . . . . . . . . 4.09. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 4.10. Events of Default. . . . . . . . . . . . . . . . . . . . . . 4.11. Investment Company Act of 1940 . . . . . . . . . . . . . . . 4.12. Regulation U . . . . . . . . . . . . . . . . . . . . . . . . 4.13. Financial Information. . . . . . . . . . . . . . . . . . . . 4.14. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.15. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . 4.16. Environmental Matters. . . . . . . . . . . . . . . . . . . . -64- 65 ARTICLE V. AFFIRMATIVE COVENANTS 5.01. Use of Proceed . . . . . . . . . . . . . . . . . . . . . . . 5.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03. Financial Statements, Reports, Etc. . . . . . . . . . . . . 5.04. Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . 5.05. Payment of Obligations . . . . . . . . . . . . . . . . . . . 5.06. Compliance with Laws . . . . . . . . . . . . . . . . . . . . 5.07. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 5.08. Adequate Books . . . . . . . . . . . . . . . . . . . . . . . 5.09. Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . 5.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 6.01. Capitalization Ratio . . . . . . . . . . . . . . . . . . . . 6.02. Change in Business . . . . . . . . . . . . . . . . . . . . . 6.03. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04. Mergers, Sales of Assets, Etc. . . . . . . . . . . . . . . . 6.05. Acquisitions, Investments. . . . . . . . . . . . . . . . . . 6.06. Operating Leases . . . . . . . . . . . . . . . . . . . . . . 6.07. Existing Indebtedness. . . . . . . . . . . . . . . . . . . . 6.08. Repurchase Arrangements. . . . . . . . . . . . . . . . . . . 6.09. Dividends and other Restricted Payments. . . . . . . . . . . ARTICLE VII. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 7.01. Nonpayment . . . . . . . . . . . . . . . . . . . . . . . . . 7.02. Representation or Warranty . . . . . . . . . . . . . . . . . 7.03. Specific Defaults. . . . . . . . . . . . . . . . . . . . . . 7.04. Other Defaults . . . . . . . . . . . . . . . . . . . . . . . 7.05. Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . 7.06. Voluntary Bankruptcy . . . . . . . . . . . . . . . . . . . . 7.07. Involuntary Bankruptcy . . . . . . . . . . . . . . . . . . . 7.08. Cross Default. . . . . . . . . . . . . . . . . . . . . . . . 7.09. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10. Change in Control. . . . . . . . . . . . . . . . . . . . . . ARTICLE VIII. RELATION OF BANKS. . . . . . . . . . . . . . . . . . . . . . 8.01. Appointment and Authorization. . . . . . . . . . . . . . . . 8.02. Pro Rata Sharing . . . . . . . . . . . . . . . . . . . . . . 8.03. Sharing of Setoff. . . . . . . . . . . . . . . . . . . . . . 8.04. Communication; Confidentiality . . . . . . . . . . . . . . . 8.05. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 8.06. Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . 8.07. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 8.08. The Agent, the Co-Agent and Bid Agent as Banks . . . . . . . 8.09. Notice of Transfer . . . . . . . . . . . . . . . . . . . . . 8.10. Credit Decision. . . . . . . . . . . . . . . . . . . . . . . 8.11. Resignation of the Agent . . . . . . . . . . . . . . . . . . 8.12. Reliance by Agent and Co-Agent . . . . . . . . . . . . . . . -65- 66 ARTICLE IX. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 9.01. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 9.02. Successors and Assigns . . . . . . . . . . . . . . . . . . . 9.03. Banks' Obligations Several . . . . . . . . . . . . . . . . . 9.04. Assignments, Participations; Setoff. . . . . . . . . . . . . 9.05. Delays and Waivers . . . . . . . . . . . . . . . . . . . . . 9.06. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . 9.07. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 9.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 9.09. Section Headings . . . . . . . . . . . . . . . . . . . . . . 9.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . 9.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 9.12. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . 9.13. Judgment Currency Indemnity. . . . . . . . . . . . . . . . . 9.14. Waiver of Jury Trail . . . . . . . . . . . . . . . . . . . . -66- 67 EXHIBIT A-1 COMMITTED NOTE EXHIBIT A-2 COMPETITIVE BID NOTE EXHIBIT B OPINION OF COUNSEL SCHEDULE I AGENT'S PAYMENT OFFICES SCHEDULE 2 SIGNIFICANT SUBSIDIARIES SCHEDULE 3 MATERIAL LIENS SCHEDULE 4 LITIGATION SCHEDULE 5 MATERIAL FINANCIAL OBLIGATIONS SCHEDULE 6 FORM OF BID LOAN REQUEST SCHEDULE 7 FORM OF BID LOAN OFFER SCHEDULE 8 FORM OF BID LOAN ACCEPTANCE SCHEDULE 9 FORM OF CONFIDENTIALITY AGREEMENT SCHEDULE 10 SCHEDULE OF LETTERS OF CREDIT SCHEDULE 11 INVESTMENTS -67- 68 SECOND AMENDED AND RESTATED OUTBOARD MARINE CORPORATION REVOLVING CREDIT AGREEMENT This Agreement is entered into as of March 29, 1996, by and among Outboard Marine Corporation (the "Company"), the banks listed on the signature pages hereof (collectively the "Banks" and individually a "Bank"), The First National Bank of Chicago as agent for the Banks (in such capacity the "Agent") and Bank of America Illinois as co-agent for the Banks (in such capacity, the "Co-Agent"). Whereas, the Company, the Banks, the Agent, and the Co-Agent are parties to an Amended and Restated Revolving Credit Agreement dated as of December 30, 1994, as heretofore amended (as so amended the "Existing Agreement"); and Whereas, the Company desires to amend and restate the Existing Agreement to, among other things, permit the withdrawal of NBD Bank as a Bank and the addition of The Northern Trust Company as a Bank and modify the Commitments (as hereinafter defined) of the Banks; So therefore, the Company, the Banks, the Agent and the Co-Agent have agreed to amend and restate the Existing Agreement on the terms and conditions set forth herein: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated for purposes of this Agreement: "Absolute Rate" means the rate of interest quoted by a Bank for an Absolute Rate Loan pursuant to Section 2.18. "Absolute Rate Loan" means a Bid Loan for which interest is based on the Absolute Rate. "Acquisition" means any transaction or series of transactions by which the Company and/or any Consolidated Subsidiary (a) acquires any going business or all or substantially all of the assets of any Person, whether through the purchase of assets, merger or otherwise; (b) directly or indirectly acquires control of at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors; or (c) directly or indirectly acquires a twenty percent (20%) or more ownership interest in any partnership or joint venture. "Advance" means a loan hereunder by a Bank under the Revolving Credit Facility pursuant to Section 2.01(a) and may also be used to refer to a Refunding Advance unless the context otherwise requires. -68- 69 "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Available Commitment" means, at any date of determination, (a) the Aggregate Commitment minus (b) the Facility Letter of Credit Obligations then outstanding minus (c) the principal amount of all then outstanding Advances and minus (d) the principal amount of all the outstanding Bid Loans. "Aggregate Commitment" means the aggregate of the Commitments of all the Banks, as modified from time to time pursuant to the terms hereof, which amount is $200,000,000 as of the Closing Date of this Agreement. "Applicable Margin" means the percentage in excess of the Base Rate payable by the Company as set forth in Section 2.04. "Available Fund" shall mean, as of any Restricted Payment Date, an amount equal to 50% of Consolidated Net Income of the Company and Subsidiaries for the period (taken as one accounting period) commencing on October 1, 1994 and terminating at the end of the Company's most recently completed fiscal quarter preceding such Restricted Payment Date, reduced by the sum of the (i) aggregate amount of all dividends and other distributions paid by the Company or any Subsidiary on each class of its capital stock on or after October 1, 1994 and (ii) the aggregate amount paid by or on behalf of the Company or any Subsidiary on or after October 1, 1994 for the redemption, purchase, retirement or other acquisition of any shares of its capital stock. For purposes of this definition, the amount of dividends and other distributions paid by any Subsidiary shall not include amounts payable to the Company or to another Subsidiary. Capital stock shall include warrants and other rights and options to acquire shares of capital stock. "Banking Day" means (a) for all purposes other than transactions referred to in clause (b) below, a day on which banks are open for business in Illinois, California and New York, and (b) with respect to all notices and determinations in connection with, and payments of principal of and interest on, Eurodollar Advances or LIBOR Loans and Optional Currency Advances, any day which is a Banking Day described in clause (a) and is also a day on which banks are open for business and quoting interest rates for Dollar deposits or the relevant Optional Currency deposits in London, England. "Base Rate" means the Reference Rate, CD Rate, or LIBOR, as the case may be. "Bid Agent" means the Agent acting in its capacity as the bid agent for the Bid Facility or any successor thereto appointed hereunder. "Bid Facility" means the credit facility provided in Section 2.18. "Bid Loan" means a loan by a Bank to the Company under the Bid Facility. "Borrowing" means any Advances hereunder made by the Banks on the same day and having the same interest rate and Interest Period and any Bid Loans hereunder made by any or all of the Banks on the same day and having the same Interest Period and may also be used to refer to a Refunding Borrowing unless the context otherwise requires. -69- 70 "CD Rate" means for each Interest Period in respect of CD Rate Advances the rate of interest determined pursuant to the following formula: CD Rate = Certificate of Deposit Rate --------------------------- + Assessment Rate 1.00 - Reserve Percentage Where, "Assessment Rate" means the arithmetic average, as determined by the Agent, of the net annual assessment rates (rounded upwards, if necessary, to the nearest one-hundredth of one percent (1/100%)) in effect on the first day of such Interest Period payable by First Chicago to the Federal Deposit Insurance Corporation, or any successor, for insuring time deposits made in Dollars at offices of First Chicago in the United States of America during the most recent period for which such rate has been determined prior to the commencement of such Interest Period. "Certificate of Deposit Rate" means for each Interest Period in respect of CD Rate Advances the rate of interest determined by the Agent to be the arithmetic average (rounded up to the nearest one-hundredth of one percent (1/100%)) of the rates of interest bid by two (2) New York or Chicago certificate of deposit dealers of recognized standing selected by First Chicago for the purchase at face value from First Chicago of its certificates of deposit in the secondary market, for such period and in the amount of First Chicago's CD Rate Advance to be made, at approximately 10:00 a.m., Chicago time, on the first day of such Interest Period. "Reserve Percentage" means for each Interest Period for CD Rate Advances the maximum reserve percentage (expressed as a decimal) in effect at the beginning of such Interest Period (including, but not limited to, marginal, emergency, supplemental, special and other reserve percentages) prescribed by the Board of Governors of the Federal Reserve System, or any successor, for determining the reserves to be maintained by member banks of the Federal Reserve System with deposits exceeding One Billion Dollars ($1,000,000,000) for new non-personal time deposits for a period approximating such Interest Period and in an amount of One Hundred Thousand Dollars ($100,000) or more. "CD Rate Advance" means an Advance for which interest is calculated with reference to the CD Rate. "Capitalization" means the sum of the Tangible Net Worth and Indebtedness for Borrowed Money of the Company and its Consolidated Subsidiaries, calculated on a consolidated basis. "Closing Date" means March 29, 1996. "Code" means the Internal Revenue Code of 1986, as amended. "Commitment" means for each Bank the obligation of such Bank to make Advances and to issue or purchase participations in Facility Letters of Credit in an aggregate amount not exceeding the amount set opposite its name on the signature pages hereof as such amount may be modified from time to time in accordance with the terms hereof. "Committed Note" means a promissory note in substantially the form of Exhibit "A-1" hereto, with appropriate insertions, duly executed and delivered to the Agent by the Company for the account of a Bank in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. -70- 71 "Competitive Bid Note" means a promissory note in substantially the form of Exhibit "A-2" hereto, with appropriate insertions, duly executed and delivered to the Agent by the Company for the account of a Bank and payable to the order of such Bank, including any amendment, modification, renewal or replacement of such promissory note. "Consolidated" or "consolidated" means: (a) when used herein with reference to financial statements, ratios, assets or liabilities, that any calculations have been made by consolidating the assets and liabilities of the Company and certain of its Subsidiaries indicated in the footnotes to the Company's financial statements after eliminating all intercompany items and making such adjustments as required by GAAP; and (b) when used herein with reference to a Subsidiary, a Subsidiary the financial statements of which have been presented together with those of the Company or a newly-acquired Subsidiary, which has been designated by the Company as a Consolidated Subsidiary pursuant to Section 5.03(f). "Credit" means the Revolving Credit Facility described in Section 2.01, the Bid Facility described in Section 2.18 and the Letter of Credit Facility described in Section 2.20. "Default" means an event which, with notice or lapse of time or both, would become an Event of Default. "Dividends" means any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of or in exchange for any shares of any class of capital stock of the Company, provided that dividend payments or other distributions payable solely in its common stock shall not be included in this definition. "Dollars" and "$" mean United States dollars. "EBIT" means for any period of determination in respect of the Company and its Consolidated Subsidiaries the sum of (a) their Net Income before deduction of taxes, (b) their Interest Expense, (c) any extraordinary losses, and (d) amortization of goodwill and intangibles associated with any Acquisition minus any extraordinary gains, all calculated on a consolidated basis. "Environmental Claim" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability for damages, punitive damages, cleanup costs, removal costs, remedial costs, response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spill, leaks, discharges, emissions or releases) of any Hazardous Material at, in or from property, whether or not owned by the Company or any of its Subsidiaries, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. -71- 72 "Environmental Law" means the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) ("OSHA"), as such laws have been or hereafter may be amended or supplemented, and any and all analogous future federal, or present or future state or local, statutes and the regulations promulgated pursuant thereto. "Equivalent Amount" means in relation to any Optional Currency Advance, at any date any determination thereof is made, the amount in Dollars of such Advance calculated at the spot rate of exchange for the purchase of Dollars with the relevant Optional Currency quoted by First Chicago at approximately 11:00 am. (London time) two (2) Banking Days prior to the relevant date. "ERISA" means the Employee Retirement Income Security Act of 1974 and all the rules and regulations promulgated pursuant thereto, as amended from time to time. "Eurodollars" means Dollars disbursed by a Bank from a location outside of the United States. "Eurodollar Advance" means an Advance denominated in Dollars for which interest is calculated with reference to LIBOR. "Event of Default" means any event set forth in Sections 7.01 through 7.10. "Existing Agreement" means the Credit Agreement dated as of December 30, 1994 as amended, among the Company, the Bank parties thereto, The First National Bank of Chicago, as Agent and Bank of America Illinois, as Co-Agent. "Existing Letters of Credit" means those Letters of Credit currently outstanding and issued by a Bank party hereto, a list of which is attached hereto as Schedule 10 including any extensions thereof. "Facility Letter of Credit Obligations" means, at any date of determination thereof, all liabilities, whether actual or contingent, of the Company in respect of the Facility Letters of Credit, including without limitation, the sum of (a) Reimbursement Obligations and (b) the aggregate undrawn face amount of the outstanding Facility Letters of Credit. "Facility Letters of Credit" means, collectively, the letters of credit issued under the Letter of Credit Facility and including, without limitation, the Existing Letters of Credit. "Federal Funds Rate" means for any day the weighted average of rates on overnight Federal funds transactions with members of the Federal Reserve System only, arranged by Federal funds brokers as published for such day (or, if such day is not a business day, for the next preceding business day) by the Federal Reserve Bank of New York in statistical release H.15 (519) or any successor publication or, if such rate is not so published for any business day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. -72- 73 "Federal Reserve Board" means the Board of Governors of the Federal Reserve System. "First Chicago" means The First National Bank of Chicago, in its individual capacity, and its successors. "fiscal year" means with respect to the Company a year commencing October 1 and ending September 30. "Fixed Assets" of any Person means land, buildings, fixtures and personal property used in the operation of the business carried out thereon (other than inventory held for sale in the ordinary course of business). "Fixed Rate" means either or both of the CD Rate or LIBOR, for a Fixed Rate Advance. "Fixed Rate Advance" means a Eurodollar Advance or a CD Rate Advance. "GAAP" means generally accepted accounting principles in effect from time to time in the United States. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any central bank thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, waste, solid waste, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste. "Indebtedness for Borrowed Money" means for any Person, without duplication, (i) all obligations of such Person (including without limitation all fees, costs or unpaid accrued interest) for or with respect to borrowed money or for the deferred purchase price of property or services (other than accounts payable in the ordinary course of business), (ii) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to any property acquired by such Person and all obligations created or arising under such agreement even though the rights and remedies of the seller or lender thereunder are limited to repossession or sale of such property in the event of default, (iii) all obligations of such Person under leases which shall have been or should be recorded as capitalized leases, (iv) all guaranties and other obligations (contingent or otherwise) of such Person to assure a creditor against loss (including, without limitation, letters of responsibility or comfort letters, arrangements to purchase or repurchase property or obligations (other than repurchase arrangements with respect to boats, motors or boat/motor/trailer (or any combination thereof) packages permitted in accordance with Section 6.08), pay for property, goods or services whether or not delivered or rendered, maintain working capital, equity capital or other financial statement condition of, or lend or contribute to or invest in, any such Person) in respect of obligations of any other Person, which guaranties and other obligations exceed in the aggregate at any one time Twenty Million Dollars ($20,000,000), (v) all endorsements of such Person (other than, in the case of instruments, for deposit or collection in the ordinary course of business), and (vi) all indebtedness secured by any Lien on any property owned by such Person, whether or not such Person has assumed or become liable for the payment thereof. In calculating the amount of Indebtedness for Borrowed Money, there shall be no double counting of obligations of Subsidiaries which are guaranteed by the Company. -73- 74 "Indemnified Party" has the meaning specified in Section 9.12. "Interest Expense" means all accrued interest paid or payable by the Company and its Consolidated Subsidiaries. "Interest Payment Date" means the last day of each Interest Period or the day specified in accordance with Section 2.04(c). "Interest Period" means (a) for Reference Rate Advances, the period requested by the Company, commencing on the date of the relevant Borrowing and ending up to ninety (90) days thereafter; (b) for Absolute Rate Loans, the period requested by the Company, commencing on the date of the relevant Borrowing and ending not less than fourteen (14) days and up to two hundred seventy (270) days thereafter; (c) (i) for Eurodollar Advances, a period selected by the Company, commencing on the date of the relevant Borrowing and ending not less than seven (7) days or more than 180 days thereafter, and (ii) for Optional Currency Advances or LIBOR Loans, the period requested by the Company, commencing on the date of the relevant Borrowing and ending thirty (30), sixty (60), ninety (90) or one hundred eighty (180) days thereafter; provided, however, that: (d) for CD Rate Advances, the period requested by the Company, commencing on the date of the relevant Borrowing and ending thirty (30), sixty (60), ninety (90) or one hundred eighty (180) days thereafter; provided, however, that: (i) If any Interest Period would end on a day not a Banking Day, it shall end on the next succeeding Banking Day, except that with respect to Eurodollar Advances, Optional Currency Advances and LIBOR Loans, if the next succeeding Banking Day would fall in the next calendar month, the Interest Period shall end on the Banking Day immediately preceding the last day of such Interest Period but for such change; and (ii) Any Interest Period which would otherwise extend beyond the Termination Date shall end on the Termination Date. "Investment" means (a) any loan, advance, extension of credit (other than in the ordinary course of business to trade customers) or contribution of capital by the Company or any Subsidiary to any Person or the purchase by the Company or any Subsidiary of any Person's notes, stock, bonds or other securities, (b) advances by the Company or any Subsidiary to employees of a Person other than in the ordinary course of business for the purpose of defraying travel, relocation or business expenses, and (c) any contribution of capital or property or services contributed or committed to be contributed by a Person in connection with the purchase of debt or equity interests or other ownership interests. "Issuance Date" means, with respect to any Facility Letter of Credit, the date on which such Facility Letter of Credit is issued hereunder. "Issuer" means, with respect to any Facility Letter of Credit, (i) any Bank which has issued a Facility Letter of Credit pursuant to the Letter of Credit Facility, and its successors and assigns, and (ii) solely with respect to the Existing Letter of Credit issued by it, NBD Bank and its successors and assigns. -74- 75 "Issuer's Fee" is defined in Section 2.20(g). "Lending Branch" means, with respect to a Bank or the Agent, any office, branch, subsidiary or affiliate of such Bank or the Agent. "Letter of Credit Facility" means the Letter of Credit Facility provided in Section 2.20. "Letter of Credit Fee" means, with respect to any Facility Letter of Credit on the Issuance Date thereof, a fee equal to the product of (a) the applicable percentage set forth in Section 2.20(g) times (b) the maximum face amount of such Facility Letter of Credit. "Letter of Credit Request" is defined in Section 2.20(c). "LIBOR" means, (a) for each Interest Period in respect of Eurodollar Advances, the rate of interest determined by the Agent to be the arithmetic average of the rates reported to the Agent by each Reference Bank as the rate at which deposits in Dollars are offered by such Reference Bank to first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Banking Days prior to the first day of such Interest Period, in the approximate amount of such Reference Bank's relevant Eurodollar Advance and having a maturity approximately equal to such Interest Period. If any Reference Bank fails to provide such quotation to the Agent, the Agent shall determine LIBOR for purposes of this clause (a) on the basis of the quotations by the remaining Reference Bank(s); and (b) for each Interest Period in respect of LIBOR Loans or Optical Currency Advances, the rate of interest determined by the Agent to be the applicable London interbank offered rate for deposits in Dollars or the applicable Optional Currency appearing on the Bloomberg System Money Market Function (Page LR) as of 11:00 a.m. (London time) two Banking Days prior to the first day of such Interest Period and having a maturity equal to such Interest Period. If no London interbank offered rate of such maturity then appears on Bloomberg Page LR, the LIBOR for purposes of this clause (b) shall be equal to the London interbank offered rate for deposits in Dollars or the applicable Optional Currency having a maturity immediately before or immediately after the maturity of such Interest Period, whichever is higher, as determined by the Agent from Bloomberg Page LR. "LIBOR Loan" means a Bid Loan for which interest is calculated with reference to LIBOR. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to provide any of the foregoing), any conditional sale or other title retention agreement or any lease in the nature thereof, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code on any property leased to any Person under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person. "Majority Banks" means Banks whose Commitments equal at least sixty-six and two-thirds percent (66-2/3%) of the Aggregate Commitments, provided that at any time after the Advances have been accelerated and the Commitments terminated pursuant to Article VII, "Majority Banks" shall mean Banks whose aggregate proportionate interest in the outstanding Advances, Bid Loans and Facility Letters of Credit constitute at least sixty-six and two-thirds percent (66-2/3%) of the outstanding Advances, Bid Loans and Facility Letters of Credit. -75- 76 "Margin" means the percentage points above or below LIBOR quoted by a Bank for a LIBOR Loan pursuant to Section 2.18. "Margin Stock" has the meaning ascribed to it in Regulation U of the Board of Governors of the Federal Reserve System. "Minimum Amount" initially means $10,000,000, such amount to be increased by an amount equal to the aggregate amount of dividends payable during a fiscal year on all new shares of capital stock issued by the Company after October 1, 1994 (at the dividend rate in effect on October 1, 1994), net of any shares retired after that date. "Moody's" means Moody's Investors Service, Inc. "Net Income" means the amount shown on the income statement of a Person as its "net earnings (loss)." "Net Proceeds" means the cash proceeds realized from the sale or from any sale and leaseback transaction (after deducting all applicable taxes and the reasonable costs of such sale) of any property (excluding receivables) owned by the Company or any Consolidated Subsidiary (other than sales of inventory in the ordinary course of business and the sale of worn-out or obsolete equipment no longer useful or needed in the operation of its business) or the sale of any common or preferred stock of the Company. "Notes" means, collectively, the Competitive Bid Notes and the Committed Notes; and "Note" means any one of the Notes. "Optional Currency" means Deutsche marks, Canadian dollars, Belgian francs or Australian dollars, which are freely transferable and convertible into Dollars and the deposits of which are traded in the London interbank market and which are disbursed by a Bank outside the Federal Republic of Germany, Canada, the Kingdom of Belgium or the Commonwealth of Australia, respectively. "Optional Currency Advance" means any Advance denominated in an Optional Currency for which interest is calculated with reference to LIBOR. "Original Dollar Amount" means in relation to any Optional Currency Advance, at any time any determination thereof is made, the amount in Dollars which would have been outstanding if such Optional Currency Advance had first been disbursed and remained denominated in Dollars (taking into account any partial repayments thereof) calculated at the spot rate of exchange for the purchase of Dollars with the relevant Optional Currency quoted by First Chicago at approximately 11:00 a.m. (London time) two (2) Banking Days prior to the disbursement date of such Optional Currency Advance. "PBGC" means the Pension Benefit Guaranty Corporation created under Section 4002 (a) of ERISA or any successor thereto. "Percentage Share" means, as to any Bank, at any time, the proportion of such Bank's Commitment (as it may be modified from time to time in connection with any assignment of the Commitment of such Bank in accordance with the terms hereof) to the Aggregate Commitment of all the Banks, expressed as such percentage. -76- 77 "Performance Guaranty" means that certain Performance Guaranty, dated as of December 22, 1995, executed and delivered by the Company in favor of its wholly-owned Subsidiary, Outboard Marine Receivables Corp., a Delaware corporation ("OMRC"), pursuant to which the Company guarantees certain performance obligations in connection with the sale of accounts receivable permitted under Section 6.04(h) by certain of its Subsidiaries to OMRC including, without limitation, customary indemnities, representations and warranties but excluding, as a general matter, collectibility of such accounts, as such Performance Guaranty may be amended, restated, supplemented or otherwise modified from time to time. "Permitted Liens" means (a) Liens for taxes not yet due or which are being actively contested in good faith by appropriate proceedings and for which adequate reserves have been established if required by GAAP; (b) other Liens incidental to the conduct of the business of the Company and its Consolidated Subsidiaries or the ownership of their respective property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the Company's and its Subsidiaries' business; (c) Liens on property or assets of a Subsidiary to secure obligations of such Subsidiary to the Company or another Subsidiary; (d) For one hundred eighty (180) days after the closing date of any Acquisition or any Investment, Liens existing at the time of such Acquisition or such Investment (and not created in contemplation of such Acquisition or such Investment) in favor of Persons other than the Banks on the inventory and accounts receivable of the Person acquired; (e) any Liens on the Fixed Assets of a Person existing at the time such Person becomes a Subsidiary, or existing Liens on Fixed Assets acquired by a Subsidiary, whether or not such Liens are assumed by the Company or a Subsidiary, or Liens on any Fixed Assets acquired, constructed or improved by the Company or any Subsidiary after the date hereof and created contemporaneously with or no more than one hundred twenty (120) days after the acquisition, construction or improvement to secure or provide for all or a portion of the purchase price of such Fixed Assets or for such construction or improvement if such Liens do not extend to other property of the Company or any Subsidiary (except to unimproved real property on which the construction or improvement is located) and the aggregate amount of Indebtedness for Borrowed Money or other obligations secured thereby does not exceed an aggregate amount of Ten Million Dollars ($10,000,000) at any time; (f) any Lien renewing or extending any Lien permitted by clause (e) above, provided that the principal amount of the obligations secured is not increased beyond the original principal amount of the obligations secured by such Lien, such principal amount secured does not include any capitalization of interest, and the Lien is not extended to other property; (g) Liens in favor of the United States of America, resulting from acceptance of progress or partial payments in the ordinary course of business under government contracts or subcontracts thereunder; -77- 78 (h) other Liens provided that the sum of (i) the aggregate principal amount of Indebtedness for Borrowed Money of the Company and its Subsidiaries secured by Liens permitted by this clause (h) plus (ii) the present value of all rental payments (discounted at the rate of 9% per annum compounded semi-annually) arising from a sale and leaseback transaction permitted in Section 6.04(c) owed by the Company and its Subsidiaries does not exceed at any time an amount equal to five percent (5%) of the Tangible Net Worth of the Company and its Subsidiaries on a consolidated basis; and (i) Liens incurred in connection with sales of receivables permitted by Section 6.04 (h). "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a governmental or political subdivision or an agent or instrumentality thereof. "Plan" means any defined benefit plan maintained or contributed to by the Company or any Subsidiary or by any trade or business (whether or not incorporated) under common control with the Company or any Subsidiary as defined in Section 4001(b) of ERISA and insured by the PBGC under Title IV of ERISA. "Reference Banks" means, collectively, First Chicago, Bank of America Illinois, and Royal Bank of Canada; and "Reference Bank" means any one of the Reference Banks. "Reference Rate" means the higher of: (a) the rate of interest announced from time to time by First Chicago in Chicago, Illinois, as its corporate base rate, which is a rate set by First Chicago based upon various factors and (b) the Federal Funds Rate plus one-half of one percent (1/2%). "Reference Rate Advance" means an Advance for which interest is calculated with reference to the Reference Rate. "Refunding Advance" means an Advance which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of the Advances of any Bank, and "Refunding Borrowing" means a Borrowing having the same result. "Reimbursement Obligations" means, at any time, the aggregate of the obligations of the Company to the Issuers and the Banks in respect of all unreimbursed payments or disbursements made by an Issuer and the Banks under or in respect of the Facility Letters of Credit. "Reportable Event" shall be as defined in ERISA. "Restricted Payments" shall mean: (i) every dividend or other distribution paid by the Company or any Subsidiary on or in respect of any class of the capital stock of the Company or any Subsidiary, and (ii) every payment by or on behalf of the Company or any Subsidiary in connection with the redemption, purchase, retirement or other acquisition of any shares of the capital stock of the Company or any Subsidiary; but excluding, however, from the foregoing every dividend, distribution or other payment to the extent payable in shares of the capital stock of the Company or any Subsidiary. For purposes of this definition, "capital stock" shall include warrants and other rights and options to acquire shares of capital stock. "Restricted Payment Date" means the date a Restricted Payment is paid. -78- 79 "Revolving Credit Facility" means the credit facility provided in Section 2.01(a). "Shareholder Rights Plan" means the Company's Amended and Restated Rights Plan dated as of June 12, 1986 as amended and restated as of September 6, 1990. "Significant Subsidiary" means (a) the Subsidiaries of the Company listed on Schedule 2 hereto and any additional schedules provided pursuant to this paragraph and (b) any other Subsidiary of the Company, the assets, revenues, or Tangible Net Worth of which during the two (2) fiscal quarters immediately preceding any date of calculation thereof is equal to or greater than five percent (5%) of the corresponding assets or revenues or the Tangible Net Worth of the Company and its Consolidated Subsidiaries, on a consolidated basis (which subsidiaries shall be listed on additional schedules delivered by the Company to the Agent from time to time). "Standard & Poor's" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. "Subsidiary" means any corporation in which the Company owns, directly or indirectly, more than fifty percent (50%) of the total voting securities thereof, irrespective of whether or not the stock of any class shall or might have voting power by reason of any contingency, or which the Company otherwise controls. "Tangible Net Worth" means, without duplication, total shareholders' equity in the Company and its Consolidated Subsidiaries (excluding treasury stock, sinking fund payments required to be made prior to the Termination Date of this Agreement, and that portion of any redeemable preferred stock which has a mandatory redemption date prior to the Termination Date of this Agreement) less (a) all items that would be treated as intangibles under GAAP, including, without limitation, the net book value of goodwill, patents, trademarks, trade names, copyrights, licenses, deferred charges, leasehold conversion costs, unamortized debt discount, franchise rights, and non-compete agreements, but excluding foreign currency translation adjustments required by the Statement of the Financial Accounting Standards Board #52, (b) any Investments in the form of credit extensions to stockholders, directors or employees of the Company or its Subsidiaries and, plus (c) from and after the date such charge is reported in the Company's financial statements, an amount, not to exceed $109,000,000 at any time, equal to the amount of non-cash charges, net of any tax benefits taken, related to retiree medical benefits. "Termination Date" means the earliest to occur of (a) December 31, 1998, or such later date to which the Termination Date is extended pursuant to Section 2.21 hereof, (b) the date on which, prior to the date set forth in (a) above, the Credit terminates in accordance with a notice to that effect given to the Agent by the Company pursuant to Section 2.13, and (c) the date on which the Credit is terminated or accelerated pursuant to Article VII. "Value Date" means the date an Advance or Bid Loan is to be disbursed to the Company. -79- 80 1.02. Financial Standards. All financial computations required under this Agreement shall be made, and all financial information required under this Agreement shall be prepared, in accordance with GAAP. If generally accepted accounting principles are modified by the Financial Accounting Standards Board subsequent to the Closing Date and prior to the Termination Date, then for purposes of this Section 1.02, such modified generally accepted accounting principles shall be the generally accepted accounting principles which are required to be consistently applied. ARTICLE II THE CREDIT 2.01. Credit. (a) The Revolving Credit Facility. From the Closing Date to but excluding the Termination Date, each Bank, severally, will make available to the Company Advances in Dollars and any available Optional Currency in an amount equal to such Bank's Percentage Share of the Aggregate Available Commitment (without regard to such Bank's outstanding Bid Loans); provided that the Original Dollar Amount of the aggregate outstanding Optional Currency Advances denominated in Australian dollars and Belgian francs, respectively, may not exceed Fifty Million Dollars ($50,000,000) on any date of disbursement of any such Optional Currency Advance; provided that in no event may the total amount of Advances for all Banks (after determining the Equivalent Amount of all Optional Currency Advances) plus Bid Loans for all Banks outstanding under this Agreement plus Facility Letter of Credit Obligations for all Banks exceed at any time the then effective Aggregate Commitment. If at any time the total amount of Advances for all Banks (after determining the Equivalent Amount of all Optional Currency Advances) plus Bid Loans for all Banks outstanding under this Agreement plus Facility Letter of Credit Obligations for all Banks exceeds the maximum available amount set forth above, the Company shall promptly prepay the excess thereof plus accrued interest thereon to the Agent for the account of the Banks. (b) Minimum Amounts. Each Borrowing under this Section 2.01 shall be in a minimum amount of (i) Five Million Dollars ($5,000,000) in respect of Reference Rate Advances and in integral multiples of One Million Dollars ($1,000,000) in excess thereof, and (ii) Five Million Dollars ($5,000,000) in respect of Fixed Rate Advances or Optional Currency Advances, and in integral multiples of One Million Dollars ($1,000,000) in excess thereof for all Advances denominated in Dollars or the Equivalent Amount of the foregoing in an Optional Currency or an integral multiple of One Million Australian dollars, Canadian dollars, Belgian francs or Deutsche marks, as the case may be. (c) Reborrowing. The Credit is a revolving credit and, prior to the Termination Date, the Company may borrow, repay and reborrow amounts repaid up to the then Aggregate Available Commitment of the Banks. -80- 81 2.02. Requests for Advances. (a) Advances shall be made available to the Company upon the irrevocable request of the Company received by the Agent, specifying: (i) the date of the Borrowing, which shall be a Banking Day; (ii) the amount of the Borrowing; (iii) whether the Advances are to be Reference Rate Advances, Eurodollar Advances, CD Rate Advances or Optional Currency Advances; (iv) the Original Dollar Amount (when such quotation is available, but in any event prior to disbursement) of any requested Optional Currency Advance; (v) the Interest Period therefor; and (vi) the bank and the account where the funds to be borrowed are to be made available to the Company. Such request must be received by the Agent at its address for notices by the time specified in Section 2.10(b) not less than (A) the day such Advance is to be made, with respect to Reference Rate Advances, (B) two (2) Banking Days, with respect to CD Rate Advances, (C) three (3) Banking Days, with respect to Eurodollar Advances and (D) four (4) Banking Days, with respect to Optional Currency Advances, prior to the date of the Borrowing. (b) Each Bank agrees that it will make the funds which it is to advance hereunder available to the Agent at the Agent's Domestic Lending Branch not later than 1:00 p.m., Chicago time, or at the locations specified on Schedule 1 attached hereto with respect to Advances in an Optional Currency not later than 11:00 a.m., local time, on the date of disbursement of Advances, upon receipt of notice from the Agent as follows: (i) not later than 11:00 a.m. (Chicago time) on the date of a Borrowing with respect to Reference Rate Advances; (ii) two (2) Banking Days prior to the date of a Borrowing with respect to CD Rate Advances; (iii) three (3) Banking Days prior to the date of a Borrowing with respect to Eurodollar Advances; and (iv) four (4) Banking Days prior to the date of a Borrowing with respect to Optional Currency Advances. The Agent will thereupon advance to the Company the amount so received from the Banks unless the Agent, after notice is given to the Company, shall determine that any condition precedent applicable to the Borrowing set forth in Section 3.01 or 3.02 shall not be fulfilled as of the date of such Borrowing. (c) Each request for a Borrowing may be made by telephone (immediately confirmed by telecopy on the same Banking Day) or by telecopy or by telex, confirmed by letter sent not later than one (1) Banking Day thereafter. (d) Each Borrowing under Section 2.01 shall be made on a pro rata basis from the Banks. Subject to Section 2.16(b), all Advances that are part of the same Borrowing shall bear the same Base Rate. -81- 82 (e) (i) With respect to any Fixed Rate Advance or an Optional Currency Advance, a notice of Borrowing shall be irrevocable and the Company shall be obliged to accept the Advance requested. If notwithstanding the notice of Borrowing, the Advance is not disbursed to the Company on the date specified in such notice by reason of any of the conditions set forth in Article III not having been satisfied, the Company shall indemnify and hold harmless each Bank, by payment in Dollars or the currency specified in the relevant notice of Borrowing as the Agent shall stipulate immediately upon demand, from and against any losses, costs and expenses (including reasonable legal expenses) which it has sustained or incurred as a consequence of the Advance not being advanced on such date, including (but not limited to) all losses, premiums and penalties incurred in liquidating or reemploying deposits made by third parties or funds acquired or arranged to effect or maintain the Advance or any part thereof. The certificate of a Bank, signed by an authorized officer, as to the amount of any losses, costs or expenses payable to it under this Section 2.02(e)(i) shall, in the absence of manifest error, be conclusive and binding upon the Company. (ii) Subject to Sections 2.16 and 2.17, the Agent shall promptly confirm by telecopy or telex to the Company that Eurodollars or the Optional Currency requested by the Company is available and notify the Company of the sum in the relevant Optional Currency which will represent the Optional Currency Advance to be made available to the Company during the Interest Period to which the notice of Borrowing relates. (iii) If Eurodollars or the Optional Currency requested by the Company is not available to any Bank, such Bank shall promptly so notify the Company and the Agent and the Bank shall consult with the Company and the Agent as to the currency in which the Advance is to be disbursed, provided, however, that in the case of renewal of an Advance, the provisions of Section 2.05 shall apply. 2.03. Evidence of Credit Extensions. (a) The total of each Bank's Advances shall be evidenced by a Committed Note, executed by the Company, payable to the order of such Bank in the amount of its Commitment, dated the Closing Date and providing for the payment of principal and interest in accordance with the terms of this Agreement. Each Bank's Bid Loans shall be evidenced by a Competitive Bid Note, executed by the Company, payable to the order of such Bank and providing for the payment of principal and interest on Competitive Bid Loans in accordance with the terms of this Agreement. Each Bank shall record Advances and Bid Loans and principal payments thereof on the grid attached thereto or, at the option of each Bank, in its records, and the Bank's record thereof shall be conclusive absent manifest error. Notwithstanding the foregoing, the failure to make, or an error in making, a notation with respect to any Advance or Bid Loan shall not limit or otherwise affect the obligation of the Company hereunder or under any Note. (b) Each Bank's proportionate interest in each Borrowing and each payment by the Company to such Bank under this Agreement and the Notes shall be made to the Agent for the account of such Bank. Each Bank may designate any of its branches as its Eurodollar Lending Branch or Optional Currency Lending Branch for purposes of this Agreement. By written notice to the Agent and the Company, a Bank may change the designation of any of its Lending Branches. All payments to the Agent shall be made at the locations specified on Schedule 1 hereto with respect to the relevant currency. -82- 83 2.04. Computation of and Payment of Interest. (a) The outstanding principal balance of each Advance shall bear interest to but excluding the last day of the Interest Period therefor at a rate per annum equal to the Base Rate selected by the Company plus the Applicable Margin set forth below for each Base Rate, which corresponds to the lower of the most recently published final Standard & Poor's or Moody's rating for the Company's senior long-term unsecured public debt (without credit enhancement) in effect four (4) Banking Days before the applicable date of Borrowing: Reference LIBOR CD Rate Rate Rate --------- ----- ------- Equal to or Better than BBB and Baa2 0% .25% .375% Equal to or Better than BBB- and Baa3 0% .35% .475% Equal to or Better than BB+ and Ba1 0% .50% .625% Equal to or Better than BB and Ba2 0% .625% .750% Lower than BB or Ba2 0% 1.000% 1.125% (b) If no senior long-term unsecured public debt rating (without credit enhancement) for the Company from Standard & Poor's or Moody's is in effect at the relevant time, the outstanding principal amount of each Advance shall bear interest as set forth in the bottom row in subclause (a) above. (c) The Company shall pay interest on the principal amount of each Advance and Bid Loan on the Interest Payment Date relating to such Advance and Bid Loan and, with respect to each Advance or Bid Loan having an Interest Period in excess of three (3) months or ninety (90) days, as the case may be, the Company shall also pay interest on the Banking Day falling three (3) months or ninety (90) days, respectively, after the Borrowing date. Interest on any Optional Currency Advance shall be calculated and paid in the relevant Optional Currency. 2.05. Payment of Principal. The Company will repay Advances to the Agent for the account of each Bank and in the currency of such Advances on the last day of the Interest Period for such Advances; provided, however, that, if a Borrowing is made on an Interest Payment Date for Advances being repaid, the Company may pay to the Agent for the account of the Banks only the amount by which the repayment of maturing Advances exceeds the amount reborrowed, and the Agent and each Bank shall apply the amount reborrowed to repay the maturing Advances, disbursing to the Company only any excess proceeds. 2.06. Notification of LIBOR for Eurodollar Advances. In the case of Eurodollar Advances, the Agent will notify each Bank of LIBOR promptly upon determination of such interest rate. Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining LIBOR with respect to Eurodollar Advances. -83- 84 2.07. Facility Fee. (a) For the period from December 22, 1995 to but excluding the Termination Date, the Company shall pay to the Agent for the account of the Banks a facility fee at a rate per annum equal to the percentage set forth below of the Aggregate Commitment for the lower of the most recently published final Standard & Poor's or Moody's rating of the Company's senior long-term unsecured public debt (without credit enhancement) in effect on the last day of the then ending fiscal quarter of the Company. The facility fee shall be due quarterly in arrears, and each payment shall be made within five (5) days following the end of each calendar quarter, and the last payment shall be due and paid on the Termination Date. The applicable rate shall be the rate set forth below: Equal to or Equal to or Equal to or Equal to or Better than Better than Better than Better than Lower than BBB and Baa2 BBB- and Baa3 BB+ and Ba1 BB and Ba2 BB or Ba2 ------------ ------------- ----------- ----------- ---------- .15% .20% .25% .25% .375% (b) If no senior long-term unsecured public debt rating (without credit enhancement) for the Company from Standard & Poor's or Moody's is in effect at the relevant time, the facility fee shall be the amount set forth in the furthest right-hand column in sub-clause (a) above. 2.08. Agent's and Co-Agent's Fees. The Company shall pay to the Agent and the Co-Agent agency fees, administration fees and such other fees in such amounts and at such times as may be agreed upon by the Company and the Agent and the Company and the Co-Agent in writing from time to time. 2.09. Computations of Interest and Fees; Banking Day. (a) All computations of interest and commissions under this Agreement shall be made on the basis of (i) a year of three hundred sixty-five (365) or three hundred sixty-six (366), as the case may be, days and actual days elapsed with respect to Reference Rate Advances; and (ii) a year of three hundred sixty (360) days and actual days elapsed with respect to Fixed Rate Advances, Optional Currency Advances, Absolute Rate Loans and LIBOR Loans. Interest shall accrue on any principal balance outstanding from and including the date of a Borrowing to but excluding the date on which such principal balance is repaid. (b) All computation of fees under this Agreement shall be made on the basis of a year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may be, and actual days elapsed. 2.10. Late Payment; Date of Receipt of Notices. (a) If any sum of principal or, to the extent permitted by law, interest in respect of any Borrowing is not paid when due, whether by acceleration or otherwise, the Company will, on demand, pay interest thereon from its due date until paid in full at a rate per annum equal to two percent (2%) in excess of the sum of the Reference Rate and the Applicable Margin. (b) All notices given by the Company to the Agent and received by the Agent after -84- 85 (i) 10:00 a.m., Chicago time, on a Banking Day in respect of Reference Rate Advances, (ii) 10:00 a.m., Chicago time, on a Banking Day, in respect of Fixed Rate Advances or Optional Currency Advances, and (iii) 10:00 a.m., Chicago time, on a Banking Day, in respect of LIBOR Loans or Absolute Rate Loans, shall be deemed received on the next Banking Day. 2.11. Method of Payment; Mistakes. (a) Each payment of principal, interest and other sums due under this Agreement shall be made without set-off or counterclaim in Dollars or the relevant Optional Currency in immediately available funds (or such other funds having similar availability as the Agent may reasonably require) on a Banking Day not later than 12:00 noon, Chicago time. All sums received after such time shall be deemed received on the next Banking Day. Any payment due on a day that is not a Banking Day shall be made on the next Banking Day, subject to the practices of the London interbank market. All payments to the Agent shall be made at the locations specified on Schedule 1 hereto with respect to the relevant currency. (b) Payment of all sums under this Agreement shall be made by the Company to the Agent for the account of the Banks, and the Agent shall promptly distribute to each Bank its share of such payments by wire transfer of immediately available funds. (c) Unless the Agent shall have been notified by telephone (confirmed in writing, by telex or telecopy), by any Bank prior to a Borrowing date, that such Bank will not make available to the Agent such Bank's pro rata share of such Borrowing or drawing under a Facility Letter of Credit, the Agent may (but shall not be required to) assume that such Bank has made such amount available to the Agent and, in reliance thereon, may make available to the Company or the Issuer a corresponding amount. If such Bank makes its pro rata share of a Borrowing or drawing under a Facility Letter of Credit available to the Agent after a Borrowing date, such Bank shall pay to the Agent on demand an amount equal to the product of (i) the daily average Federal Funds Rate from and including the Borrowing date to but excluding the date such Bank's pro rata share of the Borrowing or drawing under a Facility Letter of Credit was made available to the Agent (the "Out of Funds Period") multiplied by (ii) an amount equal to such Bank's pro rata share of the Borrowing or drawing under a Facility Letter of Credit multiplied by (iii) the number of days in the Out of Funds Period. A certificate signed by an authorized officer of the Agent submitted to any Bank with respect to any amounts owing under this subsection (c) shall be conclusive in the absence of manifest error. If such amount is not in fact made available to the Agent by such Bank within one (1) Banking Day after a Borrowing date, the Agent shall be entitled to recover such amount, with interest thereon at the rate per annum then applicable to such Borrowing or drawing under a Facility Letter of Credit, on demand from the Company, without prejudice to the Agent's and the Company's rights against such defaulting Bank. (d) Unless the Agent shall have been notified by telephone (confirmed in writing or by telex or telecopy) by the Company, prior to any date on which a payment is due hereunder, under the Notes or on a Facility Letter of Credit, that the Company will not make the required payment on such date, the Agent may (but shall not be required to) assume that the Company will make such payment to the Agent and, in reliance upon -85- 86 such assumption, may make available to each Bank the amount due to it on such date. If such amount is not in fact paid to the Agent by the Company within one (1) Banking Day after such payment is due, the Agent shall be entitled to recover from each Bank the amount paid to it by the Agent, together with interest thereon in the amount equal to the product of (i) the daily average Federal Funds Rate from and including the payment date to but excluding the date the payment was made available to the Agent (the "Out of Funds Period") multiplied by (ii) an amount equal to such Bank's pro rata share of the total amount paid by the Agent multiplied by (iii) the number of days in the Out of Funds Period. A certificate signed by an authorized officer of the Agent submitted to any Bank with respect to any amounts owing under this subsection (d) shall be conclusive in the absence of manifest error. 2.12. Optional Prepayment; Funding Losses on Any Prepayment. (a) The Company shall not prepay all or any part of the Bid Facility. The Company may, without premium or penalty, at any time prepay all or any part of the Revolving Credit Facility as follows, together with accrued and unpaid interest on the amount prepaid to but excluding the date of payment: (i) in a minimum amount of Five Million Dollars ($5,000,000) and upon written notice received by the Agent at least one (1) Banking Day prior to the date of payment with respect to Reference Rate Advances; (ii) in a minimum amount of Ten Million Dollars ($10,000,000) and upon written notice received by the Agent at least two (2) Banking Days prior to the date of payment with respect to CD Rate Advances; and (iii) in a minimum amount of Ten Million Dollars ($10,000,000) (or the Equivalent Amount thereof in an Optional Currency) and upon written notice received by the Agent at least three (3) Banking Days prior to the date of payment with respect to Eurodollar Advances and Optional Currency Advances. (b) Notwithstanding Section 2.12(a), if the Company repays or prepays Bid Loans, Optional Currency Advances or Fixed Rate Advances on a date other than the last day of an Interest Period, the Company shall pay, on demand by each Bank, such amount (as determined by such Bank) as is required to compensate such Bank for any additional losses, costs or expenses which such Bank may reasonably incur as a result of such payment, including, without limitation, any loss, costs or expense (including a loss of profit) incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Bank to fund or maintain such Bid Loan, Optional Currency Advance or Fixed Rate Advance. A Bank's written statement to the Company, signed by an authorized officer, of the amount owed in respect of this subsection shall be conclusive evidence, absent manifest error, of the amount to be paid. 2.13. Reduction or Termination of Commitments. Upon at least three (3) Banking Days' notice to the Agent and on the last day of an Interest Period, the Company may reduce the Commitments from time to time in whole or in part in an aggregate amount not less than Ten Million Dollars ($10,000,000) and integral multiples of One Million Dollars ($1,000,000) in excess thereof or may terminate the Commitments, and thereafter, if the Commitments are reduced, the computation of any facility fees shall be based upon such reduced Commitments; provided, however, that the Commitments may not at any time be reduced by the Company if the reduced Commitments would be less than the amount outstanding hereunder, under the -86- 87 Notes and the aggregate Facility Letter of Credit Obligations for all Banks on the date of reduction. Any optional reduction of a portion of the Commitments or termination shall not be reinstated. 2.14. Taxes. (a) All payments or reimbursements under this Agreement and any instrument or agreement required hereunder shall be made free and clear of and without deduction for any taxes, fees or other charges of any nature whatsoever imposed by any taxing authorities. (b) The Company agrees to pay on behalf of each Bank directly to the appropriate Governmental Authority, or to reimburse each Bank for the cost of, any or all taxes or other duties which may be imposed by any Governmental Authority with respect to the Credit, except such taxes (including income taxes or franchise taxes of any taxing jurisdiction) as are imposed on or measured by each Bank's net income or receipts. Each Bank which is organized outside the United States shall deliver to the Company such certificates, documents, or other evidence as the Company may reasonably require from time to time as are necessary to establish that such Bank is not subject to withholding under Section 1441 or 1442 of the Code, or comparable successor provisions, because payments of interest to such Bank are effectively connected with the conduct of such Bank of a trade or business in the United States or exempt from United States tax under provision of an applicable tax treaty. (c) If the Company is legally prohibited from complying with subparagraph (a) or (b), payments due to any such Bank under this Agreement and any instrument or agreement required hereunder shall be increased so that, after provisions for taxes and all taxes on such increase, the amounts received by such Bank will be equal to the amounts required under this Agreement and any instrument or agreement required hereunder if no taxes were due on such payments. (d) The Company shall confirm that all such taxes or duties have been paid by sending official tax receipts, or notarized copies thereof, to the Agent within thirty (30) days after the due date for each payment of any such tax or duty. (e) Each Bank will use its best efforts to notify the Company of any taxes subject to this provision of which it has knowledge. 2.15. Reserves, Etc. (a) The Company shall reimburse or compensate each Bank for all costs incurred, losses suffered (including lost profit) or payments made by such Bank which are applied or allocated by such Bank to its Eurodollar Advances, Optional Currency Advances, LIBOR Loans, its Commitment hereunder or the Facility Letters of Credit (all as determined by such Bank in good faith and in its sole and absolute discretion) by reason of: (i) any and all present or future reserve, deposit or similar requirements against (or against any class of or change in or in the amount of) assets or liabilities of such Bank; or (ii) compliance by such Bank with any directive, requirement or request from any regulatory authority, whether or not having the force of law. -87- 88 (b) Capital Adequacy. If, after the date hereof, any Bank shall have determined that the adoption of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Lending Branch) with any direction, requirement, or request regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, affects or would affect the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank and such Bank (taking into consideration such Bank's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of such Bank's obligations under this Agreement, then, upon demand by such Bank, the Company shall immediately pay to such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank for such increase. (c) Payment of such sum pursuant to Section 2.15(a) or (b) shall be made by the Company to any Bank making demand hereunder not later than ten (10) days after any such demand is made. A certificate of any Bank, signed by an authorized officer claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it and explaining the manner in which such amount was determined shall be conclusive evidence of the amount to be paid, absent manifest error. Demand for payment of any amount pursuant to Section 2.15(a) shall be made within thirty (30) days after the end of the Interest Period for the Advance or Bid Loan against which such cost, loss or payment is incurred. Payment shall not be demanded by any Bank pursuant to Section 2.15(b) for any portion of any period prior to forty-five (45) days before the date of such demand for which such Bank's capital is required to be increased. (d) At any time and from time to time if the Company shall receive a demand or request for payment from a Bank under Section 2.15(b), the Company may elect to terminate or replace any such Bank and thereby terminate the rights and obligations of such Bank, under this Agreement by doing any one of the following within forty-five (45) days of receipt of the demand or request: (i) the Company may, provided no Default or Event of Default then exists and upon three Banking Days prior notice to such Bank (with a copy to the Agent), and if such notice is given the Company shall, prepay in full all Advances (if any) and Bid Loans then owing to such Bank together with accrued interest thereon and all fees and other amounts payable to such Bank by the Company hereunder (including but not limited to any increased costs or additional amounts and any taxes, incurred by such Bank prior to the effective date of such prepayment) and terminate the Commitment of such Bank in full. If the Commitment of any Bank shall be so terminated, the Company may (without the consent of, but upon notice to, the Agent and the other Banks), request another Bank or Banks or designate another bank to replace such Bank and to assume all or part of the terminated Commitment pursuant to documentation which shall be reasonably satisfactory to the Agent and under which the assuming bank shall undertake, to the extent of the portion of the terminated Commitment assumed by it, to assume the rights and undertake the obligations of a Bank hereunder as though the assuming bank had initially been a party hereto. -88- 89 (ii) The Company may request such Bank (with a copy to the Agent) to, and such Bank will, if requested by the Company, unless a Default or an Event of Default shall have occurred and shall be continuing, assign to one or more financial institutions in accordance with Section 9.04 (excluding, however, the 20% retention requirement in Section 9.04(a)) all Advances and Bid Loans then owing to such Bank and all rights and obligations hereunder, provided that (A) each such assignment shall be either an assignment of all of the rights and obligations of the assigning Bank under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or assignments which together cover all of the rights and obligations of the assigning Bank under this Agreement, and (B) no Bank shall be obligated to make any such assignment as a result of a demand by the Company pursuant to this Section 2.15(d) unless and until such Bank shall have received one or more payments from either the Company or one or more assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances and Bid Loans owing to such Bank, together with accrued interest thereon to the date of payment of such principal amount and all fees and other amounts payable to such Bank under this Agreement (including but not limited to any increased costs or additional amounts and any taxes, incurred by such Bank prior to the effective date of such assignment and any reasonable costs, expenses and attorneys' fees (including without limitation the reasonable allocated cost of staff counsel) incurred in connection with making such assignment). Without prejudice to the survival of any other agreement of the Company hereunder, the agreements of the Company contained in Sections 2.10, 2.12, 2.14, 2.15 and 2.18 shall survive for the benefit of any Bank being replaced under this Section 2.15(d) with respect to the time prior to such replacement. 2.16. Illegality. (a) If at any time any Bank, in its sole and absolute discretion, determines that any change in applicable law or regulation or in the interpretation thereof makes it unlawful for such Bank to make or continue its portion of the Advances or any Bid Loan bearing interest calculated with reference to LIBOR, then such Bank shall promptly give notice (signed by an authorized officer) thereof to the Company and the Agent and, upon the giving of such notice, such Bank's obligation to make such Advances or Bid Loans, as the case may be, shall terminate and thereafter only Reference Rate Advances or CD Rate Advances shall be available from such Bank. If designating a different Lending Branch with respect to such Advances or Bid Loans, as the case may be, would obviate the need to give such notice, any affected Bank shall so designate, so long as such designation shall not be illegal or otherwise disadvantageous to such Bank. (b) Upon receipt of such notice, the Company shall repay in full the then outstanding principal amount of each affected Advance or Bid Loan bearing interest with reference to LIBOR, together with interest thereon and any amounts payable under Section 2.12(b) either (i) on the last day of the then current Interest Period applicable to such Advance or Bid Loan if such Bank may lawfully continue to maintain and fund such Advance or Bid Loan to such day or (ii) immediately if such Bank may not lawfully continue to maintain and fund such Advance or Bid Loan to such day. On the date of any prepayment pursuant to clause (ii), the Company shall borrow a Reference Rate Advance, or at the Company's option, subject to the requirements of Section 2.02, a CD Rate Advance from such Bank in an equal principal amount for an Interest Period having the same number of days remaining in the then current Eurodollar Advance Interest Period, Optional Currency Advance Interest Period or -89- 90 LIBOR Loan Interest Period, as the case may be. (c) If the condition or circumstance causing the giving of notice ceases to exist, the Agent or such Bank shall give notice thereof to the Company, and the Company may then borrow Advances or Bid Loans bearing interest calculated with reference to LIBOR, as the case may be, in accordance with the terms hereof. 2.17. Unavailability. If the Agent is advised (a) by the Majority Banks that deposits in Dollars or the relevant Optional Currency in the amount of the Advances to be made by the Banks are not being offered to the Majority Banks in the relevant market for the Interest Period requested by the Company, or (b) by Banks having Commitments equal to at least 50.1% of the Aggregate Commitments that the CD Rate or LIBOR, as the case may be, will not adequately and fairly reflect the cost to such Banks of maintaining or funding their Fixed Rate Advances or Optional Currency Advances for the requested Interest Period, the Agent shall promptly give notice thereof to the Company and the Banks, and the obligations of the Banks to make Fixed Rate Advances, or Optional Currency Advances, as the case may be, shall be suspended until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist. If the circumstances causing such suspension shall cease, the Agent shall give prompt notice thereof to the Company, and the Company may then borrow Fixed Rate Advances or Optional Currency Advances, as the case may be, in accordance with the terms of this Agreement. 2.18. The Bid Facility. (a) Bid Loans. From time to time, from the Closing Date to but excluding the Termination Date, and provided that both Standard & Poor's and Moody's ratings for the Company's senior long-term unsecured public debt (without credit enhancement) is at least equal to BB and Ba2, respectively, each Bank severally agrees to lend to the Company Absolute Rate Loans and LIBOR Loans pursuant to bids which have been made by such Bank pursuant to Section 2.18(c) and accepted by the Company pursuant to Section 2.18(d); provided, however, that the total amount of Advances for all Banks (after determining the Equivalent Amount of all Optional Currency Advances), outstanding Facility Letter of Credit Obligations and Bid Loans for all Banks outstanding under this Agreement may not exceed at any time the Aggregate Commitment. Neither the Agent, the Co-Agent nor any Bank (other than the Bank who has agreed to fund such Bid Loan) will be liable for the failure of a Bank to fund a Bid Loan such Bank agrees to make to the Company. Each Bank may, but shall have no obligation to, make a bid in response to a request for bids by the Company pursuant to Section 2.18(b), which may exceed such Bank's Commitment but not the maximum amount available under the Credit as set forth above. Subject to the requirements of Section 2.18(d), the Company shall have no obligation to accept any of the bids made pursuant to a request for bids. (b) Requests for Bids. The Company may request the Bid Agent to solicit bids from the Banks for one or more Bid Loans by a telephone notice received not later than 10:00 a.m., Chicago time, one (1) Banking Day prior to the Value Date for Absolute Rate Loans and not later than 12:00 noon, Chicago time, three (3) Banking Days prior to the Value Date for LIBOR Loans in Dollars and not later than 12:00 noon, Chicago time, six (6) Banking Days prior to the Value Date for LIBOR Loans in Optional Currencies. Each such telephone request shall -90- 91 be followed promptly by a request in writing, by telecopy or by telex in the form of Schedule 6 hereto and shall become irrevocable upon the first notice of such request given by the Bid Agent to a Bank. The Company may not request the Bid Agent to solicit bids within five (5) Banking Days of any other request. Each request shall specify: (i) the Value Date for the Bid Loans, which shall be a Banking Day and the same day for all Bid Loans requested in such notice; (ii) the principal amount of each Borrowing of Bid Loans under this Section 2.18(b)(ii), which shall not be less than Ten Million Dollars ($10,000,000) and shall be in an integral multiple of One Million Dollars ($1,000,000) in excess thereof; (iii) whether the Bid Loans are to be Absolute Rate Loans or LIBOR Loans (but only one interest rate option may be specified in each request); and (iv) if the Bid Loans are to be Absolute Rate Loans, the Interest Period for each such Loan, or if the Loans are to be LIBOR Loans, the Interest Period for each such Bid Loan. The Bid Agent shall promptly notify the Banks by telephone of each request for bids received from the Company pursuant to this Section 2.18. Each such telephone notice from the Bid Agent shall be followed promptly by notice in writing, by telecopy or by telex in the form of Schedule 6 received from the Company. (c) Bids. Each Bank shall notify the Bid Agent of the Bid Loans for which such Bank is bidding by an irrevocable notice in writing, by telecopy or by telex in the form of Schedule 7 hereto received by the Bid Agent not later than 9:00 a.m., Chicago time, on the Value Date for Absolute Rate Loans, not later than 1:00 p.m., Chicago time, three (3) Banking Days prior to the Value Date for LIBOR Loans in Dollars and not later than 1:00 p.m., Chicago time, three (3) Banking Days prior to the Value Date for LIBOR Loans in Optional Currencies; provided that the Bid Agent and any Bank may bid on not more than three (3) Bid Loans in response to any one request by the Company for bids; provided further that bids by the Bid Agent must be submitted to the Company not later than 8:45 a.m., Chicago time, on the Value Date for Absolute Rate Loans and not later than 12:45 p.m., Chicago time, three (3) Banking Days prior to the Value Date for LIBOR Loans in Dollars and Optional Currencies. Each notice shall specify: (i) the principal amount such Bank is bidding for each Bid Loan, which shall not be less than Five Million Dollars ($5,000,000) and shall be an integral multiple of One Million Dollars ($1,000,000) in excess thereof; (ii) for Absolute Rate Loans, the Absolute Rate for each such Bid Loan, and for LIBOR Loans, the Margin for each such Bid Loan (but the interest rate option for all Bid Loans covered by such bid must be the same as specified in the Company's request for bids); and (iii) for Absolute Rate Loans, the Interest Period for each such Bid Loan, and for LIBOR Loans, the Interest Period for each such Bid Loan. The Bid Agent shall notify the Company by telephone of the bid received from each Bank pursuant to this Section 2.18(c) not later than 9:30 a.m., Chicago time, on the date such bid is received by the Bid Agent for Absolute Rate Loans and not later than 1:30 p.m., Chicago time, on -91- 92 the date such bid is received by the Bid Agent for LIBOR Loans in Dollars and Optional Currencies. (d) Acceptance of Bids. If the Company wishes to accept a bid or bids, the Company shall by irrevocable telephone notice received by the Bid Agent not later than 10:00 a.m., Chicago time, on the Value Date for Absolute Rate Loans and not later than 2:00 p.m, Chicago time, three (3) Banking Days prior to the Value Date for LIBOR Loans, notify the Agent and the Bid Agent of the bid or bids it accepts, which telephone notice shall be followed promptly by a notice in writing, by telecopy or by telex in the form of Schedule 8 hereto. The Bid Agent shall promptly notify the Banks by telephone of the amount of the bids accepted and of the rates at which bids have been accepted. The acceptance of bids is subject to the following requirements: (i) the Company may accept one or more of the Bid Loans specified in a bid (but not more than the aggregate amount requested by the Company), and may accept a Bid Loan in an amount less than the amount specified in the bid for such Bid Loan, provided that, subject to the provisions of Section 2.18(d)(iii) and (iv), each Bid Loan accepted shall be in an amount not less than Five Million Dollars ($5,000,000) and an integral multiple of One Million Dollars ($1,000,000) in excess thereof; (ii) the acceptance of bids may only be made on the basis of ascending interest rates for Bid Loans with the same Interest Period; (iii) if bids are made by two or more Banks for Bid Loans with the same interest rates for the same Interest Period and for a greater aggregate amount than the Company wishes to borrow, the Company shall allocate its acceptance among such bids as nearly as possible (in amounts of One Million Dollars ($1,000,000) or integral multiples thereof) in proportion to the bids made by each Bank; and (iv) the acceptance of bids is subject to the maximum limits for borrowing under Sections 2.01(a) and 2.18(a) (as reduced pursuant to Section 2.13), and if bids are made by two or more Banks for a greater aggregate amount than permitted by such limits, the Company shall allocate its acceptance among such bids in proportion to the bid made by each such Bank so that the total amounts of Advances and Bid Loans do not exceed such limits. (e) Bid Agent's Fee. The Company shall pay to the Bid Agent for the account and sole use and benefit of the Bid Agent a fee of $200 per Bank (excluding the Agent) per auction. (f) Resignation of the Bid Agent. The Bid Agent may resign at any time by giving written notice to the Agent, the Banks and the Company. Upon any such resignation by the Bid Agent, the Majority Banks with the prior written consent of the Company, which shall not be unreasonably withheld, shall have the right to appoint a successor from among the Banks party hereto. If no successor shall have accepted such appointment within forty-five (45) days after the retiring Bid Agent's giving of notice of resignation, the retiring Bid Agent may, on behalf of the Banks, appoint a successor thereto with the prior written consent of the Company, which shall not be unreasonably withheld and such successor Bid Agent shall be a bank or trust company organized under the laws of the United States or any state thereof having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance by such successor of its appointment hereunder, such successor shall succeed to and become vested with all the rights and -92- 93 obligations of the retiring Bid Agent, and the retiring Bid Agent shall be discharged from its obligations under this Agreement except with respect to any liability with respect to a breach of any obligation hereunder prior to such resignation. The provisions of this Agreement shall inure to the benefit of the retiring Bid Agent as to any actions taken or omitted to be taken by it while it held such position under this Agreement. 2.19. Telephone Notice, Indemnity. The Company shall protect the Banks, the Bid Agent, the Agent and the Co-Agent and hold them harmless from and not liable for any and all loss, damage, claim, or expense (including, without limitation, reasonable attorneys' fees and the reasonable allocated cost of staff counsel) incurred by the Banks, the Bid Agent, the Co-Agent and the Agent in connection with or in relation to any act or any failure to act upon telephone instructions received by any Bank, the Bid Agent, the Co-Agent or the Agent from the Company or any persons who has identified himself as an authorized officer of the Company, whether or not the instructions are actually given by an authorized officer of the Company; provided, however, that such indemnity shall not, as to the Bid Agent, the Agent, the Co-Agent or any Bank, apply to any such losses, claims, damages, liabilities or related expenses arising from the gross negligence or willful misconduct of the party to be indemnified. If such written notice conflicts with the telephonic notice, the Agent, the Co-Agent, the Banks and the Bid Agent shall be entitled to rely on the telephonic notice. 2.20. Facility Letters of Credit. Subject to the terms and conditions of this Agreement, the Company may obtain Facility Letters of Credit, from time to time during the period commencing on the date hereof and ending on the Banking Day prior to the Termination Date. The Company may request any Bank to issue a Facility Letter of Credit and such Bank may, but is not required to, issue a Facility Letter of Credit. If no other Bank is willing to issue a Facility Letter of Credit, First Chicago shall issue such Facility Letter of Credit. Any Bank issuing a Facility Letter of Credit shall be an Issuer. No Bank shall be responsible for issuing a Facility Letter of Credit that First Chicago or another Bank has agreed to issue if First Chicago or such other Bank fails to issue such Facility Letter of Credit. Nothing herein contained shall prohibit the Company from obtaining letters of credit outside of this Agreement. (a) Types and Amounts. No Issuer (including First Chicago) shall: (i) issue any Facility Letter of Credit if the aggregate maximum amount then available for drawing under Facility Letters of Credit, after giving effect to the Facility Letter of Credit requested hereunder, shall exceed any limit imposed by law or regulation upon the Issuer; (ii) issue any Facility Letter of Credit if, after giving effect thereto, the sum of (a) the Facility Letter of Credit Obligations and (b) the aggregate unpaid principal balance of the Advances plus the Bid Loans would exceed the Aggregate Commitment; (iii) issue any Facility Letter of Credit which has an expiration date (a) later than twelve months after the Issuance Date thereof or (b) after the Termination Date, provided that in no case shall any Facility Letter of Credit expire after the Termination Date; or (iv) issue any Facility Letter of Credit if the Facility Letter of Credit Obligations, after giving effect to the Facility Letter of Credit requested hereunder, shall exceed $40,000,000. -93- 94 (b) Conditions. In addition to being subject to the satisfaction of the conditions contained in Article III, the obligation of the Issuer to issue any Facility Letter of Credit is subject to the satisfaction in full of the following conditions: (i) the Company shall have delivered to the Issuer, with a copy to the Agent, at such times and in such manner as the Issuer may reasonably prescribe such documents and materials as may be required pursuant to the terms of the proposed Facility Letter of Credit and the proposed Facility Letter of Credit shall be reasonably satisfactory to the Issuer as to form and content; and (ii) as of the Issuance Date, no order, judgment or decree of any court, arbitrator or Governmental Authority shall purport by its terms to enjoin or restrain the Issuer from issuing the proposed Facility Letter of Credit and no law, rule or regulation applicable to the Issuer and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuer shall prohibit or request that the Issuer refrain from the issuance of Facility Letters of Credit generally or the issuance of such proposed Facility Letter of Credit in particular. (c) Procedure for Issuance of Facility Letters of Credit. (i) The Company shall give the Issuer and the Agent three (3) Banking Days' prior written notice of any requested issuance of a Facility Letter of Credit (except that, in lieu of such written notice, the Company may give the Issuer (x) notice of such request by tested telex or other tested arrangement satisfactory to the Issuer or (y) telephonic notice of such request if confirmed in writing by delivery to the Issuer (i) immediately (A) of a telecopy of the written notice required hereunder which has been signed by an authorized signatory of the Company or (B) of a telex containing all information required to be contained in such written notice and (ii) promptly (but in no event later than the requested time of issuance) of a copy of the written notice required hereunder containing the original signature of an authorized signatory of the Company). Each such notice (each a "Letter of Credit Request") shall be irrevocable once the relevant Facility Letter of Credit is issued and shall specify the stated amount of the Facility Letter of Credit requested, the Issuance Date (which day shall be a Banking Day) of such requested Facility Letter of Credit, the date on which such requested Facility Letter of Credit is to expire (which date shall be a Banking Day and shall in no event be later than the Termination Date), the purpose for which such Facility Letter of Credit is to be issued, and the Person for whose benefit the requested Facility Letter of Credit is to be issued. Promptly after receipt thereof, the Agent shall notify each Bank of the contents of each Letter of Credit Request. At the time such Letter of Credit Request is made, the Company shall also provide the Issuer and the Agent with a copy of the form of the Facility Letter of Credit it is requesting be issued. Such Letter of Credit Request, to be effective, must be received by the Issuer and the Agent not later than 2:00 p.m. (Chicago time) on the last Banking Day on which notice can be given under this Section 2.20(c). (ii) Subject to the terms and conditions of this Section 2.20(c) and provided that the applicable conditions set forth in Article III and Section 2.20(b) have been satisfied, the Issuer shall, on the requested Issuance Date, issue the requested Facility Letter of Credit for the account of the Company in accordance with the Issuer's usual and customary business practices. -94- 95 (iii) An Issuer shall not amend, renew, extend, or permit an extension of any Facility Letter of Credit unless the requirements of this Section 2.20(c) are met as if a new Facility Letter of Credit were being requested and issued. (iv) On and after the Closing Date, all Existing Letters of Credit shall be deemed to be Facility Letters of Credit and subject to the terms of this Agreement as fully and completely as if such Letters of Credit had been issued hereunder as Facility Letters of Credit. (d) Reimbursement Obligations. (i) The Issuer shall promptly notify the Company and the Agent and each Bank of any draw under a Facility Letter of Credit. The Company shall reimburse the Agent for the account of the Issuer, in immediately available funds, for draws under a Facility Letter of Credit no later than the Banking Day next succeeding the date of the payment by the Issuer. (ii) Any Reimbursement Obligation with respect to any Facility Letter of Credit shall bear interest from the date of the relevant draws under the relevant Facility Letter of Credit at the interest rate for Borrowings not paid at maturity as calculated in accordance with Section 2.10. (iii) Any action taken or omitted to be taken by the Issuer under or in connection with any Facility Letter of Credit, if taken or omitted in the absence of willful misconduct or gross negligence, shall not put the Issuer under any resulting liability to any Bank or, assuming that the Issuer has complied with the procedures specified in Section 2.20(c) and such Bank has not given a notice contemplated by Section 2.20(e) that continues in full force and effect, relieve such Bank of its obligations hereunder to the Issuer. In determining whether to pay under any Facility Letter of Credit, the Issuer shall have no obligation relative to the Banks, the Agent or the Company other than to confirm that any documents required to be delivered under such Facility Letter of Credit appear to comply on their face with the requirements of such Facility Letter of Credit. (e) Participation; Receipt of Payments. (i) Immediately upon issuance or extension or renewal by an Issuer of any Facility Letter of Credit in accordance with the procedures set forth in Section 2.20(c), and for all Existing Letters of Credit, each Bank shall be deemed to have irrevocably and unconditionally purchased and received from the Issuer, without recourse or warranty, an undivided interest and participation equal to its Percentage Share in such Facility Letter of Credit (including, without limitation, all obligations of the Company with respect thereto) and any security therefor or guaranty pertaining thereto, if any; provided, that a Facility Letter of Credit issued by the Issuer shall not be deemed to be a Facility Letter of Credit for purposes of this Section 2.20(e) if the Issuer and the Agent shall have received written notice from any Bank on or before one Banking Day prior to the date of its issuance of such Facility Letter of Credit that one or more of the conditions contained in Article III is not then satisfied, and, in the event the Issuer and the Agent receive such a notice, there shall be no further obligation on the part of First Chicago or any Issuer to issue any Facility Letter of Credit until such notice is withdrawn by that Bank or such condition has been effectively waived in accordance -95- 96 with the provisions of this Agreement. (ii) In the event that an Issuer makes any payment under any Facility Letter of Credit and the Company shall not have repaid such amount to the Issuer pursuant to Section 2.20(d), the Issuer shall promptly notify the Agent and each Bank of such failure, and each Bank shall promptly and unconditionally pay to the Agent for the account of the Issuer the amount of such Bank's Percentage Share of the unreimbursed amount of any such payment. The failure of any Bank to make available to the Agent, in immediately available funds, its Percentage Share of the unreimbursed amount of any such payment shall not relieve any other Bank of its obligation hereunder to make available to the Agent, in immediately available funds, its Percentage Share of the unreimbursed amount of any payment on the date such payment is to be made, but no Bank shall be responsible for the failure of any other Bank to make available to the Agent its Percentage Share of the unreimbursed amount of any payment on the date such payment is to be made. (iii) Whenever the Agent or an Issuer receives a payment on account of a Reimbursement Obligation, including any interest thereon, it shall promptly pay to each Bank which has funded its participating interest therein, in immediately available funds, an amount equal to such Bank's Percentage Share thereof. (iv) The obligations of a Bank to make payments to the Agent for the account of an Issuer with respect to a Facility Letter of Credit shall be absolute, unconditional and irrevocable, not subject to any counterclaim, set-off, qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances. (f) Payment of Reimbursement Obligations. (i) The Company agrees to pay to the Agent for the account of the Issuer the amount of all Reimbursement Obligations, interest and other amounts payable to the Issuer under or in connection with any Facility Letter of Credit immediately when due, irrespective of any claim, set-off, defense or other right which the Company or any Subsidiary may have at any time against the Issuer or any other Person, under all circumstances, including without limitation, any of the following circumstances: (A) any lack of validity or enforceability of this Agreement or any of the other documents, instruments or agreements executed by the Company in connection therewith; (B) the existence of any claim, setoff, defense or other right which the Company or any Subsidiary may have at any time against a beneficiary named in a Facility Letter of Credit or any transferee of any Facility Letter of Credit (or any Person for whom any such transferee may be acting), any Issuer, any Bank, or any other Person, whether in connection with this Agreement, any Facility Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between the Company or any Subsidiary and the beneficiary named in any Facility Letter of Credit); (C) any draft, certificate or any other document presented under the Facility Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect -96- 97 (provided any such draft, certificate or other document appeared valid on its face when presented to the Issuer); (D) the surrender or impairment of any security for the performance or observance of any of the terms of this Agreement or any of the documents, instruments or agreements executed by the Company in connection therewith; or (E) the occurrence of any Default or Event of Default. (ii) In the event any payment by the Company received by the Agent or an Issuer with respect to a Facility Letter of Credit and distributed to the Banks on account of their participations is thereafter set aside, avoided or recovered from the Agent or an Issuer in connection with any receivership, liquidation, reorganization or bankruptcy proceeding, each Bank which received such distribution shall, upon demand by the Agent, contribute to the Agent or such Issuer such Bank's Percentage Share of the amount set aside, avoided or recovered together with interest at the rate required to be paid by the Agent or such Issuer upon the amount required to be repaid by it. (g) Compensation for Facility Letters of Credit. The Company shall pay to the Agent, for the ratable account of each Bank, a Letter of Credit Fee in respect of the facility Letter of Credit then being issued in accordance with the following schedule, based on the lower of the most recently published final Standard & Poor's or Moody's rating of the Company's senior long-term unsecured public debt (without credit enhancement) in effect on the day such Facility Letter of Credit is issued. For Existing Letters of Credit, the Letter of Credit Fee will commence on the Closing Date. Promptly upon its receipt of such Letter of Credit Fee, the Agent shall promptly pay to each Bank, in immediately available funds, an amount equal to such Bank's Percentage Share thereof. Letter of Credit Fee ---------- Equal to or Better than BBB and Baa2 .25% Equal to or Better than BBB- and Baa3 .35% Equal to or Better than BB+ and Ba1 .50% Equal to or Better than BB and Ba2 .625% Lower than BB or Ba2 1.000% Any Issuer shall have the right to receive, for its own account, (i) in respect of each Facility Letter of Credit issued by it, a fee in the amount of 1/4 of 1% per annum of the maximum face amount of such Facility Letter of Credit ("Issuer's Fee"), and (ii) all of its reasonable and customary costs of issuing and servicing the Facility Letters of Credit. The Letter of Credit Fee and the Issuer's Fee shall begin to accrue on the Issuance Date or, for Existing Letters of Credit, commencing on the Closing Date, and shall be payable quarterly in arrears. -97- 98 2.21. Extension of Termination Date. The Company may, from time to time, by notice to the Agent (each such notice being an "Extension Notice") given no later than 60 days but not sooner than 90 days prior to the first and second anniversary of the Closing Date, extend the Termination Date to a date one year after the then applicable Termination Date; provided, however, that such extension shall not be effective unless all of the Banks consent to such extension by written notice to the Agent within 30 days of the Agent's receipt of the Extension Notice. Failure to respond shall be deemed a rejection of the extension request. The Agent shall notify each Bank of its receipt of an Extension Notice within two (2) Business Days after the Agent's receipt thereof. The Company may deliver only one (1) Extension Notice per year and not more than two (2) Extension Notices during the term of this Agreement. In no event may the Termination Date be extended beyond December 31, 1999. If less than 100% of the Banks consent to the proposed extension, the Commitments of the Banks shall terminate on the then effective Termination Date without giving effect to such proposed extension. ARTICLE III CONDITIONS PRECEDENT 3.01. Conditions Precedent to Closing Date. In addition to the requirements set forth in Section 3.02, the obligation of each Bank to make its first Advance or Bid Loan or the Issuer to issue any Facility Letter of Credit, as the case may be, under the Credit is subject to the condition precedent that on the Closing Date, the following shall have been delivered to the Agent, in form and substance satisfactory to the Agent and its counsel and copies in sufficient numbers for each Bank: (a) Confirmation Certificate. A certificate, certified by the Secretary or an Assistant Secretary of the Company, stating that each of the following items delivered in connection with the closing of the Existing Agreement has not been amended and is still in force and effect on the Closing Date: (i) The articles of incorporation of the Company. (ii) The by-laws of the Company. (iii) The resolution passed by the Board of Directors of the Company on July 16, 1992 authorizing the Borrowings provided for herein and the execution, delivery and performance of this Agreement, the Notes and any other instrument or agreement required hereunder. (b) Company's Incumbency Certificate. A certificate, signed by the Secretary or an Assistant Secretary of the Company and dated the Closing Date, as to the incumbency, and containing the specimen signature or signatures, of the Persons authorized to execute and deliver this Agreement, the Notes, and any other instrument or agreement required hereunder. (c) Agreement. A copy of this Agreement, duly executed by an authorized officer of the Company. (d) Notes. Committed Notes payable to the order of each Bank in the amount of such Bank's Commitment, dated the Closing Date and duly executed by an authorized officer of the Company. -98- 99 (e) No Default Certificate. A certificate, signed by the controller or chief financial officer of the Company, stating that on the Closing Date the representations and warranties contained in the Agreement are true and correct and that no Default or Event of Default has occurred and is continuing. 3.02. Conditions Precedent to Each Borrowing. The obligation of each Bank to make any Advance or Bid Loan hereunder and the obligation of an Issuer to issue any Facility Letter of Credit, including the first Advance or Bid Loan or Facility Letter of Credit, is subject to the following conditions precedent: (a) On the date of any Borrowing or issuance of any Facility Letter of Credit (other than a Refunding Borrowing), the representations and warranties contained in Article IV (other than Section 4.09 and 4.13(a)) shall be true and correct as if made in writing on that date and by making a request for such Borrowing or Facility Letter of Credit, the Company shall be deemed to have made such representations and warranties as of that date (except to the extent that any of the Schedules hereto shall have been modified by more current information furnished to the Banks in accordance with Section 5.02 or 5.03, in which event such representations and warranties shall be deemed to be made on the basis of the information contained in the modified schedules). (b) On the date of each Refunding Borrowing or renewal or extensions of any Facility Letter of Credit (including, without limitation, any automatic extensions pursuant to the terms of any such Facility Letters of Credit), the representations and warranties contained in Sections 4.01 through 4.08, 4.10 through 4.12, 4.14 and 4.16 (except as any of the Schedules hereto shall have been modified by more current information furnished to the Banks in accordance with Section 5.02 or 5.03, in which event such representations and warranties deemed to be made on the basis of the information contained in the modified schedules) herein shall also be true and correct and the Company shall be deemed to have remade such representations and warranties on each such date as if made in writing by the Company on that date. (c) The Agent or the Bid Agent shall have received from the Company the notice of Borrowing described in Section 2.02 or the bid request described in Section 2.18 or the Facility Letter of Credit Request described in Section 2.20(c), as the case may be. (d) With respect to the first Bid Loan by a Bank, an executed Competitive Bid Note payable to the order of such Bank. 3.03. Termination of Existing Agreement. The parties hereto agree that the commitments under the Existing Agreement shall terminate in their entirety and the Existing Agreement shall be amended and restated by this Agreement simultaneously with and subject to the effectiveness of this Agreement and that, the Company shall simultaneously pay all other amounts due and outstanding thereunder to but excluding the Closing Date. 3.04. Status of NBD. Upon and as of the effectiveness of this Agreement, NBD Bank, N.A.) shall cease to be a "Bank" under this Agreement. Notwithstanding the foregoing, NBD shall continue to be an Issuer entitled to the benefit of this Agreement with respect to the Existing Letter of Credit issued by NBD Bank. -99- 100 ARTICLE IV REPRESENTATIONS AND WARRANTIES The Company represents and warrants that: 4.01. The Company's Existence. The Company is a corporation duly organized and existing under the laws of the State of Delaware, with its principal place of business in Waukegan, Illinois, and is duly qualified as a foreign corporation and is properly licensed and in good standing in each jurisdiction where the failure to qualify or be licensed would have a material adverse effect on the business, properties or financial condition of the Company and its Consolidated Subsidiaries taken as a whole. 4.02. Subsidiaries' Existence. Schedule 2(b) attached hereto contains a list of all of the Company's Subsidiaries showing, as to each, the jurisdiction of incorporation and as to each class of stock of such Subsidiary, the amount issued and outstanding owned by any Person other than the Company or a Subsidiary. All of the outstanding shares of stock of each of the Subsidiaries shown on Schedule 2 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and, except for directors' qualifying shares, are owned by the Company or another Subsidiary free and clear of all Liens. Each Consolidated Subsidiary is duly organized and existing under the laws of the jurisdiction of its incorporation, and is properly licensed and in good standing in each jurisdiction in which the failure to qualify or be licensed would have a material adverse effect on the business, properties or financial condition of the Company and its Consolidated Subsidiaries taken as a whole. 4.03. Company's Powers. The execution, delivery and performance of this Agreement and any instrument or agreement required to be delivered by the Company hereunder are within the Company's corporate powers, have been duly authorized by all requisite corporate action, and are not in conflict with the terms of any charter, by-law or other organizational papers of the Company, or any instrument or agreement to which the Company is a party or by which the Company is bound or affected. 4.04. Power of Company Officers. The officers of the Company executing this Agreement, the Notes and any other certificate, instrument or agreement required to be delivered by the Company hereunder have been duly elected or appointed and were fully authorized to execute the same at the time such agreement, certificate or instrument was executed. 4.05. Government and Other Approvals. No approval, consent, exemption or other action by, or notice to or filing with, any Governmental Authority is necessary in connection with the execution, delivery or performance by the Company of this Agreement, the Notes or any other instrument or agreement required hereunder. 4.06. Compliance With Laws. There is, to the best of the Company's knowledge, no law, rule or regulation, nor is there any judgment, decree or order of any court or Governmental Authority binding on the Company which would be contravened by the execution, delivery or performance of this Agreement, the Notes or any other instrument or agreement required hereunder. 4.07. Enforceability of Agreement. This Agreement is the legal, valid and binding agreement of the Company, and the Notes when executed and delivered will be the legal, valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, and any other instrument or agreement required hereunder, when executed and -100- 101 delivered, will be similarly legal, valid, binding and enforceable against the Company. 4.08. Title to Property. The Company and its Subsidiaries have good and marketable title to their respective properties and assets free and clear of Liens except for Permitted Liens. The execution, delivery and performance of this Agreement, the Notes or any other instrument or agreement required to be delivered by the Company hereunder will not result in the creation of any Lien. Schedule 3 attached hereto is a true and correct listing of all existing material Liens on property owned by the Company and its Subsidiaries. 4.09. Litigation. There are no suits, proceedings, claims or disputes pending or, to the actual knowledge of the Company after due inquiry, threatened against or affecting the Company or any Significant Subsidiary and their respective properties, the adverse determination of which individually or in the aggregate would in the reasonable judgment of the Company materially adversely affect the Company's and its Consolidated Subsidiaries' financial condition or operations taken as a whole or impair the Company's ability to perform its obligations hereunder or under any instrument or agreement required hereunder, except as disclosed in writing on Schedule 4 hereto or otherwise disclosed to the Banks in accordance with the terms hereof. 4.10. Events of Default. No Default or Event of Default has occurred and is continuing or will result from the incurring of the obligations by the Company under this Agreement. 4.11. Investment Company Act of 1940. The Company is not, and no Affiliate of the Company is, and will by such acts as may be necessary continue not to be, an investment company within the meaning of the Investment Company Act of 1940. 4.12. Regulation U. The proceeds of the Advances, Bid Loans or Facility Letters of Credit will not be used, directly or indirectly, to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock in violation of any applicable regulation of the Board of Governors of the Federal Reserve System. 4.13. Financial Information. (a) The financial statements dated September 30, 1994 and all other information and data furnished by the Company to the Banks are materially complete and correct, and such financial statements have been prepared in accordance with GAAP and fairly present the consolidated financial condition and results of operations of the Company and its Consolidated Subsidiaries as of such date and for the period ended on such date. Neither the Company nor any Consolidated Subsidiary has any contingent obligations, liabilities for taxes or other outstanding financial obligations which are material in the aggregate, except as disclosed in such statements, information and data or on Schedule 4 or Schedule 5 hereto. (b) Since the date of the financial statements of the Company and its Consolidated Subsidiaries most recently furnished to the Banks, there has been no material adverse change in the financial condition of the Company and its Consolidated Subsidiaries sufficient to impair the Company's ability to repay the Credit in accordance with the terms hereof. -101- 102 4.14. ERISA. No fact or circumstance, including but not limited to any Reportable Event, exists in connection with any Plan of the Company or any of its Consolidated Subsidiaries which would constitute grounds for the termination of any such Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer any such Plan and which would result in the termination of a Plan and the incurrence of material liability by the Company or its Affiliates to the Plan, the PBGC, participants, beneficiaries or a trustee under Section 4049 of ERISA. For the purposes of this representation and warranty, the Company or such Consolidated Subsidiary, if not the Plan administrator, shall be deemed to have knowledge of all facts attributable to the Plan administrator designated pursuant to ERISA. 4.15. Acquisitions. The consummation of each Acquisition financed with Borrowings hereunder is in accordance with the description thereof in any information furnished by the Company to the Banks and (a) is within the Company's or Subsidiary's corporate powers, whichever is applicable, (b) has been duly authorized by all necessary corporate action, (c) requires no action by or in respect of, or filing with, any governmental body, agency or official (other than filings already made related to each such Acquisition with the Securities and Exchange Commission and filings made pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) that has not been made or taken and which is material, individually or in the aggregate, other than filings on Form 8-K, which the Company is permitted to make at a later date, and (d) will not contravene, or constitute a default under, any provision of applicable law or regulation or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or any Subsidiary, except to the extent that such failure to comply or such default would not have a material adverse effect on the business, condition, property or prospects of the Person acquired or of the Company, and will not result in the creation or imposition of any Lien on any asset of the Company or any Subsidiary, other than Permitted Liens. 4.16. Environmental Matters. (a) Except as identified in Schedule 4, to the actual knowledge of the Company after due inquiry, the operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws and all other applicable requirements concerning the protection of the environment and the health and safety of the public except where the failure to comply, when aggregated with all other conditions, failures and potential liabilities and costs under this Section 4.16, would not have a material adverse effect on the financial condition of the Company and its Consolidated Subsidiaries, taken as a whole. (b) Except as identified in Schedule 4, to the actual knowledge of the Company after due inquiry, the Company and each of its Subsidiaries has obtained or has applied for all environmental, health and safety permits which they each believe are necessary or required for its operations, and all such granted permits are in good standing, and the Company and each of its Subsidiaries are in compliance with all terms and conditions of such permits except where the failure to comply, when aggregated with all other conditions, failures and potential liabilities and costs under this Section 4.16, would not have a material adverse effect on the financial condition of the Company and its Consolidated Subsidiaries, taken as a whole. (c) Except as identified in Schedule 4, to the actual knowledge of the Company after due inquiry, the Company and each of its Subsidiaries and all of their present property or operations (as well as their past property or operations) are not subject to any material outstanding written order from or agreement with any Governmental Authority or -102- 103 other Person nor subject to any material judicial or docketed administrative proceeding, respecting (i) any environmental, health or safety law, rule or regulation; (ii) any action required to clean up, remove, treat or in any other way address Hazardous Materials in the indoor or outdoor environment; or (iii) any material Environmental Claim arising from the release or threatened release of a Hazardous Material into the environment. (d) Except as identified in Schedule 4, to the actual knowledge of the Company, there are no conditions or circumstances associated with any property of the Company or any of its Subsidiaries formerly owned and operated by the Company or any of its Subsidiaries or any of their predecessors or with the former operations, including off-site disposal practices, of the Company or its Subsidiaries or their predecessors which may give rise to an Environmental Claim which Environmental Claim would, when aggregated with all other conditions, failures and potential liabilities and costs under this Section 4.16, have a material adverse effect on the financial condition of the Company and its Consolidated Subsidiaries taken as a whole. (e) Except as identified in Schedule 4, to the actual knowledge of the Company after due inquiry (i) neither the Company nor any of its Subsidiaries has any underground storage tanks (x) that are not properly permitted or for which a permit has not been applied for under applicable Environmental Laws or (y) that are leaking or dispose of Hazardous Materials off-site and (ii) the Company and each of its Subsidiaries have substantially met all notification requirements under Title III of CERCLA and OSHA. ARTICLE V AFFIRMATIVE COVENANTS The Company covenants and agrees that so long as the Commitments shall remain available and until the full and final payment of all obligations incurred hereunder and under the Notes and expiration of all Facility Letters of Credit, it will and, with respect to Sections 5.04 through 5.08, will cause each Consolidated Subsidiary to, unless the Majority Banks waive compliance in writing: 5.01. Use of Proceeds. Use the proceeds of the Credit solely (a) for working capital and trade financing, (b) to relend to its Consolidated Subsidiaries from time to time, (c) to make non-hostile Acquisitions which have been approved by the boards of directors or other governing bodies or, if a vote of such governing bodies is not required, by the stockholders of the Persons to be acquired with the proceeds of Borrowings hereunder, (d) to purchase shares of the Company's outstanding common stock to the extent permitted pursuant to Section 6.09 hereof, (e) for Facility Letters of Credit used in the ordinary course of business of the Company and its Subsidiaries, and (f) to repay Borrowings and Reimbursement Obligations; but the Company will not, and will not permit any Subsidiary to, use such proceeds to make any Acquisitions or any Investments other than those permitted under subsections (a) through (h) of Section 6.05. 5.02. Notices. Promptly give written notice to the Agent of: (a) all litigation or material Environmental Claims affecting the Company or any Subsidiary where the amount claimed is One Million Dollars (or the Equivalent Amount thereof in another currency or currencies) or more in excess of insurance coverage (including any self-retention) or where the insurance carrier has denied its responsibility as to an amount claimed of One Million Dollars (or the -103- 104 Equivalent Amount thereof in another currency or currencies) or more in excess of insurance coverage (including any self-retention); (b) any other litigation or proceeding affecting the Company or any of its Subsidiaries which the Company reports to the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, within four days after reporting the same to the Securities and Exchange Commission; (c) any Reportable Event under Section 4043(b) (5), (6) or (9) of ERISA with respect to any Plan, any decision to terminate or withdraw from a Plan, any finding made with respect to a Plan under Section 4041(c) or (e) of ERISA, the commencement of any proceeding with respect to a Plan under Section 4042 of ERISA, or any material increase in the actuarial present value of unfunded vested benefits under all Plans over the preceding year; and (d) any Default or Event of Default, specifying the nature and the period of existence thereof and what action the Company has taken and proposes to take with respect thereto. 5.03. Financial Statements, Reports, Etc. Deliver to each Bank: (a) as soon as available but not later than sixty (60) days after the close of each of the first three quarters of its fiscal year, the Company's and its Consolidated Subsidiaries' unaudited condensed statement of consolidated financial position, statement of consolidated earnings as of the close of such quarter, and statement of consolidated cash flow for such quarter and that portion of the fiscal year ending with such quarter, certified by the chief financial officer or the controller of the Company as being complete and correct and fairly presenting the Company's and its Consolidated Subsidiaries' financial condition and results of operations as of the end of such quarter and for that portion of the fiscal year ending with such quarter, and accompanied by a statement from the chief financial officer, controller or treasurer of the Company stating: (i) that as of the end of such quarter, no Default or Event of Default existed, or, if such did exist, a description of such Default or Event of Default and what action the Company has taken and proposes to take with respect thereto and (ii) that as of the end of such quarter the Company and its Consolidated Subsidiaries, taken on a consolidated basis, were in compliance with the covenants contained in Sections 5.09, 6.01, 6.04, 6.05(e), 6.06 and 6.09 and with the requirements of clauses (d), (e), and (h) of the definition of Permitted Liens, together with the calculations showing how such compliance was determined or (iii) if the Company and its Consolidated Subsidiaries, taken on a consolidated basis, were not in compliance therewith, stating each incidence of non-compliance and the amount thereof and explaining the reason therefor, together with the calculations showing how such non-compliance was determined; (b) as soon as available but not later than one hundred (100) days after the close of each of its fiscal years, a complete copy of the Company's audit report, which shall include at least the Company's and its Consolidated Subsidiaries' statement of consolidated financial position, statement of consolidated earnings, and its statement of consolidated cash flow for such year, examined in accordance with generally accepted auditing standards by an independent public accountant of national reputation selected by the Company and acceptable to the Majority Banks. Such auditor's report shall be free from exceptions, reservations or qualifications as a result of which the auditor is unable to conclude that the financial statements fairly present or adequately disclose the financial condition of the Company and its Consolidated Subsidiaries and shall not be limited because of -104- 105 restricted or limited access by such accountant to any material portion of the Company's or any Subsidiary's records and shall include or be accompanied by a statement from such accountant that during the fiscal year no Default or Event of Default has occurred. Such report shall be accompanied by a certificate from the chief financial officer, controller or treasurer of the Company stating (i) that as of the end of such fiscal year no Default or Event of Default existed, or, if any exists, a description of such Default or Event of Default and what action the Company has taken and proposes to take with respect thereto and (ii) that the Company and its Consolidated Subsidiaries, taken on a consolidated basis, are in compliance with the covenants contained in Sections 5.09, 6.01, 6.04, 6.05(e), 6.06 and 6.09 and with the requirements of clauses (d), (e), and (h) of the definition of Permitted Liens, together with the calculations showing how such compliance was determined or (iii) if the Company and its Consolidated Subsidiaries, taken on a consolidated basis, are not in compliance therewith, stating each incidence of non-compliance and the amount thereof and explaining the reason therefor, together with the calculations showing how such non-compliance was determined; (c) as soon as available but not later than one hundred twenty (120) days after the close of each of its fiscal years, its unaudited consolidating balance sheet, statement of earnings, and statement of accumulated earnings employed in the business and capital in excess of par value of the common stock; (d) promptly after being filed by the Company with the Securities and Exchange Commission, a copy of each form 8-K current report, form 10-K annual report, form 10-Q quarterly report, annual report to shareholders, proxy statement and registration statement; (e) not later than one hundred (100) days after the end of each fiscal year of the Company, an amendment to Schedule 3 hereto, describing Permitted Liens (of the type described in Schedule 3) arising by operation of law or created or suffered by the Company or any Subsidiary subsequent to the Closing Date; (f) not later than sixty (60) days after the end of each fiscal quarter of the Company, an amendment to Schedules 1 and 2 hereto, adding or subtracting the Subsidiaries or Significant Subsidiaries, as the case may be, acquired or sold or which became Significant Subsidiaries during such period; (g) as soon as available but no later than sixty (60) days after the close of each fiscal quarter of the Company, a complete copy of the statement of financial position, the statement of earnings, and the statement of consolidated cash flow of any captive finance Subsidiary of the Company, prepared by management and certified by the chief financial officer or the controller of the Company as being true and correct and fairly presenting the financial condition of such Subsidiary and, to the extent any such reports are prepared by independent auditors at fiscal year-end, a complete copy of the report of such independent auditors, no later than one hundred (100) days after the close of the Company's fiscal year; and (h) such other statements or reports as the Majority Banks may reasonably request in form and detail satisfactory to the Agent and the Majority Banks. -105- 106 5.04. Existence, Etc. Except as permitted herein, maintain and preserve its existence and all rights, privileges and franchises now enjoyed and necessary for the operation of its business and keep all its properties in good working order and condition, normal wear and tear excepted, except properties the Company or a Consolidated Subsidiary reasonably determines to be surplus, obsolete or otherwise not necessary or useful in the conduct of its business. 5.05. Payment of Obligations. Pay all taxes, assessments, governmental charges and other obligations when due, except such as may be contested in good faith or as to which a bona fide dispute may exist, and for which adequate reserves have been provided if required by GAAP. 5.06. Compliance with Laws. At all times comply in all material respects with all applicable laws, rules, regulations, orders and directions of any Governmental Authority having jurisdiction over it or its business. 5.07. Insurance. Maintain insurance with responsible insurance companies against such risks, on such properties and in at least such amounts as is customarily maintained by similar businesses; and deliver to the Agent at the request of any Bank a list in reasonable detail of the insurance policies then in effect, stating the names of the insurance companies, the amounts and rates of insurance, the dates of the expiration thereof and the properties and risks covered thereby. 5.08. Adequate Books. Maintain adequate books, accounts and records in order to provide financial statements in accordance with GAAP and, if requested by Banks holding twenty-five percent (25%) or more of the Aggregate Commitment then available, permit employees or representatives of the Agent and the Banks at any reasonable time and upon reasonable notice to inspect and audit its properties, and to examine or audit its inventory, books, accounts and records and make copies and memoranda thereof. 5.09. Interest Coverage Ratio. Maintain a ratio of (a) EBIT net of cash interest income (excluding interest income earned on dealer financing) to (b) Interest Expense, net of cash interest income (excluding interest income earned on dealer financing), of not less than 2.00 to 1.00 as of the last day of each calendar quarter, commencing with the quarter ending March 31, 1996. For purposes of calculating such ratio, the items required to be included in the calculation shall be measured on a consolidated basis for the twelve-month period (or such shorter period specified below) ending on the last day of such calendar quarter. 5.10. ERISA. Make prompt payment of contributions required to meet the minimum funding standards set forth in ERISA except to the extent waived or deferred by the PBGC. ARTICLE VI NEGATIVE COVENANTS The Company covenants and agrees that, so long as the Commitments shall remain available and until full and final payment of all obligations incurred hereunder and under the Notes and the expiration of all Facility Letters of Credit, it will not and, with respect to Sections 6.02, 6.03, 6.04, 6.05 6.06 and 6.09, will not permit any Consolidated Subsidiary of the Company to, unless the Majority Banks waive compliance in writing: 6.01. Capitalization Ratio. Permit its ratio of (i) Indebtedness for Borrowed Money for the Company and its Subsidiaries on a consolidated basis to (ii) Capitalization to exceed the ratio set forth below at any time during the calendar quarters as set forth below: -106- 107 Quarter Capitalization Ending: Ratio -------------------------- -------------- December 31 of each year during this Agreement .50 to 1.0 March 31 of each year during this Agreement .55 to 1.0 June 30 of each year during this Agreement .50 to 1.0 September 30 of each year during this Agreement .45 to 1.0 6.02. Change in Business. Engage in any business activities or operations substantially different from and unrelated to present business activities and operations conducted by the Company or any Affiliate other than business activities or operations in which the aggregate Investment of the Company or such Affiliate does not constitute a material amount in relation to the Tangible Net Worth of the Company or such Affiliate. 6.03. Liens. Create, assume or suffer to exist any Lien (including the Lien of an attachment, judgment or execution) on any of its or its Consolidated Subsidiaries' properties, whether now owned or hereafter acquired, except Permitted Liens. 6.04. Mergers, Sales of Assets, Etc. Liquidate, dissolve, or enter into any consolidation, merger, partnership, joint venture or any other combination or sell, lease, assign, transfer or otherwise dispose of any assets, whether now owned or hereafter acquired, in a single transaction or in a series of transactions or enter into any sale and leaseback transactions, other than (a) the sale of inventory in the ordinary course of business; (b) the sale or other disposition of property no longer needed in the conduct of its business; (c) the sale of Fixed Assets or any sale and leaseback transaction involving Fixed Assets if the Net Proceeds thereof and any other non-cash property received therefor in the aggregate during the term of this Agreement commencing on the Closing Date do not exceed at any time an amount equal to five percent (5%) of the Tangible Net Worth of the Company and its Subsidiaries on a consolidated basis; (d) any merger in which the Company is the legal surviving corporation and there will exist no Default or Event of Default after the consummation thereof; (e) the merger, consolidation or transfer of the business or assets of any Subsidiary with or to the Company or with or to any Consolidated Subsidiary; (f) the merger or consolidation or transfer of the business or assets of any non-consolidated Subsidiary with or to any other non-consolidated Subsidiary; (g) as permitted in Section 6.05; and (h) (1) sales of receivables by the Company or any Consolidated Subsidiary; and (2) sales of receivables by the Company or any -107- 108 Consolidated Subsidiary to any Person other than a Consolidated Subsidiary (i) in such amounts that at any one time the aggregate unpaid amount of accounts receivable so sold shall not exceed One Hundred Twenty-Five Million Dollars ($125,000,000); (ii) the consideration received by the applicable transferor for such sales of accounts receivable includes cash, cash equivalents and marketable securities in an amount not less than fifty percent (50%) of the consideration received by the applicable transferor for such sales of accounts receivable consists of promissory notes (whether subordinated or otherwise restricted in payment) against which the purchaser of such accounts receivable may offset the principal amount of uncollected accounts receivable and (iv) the amount of any recourse (other than customary representations and warranties made by the applicable transferor with respect to such receivables) to the applicable transferor established in connection with such sale of receivables does not exceed 10% of the face amount of the receivables sold. 6.05. Acquisitions, Investments. Make any Acquisitions or any Investments or commitments therefor, or create any non-consolidated Subsidiary, or create any sinking fund in relation thereto, other than (a) Investments in accordance with the Company's Short-Term Investment Policy and Guidelines, issued on July 26, 1994, a copy of which has been provided to the Banks; (b) Investments (other than in Subsidiaries) in existence on the date hereof and described in Schedule 11 hereto; (c) loans by the Company to its Consolidated Subsidiaries in the ordinary course of their respective businesses; (d) the making of tax-sharing payments to any Consolidated Subsidiary or by any Consolidated Subsidiary to the Company pursuant to an agreement with a Consolidated Subsidiary requiring such payment; (e) Investments, Acquisitions and capital contributions (not otherwise specified in this Section 6.05) of up to $20,000,000 during the term of this Agreement, provided that such amount shall be increased by $10,000,000 for each fiscal year for which the Company meets or exceeds its Base Case for Earnings Before Taxes, as presented to the Banks party to the Existing Agreement on November 30, 1994. (f) Investments in the form of credit extensions to stockholders, directors or employees of the Company or its Subsidiaries in the ordinary course of business, provided such Investments are subtracted in calculating "Tangible Net Worth"; (g) as permitted by Section 6.04; and (h) Investments in Consolidated Subsidiaries. 6.06. Operating Leases. Enter into any operating leases the terms of which prohibit cancellation of such leases if the aggregate amount of the minimum required payments under all such leases (whether entered into prior to or subsequent to the Closing Date and after giving effect to any such new lease) during the remaining life of such leases exceeds Forty Million Dollars ($40,000,000) for the Company and its Consolidated Subsidiaries. 6.07. Existing Indebtedness. Prepay, defease, refinance or repurchase or enter into any arrangement having substantially such effect with respect to, any Indebtedness for Borrowed Money (other than the Advances and Bid Loans) prior to the maturity or scheduled repayment date in effect as of the Closing Date, except that during any fiscal year, the Company may -108- 109 prepay, defease, refinance or repurchase up to an amount of $5,000,000 of such Indebtedness for Borrowed Money. If the entire $5,000,000 is not expended in any fiscal year, the unexpended amount may be carried over to later fiscal years, provided that the total amount expended to prepay, defease, refinance or repurchase Indebtedness for Borrowed Money over the term of this Agreement may not exceed $15,000,000. 6.08. Repurchase Arrangements. Repurchase boats, motors or boat/motor/trailer (or any combination thereof) packages sold pursuant to repurchase arrangements with the financing institutions owning such boats, motors or boat/motor/trailer (or any combination thereof) packages in an aggregate amount in excess of Ten Million Dollars ($10,000,000) during any fiscal year. 6.09. Dividends and other Restricted Payments. Pay any Restricted Payments (other than dividends payable in its own capital stock) except that (1) any Consolidated Subsidiary may pay dividends to the Company, (2) the Company may pay Restricted Payments during any fiscal year, commencing with the fiscal year ending September 30, 1995, if, after giving effect to such Restricted Payment, the aggregate amount of Restricted Payments during such fiscal year would not exceed the greater of (a) the Minimum Amount or (b) the Available Fund on the date the Restricted Payment is paid, provided, however, that no Restricted Payment may be paid if an Event of Default exists on the date such Restricted Payment is declared, authorized, or paid and further provided (subject to the immediately preceding proviso), that all Restricted Payments must be made within 90 days after such Restricted Payment is declared or authorized. ARTICLE VII EVENTS OF DEFAULT Regardless of the terms of any Notes issued hereunder or Facility Letters of Credit, the occurrence and continuation of any of the following events, at the option of Majority Banks, shall terminate any obligation on the part of the Banks to make or continue the Credit and, at the option of the Majority Banks, shall make all outstanding principal and accrued and unpaid interest on the Credit and all fees and other sums outstanding under or in respect of this Agreement, the Notes and the Facility Letters of Credit immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, except as hereinafter specified; provided, however, that the occurrence of any of the events set forth in Section 7.06, 7.07 or 7.10 shall automatically terminate the Banks' Commitments, automatically accelerate the amounts due hereunder and under the Notes and the Facility Letters of Credit, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. With respect to all Facility Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Company shall at such time deposit in a cash collateral account opened by the Agent for the ratable benefit of the Banks and the Issuers an amount equal to the aggregate then undrawn and unexpired amount of such Facility Letters of Credit. Amounts held in such cash collateral account shall be applied by the Agent to the payment of drafts drawn under such Facility Letters of Credit, and the unused portion thereof after all such Facility Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Company to the Banks under this Agreement. After all such Facility Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been -109- 110 satisfied and all other obligations of the Company to the Banks under this Agreement shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Company. 7.01. Nonpayment. The Company shall fail to pay when due any installment of principal or any Reimbursement Obligation when due or, within three (3) Banking Days of its due date, any installment of interest or any fee or other sum due under this Agreement in accordance with the terms hereof or of any Note or Facility Letter of Credit issued under this Agreement. 7.02. Representation or Warranty. Any written representation or warranty herein or in any agreement, instrument or certificate executed pursuant hereto shall prove to have been false or misleading in any material respect when made or when deemed to have been made. 7.03. Specific Defaults. The Company shall fail to duly or promptly perform or observe the provisions of any of Sections 5.09, 6.01, 6.03 or 6.09. 7.04. Other Defaults. The Company shall fail duly or promptly to perform or observe any of the other covenants, agreements or conditions contained in this Agreement and such default shall continue unremedied for a period of thirty (30) days after written notice thereof is delivered to the Company by the Agent. 7.05. Judgments. One or more final judgments shall be entered against the Company or any Subsidiary for the payment of money in the aggregate amount of Five Million Dollars ($5,000,000) (or the Equivalent Amount thereof in another currency or currencies) or more on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgments shall continue unsatisfied and in effect for thirty (30) consecutive days without a stay of execution. 7.06. Voluntary Bankruptcy. The Company or any Subsidiary shall generally fail to pay or admit in writing its inability to pay its debts as they come due, or shall file any petition or action for relief as to itself under any bankruptcy, reorganization, insolvency or moratorium law, or any other similar law or laws for the relief of, or relating to, debtors, or shall apply for or consent to a receiver, trustee or custodian for it or a substantial portion of its property, or shall make a general assignment for the benefit of creditors. 7.07. Involuntary Bankruptcy. An involuntary petition shall be filed under any bankruptcy or similar statute against the Company or any Subsidiary, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) shall be appointed to take possession, custody or control of the properties of the Company or any Subsidiary, unless such petition or appointment is set aside or withdrawn or ceases to be in effect within sixty (60) days from the date of said filing or appointment. 7.08. Cross Default. Any breach or default shall occur (after giving effect to any applicable cure period) under any other agreement relating to Indebtedness for Borrowed Money in excess of $5,000,000 under which the Company or any Significant Subsidiary may be obligated as borrower or guarantor, if such default consists of the failure to pay any such Indebtedness for Borrowed Money when due or if such default permits or causes the acceleration of any such Indebtedness for Borrowed Money or the termination of any commitment to lend. 7.09. ERISA. Any Plan of the Company or any of its Subsidiaries shall be terminated within the meaning of Title IV of ERISA except as permitted by Section 4044(d) of ERISA, or a trustee shall be appointed by the -110- 111 appropriate United States District Court to administer any Plan of the Company or any of its Subsidiaries, or the PBGC shall institute proceedings to terminate any Plan of the Company or any of its Subsidiaries or to appoint a trustee to administer any such Plan and, upon the occurrence of any of the foregoing, the then current value of guaranteed benefits and other benefit commitments (as such terms are defined under Title IV of ERISA and determined in accordance with the principles of Title IV of ERISA) for which the Company or any Subsidiary might be liable to any Person exceed the then current value of the assets allocable to such benefits by more than Five Million Dollars ($5,000,000). 7.10. Change in Control. (a) Any Person or Persons acting in concert shall acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of fifteen percent (15%) or more of the outstanding shares of voting stock of the Company and the board of directors of the Company fails to redeem the rights issued under the Shareholder Rights Plan within the time period prescribed therein; or (b) during any period of twelve (12) consecutive months, commencing before or after the Closing Date, individuals who at the beginning of such twelve-month period were directors of the Company cease for any reason to constitute a majority of the board of directors of the Company; or (c) any change of control shall occur as defined under the provisions of the Company's certificate of incorporation or by-laws, as at any time amended. ARTICLE VIII RELATION OF BANKS 8.01. Appointment and Authorization. Each Bank hereby appoints each of the Agent, the Bid Agent and the Co-Agent to act as its agent in connection with the administration of this Agreement and for such purpose irrevocably authorizes the Agent, the Bid Agent and the Co-Agent to take such action and to exercise such rights, powers and discretions as are specifically delegated to the Agent, the Bid Agent and the Co-Agent in this Agreement, together with all rights, powers and discretions as are reasonably incidental thereto. The Agent, the Bid Agent and the Co-Agent may perform any of their respective functions and duties under this Agreement by or through agents or their respective directors, officers or employees. In performing their respective functions and duties under this Agreement, the Agent, the Bid Agent and the Co-Agent shall not be deemed to have a fiduciary relationship in respect of, or (except as provided herein) other responsibility to, any Bank or to have assumed any relationship of agency or trust with or for the Company or any Consolidated Subsidiary. 8.02. Pro Rata Sharing. All payments of principal and interest on the Credit (including Reimbursement Obligations) are to be divided pro rata among the Banks according to the principal amount outstanding (including outstanding participations in Facility Letters of Credit) from each Bank, provided that prior to the occurrence of an Event of Default, payments of principal and interest on Bid Loans will not be divided pro rata. All payments of fees (other than Issuer's Fees) to be shared among the Banks are to be divided among the Banks pro rata according to each Bank's Commitment. 8.03. Sharing of Setoff. Any Bank which shall receive payment of or on account of all or part of its share of the Credit through the exercise of any right of setoff, counterclaim, banker's lien, secured claim under any bankruptcy statute or otherwise in a greater proportion than the proportionate amount of principal, interest and fees due it under this Agreement shall purchase immediately prior to such payment participations -111- 112 in the portions of the Credit held by the other Banks so that all recoveries of principal, interest and fees (except payments made pursuant to Section 2.08, 2.11(d), 2.14 or 2.15) shall be shared by Banks in accordance with their pro rata interests in the Credit as set forth in Section 8.02. If all or any portion of such excess payment is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. All sums received by a Bank through the exercise of any right of setoff, counterclaim, banker's lien, secured claim under any bankruptcy statute or otherwise shall be deemed to be first applied to such Bank's portion of the Indebtedness for Borrowed Money under this Agreement until payment thereof in full and any balance remaining thereafter shall be deemed applied to any other Indebtedness for Borrowed Money of the Company to such Bank. 8.04. Communication; Confidentiality. (a) Upon receipt by the Agent from the Company of any information relating to the Company or its Consolidated Subsidiaries calling for an action on the part of the Banks, or upon notice to the Agent of any Default or Event of Default, the Agent will in turn immediately inform the other Banks by telephone, telecopy or by telex of the nature of such communication or of the Default or Event of Default, as the case may be, and will promptly deliver to the Banks the information received by the Agent relating to the Company or its Consolidated Subsidiaries. (b) Each Bank agrees to use its best efforts not to disclose without the prior written consent of the Company (other than to such Bank's employees, auditors or counsel) any confidential information with respect to the Company or any Subsidiary or any Acquisition which is furnished pursuant to this Agreement; provided, however, that each Bank may disclose any such information (i) as has become generally available to the public (other than in violation of this Agreement), (ii) as required by law or regulation or by any regulatory authority having jurisdiction over the Bank, (iii) pursuant to a subpoena or other legal process or, in connection with any litigation, (iv) to any prospective purchaser or participant as described in Section 9.04, provided such prospective purchaser or participant agrees in writing to be bound as described in Section 9.04, and (v) as may be necessary to enforce its rights hereunder or under its Notes and the Facility Letters of Credit. 8.05. Approvals. Except as provided below in this Section 8.05, upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Banks, action shall be taken by the Agent for and on behalf or for the benefit of all Banks upon the direction of Majority Banks, and any such action shall be binding on all Banks. Without the prior written consent of all the Banks, no amendment, modification, consent or waiver shall be effective which: (a) increases the amount of the Credit or changes the Commitment of any Bank, (b) reduces the rate or amount of interest, principal or fees owing hereunder or under the Notes, (c) extends the date on which any sum is due hereunder or under the Notes, (d) waives an Event of Default arising from a failure to pay principal of or interest on an Advance or Bid Loan, (e) reduces the rate or amount of interest on or the principal amounts of or extends the time of payment of any Reimbursement Obligation, Letter of Credit Fee or Issuer's Fee, -112- 113 (f) changes the provisions of this Section 8.05, (g) waives any condition specified in Article III, (h) amends the definition of Majority Banks, (i) affects the rights, duties or obligations of the Agent, unless all Banks agree in writing thereto, or (j) changes the percentage of Banks required to consent to or to take any action hereunder. 8.06. Exculpation. Neither the Agent, the Bid Agent nor the Co-Agent shall be liable or answerable for anything whatsoever in connection with this Agreement or any instrument or agreement required hereunder, including responsibility in respect to the execution, construction or enforcement of this Agreement or any such instrument or agreement, except for its willful misconduct or gross negligence, and the Agent, the Bid Agent and the Co-Agent shall have no duties or obligations other than as expressly provided herein and therein. The Agent, the Bid Agent and the Co-Agent shall be entitled to rely on any opinion of counsel (including counsel for the Company) in relation to this Agreement and any instrument or agreement required hereunder, and upon statements and communications received from the Company, or from any other Person, reasonably believed by it to be authentic, and shall not be liable for any action taken or omitted in good faith on such reliance. 8.07. Indemnification. Each Bank agrees to indemnify the Agent, the Bid Agent and the Co-Agent to the extent not reimbursed by the Company, ratably according to its proportionate interest in the outstanding Advances and Reimbursement Obligations (or, if there are no outstandings hereunder, in the Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, the Bid Agent or the Co-Agent in any way relating to or arising out of this Agreement or any instrument or agreement required hereunder or any action taken or omitted by the Agent, the Bid Agent or the Co-Agent in such role under this Agreement or any such instrument or agreement; provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever resulting from the Agent's, the Bid Agent's or the Co-Agent's willful misconduct or gross negligence. 8.08. The Agent, the Co-Agent and Bid Agent as Banks. The Agent, the Bid Agent and the Co-Agent shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not the Agent, the Bid Agent or the Co-Agent; and the term "Banks" shall include the Agent, the Bid Agent and the Co-Agent in its individual capacity. The Agent, the Bid Agent and the Co-Agent and their subsidiaries and Affiliates may accept deposits from, lend money to, act as agent or trustee for other lenders to, and generally engage in any kind of banking, trust or other business with, the Company or any of its Subsidiaries or Affiliates as if it were not the Agent, the Bid Agent or the Co-Agent. 8.09. Notice of Transfer. The Agent and the Company may deem and treat a Bank party to this Agreement as the owner of such Bank's Notes for all purposes hereof unless and until a written notice of the assignment or transfer thereof executed by such Bank shall have been received by the Agent and the Company. -113- 114 8.10. Credit Decision. Each Bank represents that it has made and agrees that it shall continue to make its own independent investigation of the financial condition and affairs of the Company and its own appraisal of the creditworthiness of the Company in connection with its Commitment and the making and the continuance of the Advances, the Bid Loans and the Facility Letters of Credit. Neither the Agent, the Bid Agent nor the Co-Agent has any duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information (other than obtained pursuant to this Agreement) with respect thereto, whether coming into its possession before the date hereof or at any time thereafter, unless furnished to the Agent, the Bid Agent or the Co-Agent by the Company for delivery to the Banks. 8.11. Resignation of the Agent. The Agent, the Bid Agent and the Co-Agent may each resign at any time by giving written notice to the Banks and the Company. Upon any such resignation, the Majority Banks with the prior written consent of the Company, which shall not be unreasonably withheld, shall have the right to appoint a successor from among the Banks party hereto. If no successor shall have accepted such appointment within forty-five (45) days after the retiring Agent's, Bid Agent's or Co-Agent's giving of notice of resignation, the retiring Agent, Bid Agent or Co-Agent may, on behalf of the Banks, appoint a successor thereto with the prior written consent of the Company, which shall not be unreasonably withheld, and such successor Agent, Bid Agent or Co-Agent shall be a bank or trust company organized under the laws of the United States or any state thereof having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance by such successor of its appointment hereunder, such successor shall succeed to and become vested with all the rights and obligations of the retiring Agent, Bid Agent or Co-Agent, and the retiring Agent, Bid Agent or Co-Agent shall be discharged from its obligations under this Agreement except with respect to any liability with respect to a breach of any obligation hereunder prior to such resignation. The provisions of this Article shall inure to the benefit of the retiring Agent, Bid Agent or Co-Agent as to any actions taken or omitted to be taken by it while it held such positions under this Agreement. 8.12. Reliance by Agent and Co-Agent. Agent and Co-Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, telecopy, telex or telephone message, statement or other document or conversation reasonably believed by them to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by Agent and Co-Agent. Agent and Co-Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other instrument or agreement contemplated hereunder unless they shall first receive such advice or concurrence of the Majority Banks as they deem appropriate and, if they so request, they shall first be indemnified to their satisfaction by the Banks against any and all liability and expense which may be incurred by them by reason of taking or continuing to take any such action. Agent and Co-Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other instrument or agreement contemplated hereunder in accordance with a request or consent of the Majority Banks (or, when expressly required hereby, all the Banks) and such request and any action taken or failure to act pursuant thereto shall be binding upon all Banks. -114- 115 ARTICLE IX MISCELLANEOUS 9.01. Notices. Except as otherwise specifically set forth in Article 2, any communications between the parties hereto or notices or requests provided herein to be given may be given by mailing the same, postage prepaid (which notice shall be deemed received two Banking Days after mailing), by personal delivery, or by telex, telecopy or cable to each party at its address set forth on the signature pages hereto (with a copy to each address indicated for notices), or to such other address as any party may in writing hereafter indicate. 9.02. Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties hereto and their respective permitted successors and assigns; provided, however, that the Company shall not assign this Agreement or any of the rights or obligations of the Company hereunder without the prior written consent of each Bank. 9.03. Banks' Obligations Several. The obligations of each Bank under this Agreement are several. Neither the Agent, the Bid Agent, the Co-Agent nor any Bank shall be liable for the failure of any other Bank to perform its obligations under this Agreement. The failure of any Bank to make all or any part of the proceeds of any Advance or Bid Loan or participation in a Facility Letter of Credit to be made by it available to the Agent, the Bid Agent or the Co-Agent, as the case may be, for the benefit of the Company or Issuer, as the case may be, pursuant to this Agreement, shall not relieve any other Bank from the performance of its obligations under this Agreement. 9.04. Assignments, Participations; Setoff. (a) With the prior written consent of the Company and the Agent, which shall not be unreasonably withheld, any Bank may at any time sell, assign or otherwise transfer to any other Person all or any part of the obligations of the Company to such Bank, so long as such Bank at all times retains at least twenty percent (20%) of its original Commitment, and thereupon such Person shall become a "Bank" for all purposes hereunder, provided however, that no Bank shall be deemed to be in violation of this Section because of a subsequent reduction of the Commitments by the Company. Notwithstanding the foregoing, any Bank assigning its obligations under Section 2.15(d) may sell 100% of its obligations and any Bank may at any time, without the consent of the Company or the Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; provided that no such assignment shall release the transferor Bank from its obligations hereunder. (b) Any Bank may at any time grant participations to any other Person (a "participant") in all or part of the obligations of the Company to such Bank under this Agreement or any Note evidencing such obligations or with respect to any Reimbursement Obligation, so long as such Bank at all times retains at least twenty percent (20%) of its original Commitment hereunder and any Advances hereunder, provided however, that no Bank shall be deemed to be in violation of this Section because of a subsequent reduction in the Commitments by the Company. (c) Each such transfer by a Bank shall be in accordance with federal and state securities laws applicable to such Bank. In connection with such transfer, each Bank, including the Agent, may furnish or disclose to a proposed purchaser or participant any financial or other information furnished or disclosed to the Banks by the Company provided that the proposed purchaser or participant first executes a written -115- 116 agreement in the form of Schedule 9 stating that it will not disclose any information furnished to it with respect to the Company and its Subsidiaries except (i) as has become generally available to the public (other than in violation of this Agreement), (ii) as required by law or regulation or by any regulatory authority, (iii) pursuant to a subpoena or other legal process or in connection with any litigation, and (iv) as may be necessary to enforce the rights of the Banks or such participant hereunder or under the Notes. (d) In any participation described in subsection (b) above, each Bank shall retain the right to vote in connection with all waivers, consents and amendments and shall retain the right to take or fail to take any action hereunder except as to waivers, consents, and amendments or action directly affecting the extension of the maturity of any portion of the principal amount of or the dates on which the interest is payable on such portion of an Advance or any other amount payable under Sections 2.06 and 2.07 allocated to such participation or a reduction of any portion of the principal amount of or the rate of interest payable on such portion of an Advance or any other amount payable under Sections 2.06 and 2.07 allocated to such participation. (e) Upon any such transfer or assignment (other than a participation for a period not in excess of one hundred eighty (180) consecutive days) by a Bank pursuant to this Section 9.04, such Bank will, promptly after making such transfer, advise the Agent and the Company in writing of the transfer and the name and address of the transferee. The Company hereby acknowledges and agrees that any such disposition will give rise to a direct obligation of the Company to the participant. The Company hereby authorizes each Bank and each such participant, in case of the occurrence of an Event of Default by the Company hereunder, to proceed directly, subject to Section 8.03, by right of setoff, banker's lien, or otherwise, against any assets of the Company which may at the time of such Event of Default be in the hands of such Bank or any such participant. 9.05. Delays and Waivers. No delay or omission by the Agent or the Banks to exercise any right under this Agreement shall impair any such right, nor shall it be construed to be a waiver thereof. No waiver of any single breach or default under this Agreement shall be deemed a waiver of any other breach or default. Any waiver, modification, amendment, consent or approval relating to this Agreement, the Notes or the Facility Letters of Credit, must be in writing to be effective and must be signed by or on behalf of the Majority Banks or all the Banks, as the case may be, as provided in Section 8.05. 9.06. Costs and Expenses. The Company agrees to pay on demand to the Agent, the Bid Agent, the Co-Agent, each Bank and each Issuer all reasonable costs and expenses incurred by the Agent, the Co-Agent, the Bid Agent and each such Bank and Issuer including, without limitation, reasonable attorneys' fees and the reasonable allocated costs of staff counsel (a) in connection with the enforcement (after the occurrence of an Event of Default) of this Agreement or any instrument or agreement required hereunder or in connection with any proposed refinancing or restructuring of the credit provided in this Agreement in the nature of a "work-out" and (b) for all stamp, registration and other duties and imposts to which this Agreement and any instrument or agreement required hereunder may be subject. The Company shall indemnify the Agent, the Co-Agent, the Bid Agent, each Issuer and each Bank against any and all liabilities and penalties resulting from any delay in paying, or failure to pay, any such duties and imposts upon written notice from the Agent, the Co-Agent or the Bid Agent or an Issuer or a Bank that such amounts have been assessed. The Company shall reimburse each of the Agent, the Bid Agent and the Co-Agent for its reasonable attorneys' fees (including the reasonable allocated -116- 117 costs of staff counsel) and other expenses incurred in connection with the negotiation, preparation and execution of this Agreement and any amendments, consents, or waivers of, or relating to, this Agreement. 9.07. Entire Agreement. This Agreement and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto, and supersede all oral negotiations and prior writings in respect to the subject matter hereof (except a letter agreement dated November 21, 1994 between the Agent and the Company, a letter agreement between the Co-Agent and the Company and any subsequent agreements relating to fees to be paid to the Agent, the Co-Agent or the Bid Agent). In the event of any conflict between the terms, conditions and provisions of this Agreement and any such prior agreement, document or instrument, the terms, conditions and provisions of this Agreement shall prevail. 9.08. Governing Law. This Agreement, the Notes, the Facility Letters of Credit and all other documents executed in connection herewith shall be governed by and construed in accordance with the laws of the State of Illinois. 9.09. Section Headings. Section headings and the table of contents are for reference only, and shall not affect the interpretation or meaning of any provision of this Agreement. 9.10. Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 9.11. Counterparts. This Agreement may be executed in as many counterparts as may be deemed necessary or convenient, and by the different parties hereto on separate counterparts (provided that the Company shall execute each counterpart), each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same agreement. 9.12. Indemnity. The Company hereby agrees to indemnify, protect and hold harmless the Agent, the Bid Agent, the Co-Agent, any Issuer, the Banks and their officers, directors, agents, employees, attorneys and shareholders or their successors (each an "Indemnified Party") from and against all reasonable costs and expenses (including, without limitation, the cost of counsel, whether staff or otherwise and whether allocated or out-of-pocket) and all actions, claims (whether made or threatened), suits, liabilities, damages and losses incurred by or imposed on the Agent, the Bid Agent, the Co-Agent, any Issuer, the Banks or any such officer, director, agent, employee, attorney or shareholder or their successors in connection with or as a result of the execution, delivery and performance of this Agreement, and the transactions contemplated hereunder, or any Acquisition financed with Borrowings hereunder, or with any other act, omission or event relating in any manner to any of the foregoing. Notwithstanding anything to the contrary in this Section 9.12, the Company shall not be obligated to indemnify any such Person for any losses, claims, damages, liabilities and expenses incurred by such Person which have resulted from gross negligence or willful misconduct on the part of such Person. Without limiting the generality of the foregoing, such indemnity shall extend to any and all reasonable costs and expenses whatsoever incurred by the Banks, the Agent, the Bid Agent, the Co-Agent or any Issuer their officers, directors, agents, employees, attorneys and shareholders or their successors (including, without limitation, the reasonable cost of counsel, whether staff or otherwise and whether allocated or out-of-pocket) in connection with investigating, preparing for or defending against or providing -117- 118 evidence, producing documents or taking any action with respect to any such action, claim (whether made or threatened and whether or not such Bank or other Indemnified Party is a party to such action or claim), suit, liability, damage or loss, whether or not resulting in any liability. The obligation of the Company to indemnify each Bank, each Issuer, the Bid Agent, the Co-Agent and the Agent under this Section for fees and disbursements of counsel shall be limited to the fees and expenses of one counsel in each jurisdiction representing all such Persons, except (i) to the extent that, in the reasonable judgment of any such Person, the existence of actual or potential conflicts of interest make representation by the same counsel inappropriate and (ii) that any such Person that is a party to, or compelled to participate in, any such action, suit or proceeding shall be indemnified for the reasonable fees and disbursements of its counsel to the extent otherwise provided in this Section 9.12. This indemnity shall survive the execution, delivery and consummation of the transactions contemplated by this Agreement and the documents related to any Acquisition financed with Borrowings hereunder. The Company's obligations under this indemnity are and shall remain absolute and unconditional, enforceable against it whether or not any Borrowings are ever made by the Company or any conditions of lending are ever met and without regard to any act, omission, breach, knowledge or event by, attributable to, or in any manner involving the Banks, the Agent, the Bid Agent, the Co-Agent, or any Issuer. Payment by the Company in respect of a claim made by the Agent, the Co-Agent, the Bid Agent, or any Issuer or Bank pursuant to this Section shall be made within fifteen (15) days after demand therefor. Nothing contained herein shall be construed to prevent or restrict the Company from asserting, or be deemed to be a waiver of, any rights which the Company may have against the Agent, the Bid Agent, the Co- Agent or any Issuer or Bank, under any provision of law. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the foregoing amounts which is permissible under applicable law. 9.13. Judgment Currency Indemnity. (a) In the event of a judgment or order being rendered by a court or tribunal of any particular jurisdiction for the payment of any amount owing to the Agent, the Co-Agent, the Bid Agent, any Issuer or any of the Banks pursuant to or in respect of this Agreement or any instrument or agreement required hereunder (the "Loan Documents") and any such judgment or order being expressed in a currency (the "Judgment Currency") other than that in which the amount then owing pursuant to or in respect of this Agreement or the Loan Documents is expressed to be payable (the "Contractual Currency"), the Company shall indemnify and hold each of the Agent, the Co-Agent, the Bid Agent, any Issuer or any of the Banks harmless against any deficiency arising or resulting from any variation between (i) the rate of exchange applied in converting any amount expressed in the Contractual Currency into the Judgment Currency for the purposes of such judgment or order and (ii) the rate of exchange of the Judgment Currency for the Contractual Currency as at the date or dates of discharge of the said judgment or order. (b) The foregoing indemnity shall constitute an obligation of the Company separate and independent from its other obligations under this Agreement and the Loan Documents, shall give rise to separate and independent causes of action against the Company, shall apply irrespective of any indulgence granted to the Company by the Agent, the Co-Agent, the Bid Agent, any Issuer or any of the Banks from time to time and shall continue in full force and effect notwithstanding any judgment or order. The certificate of the Agent, the Co-Agent, the Bid Agent, an Issuer or a Bank as to the amount of any such deficiency as -118- 119 aforesaid (which shall be deemed to constitute a loss suffered by the Agent, the Co-Agent, the Bid Agent, an Issuer or such Bank without any proof or evidence of any actual loss being required) shall, save for any manifest error, be conclusive and binding on the Company. 9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the day and year first above written. OUTBOARD MARINE CORPORATION By: JAMES R. MAURICE ---------------- Title: Vice President and Controller Address for Notices: -------------------- 100 Sea-Horse Drive Waukegan, Illinois 60085 Attention: Robert J. Moerchen Telephone: (847) 689-5279 Telex: 253891 Answerback: OMCORP WAUK Rapifax: (847) 689-6206 THE FIRST NATIONAL BANK OF CHICAGO Commitment: $ 44,000,000 By: DEBORAH STEVENS --------------- Title: Authorized Agent Address for Notices: -------------------- One First National Plaza Chicago, Illinois 60670 Attention: Carlene Hicks Telephone: (312)732-6294 Answerback: FNBCUI Telex: 4330253 Rapifax: (312) 732-4840 With a copy to: --------------- The First National Bank of Chicago One First National Plaza Chicago, Illinois 60670 Attention: Deborah E. Stevens Vice President Telephone: (312) 732-2532 Telex: 4330253 Answerback: FNBCUI Rapifax: (312) 732-4840 -119- 120 BANK OF AMERICA ILLINOIS Commitment: $38,000,000 By: MIKE HEALY ---------- Title: Vice President Address for Notices: -------------------- 231 S. LaSalle Street Chicago, Illinois 60697 Attention: Lewis B. Fisher Vice President Telephone: (312) 828-3137 Rapifax: (312) 987-7384 ROYAL BANK OF CANADA Commitment: $36,000,000 By: KAREN T. HULL ------------- Title: Manager, Corporate Banking Address for Notices: -------------------- New York Branch Royal Bank of Canada Financial Square, 23rd Floor New York, NY 10005-3531 Attention: Manager, Loans Administration Telephone: (212) 428-6311 Telex: MCI62519 Answerback: RBCNY Rapifax: (212) 428-2372 With a copy to: --------------- Royal Bank of Canada 1 N. Franklin Street Suite 700 Chicago, Illinois 60606 Attention: Karen Hull Manager, Corporate Banking Telephone: (312) 551-1617 Rapifax: (312) 551-0805 THE BANK OF NEW YORK Commitment: $21,000,000 By: SARAH POWELL-GOLDMAN -------------------- Title: Manager, Corporate Banking Address for notices: -------------------- One Wall Street - 19th Floor New York, NY 10286 Attention: Ms. Sarah Powell-Goldman Assistant Vice President Telephone: (212) 635-1119 Rapifax: (212) 635-1208 -120- 121 ABN AMRO BANK N.V. Commitment: $17,000,000 By: DAVID SAGERS ------------ Title: David Sagers Vice President By: THOMAS M. TOERPE ---------------- Title: Thomas M. Toerpe Vice President Address for notices: -------------------- 135 S. Lasalle Street, Suite 425 Chicago, Illinois 60674-9135 Attention: John William Stanger Group Vice President Telephone: (312) 904-2671 Rapifax: (312) 606-8425 THE BANK OF NOVA SCOTIA Commitment: $17,000,000 By: F. C. H. ASHBY ---------------- Title: F. C. H. Ashby Senior Manager, Loan Operations Address for Notices: -------------------- The Bank of Nova Scotia 600 Peachtree St., N.E. Suite 2700 Atlanta, GA 30308 Attention: Joe Legista Loan Administrative Officer Telephone: (404) 877-1500 Rapifax: (404) 888-8998 With a copy to: --------------- The Bank of Nova Scotia 181 West Madison Avenue, Suite 3700 Chicago, IL 60602 Attention: John P. Malloy Representative Telephone: (312) 201-4100 Telex: Answerback: Rapifax: (312) 201-4108 The Bank of Nova Scotia Scotia Plaza 44 King Street West Toronto, Ontario, Canada M5H 1H1 Attention: Steve Lucken Assistant General Manager -121- 122 FIRSTAR BANK MILWAUKEE, N.A. Commitment: $17,000,000 By: F. R. DENGEL ------------ Title: Vice President Address for Notices: -------------------- 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: U.S. Banking Division F. R. Dengel, Vice President Telephone: (414) 765-4144 Telex: TRT 191178 Answerback: FIRWIS MIL Rapifax: (414) 765-5062 THE NORTHERN TRUST COMPANY Commitment: $10,000,000 By: MICHELLE M. TETEAK ------------------ Title: Vice President Address for Notices: -------------------- 50 South Lasalle Street Chicago, Illinois 60675 Attention: Chicago Division Telephone:(312) 444-3555 Telex: -------------------- Answerback: Rapifax: (312) 444-3506 NBD BANK Commitment: $0 By: JENNY GILPIN ------------ Title: Vice President Address for Notices: 611 Woodward Avenue Detroit, MI 48226 Attention: Mr. Chris Chevannes Detroit Capital Markets -- Revenue Bonds Telephone: (313) 225-3104 Rapifax: (312) 225-4533 ------------ $200,000,000 ============ -122- 123 EXHIBIT 11 OUTBOARD MARINE CORPORATION AND SUBSIDIARIES Computation of Per Share Earnings
Three Months Ended Six Months Ended Mar. 31 Mar. 31 (In millions except amounts per share) 1996 1995 1996 1995 - -------------------------------------- ---- ---- ---- ---- Primary Earnings Per Share: Net Earnings (Loss) $ 1.1 $ 18.0 $ (11.3) $ 14.9 ====================== ====================== Weighted Average Number of Shares 20.1 20.0 20.1 20.0 Common Stock Equivalents (Stock Options) .1 .1 * .1 ---------------------- ---------------------- Average Shares Outstanding 20.2 20.1 20.1 20.1 ====================== ====================== Primary Earnings (Loss) Per Share $ .05 $ .90 $ (.56) $ .74 ====================== ====================== Fully Diluted Earnings Per Share: Net Earnings (Loss) $ 1.0 $ 18.0 $ (11.3) $ 14.9 Add: After-Tax Interest and Related Expense Amortization on 7% Convertible Subordinated Debentures .9 .9 1.6 1.7 ---------------------- ---------------------- Net Earnings (Loss) Adjusted $ 1.9 $ 18.9 $ (9.7) $ 16.6 ====================== ====================== Weighted Average Number of Shares 20.1 20.0 20.1 20.0 Common Stock Equivalents (Stock Options) .1 .1 .1 .1 Weighted Average Common Shares Assuming Conversion of 7% Convertible Subordinated Debentures 3.4 3.4 3.4 3.4 ---------------------- ---------------------- Average Shares Outstanding 23.6 23.5 23.6 23.5 ====================== ====================== Fully Diluted Earnings (Loss) Per Share $ ** $ .81 $ ** $ .71 ====================== ======================
* The computation of primary earnings per share of common stock is computed without common stock equivalents because inclusion of common stock equivalents is antidilutive. ** The computation of fully diluted earnings per share of common stock is antidilutive; therefore, the amount reported for primary and fully diluted earnings per share is the same. -123- 124 EXHIBIT 19 To Our Shareholders: The second quarter of fiscal 1996 was one in which our performance fell significantly below our expectations. We achieved net earnings of $1.1 million, or five cents per share (primary and fully diluted), on sales of $285.5 million for the quarter, compared with net earnings of $18 million, or 90 cents per share (81 cents, fully diluted), on sales of $318.8 million for last year's second quarter. Our U.S. sales declined 14.4 percent, while our sales outside the U.S. increased 1.3 percent. Our U.S. sales declined in the second quarter because of a sharp drop in market demand for marine products, exacerbated by our higher field inventories of outboards. Additionally, the year-to-year sales comparison was made more difficult by the fact that last year's second quarter benefitted from as much as $15 million in sales from engine backorders carried into the period. Sales in all of our U.S. product lines were down, with the exception of our Recreational Boat Group, which achieved a small sales gain. Our reduced sales performance was similar to the overall U.S. marine industry's performance in the quarter. Unusually cold weather early this spring may have negatively impacted industry sales. Some short-term softness in employment and consumer confidence in the quarter also may have played a role. Our second quarter earnings this year were depressed by our lower sales and also by lower manufacturing efficiencies that resulted from reduced production schedules in our engine plants. We reduced our manufacturing schedules because of reduced market demand and our commitment to better manage our factory inventories. By comparison, last year's second quarter benefitted from higher manufacturing efficiencies due to increased production levels that resulted from the engine order backlog carried into the quarter. The lower manufacturing efficiencies in this year's second quarter accounted for the reduction in our gross margin to 21.5 percent from 26.9 percent in the second quarter last year. Although we reduced our operating expense by 10.5 percent, or $6.4 million, in the past quarter, our operating earnings still declined to $6.8 million from $24.9 million, and our pre-tax earnings fell to $2.9 million from $20.3 million in the second quarter of 1995. For the first six months of fiscal 1996, we incurred a net loss of $11.3 million, or 56 cents per share (primary and fully-diluted), on sales of $517.6 million compared with net earnings of $14.9 million, or 74 cents per share (71 cents, fully diluted), on sales of $561.4 million for the first half of 1995. As you know, we also limited production in our first quarter to control factory inventories. That further contributed to the reduction in our gross margin to 19.5 percent in the first half of 1996, down from 24.4 percent in the first half of last year. Operating expense was reduced by more than 10 percent in the first half, as well; however, operating earnings fell to $500,000 from $26 million in the first half of 1995. On a pre-tax basis, we incurred a loss of $8.5 million for this year's first half compared with pre-tax earnings of $18 million for the first half last year. Clearly, this isn't a level of performance we're satisfied with, and we're taking action to improve it. We've implemented immediate cost-cutting measures to improve our earnings performance for the balance of fiscal 1996. Additionally, we're taking a longer view to improving our earnings and returns. -124- 125 Last fall, when we combined our U.S. Marine Power Products Group and our former International Group, we began a study of how we could achieve efficiencies and improve service to our customers through a strategic consolidation of the two units. That work is nearly complete, and we are beginning to implement our plans. The first step is the re-engineering of our U.S. and Canadian sales and marketing operations into one streamlined, North American unit. We will gain the benefits of superior coordination and consistent brand positioning by unifying our marketing efforts for both countries. We'll also gain efficiencies by consolidating our back-room operations: functions like warehousing, order processing and warranty administration. Our North American and European re-engineering effort will result in costs of $8 million to $12 million and annualized savings, beginning in fiscal 1997, of a like amount. We are studying similar initiatives in our markets around the globe. We also have begun a study of our boat operations to determine how we can increase efficiencies by consolidating our boat groups and streamlining both manufacturing and support functions. The plan that grows out of that effort will be implemented in fiscal 1997. Additionally, we are conducting a study of our corporate staff organization to determine the most effective structure for the staff group and to reduce our corporate overhead cost. And, we are evaluating critical issues in the areas of sales, manufacturing and information systems with the aim of improving our sales margins, reducing our product costs and increasing our competitiveness. We will establish our base operational costs at levels that will support the achievement of consistently higher returns on the assets invested in our business. Not all of our activities, though, are focused on consolidation and cost cutting. In the third quarter, we'll begin to ship the first models of a new generation of outboards -- the FICHT Fuel Injection engines. The first model we'll introduce will be a 150-horsepower engine designed primarily for the high-volume, high-profit bass boat market. These engines incorporate a revolutionary computerized fuel injection technology that will be unique to our outboards. Supported by high quality manufacturing and effective marketing, we believe Ficht Fuel Injection can establish important product differentiation for our engines and boat packages. We're also making progress on our visioning effort, which we will be reviewing with our employees and fine-tuning in the third quarter. This effort is helping us clarify our direction and our areas of opportunity. We've obviously got a lot of work ahead of us, but we're also taking important steps to improve our operations and establish the foundation for stronger long-term returns. On April 24, our board of directors declared a cash dividend of 10 cents per share, payable June 28, 1996, to shareholders of record June 14, 1996. HARRY W. BOWMAN - --------------- Harry W. Bowman Chairman, President and Chief Executive Officer April 25, 1996 -125- 126 OUTBOARD MARINE CORPORATION Statements of Consolidated Earnings (Unaudited)
Three Months Ended Six Months Ended Mar. 31 Mar. 31 (In millions except amounts per share) 1996 1995 1996 1995 - -------------------------------------- ---- ---- ---- ---- Net Sales $ 285.5 $ 318.8 $ 517.6 $ 561.4 Cost of Goods Sold 224.2 233.0 416.9 424.4 --------------------- --------------------- Gross Earnings 61.3 85.8 100.7 137.0 Selling, General & Administrative Expenses 54.5 60.9 100.2 111.0 --------------------- --------------------- Earnings from Operations 6.8 24.9 .5 26.0 Non-Operating Expense (Income) Interest 4.1 5.4 9.5 10.4 Other, Net (.2) (.8) (.5) (2.4) --------------------- --------------------- 3.9 4.6 9.0 8.0 --------------------- --------------------- Earnings (Loss) Before Provision for Income Taxes 2.9 20.3 (8.5) 18.0 Provision for Income Taxes 1.8 2.3 2.8 3.1 --------------------- --------------------- Net Earnings (Loss) $ 1.1 $ 18.0 $ (11.3) $ 14.9 ===================== ===================== Net Earnings (Loss) Per Share of Common Stock Primary $ .05 $ .90 $ (.56) $ .74 ===================== ===================== Fully Diluted $ .05 $ .81 $ (.56) $ .71 ===================== ===================== Dividends Paid Per Share $ .10 $ .10 $ .20 $ .20 ===================== ===================== Average Shares of Common Stock and Common Stock Equivalents Outstanding 20.2 20.1 20.1 20.1
-126- 127 OUTBOARD MARINE CORPORATION Condensed Statements of Consolidated Financial Position
(Unaudited) ------------------- Mar. 31 Mar. 31 Sept. 30 Sept. 30 (In millions) 1996 1995 1995 1994 - ------------- ---- ---- ---- ---- Assets - ------ Current Assets Cash & Cash Equivalents $ 35.1 $ 37.1 $ 58.3 $ 80.3 Receivables 168.1 211.0 200.9 150.5 Inventories Finished Product 92.1 90.5 69.9 58.7 Raw Material, Work In Process & Service Parts 125.5 143.9 124.2 105.0 --------------------- -------------------- Total Inventories 217.6 234.4 194.1 163.7 Other Current Assets 49.6 37.2 48.9 35.3 --------------------- --------------------- Total Current Assets 470.4 519.7 502.2 429.8 Product Tooling, Net 53.0 52.4 52.0 48.3 Intangibles 39.4 31.5 40.6 32.1 Other Assets 90.7 95.4 87.9 89.8 Plant & Equipment 567.2 548.0 558.9 535.6 Accumulated Depreciation (343.4) (326.5) (334.6) (318.5) --------------------- --------------------- Plant & Equipment, Net 223.8 221.5 224.3 217.1 --------------------- --------------------- Total Assets $ 877.3 $ 920.5 $ 907.0 $ 817.1 ===================== ===================== -127- 128 Liabilities and Shareholders' Investment - ---------------------------------------- Current Liabilities Notes Payable $ - $ 90.0 $ - $ - Accounts Payable 86.7 101.7 99.6 102.9 Accrued and Other 144.0 132.3 149.2 130.7 --------------------- --------------------- Total Current Liabilities 230.7 324.0 248.8 233.6 Long-Term Debt 177.5 177.3 177.4 178.2 Postretirement Benefits Other Than Pensions 101.0 100.8 102.6 102.3 Other Non-Current Liabilities 126.6 96.1 122.4 94.0 Shareholders' Investment Common Stock & Capital Surplus 113.8 110.9 111.6 109.3 Retained Earnings 134.4 117.2 149.7 106.3 Cumulative Translation Adjustments (6.7) (5.8) (5.5) (6.6) --------------------- --------------------- Total Shareholders' Investment 241.5 222.3 255.8 209.0 --------------------- --------------------- Total Liabilities and Shareholders' Investment $ 877.3 $ 920.5 $ 907.0 $ 817.1 ===================== ===================== Shares of Common Stock Outstanding 20.1 20.0 20.0 20.0
-128- 129 EXHIBIT 99 "SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Information provided by the company from time to time may contain certain "forward-looking" information, as that term is defined by: (i) the Private Securities Litigation Reform Act of 1995 (the "Act") and in (ii) releases made by the Securities Exchange Commission ("SEC"). These cautionary statements are being made pursuant to the provisions of the Act and with the intent of obtaining the benefits of the "Safe Harbor" provisions of the Act. The company cautions investors that any forward-looking statements made by the company are not guarantees of future performance and that actual results may differ materially from those in the forward-looking statements as a result of various factors, including but not limited to the following: - The company's performance should be expected to be affected by the strength of the retail economy, primarily in the United States, but also in other international markets. Weakness in consumer confidence and rising interest rates should be expected to adversely impact the company's future financial results. - Sales of a significant portion of the company's products can be negatively impacted by abnormal weather conditions during different seasons and quarters of the year. - The Company competes with numerous well established manufacturers and distributors in its product lines. The Company's financial results may be negatively impacted by failure of new or existing products to be favorably received by retailers and consumers due to price, availability, features, other product choices or the necessity of promotions to increase sales of the company's products. - Underutilization of the company's facilities may occur as a result of failure to meet anticipated sales volumes. Such underutilization, which results in excess capacity costs, may significantly affect the company's operating results. Any material inability of the company to utilize excess factory capacity efficiently, either through increased production or reduction in capacity, should be expected to adversely affect future financial results. - The company manufactures most of its products, although it sources some products from third parties. The company's ability to realize operating profits is dependent upon its ability to timely manufacture, source and deliver products which may be sold for a profit. Labor difficulties, delays in delivery or pricing of raw materials or sourced products, scheduling and transportation difficulties, management dislocations and delays in development and manufacture of new products can negatively affect operating profits. - The company is currently analyzing opportunities for reducing costs and improving efficiencies and service on a worldwide basis. The timing, cost and impact of any strategies which are implemented could affect future financial results. -129- -----END PRIVACY-ENHANCED MESSAGE-----