-----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, Jgl0LB75Ltv1C8UaxfmsXCliTOTR4vj1eTO0wYWMi/yxen3ytb8oEyuVRBp4LdK/ +HAZvaPW/NllnZSHtVNbVg== 0000950123-98-006317.txt : 19980630 0000950123-98-006317.hdr.sgml : 19980630 ACCESSION NUMBER: 0000950123-98-006317 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 19980629 SROS: NONE 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: S-4 SEC ACT: SEC FILE NUMBER: 333-57949 FILM NUMBER: 98655803 BUSINESS ADDRESS: STREET 1: 100 HUNDRED 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMC FISHING BOAT GROUP INC CENTRAL INDEX KEY: 0001064317 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-57949-01 FILM NUMBER: 98655804 BUSINESS ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 BUSINESS PHONE: 8476896200 MAIL ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMC ALUMINUM BOAT GROUP INC CENTRAL INDEX KEY: 0001064318 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-57949-02 FILM NUMBER: 98655805 BUSINESS ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 BUSINESS PHONE: 8476896200 MAIL ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMC RECREATIONAL BOAT GROUP INC CENTRAL INDEX KEY: 0001064319 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-57949-03 FILM NUMBER: 98655806 BUSINESS ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 BUSINESS PHONE: 8476896200 MAIL ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RECREATIONAL BOAT GROUP L P CENTRAL INDEX KEY: 0001064320 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-57949-04 FILM NUMBER: 98655807 BUSINESS ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 BUSINESS PHONE: 8476896200 MAIL ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMC LATIN AMERICA CARIBBEAN INC CENTRAL INDEX KEY: 0001064321 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-57949-05 FILM NUMBER: 98655808 BUSINESS ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 BUSINESS PHONE: 8476896200 MAIL ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 S-4 1 OUTBOARD MARINE CORPORATION 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ISSUER OF SENIOR NOTES REGISTERED HEREBY OUTBOARD MARINE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3519 36-1589715 3732 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.) OMC FISHING BOAT GROUP, INC. DELAWARE 36-3516449 OMC ALUMINUM BOAT GROUP, INC. DELAWARE 36-3675740 OMC RECREATIONAL BOAT GROUP, INC. DELAWARE 36-3913531 RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP DELAWARE 36-3925608 OMC LATIN AMERICA/CARIBBEAN, INC. DELAWARE 36-25366154 (EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER SPECIFIED IN ITS CHARTER) INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
100 SEA HORSE DRIVE WAUKEGAN, ILLINOIS 60085 (847) 689-6200 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ROBERT S. ROMANO, ESQ. VICE PRESIDENT AND GENERAL COUNSEL 100 SEA HORSE DRIVE WAUKEGAN, ILLINOIS 60085 (847) 689-6200 (NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES OF COMMUNICATIONS TO: DAVID E. ZELTNER, ESQ. WEIL, GOTSHAL & MANGES LLP 767 FIFTH AVENUE NEW YORK, NEW YORK 10153-0119 (212) 310-8000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
============================================================================================================================== TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(2) - ------------------------------------------------------------------------------------------------------------------------------ 10 3/4% Senior Notes Due 2008, Series B.......................... $160,000,000 100% $160,000,000 $47,200 - ------------------------------------------------------------------------------------------------------------------------------ Guarantee of Senior Notes........... -- -- -- None ==============================================================================================================================
(1) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(f)(2). (2) Calculated pursuant to Rule 457(f)(2). THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION DATED JUNE 29, 1998 PROSPECTUS OUTBOARD MARINE CORPORATION OFFER TO EXCHANGE ITS 10 3/4% SENIOR NOTES DUE 2008, SERIES B, FOR ANY AND ALL OF ITS OUTSTANDING 10 3/4% SENIOR NOTES DUE 2008, SERIES A THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. Outboard Marine Corporation, a Delaware corporation (the "Company"), hereby offers (the "Exchange Offer"), upon the terms and conditions set forth in this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its 10 3/4% Senior Notes due 2008, Series B (the "Exchange Notes"), registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this prospectus is a part, for each $1,000 principal amount of its outstanding 10 3/4% Senior Notes due 2008 (the "Old Notes"), of which $160,000,000 principal amount is outstanding. The form and terms of the Exchange Notes are the same as the form and terms of the Old Notes except that (i) the Exchange Notes will bear a Series B designation, (ii) the Exchange Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (iii) holders of the Exchange Notes will not be entitled to certain rights of holders of Old Notes under the Registration Rights Agreement (as defined). The Old Notes and the Exchange Notes are referred to herein collectively as the "Notes." The Exchange Notes will evidence the same debt as the Old Notes (which they replace) and will be issued under and be entitled to the benefits of the Indenture dated as of May 27, 1998 (the "Indenture") by and among the Company, the Subsidiary Guarantors (as defined) and State Street Bank and Trust Company, as trustee, governing the Notes. See "The Exchange Offer" and "Description of the Notes." The Company will accept for exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time on , 1998, unless extended by the Company in its sole discretion (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain customary conditions. See "The Exchange Offer." The Old Notes were sold by the Company on May 27, 1998 to Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co. Inc. (together, the "Initial Purchasers") in a transaction not registered under the Securities Act in reliance upon an exemption under the Securities Act (the "Initial Offering"). The Initial Purchasers subsequently resold the Old Notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. Accordingly, the Old Notes may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The Exchange Notes are being offered hereunder in order to satisfy the obligations of the Company and the Subsidiary Guarantors under the Registration Rights Agreement entered into by the Company, the Subsidiary Guarantors and the Initial Purchasers in connection with the Initial Offering (the "Registration Rights Agreement"). See "The Exchange Offer." Interest on the Notes is payable semi-annually on June 1 and December 1 of each year, commencing December 1, 1998. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after June 1, 2003 in cash at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages (as defined), if any, thereon to the date of redemption. In addition, at any time prior to June 1, 2001, the Company may on any one or more occasions redeem up to an aggregate of 35% of the original aggregate principal amount of Notes at a redemption price of 110.750% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings (as defined); provided that at least 65% of the aggregate principal amount of Notes originally issued remains outstanding immediately after the occurrence of any such redemption; and provided, further, that any such redemption shall occur within 60 days of the date of the closing of any such offering. See "Description of Notes--Optional Redemption." In addition, upon the occurrence of a Change of Control (as defined), each holder of Notes will have the right to require the Company to repurchase all or any part of such holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of repurchase. See "Description of Notes--Repurchase at the Option of Holders--Change of Control." The Notes will be senior unsecured obligations of the Company (except as provided with respect to the applicable Interest Reserve Account (as defined)) and will rank pari passu in right of payment with all existing and future unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Notes will be fully and unconditionally guaranteed (the "Subsidiary Guarantees") on a joint and several basis by each of the Company's principal domestic operating subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantees will be general unsecured obligations of the Subsidiary Guarantors (except as provided with respect to the applicable Interest Reserve Account) and will rank pari passu in right of payment with all existing and future unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Subsidiary Guarantees, however, will be effectively subordinated to secured obligations of the Company and the Subsidiary Guarantors, respectively (including the Company's and the Subsidiary Guarantors' obligations under the Credit Agreement (as defined), to the extent of the assets securing such obligations) and to all indebtedness and other obligations of each Subsidiary that is not a Subsidiary Guarantor (the "Non-Guarantor Subsidiaries"). As of March 31, 1998, pro forma for the issuance of the Old Notes and the application of the net proceeds therefrom, the Notes and the Subsidiary Guarantees would have been effectively subordinated to approximately $83.8 million of secured obligations of the Company and the Subsidiary Guarantors (excluding an aggregate of $17.2 million of letter of credit obligations under the Credit Agreement) and $24.5 million of indebtedness and other obligations of the Non-Guarantor Subsidiaries. See "Risk Factors--Substantial Leverage and Debt Service." (continued on next page) - -------------------------------------------------------------------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- THE DATE OF THIS PROSPECTUS IS , 1998 3 (cover page continued) Based upon an interpretation by the staff of the Securities and Exchange Commission (the "Commission") set forth in certain no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. See "The Exchange Offer--Resale of the Exchange Notes." Holders of Old Notes wishing to accept the Exchange Offer must represent to the Company, as required by the Registration Rights Agreement, that such conditions have been met. Each broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 270 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." The Company will not receive any proceeds from the Exchange Offer. The Company has agreed to bear the expenses of the Exchange Offer. No underwriter is being used in connection with the Exchange Offer. Holders of Old Notes not tendered and accepted in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and benefits and will be subject to the limitations applicable thereto under the Indenture and with respect to transfer under the Securities Act. See "The Exchange Offer." There has not previously been any public market for the Old Notes or the Exchange Notes. The Company does not intend to list the Exchange Notes on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the Exchange Notes will develop. See "Risk Factors--Absence of a Public Market Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM. EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM," THE COMPANY EXPECTS THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE REPRESENTED BY A GLOBAL NOTE (AS DEFINED), WHICH WILL BE DEPOSITED WITH, OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME OR IN THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE REPRESENTING THE EXCHANGE NOTES i 4 (cover page continued) WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN CERTIFICATED FORM WILL BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN THE INDENTURE. SEE "BOOK-ENTRY; DELIVERY AND FORM." PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX, BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARY GUARANTORS IS MAKING ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS. ------------------------ FORWARD-LOOKING STATEMENTS THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS," WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT")). THE COMPANY WISHES TO ENSURE THAT ALL SUCH FORWARD-LOOKING STATEMENTS ARE ACCOMPANIED BY MEANINGFUL CAUTIONARY STATEMENTS PURSUANT TO THE SAFE HARBOR ESTABLISHED IN SUCH ACT. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION, THE "PROJECTED FINANCIAL INFORMATION" CONTAINED IN APPENDIX A AND CERTAIN COST-SAVING AND INDUSTRY GROWTH FORECASTS AND OTHER STATEMENTS MADE HEREIN, INCLUDING IN THE "SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" SECTIONS, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND MEMBERS OF ITS SENIOR MANAGEMENT TEAM. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE BASED ON VARIOUS EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS AND THEY ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. DUE TO THOSE UNCERTAINTIES AND RISKS, PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS. WHILE THE COMPANY BELIEVES THESE STATEMENTS ARE REASONABLE, PROSPECTIVE PURCHASERS OF THE NOTES SHOULD BE AWARE THAT ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED BY SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH IN THIS PROSPECTUS OR OTHER FACTORS, INCLUDING THE IMPACT OF COMPETITION, PRODUCT DEMAND AND MARKET ACCEPTANCE, NEW PRODUCT DEVELOPMENT AND GENERAL ECONOMIC CONDITIONS. PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSIDER CAREFULLY THE RISK FACTORS AS WELL AS THE OTHER INFORMATION AND DATA INCLUDED IN THIS PROSPECTUS IN EVALUATING AN INVESTMENT IN THE NOTES. THE COMPANY CAUTIONS THE READER, HOWEVER, THAT THE LIST OF RISK FACTORS SET FORTH HEREIN MAY NOT BE EXHAUSTIVE AND THAT THESE OR OTHER FACTORS COULD HAVE AN ADVERSE EFFECT ON THE ABILITY OF THE COMPANY TO SERVICE ITS INDEBTEDNESS, INCLUDING PRINCIPAL AND INTEREST PAYMENTS ON THE NOTES. SEE "RISK FACTORS." ii 5 AVAILABLE INFORMATION The Company's outstanding 7% Convertible Subordinated Debentures due 2002 are registered under the Exchange Act pursuant to Section 12(b) thereof. Accordingly, the Company is subject to the information and reporting requirements of the Exchange Act. Filings made by the Company with the Commission may be inspected at the public reference facilities of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the following regional offices of the Commission: New York Regional Office, Seven World Trade Center, New York, New York 10048, and Chicago Regional Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of the material contained therein may be obtained at prescribed rates from the Commission's public reference facilities in Washington, D.C. The Commission also maintains a Web site that contains reports, proxy and other information statements and other materials that are filed through the Commission's Electronic Data Gathering, Analysis, and Retrieval System. This Web site can be accessed at http://www.sec.gov. The Company has filed with the Commission a Registration Statement on Form S-4 (the "Exchange Offer Registration Statement," which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the Exchange Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. In addition, the Company has agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any Notes remain outstanding, it will furnish to the holders of the Notes and, to the extent permitted by applicable law or regulation, file with the Commission all quarterly and annual financial information that would be required to be filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor provision thereto. ------------------------ OMC, FICHT, JOHNSON, EVINRUDE, FOUR WINNS, SEASWIRL, STRATOS, JAVELIN, HYDRA-SPORTS, LOWE, PRINCECRAFT, QUEST, ROUGHNECK, SEA HORSE, SEA NYMPH and SUNCRUISER are registered trademarks of the Company. FFI is a trademark of the Company for which a trademark registration application is currently pending. The Company licenses from Chris Craft Industries, Inc. the CHRIS CRAFT trade name and trademark for use with respect to certain boats and boat accessory products. The Company licenses from Northrop Grumman Corporation the GRUMMAN trade name and trademark for use with respect to certain boat products. All other trademarks appearing in this Prospectus are the property of their respective holders. iii 6 SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and Consolidated Financial Statements of the Company, together with the notes thereto, included elsewhere in this Prospectus. Unless the context otherwise requires, all references to the "Company" or "OMC" in this Prospectus shall mean Outboard Marine Corporation and its consolidated subsidiaries. Unless otherwise indicated, all domestic industry statistics referenced herein are derived from data published by the National Marine Manufacturers' Association ("NMMA"), which the Company has not independently verified but believes to be reliable. All foreign industry data referenced herein are estimates prepared internally by the Company based in part on publicly-available sources, which the Company has not independently verified but believes to be reliable. The Company's fiscal year ends each September 30; therefore, for example, references to "fiscal 1997" refer to the Company's fiscal year ended September 30, 1997. A glossary of technical terms used herein is included for the convenience of the reader on page 109. THE COMPANY OMC is the world's largest dedicated manufacturer of outboard marine engines and boats. The Company has an approximate 36% share of the United States outboard marine engine market and an approximate 26% share of the worldwide market. Sold under the Johnson and Evinrude brand names, the Company offers one of the industry's widest ranges of outboard engines, with models from two to 250-horsepower. The Company's boat brands are also among the most recognized in the industry and are market leaders in several categories, including the fishing, aluminum and recreational boat segments. OMC's primary boat brands include Chris Craft, Four Winns, Seaswirl, Stratos, Javelin, Hydra-Sports, Lowe and Princecraft. The Company also generates a significant, recurring stream of revenue in replacement parts and accessories from its large installed base of over seven million engines. The Company believes that its marine dealer network of approximately 7,000 independent authorized dealers worldwide, approximately 5,000 of which are located in North America, is the largest marine dealer network in the world. The Company owns a majority interest in FICHT GmbH & Co. KG, which has developed a patented, highly innovative fuel-injection technology designed for two-stroke engines. The FICHT fuel-injection technology utilizes advanced electronic microprocessors to directly inject high-pressure fuel into a sealed combustion chamber, eliminating the escape of any unburned fuel. The FICHT fuel-injection system uses fewer mechanical parts, is smaller and, the Company believes, more reliable than any other low-emission engine system. The FICHT fuel-injection technology possesses several advantages over standard two-stroke engines, including smoother and quieter operation, 35% better fuel economy on average, up to 80% reduction in hydrocarbon emissions and virtually no smoke on start-up. In addition, two-stroke engines based on the FICHT fuel-injection technology offer several benefits relative to four-stroke engines, including increased low-end power, lighter weight and smaller size. Furthermore, the FICHT fuel-injection technology meets emissions standards mandated by the EPA set for the Year 2006. The Company has already introduced outboard engines incorporating the FICHT fuel-injection technology in four separate horsepower categories and plans to introduce these engines in another two horsepower categories in the Summer of 1998. To date, the Company has received several awards relating to its FICHT fuel-injection technology, including the 1996 Popular Mechanics Design & Engineering Award for marine engines, the 1997 International Marine Trades Exposition and Conference Innovation Award and the 1997 Motor Boating and Sailing Magazine Innovation Award. In September 1997, the Company was acquired by an affiliate of Greenway Partners, L.P. and entities affiliated with Soros Fund Management LLC. Since the acquisition, the Company has assembled a new, highly experienced senior management team led by David D. Jones, Jr. as President and Chief Executive Officer. Mr. Jones was previously President of the Mercury Marine Division of Brunswick Corporation, where, under his direction, the division gained substantial market share in several key marine segments. Mr. Jones has more than twenty years of experience in the marine industry. Also as part of the new management team, Andrew P. Hines joined the Company as Executive Vice President and Chief Financial Officer. Mr. Hines has extensive experience in turnaround situations. In addition, the Company has added 25 other new members to 1 7 its management team to fill key operational and administrative positions, including new heads of most of its boat divisions, its engine manufacturing operations, its purchasing and supply operations, and its sales, marketing and advertising operations. The new management team is complemented by a highly experienced and skilled workforce. In its engine manufacturing operations, where skill, experience and training represent a significant competitive advantage, the Company's salaried and hourly employees have an average tenure with the Company of approximately 16 and 14 years, respectively. Since the new senior management team was hired, the Company's EBITDA has improved by $25.6 million to $21.7 million for the six months ended March 31, 1998 from $(3.9) million for the comparable period in fiscal 1997. BUSINESS STRATEGY The Company's new senior management team has developed a turnaround strategy designed to capitalize on its strong market position and leading, well-recognized brand names and to take advantage of the continued anticipated growth in the recreational marine industry. Specifically, the Company's business strategy combines the following elements: - RATIONALIZE BOAT BRANDS AND PRICING. The Company is rationalizing and realigning its boat brands to lower its manufacturing costs and better focus each of its brands on a particular niche in the boating industry, thereby reducing competition among its own brands. Pricing also will be reset to better reflect the particular image and the value added by each brand. To further support this strategy, the Company is refocusing its marketing efforts and expenditures to emphasize and reinforce its brands as they are repositioned. - AGGRESSIVELY REDUCE OPERATING COSTS. The Company's new management team has identified several cost reduction opportunities that management believes could reduce overall manufacturing costs. The Company's cost reduction strategy includes the following elements: (i) reduce purchasing costs by consolidating purchasing across vendors, integrating suppliers into the product design process at an early stage, and designing products for lower cost; (ii) rationalize boat operations and consolidate the number of boat manufacturing facilities to improve manufacturing efficiencies and unit costs; (iii) improve operating efficiency by improving factory layout and workflows, standardizing manual labor inputs, stabilizing machining and casting, and improving quality control; and (iv) increase outsourcing of non-core capabilities from approximately 40% of the value of the Company's engines to 65%. In furtherance of these initiatives, the Company has already: - closed a boat manufacturing plant; - substantially completed its announced 540 employee workforce reduction (representing an approximate 8% reduction in its workforce); - implemented the first phase of its purchasing initiative, which includes efforts to reduce the cost of purchasing raw materials, components and subassemblies; and - implemented the first phase of its lean manufacturing realignment at its main outboard engine manufacturing and assembly facility. The Company expects to generate over $17.0 million in annual savings from the measures that have already been put in place. - CAPITALIZE ON FICHT TECHNOLOGY. The Company plans to exploit its innovative FICHT technology by expanding its application to a wider range of engine models. Since the Company's introduction of the FICHT technology in its 150-horsepower Johnson and Evinrude models released in January 1997, the Company has introduced 90-horsepower, 115-horsepower and 175-horsepower models and plans to introduce 200-horsepower and 225-horsepower models in the Summer of 1998. - STRENGTHEN CONTINUOUS QUALITY IMPROVEMENT PROGRAMS. Management believes that the quality of the Company's products represents a key competitive factor. The Company maintains rigid quality controls and extensively tests its products and components in each of its manufacturing and assembly facilities. In addition to on-site testing, the Company maintains year-round, on-water testing facilities in Illinois and Florida. The Company continually monitors its quality assurance programs and intends 2 8 to expand these programs and further motivate its workforce towards achieving increasing quality standards. - STRENGTHEN DEALER NETWORK. The Company has implemented a number of initiatives to strengthen its dealer network. In fiscal 1997, the Company managed a program to substantially reduce dealer inventory of outboard engines, which helped strengthen the viability of the dealer network by reducing dealer inventory costs. The Company is also participating in industry association initiatives to strengthen the marine industry's retailer network. These initiatives have been spearheaded by a joint task force, including the NMMA, the Marine Retailers Association of America ("MRAA") and other marine industry leaders, including the Company. The initiatives include dealership educational programs to improve dealer servicing standards and customer relationships. - EXPAND PARTS AND ACCESSORIES BUSINESS. The Company plans to strengthen its parts and accessories business, which generates a recurring stream of high-margin sales. The Company's initiatives to strengthen its parts and accessories business include redesigned packaging and an advertising program that will provide a consistent brand image and clearer product descriptions. - STRENGTHEN MARKET-DRIVEN PRODUCT DEVELOPMENT EFFORTS. The Company has developed a reputation as a leader in marine engineering capabilities. Since the Company's founding in 1936, the Company has continually introduced advanced engineering designs, applications and technologies to the marine industry. Management plans to make better use of the Company's superior engineering capabilities by focusing the Company's product development efforts on the features and capabilities most demanded by customers and on product designs that maximize the cost effectiveness of its manufacturing operations. Management believes that its development of the FICHT fuel-injection technology is a result of this market-driven product development initiative, and that this initiative should help the Company increase market share among all of its product lines. INDUSTRY The Company believes that the recreational boating industry possesses favorable market dynamics. The recreational boating industry generated approximately $19.3 billion in domestic retail sales in 1997, including approximately $8.8 billion in sales of boats, engines, trailers and accessories. Most boat purchasers are in the 35 to 54 age group, which accounts for over 50% of American discretionary income and which is projected to be the fastest growing segment of the U.S. population over the next three years. Also, according to statistics compiled by the U.S. Department of Commerce, recreational products and services represent one of the fastest growing segments of U.S. expenditures. Although unit sales in the marine industry in recent years have been declining or flat, the Company expects to benefit from recent industry-wide efforts in the U.S. designed to increase the share of recreational expenditures related to boating. The NMMA, MRAA and other marine industry leaders, including the Company, have formed a joint task force to implement initiatives to improve the quality of the industry's marine dealer network, improve the overall boating experience for consumers and enhance the awareness of boating as a recreational activity through various advertising programs. The Company believes that the growth in the U.S. age group with the highest discretionary income, the overall shift in spending of discretionary income towards recreational products and services and recent efforts to increase the share of recreational expenditures directed towards boating will contribute to growth in the recreational boating industry over the next several years. Industry observers project that consumer spending on recreational marine products and services will grow by approximately 5.6% annually from 1997 to 2002. The Company believes it is well positioned within the recreational boating industry. The Company is one of only two domestic manufacturers of both marine engines and boats. The Company believes that this combination is a competitive advantage as the industry continues to trend towards sales of boat and engine packages. Also, the capital investment and technological expertise required in manufacturing marine engines create high barriers to entry. As a result, the marine engine market is concentrated and the Company is one of only two domestic and a total of five significant worldwide manufacturers of outboard marine engines. Although the recreational boat market is fragmented, the top four boat builders (including the Company) accounted for approximately 45% of the U.S. market in 1997 in terms of unit sales. 3 9 THE GREENMARINE ACQUISITION On September 12, 1997, Greenmarine Holdings LLC ("Greenmarine Holdings") acquired control of the Company through a tender for the common stock of the Company. Greenmarine Holdings beneficially owned approximately 9.9% of OMC's outstanding common stock prior to the tender offer. The acquisition was completed for an aggregate equity purchase price of $373.0 million (including Greenmarine Holdings' initial share holdings), which implied an aggregate enterprise valuation of $495.3 million. The investors in Greenmarine Holdings include an entity affiliated with Alfred D. Kingsley and Gary K. Duberstein of Greenway Partners, L.P., and two entities affiliated with Soros Fund Management LLC. The acquisition and related debt redemption were funded with approximately $277 million of equity and $150 million of debt financing. ------------------------------ The Company was incorporated under the laws of the State of Delaware in 1936. The principal executive offices of OMC are located at 100 Sea Horse Drive, Waukegan, Illinois 60085, and its telephone number is (847) 689-6200. 4 10 THE INITIAL OFFERING The Initial Offering....... The Old Notes were sold by the Company on May 27, 1998 (the "Initial Offering") to Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co. Inc. (together, the "Initial Purchasers") pursuant to a Purchase Agreement dated May 21, 1998 (the "Purchase Agreement"). The Initial Purchasers subsequently resold all of the Old Notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. Registration Rights Agreement................ Pursuant to the Purchase Agreement, the Company, the Subsidiary Guarantors and the Initial Purchasers entered into a Registration Rights Agreement dated as of May 27, 1998 (the "Registration Rights Agreement"), which grants the holders of the Old Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange and registration rights which terminate upon the consummation of the Exchange Offer. THE EXCHANGE OFFER Securities Offered......... $160,000,000 aggregate principal amount of 10 3/4% Senior Notes due 2008, Series B, of the Company (the "Exchange Notes"). The Exchange Offer......... The Company is offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Old Notes that are properly tendered and accepted. As of the date hereof, $160,000,000 aggregate principal amount of Old Notes are outstanding. The Company will issue the Exchange Notes to holders on or promptly after the Expiration Date. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act; provided, that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Any Participating Broker-Dealer that acquired Old Notes for its own account as a result of market-making activities or other trading activities may be a statutory underwriter. Each Participating Broker-Dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange 5 11 Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 270 days after the Expiration Date, they will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." Any holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the Exchange Notes could not rely on the position of the staff of the Commission enunciated in no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Failure to comply with such requirements in such instance may result in such holder incurring liability under the Securities Act for which the holder is not indemnified by the Company. Expiration Date............ 5:00 p.m., New York City time, on , 1998 unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Accrued Interest on the Exchange Notes and the Old Notes................ Each Exchange Note will bear interest from its issuance date. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the issuance date of the Exchange Notes. Such interest will be paid with the first interest payment on the Exchange Notes. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the Exchange Notes. Conditions to the Exchange Offer........... The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer--Conditions." Procedures for Tendering Old Notes................ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof (or, in the case of a book-entry transfer, transmit an Agent's Message (as defined) in lieu thereof), in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile (or Agent's message), together with the Old Notes and any other required documentation to the Exchange Agent (as defined) at the address set forth herein. By executing the Letter of Transmittal (or transmitting an Agent's Message), each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. See "The Exchange Offer--Purpose and Effect of the Exchange Offer" and "--Procedures for Tendering." 6 12 Untendered Old Notes....... Following the consummation of the Exchange Offer, holders of Old Notes eligible to participate but who do not tender their Old Notes will not have any further exchange or registration rights and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. See "Risk Factors--Absence of Public Market Could Adversely Affect the Value of Exchange Notes" and "--Failure to Exchange Old Notes." Consequences of Failure to Exchange.............. The Old Notes that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Notes may be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption under the Securities Act, (iii) outside the United States to a foreign person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer--Consequences of Failure to Exchange." Shelf Registration Statement.................. If (i) the Exchange Offer is not permitted by applicable law or Commission policy or (ii) if any holder of the Old Notes shall notify the Company that (A) such holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and this Prospectus is not appropriate or available for such resales by such holder or (C) such holder is a broker-dealer and holds Old Notes acquired directly from the Company or any of its "affiliates" within the meaning of Rule 405 under the Securities Act, and such holder has satisfied certain conditions relating to the provision of information to the Company for use therein, the Company and the Subsidiary Guarantors have agreed to register the Old Notes on a shelf registration statement (the "Shelf Registration Statement") and to use their best efforts to cause it to be declared effective by the Commission. The Company and Subsidiary Guarantors have agreed to maintain the effectiveness of the Shelf Registration Statement for, under certain circumstances, a maximum of two years, to cover resales of the Old Notes held by any such holders. Special Procedures for Beneficial Owners........ Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Guaranteed Delivery Procedures............... Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes (or comply with the procedures for book-entry transfer), the Letter of Transmittal or any other documents required by the Letter of 7 13 Transmittal to the Exchange Agent (or transmit an Agent's message in lieu thereof) prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Acceptance of Old Notes and Delivery of Exchange Notes........... The Company will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Certain Federal Income Tax Considerations....... For a discussion of material U.S. federal income tax considerations relating to the exchange of the Exchange Notes for the Old Notes, see "Certain Federal Income Tax Considerations." Use of Proceeds............ There will be no cash proceeds to the Company from the issuance of the Exchange Notes pursuant to the Exchange Offer. See "Use of Proceeds." Exchange Agent............. The Exchange Agent is State Street Bank and Trust Company. The address and telephone and facsimile numbers of the Exchange Agent are set forth under "The Exchange Offer--Exchange Agent" and in the Letter of Transmittal. SUMMARY OF THE TERMS OF THE NOTES The Exchange Offer applies to the Old Notes. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the Old Notes, except that (i) the Exchange Notes will bear a Series B designation, (ii) the Exchange Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of Old Notes under the Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Old Notes (which they replace) and will be issued under and be entitled to the benefits of the Indenture. For further information and for definitions of certain capitalized terms used below, see "Description of the Notes." Securities Offered......... $160.0 million in aggregate principal amount of the Company's 10 3/4% Senior Notes due 2008. Maturity Date.............. June 1, 2008. Interest Rate.............. The Notes will bear interest at the rate of 10 3/4% per annum, payable semi-annually on June 1 and December 1 of each year, commencing December 1, 1998. Interest Reserve Accounts................... The Company placed approximately $28.6 million, including approximately $4.1 million of the net proceeds of the Initial Offering and approximately $24.5 million of available cash, into the Interest Reserve Accounts (as defined). The aggregate amount deposited is an amount (the "Required Amount") sufficient to pay one year of Projected Senior Debt Interest Expense (as defined) as of the Issue Date. The Notes Interest Account (as defined) is pledged to the Trustee (as defined) as 8 14 security for the benefit of the Trustee and the holders of the Notes, and the Other Senior Debt Interest Account (as defined) is pledged to the Administrative Agent (as defined) as security for the benefit of the Administrative Agent and the lenders under the Credit Agreement. All amounts deposited with the Depositary Agent will be invested in U.S. Government Securities (as defined). In the event that the Company's Excess Available Cash (as defined) for any given fiscal quarter ending after the Issue Date is less than the Company's Projected Senior Debt Interest Expense for the next fiscal quarter, the Company may request that funds be disbursed from the applicable Interest Reserve Account for payment of interest on the Notes or any other Senior Debt, as applicable. In the event that (i) the Company's Excess Available Cash for any given fiscal quarter is greater than its Projected Senior Debt Interest Expense for the next fiscal quarter and (ii) either (a) the Notes Required Amount (as defined) exceeds the difference between (x) the amount of funds on deposit in the Notes Interest Account and (y) the amount of all Deemed Payments with respect to the Notes which have not yet been distributed, or (b) the Other Senior Debt Required Amount (as defined) exceeds the difference between (x) the amount of funds on deposit in the Other Senior Debt Interest Account and (y) the amount of all Deemed Payments with respect to the other Senior Debt which have not yet been distributed, then the Company shall deposit into the applicable Interest Reserve Account, an amount equal to such excess; provided that if the Excess Cash (as defined) is less than the amount of such required deposits, then the amount of Excess Cash shall be deposited ratably into the Notes Interest Account and the Other Senior Debt Interest Account (based on the amount of their respective required deposits). The Company is required to maintain the Interest Reserve Accounts until the earlier of (i) the later of (x) three years from the Issue Date and (y) such time as the Company's Fixed Charge Coverage Ratio for the four consecutive fiscal quarter periods ending as of the last day of the most recent fiscal quarter is greater than 2.5 to 1.0, and (ii) the date upon which all obligations with respect to the Notes have been indefeasibly paid in full. See "Description of Notes--Interest Reserve Accounts." OPTIONAL REDEMPTION........ The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after June 1, 2003 in cash at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages (as defined), if any, thereon to the date of redemption. In addition, at any time prior to June 1, 2001, the Company may on any one or more occasions redeem up to an aggregate of 35% of the original aggregate principal amount of Notes at a redemption price of 110.750% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings (as defined); provided that at least 65% of the aggregate principal amount of Notes originally issued remains outstanding immediately after the occurrence of any such redemption; and provided, further, that any such redemption shall occur within 60 days of the date of the closing of any such offering. See "Description of Notes -- Optional Redemption." CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control (as defined), each holder of Notes will have the right to require the Company to repurchase all or any 9 15 part of such holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of repurchase. See "Description of Notes -- Repurchase at the Option of Holders -- Change of Control." SUBSIDIARY GUARANTEES...... The Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's principal domestic operating subsidiaries existing on the Issue Date and certain other subsidiaries formed or acquired thereafter (collectively, the "Subsidiary Guarantors"). The Subsidiary Guarantors' liability under the Subsidiary Guarantees will be limited as described herein and the Subsidiary Guarantees will be automatically released in connection with certain Asset Sales (as defined). See "Description of Notes -- Subsidiary Guarantees." RANKING.................... The Notes will be senior unsecured obligations of the Company (except as provided with respect to the applicable Interest Reserve Account) and will rank pari passu in right of payment with all existing and future unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Subsidiary Guarantees will be general unsecured obligations of the Subsidiary Guarantors (except as provided with respect to the applicable Interest Reserve Account) and will rank pari passu in right of payment with all existing and future unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Subsidiary Guarantees, however, will be effectively subordinated to secured obligations of the Company and the Subsidiary Guarantors, respectively (including the Company's and the Subsidiary Guarantors' obligations under the Credit Agreement (as defined), to the extent of the assets securing such obligations) and to all indebtedness and other obligations of each Subsidiary that is not a Subsidiary Guarantor (the "Non-Guarantor Subsidiaries"). As of March 31, 1998, pro forma for the issuance of the Old Notes and the application of the net proceeds therefrom, the Notes and the Subsidiary Guarantees would have been effectively subordinated to approximately $83.8 million of secured obligations of the Company and the Subsidiary Guarantors (excluding an aggregate of $17.2 million of letter of credit obligations under the Credit Agreement) and $24.5 million of indebtedness and other obligations of the Non-Guarantor Subsidiaries. See "Risk Factors -- Substantial Leverage and Debt Service." CERTAIN COVENANTS.......... The Indenture contains certain covenants that limit, among other things, the ability of the Company and its Restricted Subsidiaries to (i) pay dividends, redeem capital stock or make certain other restricted payments or investments; (ii) incur additional indebtedness or issue certain preferred equity interests; (iii) merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets; (iv) create liens on assets; and (v) enter into certain transactions with affiliates or related persons. See "Description of Notes -- Certain Covenants." FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BEFORE TENDERING OLD NOTES IN EXCHANGE FOR EXCHANGE NOTES, SEE "RISK FACTORS." THE RISK FACTORS ARE GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE EXCHANGE NOTES. 10 16 SUMMARY ADJUSTED PRO FORMA AND PROJECTED FINANCIAL DATA The following sets forth (i) certain summary unaudited pro forma operating data of the Company, as if the Greenmarine Acquisition (as defined) and the Initial Offering had occurred on October 1, 1996, and as further adjusted to (a) exclude certain charges which were recorded in fiscal 1997, but which management deems to be unusual and non-recurring in nature, and (b) give pro forma effect to certain facility consolidations and net workforce reductions as if they had occurred on the same date, and (ii) projected financial data for the Company for fiscal 1998. The adjusted pro forma information excludes certain historical charges and is not necessarily indicative of the results that would have occurred had the Greenmarine Acquisition, Initial Offering and the other actions mentioned been completed on the dates indicated or of the Company's actual or future results. In addition, the adjusted pro forma data have not been prepared in accordance with the requirements of Article 11 of Regulation S-X under the Securities Act and are included for the sole purpose of providing supplemental information which the Company believes may be useful to investors. See "Unaudited Pro Forma Condensed Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein. The projected financial data of the Company set forth below have been derived from, and should be read in conjunction with, the summary financial projections and related assumptions contained in Appendix A hereto (the "Projections"). The Projections included in this Prospectus were prepared by the Company and are forward-looking statements based upon a number of assumptions and estimates that, while presented with numerical specificity and considered reasonable by the Company, are inherently speculative in nature and subject to significant business, economic, competitive and operational uncertainties, contingencies and risks, many of which are beyond the control of the Company. It can be expected that one or more of the assumptions underlying the Projections will prove not to be accurate and that unanticipated events and circumstances will occur. As a result, actual results will vary from the Projections and those variations may be material due to various risks, including the inability of the Company's management team to successfully restructure its boat and engine manufacturing operations in the manner and within the time frame presently contemplated and the other risks described herein under "Risk Factors." Consequently, this Prospectus should not be regarded as a representation by the Company or any other person (including the Initial Purchasers) that the Projections will be achieved. The Projections were not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, or any other regulatory or professional agency or body or generally accepted accounting principles. See "Risk Factors--Risks Related to Projections." Neither Arthur Andersen LLP, the Company's independent certified public accountants, nor the Initial Purchasers have compiled or examined the Adjusted Pro Forma Data or the Projections and, accordingly, they express no opinion or any other form of assurance with respect to, assume no responsibility for, and disclaim any association with, the Adjusted Pro Forma Data and the Projections. The Company does not intend to update or otherwise revise the Projections to reflect events or circumstances existing or arising after the date of this Prospectus or to reflect the occurrence of unanticipated events. IN LIGHT OF THE FOREGOING, PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO RELY ON THE ADJUSTED PRO FORMA DATA OR THE PROJECTIONS.
ADJUSTED PRO FORMA HISTORICAL PROJECTED ---------------------------------------------- ---------------- ---------------------------------- SIX MONTHS ENDED YEAR ENDED ----------------------------- SIX MONTHS ENDED SIX MONTHS ENDING YEAR ENDING SEPT. 30, 1997 MAR. 31, 1997 MAR. 31, 1998 MAR. 31, 1998 SEPT. 30, 1998 SEPT. 30, 1998 -------------- ------------- ------------- ------------- -------------- -------------- (DOLLARS IN MILLIONS, EXCEPT FOR RATIOS) INCOME STATEMENT DATA: Net sales.............. $979.5 $434.1 $475.5 $475.5 $594.1 $1,069.6 Gross earnings......... 175.3(1) 66.3(1) 103.9(1) 97.6 139.7 237.3 Earnings (loss) from operations........... (26.3)(2) (27.1)(2) 3.5(2) (4.9) 32.1 27.2 OTHER DATA: EBITDA(3).............. 41.2 4.7 30.1 21.7 66.7 88.4 Interest expense(4).... 31.2 15.9 15.8 14.4 14.9 29.3 Capital expenditures... 36.3 22.7 11.9 11.9 15.5 27.4 Gross earnings margin............... 17.9% 15.3% 21.9% 20.5% 23.5% 22.2% EBITDA margin.......... 4.2% 1.1% 6.3% 4.6% 11.2% 8.3% CREDIT DATA: Ratio of EBITDA/interest expense.............. 1.3x 0.3x 1.9x 1.5x 4.5x 3.0x Ratio of net normalized debt/EBITDA(5)....... 5.7x -- -- -- -- 2.7x
MARCH 31, 1998 ------------------------------ ACTUAL AS ADJUSTED -------------- ------------- BALANCE SHEET DATA: Net debt(5).................................. $275.7 $281.2 Net normalized debt(5)....................... 229.3 234.8
(footnotes on following page) 11 17 - ------------------------------ (1) Adjusted pro forma gross earnings reflect adjustments to the Company's pro forma income statement data for the periods indicated (giving effect to the Initial Offering and the Greenmarine Acquisition) in order to: (i) exclude the effect of certain charges recorded in fiscal 1997 under cost of goods sold which are deemed by management to be unusual and non-recurring in nature, including the write-off of impaired assets relating to the Chris Craft line of boats and write-offs of inventory and tooling relating to discontinued products and technology ($4.6 million for the year ended September 30, 1997); additional reserves relating to changes in the method of estimating surplus parts and accessories inventory and recognizing certain pre-rigging rebate expense ($1.8 million for the year ended September 30, 1997); an additional accrual relating to salt water intrusion issues on certain engines, which have since been resolved ($1.0 million for the year ended September 30, 1997); and certain non-recurring expenses associated with the introduction of the FICHT technology ($0.8 million for the year ended September 30, 1997); and (ii) reflect the pro forma benefit to cost of goods sold of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including employee reductions ($12.2 million for the year ended September 30, 1997, $6.1 million for the six months ended March 31, 1997 and $6.0 million for the six months ended March 31, 1998, of which $1.0 million, $0.5 million and $0.5 million, respectively, are based on management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized) and the closing of the Company's Old Hickory facility ($0.5 million, $0.3 million and $0.3 million, respectively). (2) Adjusted pro forma earnings (loss) from operations reflect the effect of the adjustments described in Footnote 1 above and also reflects further adjustments to the Company's pro forma income statement data for the periods indicated (giving effect to the Initial Offering and the Greenmarine Acquisition) in order to: (i) exclude the effect of certain charges recorded in fiscal 1997 under selling, general and administrative expense, which are deemed by management to be unusual and non-recurring in nature, including charges resulting from the early adoption of the AICPA Statement of Position 96-1 "Environmental Remediation Liabilities" ($7.0 million for the year ended September 30, 1997); and additional accruals for warranty expenses at the Company's Boat Group as a result of changes in the method used to estimate warranty reserves ($9.7 million for the year ended September 30, 1997); and (ii) reflect the pro forma benefit to selling, general and administrative expense of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including employee reductions ($4.5 million for the year ended September 30, 1997, $2.2 million for the six months ended March 31, 1997, and $2.1 million for the six months ended March 31, 1998, of which $1.5 million, $0.7 million and $0.7 million, respectively, are based on management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized). (3) "EBITDA" represents earnings from operations (including income derived from the Company's stern drive joint venture, net of joint venture expenses) before depreciation and amortization (excluding debt discount amortization). The Company accrues for income from the stern drive joint venture, net of joint venture expenses, in Other Income and has included it in EBITDA because it reflects a recurring stream of revenue from the sale of the Company's stern drive parts and accessories products. Income from the stern drive joint venture, net of joint venture expenses, was $7.2 million in fiscal 1997, $2.1 million and $0.1 million for each of the six months ended March 31, 1997 and 1998, respectively, and is projected to be $4.2 million for the six months ended September 30, 1998 and $4.3 million for fiscal 1998. EBITDA is widely used by securities analysts and is presented here to provide additional information about the Company's operations. However, EBITDA as presented herein may be calculated differently by other companies and, accordingly, the amounts presented herein may not be comparable to similarly titled measurements of other companies. EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (4) Interest expense represents total interest expense less amortization of deferred financing costs, pro forma for the Initial Offering. (5) Net debt as of March 31, 1998 represents the Company's historical total debt minus available cash and cash equivalents and amounts in the Interest Reserve Accounts. See "Capitalization." Net normalized debt gives pro forma effect to the Initial Offering and the application of the net proceeds therefrom, and represents the Company's total debt minus available cash and cash equivalents and the amounts in the Interest Reserve Accounts, and assumes $24.3 million outstanding under the revolving credit facility of the Credit Agreement, which represents the Company's average month-end balance outstanding for the last twelve months ended March 31, 1998. As of March 31, 1998, the Company had $70.7 million drawn under the Credit Agreement (excluding an aggregate of $17.2 million of letter of credit obligations under the Credit Agreement). 12 18 SUMMARY HISTORICAL FINANCIAL INFORMATION The summary historical consolidated financial information of the Company presented below was derived from the consolidated financial statements of the Company as of and for each of the years in the five-year period ended September 30, 1997, and for the six months ended March 31, 1997 and 1998. The following summary financial information is qualified in its entirety by, and should be read in conjunction with, "Capitalization," "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and the Consolidated Financial Statements of the Company, together with the notes thereto, included elsewhere in this Prospectus. For accounting purposes, the Greenmarine Acquisition was treated as a purchase transaction and, accordingly, the summary historical consolidated financial information of the Company prior to the Greenmarine Acquisition is not comparable in all respects to the historical consolidated financial information for subsequent periods. The Company's consolidated financial data for the six month periods ended March 31, 1997 and 1998 have been derived from the Company's unaudited consolidated financial statements which, in the opinion of management, contain all normal recurring adjustments necessary for fair presentation of the financial condition and results of operations for such periods. Operating results for the six months ended March 31, 1998 may not be indicative of the results that can be expected for fiscal 1998.
POST-MERGER PRE-MERGER COMPANY COMPANY ---------------------------------------------------------------- ------------ SIX SIX MONTHS MONTHS ENDED ENDED FISCAL YEARS ENDED SEPTEMBER 30, MARCH 31, MARCH 31, -------------------------------------------------- ----------- ------------ 1993 1994 1995 1996 1997 1997 1998(1) -------- -------- -------- -------- ------ ----------- ------------ (DOLLARS IN MILLIONS) (UNAUDITED) (UNAUDITED) INCOME STATEMENT DATA: Net sales................... $1,034.6 $1,078.4 $1,229.2 $1,121.5 $979.5 $434.1 $475.5 Gross earnings.............. 218.0 252.0 297.4 229.3 153.0 59.2 97.6 Selling, general and administrative expense... 226.1 206.0 230.2 210.3 215.4 91.9 102.5 Restructuring charges(2).... 144.8 -- -- 25.6 -- -- -- Earnings (loss) from operations(3)............ (152.9) 46.0 67.2 (6.6) (62.4) (32.7) (4.9) OTHER DATA: EBITDA(4)................... 46.9 93.4 118.7 77.3 (0.9) (3.9) 21.7 Capital expenditures........ 50.0 68.2 66.5 52.7 36.3 22.7 11.9 Ratio of earnings to fixed charges(5)............... N/A 4.3x 3.5x 0.2x N/A N/A 0.0x
MARCH 31, 1998 -------------------------- AS ACTUAL ADJUSTED(6) -------- -------------- (DOLLARS IN MILLIONS) BALANCE SHEET DATA: Cash and cash equivalents................................. $ 49.1 $ 25.0 Interest Reserve Accounts(7).............................. -- 28.6 -------- -------- Total cash and cash equivalents........................ $ 49.1 $ 53.6 ======== ======== Current assets............................................ $ 462.9 $ 467.4 Total assets.............................................. 1,152.2 1,162.2 Total debt................................................ 324.8 334.8 Total shareholders' investment............................ 257.1 257.1
(footnotes on following page) 13 19 - ------------------------------ (1) On September 12, 1997, a wholly-owned subsidiary of Greenmarine Holdings acquired beneficial ownership of more than 90% of the Company's common stock. On September 30, 1997, the subsidiary merged with and into the Company. This acquisition has been accounted for as a purchase and is deemed to have occurred on September 30, 1997. The Company's balance sheet as of March 31, 1998 and its results of operations for the six months ended March 31, 1998 reflect the purchase accounting adjustments and, consequently, such operating results are not directly comparable to results of operations in prior periods. (2) The restructuring charges recorded in fiscal 1993 related to closings and transfers of manufacturing and distribution operations including severance costs resulting from staff reduction programs as well as write-off of the remaining intangibles of $75.8 million primarily related to the recreational boat group. The restructuring charges recorded in fiscal 1996 related to closings of distribution operations and write-down of manufacturing facilities outside the United States. (3) The net loss reported in fiscal 1993 reflects an extraordinary charge of $117.5 million representing a cumulative effect on prior years of changes in accounting principles for income taxes and postretirement benefits other than pensions. (4) "EBITDA" represents earnings from operations (including income derived from the Company's stern drive joint venture, net of joint venture expenses) before depreciation and amortization (excluding debt discount amortization) and restructuring charges. The Company accrues for income from the stern drive joint venture, net of joint venture expenses, in Other Income and has included it in EBITDA because it reflects a recurring stream of revenue from the sale of the Company's stern drive parts and accessories products. Income from the stern drive joint venture, net of joint venture expenses, was $0.4 million, $4.1 million, $4.9 million, $4.4 million, $7.2 million, $2.1 million and $0.1 million for the fiscal years ended 1993, 1994, 1995, 1996 and 1997, respectively, and for the six months ended March 31, 1997 and 1998, respectively. Information of the type represented by EBITDA is widely used by securities analysts and is presented here to provide additional information about the Company's operations. EBITDA as presented herein may be calculated differently by other companies and, accordingly, the amounts presented herein may not be comparable to similarly titled measurements of other companies. EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (5) For purposes of the computations, earnings before fixed charges consist of income (loss) before the provision for income taxes and fixed charges; fixed charges consist of interest expense, including the interest portion of rental obligations on capitalized and noncapitalized leases and amortization of debt discount and deferred debt expenses. Earnings were inadequate to cover fixed charges for fiscal 1993 and fiscal 1997 and the six months ended March 31, 1997. The amounts of additional earnings that would have been required to cover fixed charges for such periods are $159.9 million, $76.3 million and $19.8 million, respectively. (6) As adjusted data reflects the Initial Offering and the application of the net proceeds therefrom. See "Use of Proceeds." (7) Funds deposited in the Interest Reserve Accounts will be held by a depositary as a contingency reserve for future interest payments on Senior Debt (as defined). See "Description of Notes--Interest Reserve Accounts." 14 20 RISK FACTORS Prospective investors should carefully consider the following factors, together with the other information set forth in this Prospectus, before making an investment decision. The risk factors set forth below are generally applicable to the Old Notes as well as the Exchange Notes. SUBSTANTIAL LEVERAGE AND DEBT SERVICE The Company has substantial indebtedness and debt service obligations. As of March 31, 1998, pro forma for the Initial Offering and the application of the net proceeds therefrom, the Company would have had total consolidated indebtedness and stockholder's equity of approximately $334.8 million and $257.1 million, respectively. For the year ended September 30, 1997, on a pro forma basis, the Company's earnings would have been insufficient to cover its fixed charges by $70.4 million. For the six months ended March 31, 1998, on a pro forma basis, the Company's earnings were equal to its fixed charges. See "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company's high level of indebtedness will have important consequences for its future operations, including, but not limited to, the following: (i) a substantial portion of its cash flow from operations must be dedicated to debt service and will not be available for other purposes; (ii) the Company's ability to obtain additional debt financing in the future for working capital, capital expenditures or acquisitions may be limited; (iii) the level of indebtedness could increase the Company's vulnerability to adverse changes in the marine industry and general economic conditions; (iv) the Company may be placed at a competitive disadvantage with respect to its competitors; and (v) a portion of the Company's borrowings bear interest at variable rates of interest which could result in higher interest expense in the event of an increase in market interest rates. The Indenture governing the Notes restricts, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, to encumber or sell assets, to enter into transactions with affiliates and to make certain investments. In addition, the Credit Agreement contains certain other and more restrictive covenants and prohibits the Company and its subsidiaries from prepaying other indebtedness, including the Notes. The Credit Agreement also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. The Company's ability to meet those financial ratios and tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those tests. Certain of the Company's other debt instruments contain financial and other restrictive covenants, including restrictions on the Company's ability to incur certain secured indebtedness and to enter into certain sale and lease-back transactions. A violation of any of such covenants would result in an event of default which, if not cured or waived, could prevent the Company from making additional borrowings under the Credit Agreement and otherwise have a material adverse effect on the Company. See "Description of Notes" and "Description of Certain Other Indebtedness." Based upon the current level of operations and anticipated cost savings, the Company believes that its cash flow from operations, together with borrowings under the Credit Agreement, the Interest Reserve Accounts and its other sources of liquidity, will be adequate to meet its anticipated requirement for working capital and accrued liabilities, capital expenditures, interest payments and scheduled principal payments over the next several years. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financial Condition; Liquidity and Capital Resources." There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels or that anticipated costs savings can be fully achieved. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt and accrued liabilities and make necessary capital expenditures, or if its future earnings growth is insufficient to amortize all required principal payments out of internally generated funds, the Company may be required to refinance all or a portion of its existing debt, sell assets or obtain additional financing. There can be no assurance that any such refinancing or asset sales would be possible or that any additional financing could be obtained, particularly in view of the Company's high level of debt. 15 21 DECLINING MARKET SHARE AND SALES; NET LOSSES; ABILITY TO EXECUTE TURNAROUND STRATEGY The Company's market share in the U.S. boat market has declined from 20% in fiscal 1993 to 14% as of February 28, 1998, and its market share in the U.S. engine market has declined from 49% in fiscal 1993 to 35% as of March 31, 1998. The Company's net sales have declined from $1,229.2 million in fiscal 1995 to $979.5 million in fiscal 1997. The declining sales in fiscal 1996 and fiscal 1997 contributed to net losses of $7.3 million and $79.1 million in the respective years. The Company estimates that approximately 10% of its decline in market share with respect to its outboard marine engines was due to the loss of a major customer in fiscal 1994. The loss of this customer resulted from Brunswick Corporation, one of the Company's major competitors, acquiring an equity interest in the customer. Since the Company's new senior management team was hired, the Company's EBITDA has improved by $25.6 million to $21.7 million for the six months ended March 31, 1998 from $(3.9) million for the comparable period in fiscal 1997. However, there can be no assurance that net sales and market share will not continue to decline or that the Company will not continue to report net losses in the future. Under its new ownership and management, the Company has implemented various revenue-enhancing and cost-reducing initiatives as part of its business strategy. See "Business--Business Strategy." The success of the Company's strategy will be dependent upon a number of factors, many of which are beyond the Company's control. These factors include: substantial market acceptance for the Company's existing or future products, the ability of the Company to attract and retain qualified personnel, the successful integration of its newest management members, the condition of the marine industry and the domestic and international economy in general, and the other risks referred to in "Risk Factors." There can be no assurance that the Company's business strategy, or all elements thereof, will be fully implemented or, if implemented, that the anticipated benefits of the initiatives will be realized. HIGHLY CYCLICAL INDUSTRY The Company's business is highly cyclical, and its operations are highly dependent on a number of factors relating to or affecting consumer spending. Sales of the Company's products are closely linked to the condition of the overall economy and are influenced by local, national and international economic conditions, as well as interest rates and the availability of fuel. In an economic downturn, consumer discretionary spending levels are reduced, often resulting in disproportionately large declines in the sale of relatively expensive items such as recreational boats. Similarly, rising interest rates could have a negative impact on consumers' ability, or willingness to obtain financing from lenders, which could also adversely affect the ability of the Company to sell its products. Even if prevailing economic conditions are positive, consumer spending on non-essential goods such as recreational boats can be adversely affected due to declines in consumer confidence levels. Total unit sales of outboard boats in the United States fell from a high of 355,000 units in 1988 to 192,000 units in 1992, while total unit sales of outboard engines in the United States fell from a high of 460,000 units to 272,000 units during the same time period. The sales decline in the marine industry during this period was the worst such decline in the last 30 years. Although annual U.S. purchases of boats and engines increased to 336,960 and 317,000, respectively, in 1995, unit sales declined in 1996 and again in 1997, when reported U.S. sales of boats and engines were 304,600 and 302,000, respectively. The Company believes these declines were partially due to adverse weather conditions. See "--Seasonality; Weather Conditions" and "Business--Industry Overview." SEASONALITY; WEATHER CONDITIONS The Company's business is seasonal due to the impact of the buying patterns of its dealers and consumers. The Company's peak revenue periods historically have been its third and fourth fiscal quarters ending June 30 and September 30, respectively. Because of the seasonality of the Company's business, the results of operations for any fiscal quarter are not necessarily indicative of the results for the full year. Additionally, an event which adversely affects the Company's business during any of these peak periods could have a material adverse effect on the Company's financial condition or results of operations for the full year. The Company's business is also affected by weather patterns which may adversely impact the Company's operating results. For example, excessive rain during the Spring and Summer, the peak retail sales periods, or 16 22 unseasonably cool weather and prolonged winter conditions may curtail customer demand for the Company's products. Although the geographic diversity of the Company's dealer network will reduce the overall impact on the Company of adverse weather conditions in any one market area, such conditions will continue to represent potential adverse risks to the Company's financial performance. RELIANCE ON PATENTS AND INTELLECTUAL PROPERTY; CERTAIN ALLEGATIONS REGARDING FICHT TECHNOLOGY The Company's engine manufacturing business relies heavily on patented and other proprietary technology. The Company relies upon a combination of patent, trademark and trade secret laws, together with licenses, confidentiality agreements and other contractual covenants to establish and protect its technology and other intellectual property rights. Wherever legally permissible and appropriate, the Company files applications to acquire its patents and register its trademarks and service marks in the United States and many foreign countries where the Company currently sells its products or could reasonably be expected to sell products in future years. There can be no assurance that the patent applications submitted by the Company or its licensors will result in patents being issued or that if issued, such patents or pre-existing patents will afford adequate protection against competitors with similar technology. There can also be no assurance that any patents issued to or licensed by the Company will not be infringed upon or designed around by others, that others will not obtain patents that the Company will need to license or design around, that the Company's products will not inadvertently infringe upon the valid patents of others or that others will not manufacture and distribute the Company's patented products upon expiration of such patents. In addition, there can be no assurance that key patents of the Company will not be invalidated or that the Company or its licensors will have adequate funds to finance the high cost of prosecuting or defending patent validity or infringement issues. The Company has recently received correspondence from Orbital Engine Corporation Limited ("Orbital") alleging that the Company's FICHT fuel-injected 150-horsepower engines infringe two Australian Orbital patents, which correspond to three U.S. patents and to a number of foreign patents. The Company believes that it has substantial defenses to these allegations, including that the three corresponding U.S. patents are not infringed and/or are invalid. However, there can be no assurance that Orbital will not commence litigation against the Company with respect to this matter or, if such litigation is commenced, that the Company's defenses will be successful. If Orbital is successful in an action against the Company, the Company could be required to obtain a license from Orbital to continue the manufacture, sale, use or sublicense of FICHT products and technology or it may be required to redesign its FICHT products and technology to avoid infringement. There can be no assurance that any such license could be obtained or that any such redesign would be possible. There also can be no assurance that the failure to obtain any such license or effect any such redesign, or any cost associated therewith, would not have a material adverse effect on the Company. See "Business--Intellectual Property." COMPETITION All the fields in which OMC is engaged are highly competitive. The Company faces competition on international, national, regional and local levels. OMC's principal competition in the domestic and international outboard engine market is from Brunswick Corporation and Yamaha Motor Co., Ltd. In the boat manufacturing industry, there are hundreds of manufacturers which compete with OMC, the largest of which in the United States are Brunswick Corporation, Genmar Industries, Inc., and Tracker Marine, L.P. Many of OMC's competitors in the boat manufacturing industry are smaller, regional builders who may possess cost advantages over the Company's boat manufacturing operations. In addition, the Company faces competition generally from other forms of recreational products and activities such as golf, camping and recreational vehicles. Many of the Company's competitors, including Brunswick Corporation and Yamaha Motor Co., Ltd., are large, vertically integrated companies that may have greater resources, including financial resources, than the Company. Although the Company believes that its products are well recognized in the markets in which the Company competes and that it can effectively continue to compete in these markets, there can be no assurance that such competition will not adversely affect the Company's results of operations or ability to maintain or increase sales and market share. 17 23 DEPENDENCE UPON KEY PERSONNEL Since the Company's acquisition by Greenmarine Holdings, the Company has replaced a large portion of its management team. The ability of the Company to turnaround its operations and restore profitability is highly dependent upon certain members of this senior management team. The loss of certain of these managers could have a material adverse effect upon the Company's business. The Company has employment agreements with David D. Jones, its President and Chief Executive Officer, and Andrew P. Hines, its Executive Vice President and Chief Financial Officer. However, these employment agreements do not preclude Mr. Jones or Mr. Hines from voluntarily terminating their employment with the Company. The Company does not maintain key-man life insurance with respect to any of its officers. The Company's success will also depend on its ability to attract and retain highly skilled and qualified personnel. See "Management." FOREIGN OPERATIONS The Company has manufacturing and assembly operations in Mexico, China, Hong Kong, Brazil, Australia and Canada and sells its products worldwide. For the six months ended March 31, 1998 and for fiscal 1997, approximately 25% and 26%, respectively, of the Company's net sales were derived from operations conducted outside the United States. In addition, as of March 31, 1998, approximately 16% of the Company's assets were located outside the United States. Foreign operations are subject to special risks that can materially affect sales of the Company and the value of the Company's foreign assets, including currency exchange rate fluctuations, the impact of inflation, government expropriation, exchange controls and other restrictions on the repatriation of earnings, political instability, civil insurrection and other risks. Changes in certain exchange rates could have an adverse effect on the relative prices at which the Company and foreign competitors sell their products in the same market and on the Company's ability to meet interest and principal obligations with respect to its U.S. dollar-denominated debt. Similarly, the cost of certain items required in the Company's operations may be affected by changes in the value of the relevant currencies. Specifically, the substantial devaluation of the Japanese yen since the beginning of the fourth quarter of fiscal 1997 has improved the competitive position of several of the Company's Japanese competitors by decreasing the sales price in U.S. dollars of their Japanese products in the U.S. market. While the Company hedges certain exposures to foreign currency exchange rate changes arising in the ordinary course of business, there can be no assurance that the Company will be successful and that shifts in currency exchange rates will not have a material adverse effect on the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financial Condition; Liquidity and Capital Resources" and Notes 10 and 16 to the Consolidated Financial Statements included elsewhere herein. ENVIRONMENTAL AND REGULATORY COMPLIANCE The Company is subject to regulation under various federal, state and local laws relating to the environment and to employee safety and health. These laws include those relating to the generation, storage, transportation, disposal and emission into the environment of various substances, those relating to drinking water quality initiatives and those which allow regulatory authorities to compel (or seek reimbursement for) cleanup of environmental contamination arising at its owned or operated sites and at facilities where its waste is being or has been disposed. The Company believes it is in substantial compliance with such laws except where such noncompliance is not expected to have a material adverse effect. The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") and similar state laws impose joint, strict, and several liability on (i) owners or operators of facilities at, from, or to which a release of hazardous substances has occurred; (ii) parties who generated hazardous substances that were released at such facilities; and (iii) parties who transported or arranged for the transportation of hazardous substances to such facilities. A majority of states have adopted Superfund statutes comparable to, and in some cases more stringent than, CERCLA. The Company has been notified that it is named a potentially responsible party ("PRP") at various sites for study and clean-up costs. In some cases there are several named PRPs and in others there are hundreds. The Company generally participates in the investigation or clean-up of these sites through cost sharing agreements with terms which vary from site to site. Costs are typically allocated based upon the volume and nature of the materials sent to the site. However, as a PRP, the Company can be held 18 24 jointly and severally liable for all environmental costs associated with a site. As of March 31, 1998, the Company has accrued approximately $23.0 million for costs relating to remediation at contaminated sites, including operation and maintenance for continuing and closed-down operations. The Company believes that these reserves are adequate, although there can be no assurance that this amount will be adequate to cover such known or unknown matters. See "Business--Environmental Matters" and Note 18 to the Consolidated Financial Statements included elsewhere herein. The EPA has adopted regulations governing emissions from two-stroke marine engines. As adopted, the regulations as they relate to outboard engines phase in over nine years, beginning in model year 1998 and concluding in model year 2006. With respect to personal watercraft, the regulations phase in over eight years, beginning in model year 1999 and concluding in model year 2006. Marine engine manufacturers will be required to reduce hydrocarbon emissions from outboard engines, on average, by 8.3% per year beginning with the 1998 model year, and emissions from personal watercraft by 9.4% per year beginning in model year 1999. In 1994, the Company announced "Project LEAP," a project to convert its entire outboard product line to low-emission products within the next decade. To date, the Company estimates that it has spent approximately $50.0 million on Project LEAP, including the introduction of its new FICHT fuel-injection technology and four-stroke outboard engines, and by the Year 2006 the Company is expected to have expended an aggregate of approximately $90.0 million to meet the EPA's new emissions standards. See "Business--Research and Development" and "--Environmental Matters." The Company does not believe that compliance with these standards, which will add cost to the Company's engine products and will initially result in a lower margin to the Company, will be a major deterrent to sales. The Company believes that its new compliant technology will add value to its products at the same time that the entire industry is faced with developing solutions to the same regulatory requirements. In addition, the Company has implemented several initiatives to reduce the manufacturing costs of its new engines. Although there can be no assurance, the Company does not believe that compliance with these new EPA regulations will have a material adverse effect on future results of operations or the financial condition of the Company. Additionally, certain states have required or are considering requiring a license to operate a recreational boat. While such licensing requirements are not expected to be unduly restrictive, regulations may discourage potential first-time buyers, which could affect the Company's business, financial condition and results of operations. The Company cannot predict the environmental legislation or regulations that may be enacted in the future or how existing or future laws or regulations will be administered or interpreted. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretation of existing laws, may require additional expenditures by the Company, some or all of which may be material. RISKS RELATED TO PROJECTIONS The projections set forth under "Summary--Summary Adjusted Pro Forma and Projected Financial Data" and "Projected Financial Information," while presented with numerical specificity, are based upon a number of estimates and assumptions. Though considered reasonable by the Company, such estimates and assumptions are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, and upon assumptions with respect to future business strategies and decisions which are subject to change. The Projections were not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, any regulatory or professional agency or body, or generally accepted accounting principles. Moreover, neither Arthur Andersen LLP, the independent public accountants for the Company, nor the Initial Purchasers have compiled or examined the Projections and, accordingly, they express no opinion or any other form of assurance with respect to, assume no responsibility for and disclaim any association with the Projections. While the Company believes the Projections are based upon reasonable assumptions and estimates, actual results will vary and such variations may be material. This Prospectus also includes projections of industry growth rates by industry sources. Such projections are also subject to uncertainties, contingencies and assumptions. Projections are necessarily speculative in nature, and it is usually the case that one or more of the assumptions 19 25 underlying the projections will not materialize. Furthermore, the Company does not intend to update or revise the Projections to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Prospective purchasers of the Notes are cautioned not to rely on any of the projections included herein. RANKING The Notes will be senior unsecured obligations of the Company (except as provided with respect to the applicable Interest Reserve Account) and will rank pari passu in right of payment with all existing and future senior unsubordinated indebtedness of the Company and senior in right of payment to all existing and future subordinated indebtedness of the Company. The Subsidiary Guarantees will be general unsecured obligations of the Subsidiary Guarantors (except as provided with respect to the applicable Interest Reserve Account) and will rank pari passu in right of payment with all existing and future unsubordinated indebtedness of the Subsidiary Guarantors, and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. The Notes and the Subsidiary Guarantees will be effectively subordinated to secured obligations of the Company and the Subsidiary Guarantors, respectively (including the Company's and the Subsidiary Guarantors' obligations under the Credit Agreement, to the extent of the assets securing such obligations) and to all indebtedness and other obligations of each Non-Guarantor Subsidiary. As of March 31, 1998, on a pro forma basis, after giving effect to the application of the net proceeds of the Initial Offering, the Notes and the Subsidiary Guarantees would have been effectively subordinated to approximately $83.8 million of secured obligations of the Company and the Subsidiary Guarantors (excluding an aggregate of $17.2 million of letter of credit obligations under the Credit Agreement) and $24.5 million of indebtedness and other obligations of the Non-Guarantor Subsidiaries. See "Capitalization." BANKRUPTCY RISK RELATED TO INTEREST RESERVE ACCOUNTS The right of the trustee under the Depositary Agreement (as defined) to foreclose on the Notes Interest Account (as defined) upon the occurrence of any event of default on the Notes is likely to be significantly impaired by applicable law if a bankruptcy or reorganization case were to be commenced by or against the Company. Upon the commencement of a bankruptcy case, for example, the trustee will be automatically stayed from commencing or continuing any foreclosure action absent an order from the bankruptcy court. In addition, the cash in the Interest Reserve Accounts may be deemed "cash collateral" which the Company may be able to use (subject to bankruptcy court order and adequate protection to the trustee) for purposes other than those specified under the Depositary Agreement. Moreover, payments of interest from the Interest Reserve Accounts, or payments to replenish the balance thereof, made within 90 days of the commencement of a bankruptcy case may be deemed preferences and, therefore, recoverable from recipients or immediate transferees of such recipients. If such payments are made to "insiders" (as defined in the Bankruptcy Code), the applicable preference period will increase from 90 days to one year. Further, under a plan of reorganization, the maturity date and interest rate associated with the claim secured by the Interest Reserve Accounts may be significantly modified. FRAUDULENT TRANSFER CONSIDERATIONS Under relevant fraudulent transfer law, if a court were to find in a lawsuit by an unpaid creditor or representative of creditors of the Company or a Subsidiary Guarantor, that at the time the Company issued the Notes or at the time the Subsidiary Guarantors issued the Subsidiary Guarantees either (i) the Company or a Subsidiary Guarantor received less than fair consideration or reasonable equivalent value for incurring the indebtedness represented by the Notes or the Subsidiary Guarantees, and, at the time of such incurrence, the Company or a Subsidiary Guarantor (a) was insolvent or was rendered insolvent by reason of such incurrence, (b) was engaged or about to engage in a business or transaction for which its remaining property constituted unreasonably small capital or (c) intended to incur, or believed it would incur, debts beyond its ability to pay as such debts mature, or (ii) the Notes or the Subsidiary Guarantees were issued with actual intent to hinder, delay or defraud creditors, such court could, among other things, (x) void all or a portion of the Company's or such Subsidiary Guarantor's obligations to the holders of the Notes and/or (y) subordinate the Company's or 20 26 such Subsidiary Guarantor's obligations to the holders of the Notes to other existing and future indebtedness of the Company or such Subsidiary Guarantor, the effect of which would be to entitle such other creditors to be paid in full before any payment could be made on the Notes or Subsidiary Guarantees. In addition, because net proceeds from the issuance of the Old Notes was applied to repay outstanding indebtedness under the Term Loan (as defined), a court may also consider the solvency of the Company at the time when such indebtedness was incurred. The measure of insolvency for purposes of determining whether a transfer is avoidable as a fraudulent transfer varies depending upon the law of the jurisdiction which is being applied. Generally, however, a debtor would be considered insolvent if the sum of all of its liabilities were greater than the value of all of its property at a fair valuation, or if the present fair salable value of the debtor's assets were less than the amount required to repay its probable liability on its debts as they become absolute and mature. There can be no assurance as to what standard a court would apply in order to determine solvency. On the basis of its historical financial information, its recent operating results and other factors, the Company believes that (i) the Company was, at the time it assumed indebtedness under the Term Loan and at the time it incurred additional indebtedness under the Term Loan, and will be, at the time the Old Notes were issued, and (ii) each Subsidiary Guarantor was, at the time the Subsidiary Guarantees were issued, and that the Company and each Subsidiary Guarantor will continue to be solvent, that each will have sufficient capital to carry on its business and will continue to be able to pay its debts as they mature. There can be no assurance, however, that a court would necessarily agree with these conclusions. CONTROL BY PRINCIPAL STOCKHOLDER Greenmarine Holdings holds 99.9% of the outstanding common stock of the Company. Accordingly, Greenmarine Holdings can elect all of the directors of the Board of Directors of the Company and controls all corporate transactions or other matters required to be submitted to stockholders for approval, including any merger, consolidation, or sale of all or substantially all of the Company's assets. By reason of such stock ownership, Greenmarine Holdings may have interests which could be in conflict with those of the holders of the Notes. See "The Greenmarine Acquisition" and "Security Ownership of Certain Beneficial Owners and Management" (including Footnote 1 thereto). CHANGE OF CONTROL PROVISIONS Upon the occurrence of a Change of Control, each holder of Notes will have the right to require the Company to repurchase all or any of such holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of repurchase. See "Description of Notes--Repurchase at the Option of Holders--Change of Control." In the event that a Change of Control occurs, the Company would likely be required to refinance the indebtedness outstanding under the Credit Agreement and the Notes. There can be no assurance that the Company would be able to refinance such indebtedness or, if such refinancing were to occur, that such refinancing would be on terms favorable to the Company. ABSENCE OF PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES The Old Notes were issued to, and the Company believes are currently owned by, a relatively small number of beneficial owners. Prior to the Exchange Offer, there has not been any public market for the Old Notes. The Old Notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for Exchange Notes by holders who are entitled to participate in the Exchange Offer. The market for Old Notes not tendered for exchange in the Exchange Offer is likely to be more limited than the existing market for such Notes. The holders of Old Notes (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who are not eligible to participate in the Exchange Offer are entitled to certain registration rights, and the Company is required to file a Shelf Registration Statement (as defined) with respect to such Old Notes. The Exchange Notes will constitute a new issue of securities with no established trading market. The Company does not intend to list the Exchange Notes on any national securities exchange or seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial 21 27 Purchasers have advised the Company that they currently intend to make a market in the Exchange Notes, but they are not obligated to do so and may discontinue such market making at any time. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer and the pendency of the Shelf Registration Statement. Accordingly, no assurance can be given that an active public or other market will develop for the Exchange Notes or as to the liquidity of the trading market for the Exchange Notes. If a trading market does not develop or is not maintained, holders of Exchange Notes may experience difficulty in reselling the Exchange Notes or may be unable to sell them at all. If a market for the Exchange Notes develops, any such market making may be discontinued at any time. FAILURE TO EXCHANGE OLD NOTES Exchange Notes will be issued in exchange for Old Notes only after timely receipt by the Exchange Agent of such Old Notes, a properly completed and duly executed Letter of Transmittal (or Agent's Message) and all other required documentation. Therefore, holders of Old Notes desiring to tender such Old Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor the Company is under any duty to give notification of defects or irregularities with respect to tenders of Old Notes for exchange. Old Notes that are not tendered or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and, upon consummation of the Exchange Offer, certain registration rights under the Registration Rights Agreement will terminate. In addition, any holder of Old Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities, and if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each Participating Broker-Dealer that receives Exchange Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or any other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. See "The Exchange Offer." 22 28 THE GREENMARINE ACQUISITION On September 12, 1997, Greenmarine Holdings acquired control of approximately 90% of the then outstanding shares of common stock ("Pre-Merger Company Shares") of Outboard Marine Corporation through an $18.00 per share tender offer (the "Tender Offer"). On September 30, 1997, Greenmarine Holdings acquired the untendered Pre-Merger Company Shares by merging an acquisition subsidiary with and into the Company (the "Merger"). As a result of the Merger, OMC became a wholly-owned subsidiary of Greenmarine Holdings; each untendered Pre-Merger Company Share outstanding immediately prior to the Merger was converted into the right to receive a cash payment of $18.00 per share; and 20.4 million shares of new common stock of the Company were issued to Greenmarine Holdings. The Tender Offer and the Merger are collectively referred to herein as the "Greenmarine Acquisition." The members of Greenmarine Holdings are Greenlake Holdings LLC ("Greenlake"), Quasar Strategic Partners LDC ("QSP") and Quantum Industrial Partners LDC ("QIP"). Greenlake, QSP and QIP have approximately a 30.5%, 34.75% and 34.75% interest in Greenmarine Holdings, respectively. Greenlake is controlled by Mr. Alfred D. Kingsley and Mr. Gary K. Duberstein. QSP and QIP are entities affiliated with Soros Fund Management LLC. See "Security Ownership of Certain Beneficial Owners and Management" (including Footnote 1 thereto). To finance a portion of the funds required to effect the Greenmarine Acquisition, the acquisition subsidiary of Greenmarine Holdings entered into a Credit Agreement, dated August 13, 1997, with American Annuity Group, Inc. and Great American Insurance Company, as lenders, pursuant to which the lenders provided a $150.0 million term loan (the "Term Loan"). The proceeds of the Term Loan were used to acquire Pre-Merger Company Shares in the Tender Offer and the Merger, and to repurchase a portion of the Company's 7% Convertible Subordinated Debentures due 2002 (the "Convertible Debentures"), which the Company was required to offer to repurchase as a result of the Greenmarine Acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financial Condition; Liquidity and Capital Resources" and "Description of Certain Other Indebtedness--Subordinated Debt Securities--7% Convertible Subordinated Debentures Due 2002." In connection with the Merger, the Company assumed all of the borrower's obligations under the Term Loan. To finance the remaining portion of the funds required to consummate the Greenmarine Acquisition, each of QSP and QIP contributed $96.25 million to Greenmarine Holdings and Greenlake contributed $48.5 million and 2.0 million Pre-Merger Company Shares to Greenmarine Holdings. USE OF PROCEEDS The Exchange Offer is intended to satisfy certain of the Company's obligations under the Purchase Agreement and the Registration Rights Agreement. The Company will not receive any cash proceeds from the issuance of the Exchange Notes offered hereby. In consideration for issuing the Exchange Notes contemplated in this Prospectus, the Company will receive Old Notes in like principal amount, the form and terms of which are the same as the forms and terms of the Exchange Notes (which replace the Old Notes), except as otherwise described herein. The Old Notes surrendered in exchange for Exchange Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes will not result in any increase or decrease in the indebtedness of the Company. As such, no effect has been given to the Exchange Offer in the pro forma statements or capitalization tables. The net proceeds of the sale of the Old Notes were used to repay the $150.0 million principal amount of the Term Loan, plus accrued and unpaid interest thereon (approximately $1,083,000). In addition, approximately $4.1 million of the net proceeds of the sale of the Old Notes and $24.5 million of available cash, in aggregate representing an amount sufficient to pay one year of pro forma interest on the Company's Senior Debt, were used to fund the Interest Reserve Accounts. In certain instances, the Company will be required to contribute additional amounts to the Interest Reserve Accounts to maintain the Required Amount. The Depositary Agreement allows the Depositary Agent to foreclose upon the net proceeds of the Interest Reserve Accounts upon the occurrence of any default or event of default under the Indenture or the Credit Agreement. See "Description of Notes--Interest Reserve Accounts." 23 29 CAPITALIZATION The following table sets forth the historical capitalization of the Company as of March 31, 1998 and the pro forma capitalization of the Company as of March 31, 1998, as adjusted to give effect to the consummation of the Initial Offering and the application of the estimated net proceeds therefrom. This table should be read in conjunction with "Use of Proceeds," "Selected Historical Consolidated Financial Data" and the Consolidated Financial Statements, and the related notes thereto, included elsewhere herein.
AS OF MARCH 31, 1998 ---------------------- AS ACTUAL ADJUSTED -------- ---------- (UNAUDITED) (DOLLARS IN MILLIONS) Cash and cash equivalents................................... $ 49.1 $ 25.0 Interest Reserve Accounts(1)................................ -- 28.6 ------ ------ Total cash and cash equivalents............................. $ 49.1 $ 53.6 ====== ====== Total debt (including current portion of long-term debt): Credit Agreement(2)....................................... $ 70.7 $ 70.7 Term Loan................................................. 150.0 -- 10 3/4% Senior Notes due 2008............................. -- 160.0 9 1/8% Debentures due 2017................................ 62.6 62.6 Medium-Term Notes due 1999 to 2001(3)..................... 21.3 21.3 Industrial Revenue Bonds due 2002 to 2007 and other debt(4)................................................ 13.1 13.1 7% Convertible Subordinated Debentures due 2002(5)........ 7.1 7.1 ------ ------ Total debt............................................. 324.8 334.8 ------ ------ Total shareholders' investment.............................. 257.1 257.1 ------ ------ Total capitalization................................... $581.9 $591.9 ====== ======
- ------------------------------ (1) Funds deposited in the Interest Reserve Accounts will be held by a depositary as contingency reserves for future interest payments on Senior Debt (as defined). See "Description of Notes--Interest Reserve Accounts." (2) As of May 21, 1998, aggregate outstanding borrowings under the Credit Agreement totalled $45.7 million. In addition, eight letters of credit in an aggregate amount of $19.1 million were outstanding on that date. As of March 31, 1998, the Company had additional borrowing availability of approximately $46 million under the Credit Agreement, after giving effect to the borrowing base limitation and $17.2 million of outstanding letters of credit. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financial Condition; Liquidity and Capital Resources" and "Description of Certain Other Indebtedness--Credit Agreement." (3) Interest rates on the Medium-Term Notes range from 8.160% to 8.625%. See "Description of Certain Other Indebtedness--Senior Debt Securities--Medium-Term Notes." (4) Interest rates on the Industrial Revenue Bonds range from 6% to 12.037%. (5) As a result of the Greenmarine Acquisition, the outstanding Convertible Debentures are convertible into the right to receive a cash payment equal to $809 for each $1,000 principal amount of Convertible Debentures so converted. The outstanding Convertible Debentures are convertible at any time prior to their maturity on July 1, 2002. 24 30 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The selected historical consolidated financial information of the Company presented below was derived from the consolidated financial statements of the Company as of and for each of the years in the five-year period ended September 30, 1997 and for the six months ended March 31, 1997 and 1998. For accounting purposes, the Greenmarine Acquisition was treated as a "purchase" transaction and, accordingly, the selected historical consolidated financial information of the Company is not comparable in all respects to the historical consolidated financial information for periods subsequent to the Greenmarine Acquisition. The Company's consolidated financial data for the six month periods ended March 31, 1997 and 1998 have been derived from the Company's unaudited consolidated financial statements which, in the opinion of management, contain all normal recurring adjustments necessary for fair presentation of the financial condition and results of operations for such periods. Operating results for the six months ended March 31, 1998 may not be indicative of the results that can be expected for fiscal 1998. The following selected financial information is qualified in its entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and the Consolidated Financial Statements of the Company, together with the notes thereto, included elsewhere in this Prospectus.
POST-MERGER PRE-MERGER COMPANY COMPANY ----------------------------------------------------------------- ----------- SIX MONTHS SIX MONTHS ENDED ENDED FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31, MARCH 31, --------------------------------------------------- 1997 1998(1) 1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED) -------- -------- -------- -------- ------- ----------- ----------- (DOLLARS IN MILLIONS, EXCEPT FOR RATIOS) INCOME STATEMENT DATA: Net sales.................. $1,034.6 $1,078.4 $1,229.2 $1,121.5 $ 979.5 $ 434.1 $475.5 Cost of goods sold......... 816.6 826.4 931.8 892.2 826.5 374.9 377.9 -------- -------- -------- -------- ------- ------- ------ Gross earnings............. 218.0 252.0 297.4 229.3 153.0 59.2 97.6 Selling, general and administrative expense................. 226.1 206.0 230.2 210.3 215.4 91.9 102.5 Restructuring charges(2)... 144.8 -- -- 25.6 -- -- -- -------- -------- -------- -------- ------- ------- ------ Earnings (loss) from operations.............. (152.9) 46.0 67.2 (6.6) (62.4) (32.7) (4.9) Interest expense........... 19.8 15.1 23.1 12.3 16.2 8.4 14.4 Change in control expenses................ -- -- -- -- 26.9 -- -- Other (income)/expense, net..................... (12.8) (22.5) (16.7) (8.5) (29.2) (21.3) (4.9) -------- -------- -------- -------- ------- ------- ------ Earnings (loss) before provision for income taxes................... (159.9) 53.4 60.8 (10.4) (76.3) (19.8) (14.4) Provisions (credit) for income taxes............ 5.1 4.9 9.4 (3.1) 2.8 1.8 1.8 -------- -------- -------- -------- ------- ------- ------ Net earnings (loss)(3)..... $ (282.5) $ 48.5 $ 51.4 $ (7.3) $ (79.1) $ (21.6) $(16.2) ======== ======== ======== ======== ======= ======= ====== OTHER DATA: EBITDA(4).................. $ 46.9 $ 93.4 $ 118.7 $ 77.3 $ (0.9) $ (3.9) $ 21.7 Depreciation and amortization............ 55.6 44.0 47.6 54.7 57.0 27.0 27.4 Capital expenditures....... 50.0 68.2 66.5 52.7 36.3 22.7 11.9 Ratio of earnings to fixed charges(5).............. N/A 4.3x 3.5x 0.2x N/A N/A 0.0x
PRE-MERGER COMPANY POST-MERGER PRE-MERGER POST-MERGER ------------------------------------- COMPANY COMPANY COMPANY SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31, ------------------------------------- ------------- ----------- ----------- 1993 1994 1995 1996 1997 1997 1998 ------- ------- ------- ------- ------------- ----------- ----------- (UNAUDITED) (UNAUDITED) BALANCE SHEET DATA: Cash and cash equivalents...... $ 104.4 $ 80.3 $ 58.3 $ 95.5 $ 54.4 $ 69.5 $ 49.1 Working capital..... 173.9 196.2 253.4 214.2 (28.5)(6) 197.2 (41.7)(6) Total assets........ 791.8 817.1 907.0 873.7 1,179.0 835.4 1,152.2 Long-term debt...... 183.0 178.2 177.4 177.6 103.8 172.6 92.9 Total shareholders' investment....... 160.9 209.0 255.8 237.6 277.0 210.2 257.1
(footnotes on following page) 25 31 - ------------------------------ (1) On September 12, 1997, a wholly-owned subsidiary of Greenmarine Holdings acquired beneficial ownership of more than 90% of the Company's common stock. On September 30, 1997, the subsidiary merged with and into the Company. This acquisition has been accounted for as a purchase and is deemed to have occurred on September 30, 1997. The Company's balance sheet as of March 31, 1998 and its results of operations for the six months ended March 31, 1998 reflect the purchase accounting adjustments and, consequently, such operating results are not directly comparable to results of operations in prior periods. (2) The restructuring charges recorded in fiscal 1993 related to closings and transfers of manufacturing and distribution operations including severance costs resulting from staff reduction programs as well as write-off of the remaining intangibles of $75.8 million primarily related to the recreational boat group. The restructuring charges recorded in fiscal 1996 related to closings of distribution operations and write-down of manufacturing facilities outside the United States. (3) The net loss reported in fiscal 1993 reflects an extraordinary charge of $117.5 million representing a cumulative effect on prior years of changes in accounting principles for income taxes and postretirement benefits other than pensions. (4) "EBITDA" represents earnings from operations (including income derived from the Company's stern drive joint venture, net of joint venture expenses) before depreciation and amortization (excluding debt discount amortization) and restructuring charges. The Company accrues for income from the stern drive joint venture, net of joint venture expenses, in Other Income and has included it in EBITDA because it reflects a recurring stream of revenue from the sale of the Company's stern drive parts and accessories products. Income from the stern drive joint venture, net of joint venture expenses, was $0.4 million, $4.1 million, $4.9 million, $4.4 million, $7.2 million, $2.1 million and $0.1 million for the fiscal years ended 1993, 1994, 1995, 1996 and 1997, and for the six months ended March 31, 1997 and 1998, respectively. EBITDA is widely used by securities analysts and is presented here to provide additional information about the Company's operations. However, EBITDA as presented herein may be calculated differently by other companies and, accordingly, the amounts presented herein may not be comparable to similarly titled measurements of other companies. EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (5) For purposes of the computations, earnings before fixed charges consist of income (loss) before the provision for income taxes and fixed charges; fixed charges consist of interest expense, including the interest portion of rental obligations on capitalized and noncapitalized leases and amortization of debt discount and deferred debt expenses. Earnings were inadequate to cover fixed charges for fiscal 1993 and fiscal 1997 and the six months ended March 31, 1997. The amounts of additional earnings that would have been required to cover fixed charges for such periods are $159.9 million, $76.3 million and $19.8 million, respectively. (6) Working capital as of September 30, 1997 and March 31, 1998 includes $96.0 million and $150.0 million in principal amount, respectively, of the Term Loan, which had been classified as short-term indebtedness. 26 32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the more detailed information and Consolidated Financial Statements of the Company, together with the notes thereto, included elsewhere in this Prospectus. GENERAL Industry Overview. In general, the recreational marine industry is highly cyclical. Industry sales are impacted by the general state of the economy, interest rates, consumer spending, technology, dealer effectiveness, demographics, fuel availability and government regulations. In addition, the Company's business is impacted by weather patterns. For example, excessive rain during the Spring and Summer, the peak retail sales periods, or unseasonably cool weather and prolonged winter conditions may curtail customer demand for the Company's products. See "Risk Factors--Highly Cyclical Industry" and "--Seasonality; Weather Conditions." Fiscal 1997 Operating Results. In fiscal 1997, the Company's sales declined 12.7% from $1,121.5 million in fiscal 1996 to $979.5 million in fiscal 1997, and the Company reported a net loss in fiscal 1997 of $79.1 million. Although the recreational boating industry as a whole experienced a downturn in sales in 1997, the Company believes that its results were adversely affected by several unusual occurrences. Among these was the distraction of former senior management following the announcement by the prior Board of Directors in April 1997 of its intention to sell the Company. This decision culminated in the Greenmarine Acquisition in September 1997. In addition, due to the soft unit sales environment and an unusually high level of dealer engine inventories at the beginning of fiscal 1997, the Company elected to reduce its planned engine production levels to allow dealer inventories to return to normal levels. As a result, management believes that dealer inventory of the Company's outboard engines declined by approximately 17,200 units between fiscal 1996 and fiscal 1997. Had the Company's dealers maintained their inventory between fiscal 1996 and fiscal 1997, rather than allow it to decline, the Company estimates that it would have generated an additional $20 million in gross earnings for the fiscal year. In addition, the reduced production volume associated with lower unit sales and shutdowns for equipment changes to improve quality resulted in significant costs relating to unscheduled downtime in the Company's manufacturing operations. During fiscal 1997, the Company also incurred expenses that management deems to be unusual and non-recurring in nature. These additional charges included the following: (i) charges resulting from the early adoption of the AICPA Statement of Position 96-1 "Environmental Remediation Liabilities" ($7.0 million); (ii) additional accruals for warranty expenses at the Company's Boat Group as a result of changes in the method used to estimate warranty reserves ($9.7 million); (iii) an additional accrual relating to salt water intrusion issues on certain engines, which have since been resolved ($1.0 million); (iv) the write-off of impaired assets relating to the Chris Craft line of boats and write-offs of inventory and tooling relating to discontinued products and technology ($4.6 million); (v) additional reserves relating to changes in the method of estimating surplus parts and accessories inventory and recognizing certain pre-rigging rebate expenses ($1.8 million); and (vi) certain non-recurring expenses associated with the introduction of the FICHT technology ($0.8 million). New Management Initiatives. On September 12, 1997, Greenmarine Holdings acquired control of the Company. See "The Greenmarine Acquisition." Since that time the Company has assembled a new, highly-experienced senior management team led by David D. Jones. The new senior management team has developed a turnaround strategy to capitalize on the Company's strong market position and leading, well-recognized brand names and to take advantage of anticipated growth in the recreational marine industry. As part of its strategic business plan, the Company has begun to implement a series of initiatives to reduce operating costs, improve the Company's operating practices, and rationalize its facilities, workforce and product lines. In January 1998, the Company began the rationalization of its boat manufacturing operations by closing its Old Hickory, Tennessee facility and consolidating the freshwater fishing operations at the Company's Murfreesboro, Tennessee facility. The Company also began the consolidation of its saltwater fishing operations 27 33 at its Columbia, South Carolina facility. In addition, as part of the Company's plan to improve operating efficiencies and reduce costs, the Company has reduced its workforce by approximately 540 employees as of March 31, 1998, primarily within the Company's boat operations. In April 1998, the Company announced that it would close its research facility in Waukesha, Wisconsin. In March 1998, the Company announced a lean manufacturing initiative for its marine power manufacturing operations. The first phase of this initiative has been introduced at the Company's final assembly plant in Calhoun, Georgia. This initiative is expected to substantially reduce costs, shorten production times, lower inventory and dramatically improve the Company's responsiveness to dealer and consumer demand. The Company has also implemented a strategic purchasing program which was announced in January 1998. This program is designed to reduce purchasing costs by consolidating purchasing across vendors, integrating suppliers into the product design process at an early stage and designing products for lower cost. Management anticipates that the measures implemented to date will result in overall cost reductions of over $17.0 million annually, a portion of which the Company anticipates will be realized in fiscal 1998. The Company believes that these savings represent permanent reductions in its cost structure and anticipates further savings from the full implementation of all elements of the Company's strategy. There can be no assurance, however, that these programs will achieve the anticipated savings in fiscal 1998 or that additional cost savings will be achieved. Introduction of FICHT Engines. All marine engine manufacturers are facing the challenge of meeting the EPA's emission standards which require manufacturers to reduce hydrocarbon emissions from outboard engines, on average, by 8.3% per year through model year 2006 beginning with the 1998 model year, and emissions from personal watercraft by 9.4% per year through model year 2006 beginning in model year 1999. Partly in response to these EPA emission standards, the Company introduced its new Johnson and Evinrude engines with FICHT fuel-injection technology, which offer an average hydrocarbon emission reduction of 80% and an approximate 35% increase in fuel economy depending on the application. The higher manufacturing costs of the FICHT fuel injected engines will result initially in a lower margin to the Company; however, the Company has implemented several initiatives to reduce the manufacturing costs of its new engines. Because of the higher retail costs of engines incorporating the FICHT technology, consumer acceptance of the new engines may be restrained as long as less expensive engine models, which do not meet the new EPA standards, continue to be available. To date, the Company estimates that it has spent approximately $50.0 million on low-emission technology, and by the Year 2006 the Company is expected to have expended an aggregate of approximately $90.0 million to meet the EPA's new emission standards. The Company expenses its research and development costs as they are incurred. Purchase Accounting. On September 12, 1997, Greenmarine Holdings acquired control of the Company by consummating the Tender Offer. On September 30, 1997, Greenmarine Holdings' acquisition subsidiary was merged with and into the Company, with the Company being the surviving entity of the merger. The Greenmarine Acquisition was completed for aggregate consideration of approximately $373.0 million and has been accounted for under the purchase method of accounting. Accordingly, the purchase price has been allocated to assets acquired and liabilities assumed based on fair market values at the date of acquisition (i.e., September 30, 1997). In the opinion of management, accounting for the purchase as of September 30, 1997 instead of September 12, 1997 did not materially affect the Company's results of operations for fiscal 1997. The fair values of tangible assets acquired and liabilities assumed were $844.9 million and $902.0 million, respectively. In addition, $83.9 million of the purchase price was allocated to intangible assets for trademarks, patents and dealer network. As part of the initial purchase price allocation, the Company accrued an aggregate amount of $136.9 million for implementation and execution of business reorganizations, including product line rationalization, implementation of the lean manufacturing realignment, implementation of the Company's purchasing initiatives, plant restructuring and reduction of the Company's workforce. The financial statements reflect the preliminary allocation of purchase price as the purchase price allocation has not been finalized. The excess purchase price over fair value of the net assets acquired was $250.2 million and has been classified as goodwill in the Statement of Consolidated Financial Position as of September 30, 1997. The goodwill related to the acquisition will be amortized using the straight-line method over a period of 40 years. Accordingly, the 28 34 Company's results of operations for the six months ended March 31, 1998 are not comparable to its results of operations in earlier periods. Seasonality. The Company's business is seasonal due to the impact of the buying patterns of its dealers and consumers. The Company's peak revenue periods historically have been its third and fourth fiscal quarters ending June 30 and September 30, respectively. Accordingly, the Company's business, receivables, inventory and accompanying short-term borrowing to satisfy working capital requirements are usually at their highest levels in the Company's second fiscal quarter and decline thereafter as the Company's products enter the peak consumer selling seasons. Short-term borrowings averaged $2.9 million and $5.7 million in 1997 and 1996, respectively, with month-end peak borrowings of $29.0 million and $15.0 million in February 1997 and 1996, respectively. To date in fiscal 1998, month-end peak borrowings were $70.7 million in February and March. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected financial information expressed in dollars in millions and as a percentage of net sales:
FISCAL YEARS ENDED SIX MONTHS ENDED SEPTEMBER 30, MARCH 31, ----------------------------------------------------- -------------------------------- 1995 1996 1997 1997 1998 ---------------- ---------------- -------------- -------------- -------------- Net sales............ $1,229.2 100.0% $1,121.5 100.0% $979.5 100.0% $434.1 100.0% $475.5 100.0% Cost of goods sold... 931.8 75.8 892.2 79.6 826.5 84.4 374.9 86.4 377.9 79.5 -------- ----- -------- ----- ------ ----- ------ ----- ------ ----- Gross earnings....... 297.4 24.2 229.3 20.4 153.0 15.6 59.2 13.6 97.6 20.5 Selling, general and administrative expense............ 230.2 18.7 210.3 18.8 215.4 22.0 91.9 21.2 102.5 21.6 Restructuring charges............ -- -- 25.6 2.3 -- -- -- -- -- -- -------- ----- -------- ----- ------ ----- ------ ----- ------ ----- Earnings (loss) from operations......... 67.2 5.5 (6.6) (0.7) (62.4) (6.4) (32.7) (7.6) (4.9) (1.1) Non-operating expense (income)........... 6.4 0.5 3.8 0.3 13.9 1.4 (12.9) (3.0) 9.5 2.0 Provision (credit) for income taxes... 9.4 0.8 (3.1) (0.3) 2.8 0.3 1.8 0.4 1.8 0.4 ------- ---- ------- ---- ----- ---- ----- ---- ----- ---- Net earnings (loss)............. $ 51.4 4.2% $ (7.3) (0.7)% $(79.1) (8.1)% $(21.6) (5.0)% $(16.2) (3.5)% ======= ==== ======= ==== ===== ==== ===== ==== ===== ====
SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO SIX MONTHS ENDED MARCH 31, 1997 Net Sales. Net sales increased to $475.5 million in the six months ended March 31, 1998 from $434.1 million in the six months ended March 31, 1997, an increase of 9.5%. U.S. revenues, which accounted for 75% of total sales, increased 11.1% during the six months ended March 31, 1998 while international sales increased 5.3%. The Company's sales increase was attributable primarily to higher volume sales in the United States of marine engines in the current fiscal year, which increased 25.1% over the prior year period. Engine sales were depressed in the first half of fiscal 1997 as a result of the Company's program to restrain engine production in order to assist dealers in reducing inventory levels. In the first quarter of fiscal 1997, the Company suspended production of many of its larger engines for nearly a month in order to make changes to equipment and processes necessary in order to significantly improve the quality of those engines. This production suspension adversely affected the Company's sales and margins in the first half of fiscal 1997. Cost of Goods Sold. Cost of goods sold increased to $377.9 million in the six months ended March 31, 1998 from $374.9 in the six months ended in March 31, 1997, an increase of $3.0 million or 0.8%. Cost of goods sold was 79.5% of net sales in the six months ended March 31, 1998 as compared with 86.4% of net sales in the six months ended March 31, 1997. The improvement in the Company's gross margin in the first half of fiscal 1998 reflects increased manufacturing efficiencies at engine plants and a better absorption of costs, primarily due to higher sales volume. In addition, in the first quarter of fiscal 1997, the Company's cost of goods sold was negatively impacted by the production suspension discussed above in Net Sales. Selling, General and Administrative ("SG&A") Expense. SG&A expense increased to $102.5 million in the six months ended March 31, 1998 from $91.9 million in the six months ended March 31, 1997, an increase of $10.6 million or 11.5%. SG&A expense as a percentage of net sales increased to 21.6% in the six months 29 35 ended March 31, 1998 from 21.2% in the six months ended March 31, 1997. The change in SG&A expense in the six months ended March 31, 1998 reflected higher amortization of goodwill and intangibles due to purchase accounting and higher warranty expense due to extended warranty coverage on certain new models. Earnings (Loss) from Operations. Loss from operations decreased to $4.9 million for the six months ended March 31, 1998 from a loss of $32.7 million for the six months ended March 31, 1997, a decrease of $27.8 million or 85.0%. The decrease was primarily attributable to the increase in sales coupled with better absorption of costs as described above. Non-Operating Expense (Income). Interest expense increased to $14.4 million in the six months ended March 31, 1998 from $8.4 million in the six months ended March 31, 1997, an increase of $6.0 million, as a result of the new debt structure in place after the Greenmarine Acquisition. Other non-operating income was $4.9 million in the six months ended March 31, 1998 compared to $21.3 million in the six months ended March 31, 1997. The six months ended March 31, 1997 amount included non-recurring income, including insurance recovery and a lawsuit settlement, as well as gains on disposition of fixed assets. Provision (Credit) for Income Taxes. Provision (credit) for income taxes was $1.8 million in the six months ended March 31, 1998 and $1.8 million in the six months ended March 31, 1997. The provision for income taxes for the six months ended March 31, 1998 and 1997 resulted from the net of expected taxes payable and benefits relating to certain international subsidiaries. No tax benefit is allowed for domestic losses because they are not realizable, at this time, under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1996 Net Sales. Net sales decreased to $979.5 million in fiscal 1997 from $1,121.5 million in fiscal 1996, a decrease of $142.0 million or 12.7%. U.S. revenues, which accounted for 74% of total net sales, declined 11.3% in fiscal 1997 while international sales decreased 16.1%. Industry unit volume in the U.S. declined for outboard motors and boats in fiscal 1997 compared to fiscal 1996. The Company's sales of outboard motor units in the U.S. declined by 19.5% in fiscal 1997 as compared to fiscal 1996. These declines were due primarily to the planned reduction in dealer inventories, disruptions in marketing efforts and customer demand resulting from the announcement in April 1997 concerning the possible sale of the Company, as well as an overall decline in the industry for sales of outboard engines. Cost of Goods Sold. Cost of goods sold decreased 7.4% to $826.5 million in fiscal 1997 from $892.2 in fiscal 1996. Cost of goods sold was 84.4% of net sales in fiscal 1997 as compared with 79.6% of net sales in fiscal 1996. Cost of goods sold in fiscal 1997 included charges for the introduction of the FICHT technology, manufacturing consulting services, changes in accounting estimates and write-down of underperforming assets in an aggregate amount of approximately $8.2 million. The Company believes that these charges represent one-time, non-recurring expenses. Excluding these charges, cost of goods sold in fiscal 1997 would have been $818.3 million or 83.5% of net sales. Selling, General and Administrative Expense. SG&A expense increased to $215.4 million in fiscal 1997 from $210.3 million in fiscal 1996, an increase of $5.1 million or 2.4%. SG&A expense, as a percentage of net sales increased to 22.0% in fiscal 1997 from 18.8% in fiscal 1996. The fiscal 1997 SG&A expense reflected the reduction of costs resulting from the restructuring programs initiated in fiscal 1996, but were more than offset by charges resulting from a change in accounting estimate of $9.7 million related to increased warranty accruals and a $7.0 million accrual for environmental remediation related to the early adoption of a new accounting standard. Excluding these charges, SG&A expense for fiscal 1997 would have been $198.7 million or 20.3% of net sales. Earnings (Loss) from Operations. Operating loss increased to $62.4 million in fiscal 1997 from a loss of $6.6 million in fiscal 1996. The increase in operating loss was primarily a result of the decline in net sales, higher costs for product and higher SG&A expense, each as described above. Fiscal 1996 included restructuring charges of $25.6 million, primarily related to the closing of distribution operations and the write-down of manufacturing facilities outside the United States. Excluding the unusual expenses and charges of $8.2 million and $16.7 million referred to in the discussion of Cost of Goods Sold and Selling, General and Administrative Expense above, respectively, operating loss would have been $37.5 million for fiscal 1997. 30 36 Non-Operating Expense (Income). Interest expenses in fiscal 1997 increased by $3.9 million to $16.2 million in fiscal 1997 from $12.3 million in fiscal 1996. The increase in fiscal 1997 was primarily attributable to a $5.0 million favorable interest adjustment for past tax liabilities which was recorded in fiscal 1996. Included in non-operating expense in fiscal 1997 was $26.9 million of change of control expenses associated with the Greenmarine Acquisition. Other non-operating income was $29.2 million in fiscal 1997 and $8.5 million in fiscal 1996. The fiscal 1997 amount included insurance recovery and a lawsuit settlement, as well as higher gains on disposition of fixed assets. See Note 14 to the Consolidated Financial Statements included elsewhere herein. Provision (Credit) for Income Taxes. Provision (credit) for income taxes was $2.8 million in fiscal 1997 and $(3.1) million in fiscal 1996, and is explained in Note 15 to the Consolidated Financial Statements included elsewhere herein. The provision for income taxes for fiscal 1997 resulted from the net of expected taxes payable and benefits relating to certain international subsidiaries. No tax benefit is allowed for domestic losses because they are not deemed realizable, at this time, under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The resolution of open tax issues from prior years resulted in a tax credit in fiscal 1996. FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1995 Net Sales. Net sales decreased to $1,121.5 million in fiscal 1996 from $1,229.2 million in fiscal 1995, a decrease of $107.7 million or 8.8%. U.S. revenues, which accounted for 73% of total sales, declined 10.3% in fiscal 1996 while international sales decreased 4.4%. The marine industry experienced unexpected weakness in Winter and Spring retail demand in fiscal 1996 in the segments in which the Company is strongest. This weakness was due primarily to an unusually cold and wet Spring. Cost of Goods Sold. Cost of goods sold decreased to $892.2 million in fiscal 1996 from $931.8 million in fiscal 1995, a decrease of $39.6 million or 4.2%. Cost of goods sold was 79.6% of net sales in fiscal 1996 as compared with 75.8% of net sales in fiscal 1995. This deterioration in the Company's gross margins resulted from the inability to adjust operations to reflect lower sales. Selling, General and Administrative Expense. SG&A expense decreased to $210.3 million in fiscal 1996 from $230.2 million in fiscal 1995, a decrease of $19.9 million or 8.6%. As a percentage of net sales, SG&A expense was 18.8% in fiscal 1996, which approximates the prior fiscal year. The decrease in SG&A expense was due primarily to efforts to reduce these expenses because of decreased sales. Operating decisions were made in the third and fourth quarters of fiscal 1996 which resulted in restructuring charges of $25.6 million. Included in these charges was $20.1 million for closings of distribution operations and write-down of manufacturing facilities outside the United States. The North American and European sales, marketing and manufacturing operations were realigned to more effectively meet market needs. Earnings (Loss) from Operations. The Company reported an operating loss of $6.6 million in fiscal 1996 compared to an operating profit of $67.2 million in fiscal 1995. The decrease in operating income was primarily a result of lower sales, higher cost of sales and restructuring charges, offset by lower SG&A expense as described above. Before the restructuring charges, earnings from operations were $19.0 million. Non-Operating Expense (Income). Interest expense decreased to $12.3 million in fiscal 1996 from $23.1 million in fiscal 1995. Significant causes for the reduction included $5.0 million as a result of a favorable adjustment of interest on past tax liabilities, lower levels of working capital required in fiscal 1996 and accounts receivable sales that lowered interest expense. Other non-operating income decreased to $8.5 million in fiscal 1996 from $16.7 million in fiscal 1995, a decline of $8.2 million. The decrease was primarily the result of the absence of gain recognized on the sale of the Company's investment in I.J. Holdings, Inc. in fiscal 1995, a reduction in realization from fixed assets sales and discount charges on accounts receivable sales in fiscal 1996. Provision (Credit) for Income Taxes. The resolution of open tax issues from prior years resulted in a tax credit in fiscal 1996. Provision (credit) for income taxes was $(3.1) million in 1996 and $9.4 million in fiscal 1995, and is explained in Note 15 to the Consolidated Financial Statements included elsewhere herein. 31 37 FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES As a result of the Greenmarine Acquisition, the Statement of Consolidated Financial Position as of September 30, 1997 was prepared using the purchase method of accounting which reflects the fair values of assets acquired and liabilities assumed. The excess of the total acquisition cost over the estimated fair value of assets acquired and liabilities assumed at the date of acquisition was estimated initially at $250.2 million. The financial statements reflect the preliminary allocation of purchase price, as the purchase price allocation has not been finalized. Accordingly, the Statement of Condensed Consolidated Financial Position as of March 31, 1998 is not comparable to that as of March 31, 1997 because of the purchase accounting adjustments. The Company's business is seasonal in nature with receivable and inventory levels normally increasing in the first fiscal quarter and peaking in the second fiscal quarter. Current assets at March 31, 1998 decreased $8.1 million from September 30, 1997. Cash and cash equivalents at March 31, 1998 decreased $5.3 million from September 30, 1997, while receivables increased $26.1 million due primarily to higher sales in line with the seasonal nature of the Company's business. Inventories at March 31, 1998 increased $16.9 million from September 31, 1997 also due to seasonality. Other current assets at March 31, 1998 decreased $45.8 million from September 30, 1997 primarily due to a reduction in a trust depository that funded the remaining untendered outstanding shares of the Company's common stock and due to the redemption of deposits for letters of credit. Accounts payable at March 31, 1998 decreased $75.4 million from September 30, 1997 due to payments to Company shareholders for untendered outstanding stock and to other payments relating to the change of control. Accrued liabilities increased $18.2 million due to higher dealer incentive accruals relating to the seasonality of sales. Cash used by operations was $49.5 million for the six months ended March 31, 1998 compared with $8.9 million for the six months ended March 31, 1997. Expenditures for plant, equipment and tooling were $11.9 million for the six months ended March 31, 1998, representing a $10.8 million decrease from the prior year period level of $22.7 million, primarily as a result of deferred capital expenditures. The low level of spending to date is related primarily to the Company's capital appropriation process. Capital spending related to any approved capital expenditure is realized, on average, approximately nine months after approval. A lower level of capital spending was appropriated in fiscal 1997 as compared to prior years due to the Company's pending sale, which was completed in September 1997. Since the Greenmarine Acquisition, the Company's new senior management team has evaluated and continues to evaluate its internal systems and controls. Although the Company believes that such systems and controls are adequate, the Company will upgrade them as it deems necessary to improve the overall efficiency of the Company's operations. The Company estimates that total capital expenditures for fiscal 1998 will be approximately $27.4 million, which includes maintenance capital expenditures and various planned and potential projects designed to increase efficiencies and enhance the Company's competitiveness and profitability. Specifically, these capital expenditures include continued expenditures related to the introduction of the FICHT technology to the Company's various engine models, cost reduction programs, product quality improvements, improvements to and upgrades of the Company's hardware and software, and other general capital improvements and repairs. Short-term debt was $220.7 million at March 31, 1998, including the $150.0 million principal amount of the Term Loan. The Company assumed the obligations under the Term Loan in connection with the Greenmarine Acquisition. Current maturities and sinking fund requirements of long-term debt decreased by $61.7 million from September 30, 1997 due primarily to the redemption of the Company's 7% Convertible Subordinated Debentures due 2002. A portion of the net proceeds from the Initial Offering was used to repay the principal of and any interest on the Term Loan. See "Use of Proceeds" and "Description of Certain Other Indebtedness--Subordinated Debt Securities--7% Convertible Subordinated Debentures Due 2002." The Company also borrowed approximately $30.0 million from certain wholly-owned foreign subsidiaries. Approximately $2.0 million, net of offsets, is due in fiscal 1998, and approximately $20.2 million is due at the end of fiscal 1999. The Company entered into an Amended and Restated Loan and Security Agreement, effective as of January 6, 1998 (the "Credit Agreement"), with a syndicate of lenders for which NationsBank of Texas, N.A. is administrative and collateral agent (the "Agent"). The Credit Agreement provides a revolving credit facility 32 38 (the "Revolving Credit Facility") of up to $150.0 million, subject to borrowing base limitations, to finance working capital with a $30.0 million sublimit for letters of credit. The Revolving Credit Facility expires on December 31, 2000. The Revolving Credit Facility is secured by a first and only security interest in all of the Company's existing and hereafter acquired accounts receivable, inventory, chattel paper, documents, instruments, deposit accounts, contract rights, patents, trademarks and general intangibles and is guaranteed by the Company's four principal domestic operating subsidiaries. On March 31, 1998, outstanding borrowings under the Credit Agreement aggregated $70.7 million and six letters of credit were outstanding totalling $17.2 million. The level of borrowings as of March 31, 1998 was due primarily to the seasonality of the Company's business, as inventory and receivables levels increase during the Company's first and second fiscal quarters in preparation for the heavy selling season in the Spring and Summer. See "--Seasonality." The level of outstanding borrowings as of March 31, 1998 was also due in part to payments of certain change of control expenses. Although there can be no assurance, the Company expects to use the cash from the anticipated sales of products and collection of receivables to repay all amounts outstanding under the Revolving Credit Facility by the end of fiscal 1998. As of May 21, 1998, aggregate outstanding borrowings under the Credit Agreement totalled $45.7 million. In addition, eight letters of credit in an aggregate amount of $19.1 million were outstanding on that date. The Credit Agreement contains a number of financial covenants, including those requiring the Company to satisfy specific levels of (i) consolidated tangible net worth, (ii) interest coverage ratios, and (iii) leverage ratios. On May 21, 1998, the Company entered into a First Amendment to Amended and Restated Loan and Security Agreement with the lenders under the Credit Agreement, pursuant to which, among other things, (i) the Company's compliance with the consolidated tangible net worth covenant for the period ended June 30, 1998 was waived, notwithstanding the Company's anticipated compliance therewith, (ii) the Company's consolidated tangible net worth requirement for the period ended September 30, 1998 has been amended, (iii) the borrowing base was amended to allow for borrowings against eligible intellectual property, thereby increasing borrowing capacity, (iv) the sublimit for the issuance of letters of credit was increased from $25.0 million to $30.0 million, and (v) the lenders consented to several other matters related to the Initial Offering, including the establishment of the Interest Reserve Accounts. See "Description of Certain Other Indebtedness--Credit Agreement." 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 products in the event of repossession upon a retail dealer's default. These arrangements contain provisions which limit the Company's repurchase obligation to $40.0 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. In fiscal 1997, the Company repurchased approximately $3.9 million of products, all of which were resold at a discounted price. The Company accrues for losses that are anticipated in connection with expected repurchases. The Company does not expect these repurchases to materially affect its results of operations. As of September 30, 1997, the Company reserved a total amount equal to $136.9 million as accrued liabilities for business reorganizations. These reserves include accruals for rationalization of the Company's product lines, workforce reductions, plant consolidations and closures. A total of approximately $33.2 million of such accrued liabilities relate to non-cash items. The Company also has other non-current liabilities of $202.2 million, including environmental reserves and post-retirement benefits other than pension of $95.4 million. The Company has recorded net deferred tax assets of $40.1 million, of which $21.1 million is reflected as a net long-term asset. The Company believes that these net deferred tax assets will be realized. A valuation allowance of $131.8 million was recorded at September 30, 1997 to reduce the deferred tax assets to their estimated net realizable value. Of this valuation allowance, $20.7 million relates to deferred tax assets established for foreign and state loss carryforwards. As of September 30, 1997, certain non-U.S. subsidiaries of the Company had net operating loss carryforwards for income tax purposes of $34.8 million. Of this amount, $4.0 million will expire by 2002, with the remaining balance being unlimited. In addition, the Company has $103.2 million of federal net operating loss carryforwards expiring between 2009 and 2012, and $133.8 million of state net operating loss carryforwards expiring between 1998 and 2012. These carryforwards, however, are 33 39 entirely offset by the valuation allowance referred to above. Accordingly, no benefit has been recognized with respect to these carryforwards in the Consolidated Financial Statements. Several factors would generally enable the Company to recognize the deferred tax assets that have been offset by the valuation allowance. Historical profitability, forecasted earnings, and management's determination "it is more likely than not" the deferred tax assets will be realized against forecasted earnings, all affect whether the remaining U.S. deferred tax assets may be recognized through a reversal of the valuation allowance. Because the deferred tax asset realization factors were adversely affected by the Company's results for fiscal 1997, the Company believes it is unlikely the reversal of the valuation allowance will occur in fiscal 1998. See the Consolidated Financial Statements and the notes thereto (including Note 15) included elsewhere herein. During fiscal 1997, the Company assessed the steps necessary to address matters related to "Year 2000" issues. The preliminary review included all of the Company's hardware and software requirements worldwide. The Company has developed a strategy for attaining Year 2000 compliance that includes modifying existing software, purchasing new software and acquiring new hardware, covering all the Company's equipment from mainframe applications to personal computers. The Company estimates that it will spend a total of between $6.0 million and $10.0 million to modify its existing systems to attain Year 2000 compliance. Based upon the current level of operations and anticipated cost savings, the Company believes that its cash flow from operations, together with borrowings under the Credit Agreement, the Interest Reserve Accounts and its other sources of liquidity, will be adequate to meet its anticipated requirement for working capital and accrued liabilities, capital expenditures, interest payments and scheduled principal payments over the next several years. There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels or that anticipated costs savings can be fully achieved. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt and accrued liabilities and make necessary capital expenditures, or if its future earnings growth is insufficient to amortize all required principal payments out of internally generated funds, the Company may be required to refinance all or a portion of its existing debt, sell assets or obtain additional financing. There can be no assurance that any such refinancing or asset sales would be possible or that any additional financing could be obtained on attractive terms, particularly in view of the Company's high level of debt. See "Risk Factors--Substantial Leverage and Debt Service." RECENTLY ADOPTED ACCOUNTING STANDARDS In fiscal 1999, the Company will implement three accounting standards issued by the Financial Accounting Standards Board, SFAS 130, "Reporting Comprehensive Income," SFAS 131, "Disclosures About Segments of an Enterprise and Related Information," and SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The Company believes that these changes will have no effect on its financial position or results of operations as they require only changes in or additions to current disclosures. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation Liabilities", which provides authoritative guidance on the recognition, measurement, display and disclosure of environmental remediation liabilities. The Company adopted SOP 96-1 in the quarter ended September 30, 1997. The change in accounting estimate required the Company to accrue for future normal operating and maintenance costs for site monitoring and compliance requirements at particular sites. The initial expense for implementation of SOP 96-1 was $7.0 million, charged to selling, general and administrative expense in the quarter ended September 30, 1997. INFLATION Inflation may cause or may be accompanied by increases in gasoline prices and interest rates. Such increases may adversely affect the purchase of the Company's products. Inflation has not had a significant impact on operating results during the past three fiscal years. 34 40 BUSINESS GENERAL OMC is the world's largest dedicated manufacturer of outboard marine engines and boats. The Company has an approximate 36% share of the United States outboard marine engine market and an approximate 26% share of the worldwide market. Sold under the Johnson and Evinrude brand names, the Company offers one of the industry's widest ranges of outboard engines, with models from two to 250-horsepower. The Company's boat brands are also among the most recognized in the industry and are market leaders in several categories, including the fishing, aluminum and recreational boat segments. OMC's primary boat brands include Chris Craft, Four Winns, Seaswirl, Stratos, Javelin, Hydra-Sports, Lowe and Princecraft. The Company also generates a significant, recurring stream of revenue in replacement parts and accessories from its large installed base of over seven million engines. The Company believes that its marine dealer network of approximately 7,000 independent authorized dealers worldwide, approximately 5,000 of which are located in North America, is the largest marine dealer network in the world. The Company currently has several important strategic alliances with respect to marine engines, including for the development of the new FICHT fuel injection technology, a supply arrangement with Suzuki Motor Corporation and an arrangement with AB Volvo-Penta relating to gasoline stern drive and inboard marine power systems. The Company was incorporated in 1936 by members of the Briggs and Evinrude families. Prior to the 1980s, the focus of the Company's strategy was to be the industry leader in the two-cycle engine market by manufacturing engines and a variety of products powered by small gasoline engines. In addition to outboard engines, the Company's products included lawnmowers, chainsaws, snowmobiles, light industrial vehicles and turf care products. In the late 1980s, however, a structural shift occurred in the marine industry as engine manufacturers, including the Company, began to package their engines with boats from boat manufacturers. Marine dealers found it more efficient and economical to buy boats "packaged" with engines rather than buy engines and boats separately. In line with this trend, the Company acquired 15 boat companies by 1990 and divested its non-marine product lines, thereby transforming itself from an engine company to a marine company. In September 1997, the Company was acquired by an affiliate of Greenway Partners, L.P. and entities affiliated with Soros Fund Management LLC. Since the acquisition, the Company has assembled a new, highly experienced senior management team led by David D. Jones, Jr. as President and Chief Executive Officer. Mr. Jones was previously President of the Mercury Marine Division of Brunswick Corporation, where, under his direction, the division gained substantial market share in several key marine segments. Mr. Jones has more than twenty years of experience in the marine industry. Also as part of the new management team, Andrew P. Hines joined the Company as Executive Vice President and Chief Financial Officer. Mr. Hines has extensive experience in turnaround situations. In addition, the Company has added 25 other new members to its management team to fill key operational and administrative positions, including new heads of most of its boat divisions, its engine manufacturing operations, its purchasing and supply operations, and its sales, marketing and advertising operations. The new management team is complemented by a highly experienced and skilled workforce. In the engine manufacturing operations, where skill, experience and training represent a significant competitive advantage, the Company's salaried and hourly employees have an average tenure with the Company of approximately 16 and 14 years, respectively. The new senior management team has developed several key initiatives to turn around and substantially improve the Company's operations. Since the new team was hired, the Company's EBITDA has improved by $25.6 million to $21.7 million for the six months ended March 31, 1998 from $(3.9) million for the comparable period in fiscal 1997. The Company owns a majority interest in FICHT GmbH & Co. KG, which has developed a patented, highly innovative fuel-injection technology designed for two-stroke engines. The FICHT fuel-injection technology utilizes advanced electronic microprocessors to directly inject high-pressure fuel into a sealed combustion chamber, eliminating the escape of any unburned fuel. The FICHT fuel-injection system uses fewer mechanical parts, is smaller and, the Company believes, more reliable than any other low-emission engine. The FICHT fuel-injection technology possesses several advantages over standard two-stroke engines, including smoother and quieter operation, 35% better fuel economy on average, up to 80% reduction in 35 41 hydrocarbon emissions and virtually no smoke on start-up. In addition, two-stroke engines based on the FICHT fuel-injection technology offer several benefits relative to four-stroke engines, including increased low-end power, lighter weight and smaller size. Furthermore, the FICHT fuel-injection technology meets emissions standards mandated by the EPA set for the Year 2006. The Company has already introduced outboard engines incorporating the FICHT fuel-injection technology in four separate horsepower categories and plans to introduce these engines in another two horsepower categories in the summer of 1998. To date, the Company has received several awards relating to its FICHT fuel-injection technology, including the 1996 Popular Mechanics Design & Engineering Award for marine engines, the 1997 International Marine Trades Exposition and Conference Innovation Award, the 1997 Motor Boating and Sailing Magazine Innovation Award, the 1997 Society of Automotive Engineers International Off-Highway & Powerplant Company of the Year Award and the 1997 Euromot Award. INDUSTRY OVERVIEW The recreational boating industry generated approximately $19.3 billion in domestic retail sales in 1997, including approximately $8.8 billion in sales of boats, engines, trailers and accessories. Most boat purchasers are in the 35 to 54 age group, which accounts for over 50% of American discretionary income and which is projected to be the fastest growing segment of the U.S. population over the next three years. Also, according to statistics compiled by the U.S. Department of Commerce, recreational products and services represent one of the fastest growing segments of U.S. expenditures. Although unit sales in the marine industry in recent years have been declining or flat, the Company expects to benefit from recent industry-wide efforts in the U.S. designed to increase the share of recreational expenditures related to boating. The NMMA, the MRAA and other marine industry leaders, including the Company, have formed a joint task force to implement initiatives to improve the quality of the industry's marine dealer network, improve the overall boating experience for consumers and enhance the awareness of boating as a recreational activity through various advertising programs. The Company believes that the growth in the U.S. age group with the highest discretionary income, the overall shift in spending of discretionary income towards recreational products and services and recent efforts to increase the share of recreational expenditures directed towards boating, will contribute to growth in the recreational boating industry over the next several years. In general, recreational marine industry sales are impacted by the general state of the economy, interest rates, consumer spending, technology, dealer effectiveness, demographics, weather conditions, fuel availability and government regulations. During the period from 1983 to 1992, the recreational marine industry experienced both its largest growth (from 1983 to 1988) and its largest downturn (from 1988 to 1992) in over 30 years. The growth period was stimulated not only by increasing real disposable income, but also by the emerging trend within the marine industry of packaging engines with boats, which resulted in boat packages that were more affordable to consumers, and easily obtainable marine loans that required no money down and could be refinanced over a term of over ten years. The following contraction in sales from 1988 to 1992 was due not only to the recession during the early 1990s, but also to the accentuated level of sales in the late 1980s. Many boat owners had loan balances in the early 1990s that exceeded their boat value, which made trade-up sales more difficult to obtain. In addition, the U.S. government imposed a luxury tax in 1990 on boats sold at prices in excess of $100,000. The Company believes, however, that it was not clear to most consumers that the tax applied only to higher priced boats and that many consumers believed it applied to all boats. As a result, the Company believes that the luxury tax depressed sales of boats among all price segments. The luxury tax was repealed in 1993. Since 1992, domestic sales of recreational boats have increased from $2.2 billion in 1992 to $3.6 billion in 1997. In addition, industry observers project that consumer spending on recreational marine products and services will grow approximately 5.6% annually from 1997 to 2002. BUSINESS STRATEGY The Company's new senior management team has developed a turnaround strategy designed to better capitalize on its strong market position and leading, well-recognized brand names and to take advantage of the 36 42 continued anticipated growth in the recreational marine industry. Specifically, the Company's business strategy combines the following elements: - RATIONALIZE BOAT BRANDS AND PRICING. The Company is rationalizing and realigning its boat brands to lower its manufacturing costs and better focus each of its brands on a particular niche in the boating industry, thereby reducing competition among its own brands. Pricing also will be reset to better reflect the particular image and the value added by each brand. To further support this strategy, the Company is refocusing its marketing efforts and expenditures to emphasize and reinforce its brands as they are repositioned. - AGGRESSIVELY REDUCE OPERATING COSTS. The Company's new management team has identified several cost reduction opportunities that management believes could reduce overall manufacturing costs. The Company's cost reduction strategy includes the following elements: (i) reduce purchasing costs by consolidating purchasing across vendors, integrating suppliers into the product design process at an early stage, and designing products for lower cost; (ii) rationalize boat operations and consolidate the number of boat manufacturing facilities to improve manufacturing efficiencies and unit costs; (iii) improve operating efficiency by improving factory layout and workflows, standardizing manual labor inputs, stabilizing machining and casting and improving quality control; and (iv) increase outsourcing of non-core capabilities from approximately 40% of the value of the Company's engines to 65%. In furtherance of these initiatives, the Company has already: - closed a boat manufacturing plant; - substantially completed its announced 540 employee workforce reduction (representing an approximate 8% reduction in its workforce); - implemented the first phase of its purchasing initiative, which includes efforts to reduce the cost of purchasing raw materials, components and subassemblies; and - implemented the first phase of its lean manufacturing realignment at its main outboard engine manufacturing and assembly facility. The Company expects to generate over $17.0 million in annual savings from the measures that have already been put in place. - CAPITALIZE ON FICHT TECHNOLOGY. The Company plans to exploit its innovative FICHT technology by expanding its application to a wider range of engine models. Since the Company's introduction of the FICHT technology in its 150-horsepower Johnson and Evinrude models released in January 1997, the Company has introduced 90-horsepower, 115-horsepower and 175-horsepower models and plans to introduce 200-horsepower and 225-horsepower models in the Summer of 1998. The Company also plans to capitalize on the FICHT technology by generating additional revenues from sublicensing the technology to, and manufacturing components for, other engine applications, including snowmobiles, personal watercraft, motorcycles and lawn equipment. The Company, directly or through its FICHT GmbH & Co. KG subsidiary, has entered into five such sublicensing arrangements to date with Polaris Industries Inc., Arctic Cat, Inc., Kawasaki Heavy Industries, Ltd., and two lawn and garden-care equipment manufacturers. See "--Strategic Alliances--FICHT Joint Venture" and "--Intellectual Property." - STRENGTHEN CONTINUOUS QUALITY IMPROVEMENT PROGRAMS. Management believes that the quality of the Company's products represents a key competitive factor. The Company maintains rigid quality controls and extensively tests its products and components in each of its manufacturing and assembly facilities. In addition to on-site testing, the Company maintains year-round, on-water testing facilities in Illinois and Florida. The Company continually monitors its quality assurance programs and intends to expand these programs and further motivate its workforce toward achieving increasing quality standards. - STRENGTHEN DEALER NETWORK. The Company has implemented a number of initiatives to strengthen its dealer network. In fiscal 1997, the Company managed a program to substantially reduce dealer 37 43 inventory of outboard engines, which helped strengthen the viability of the dealer network by reducing dealer inventory costs. The Company is also participating in industry association initiatives to strengthen the marine industry's retailer network. These initiatives have been spearheaded by a joint task force, including the NMMA, MRAA and other marine industry leaders, including the Company. The initiatives include dealership educational programs to improve dealer servicing standards and customer relationships. - EXPAND PARTS AND ACCESSORIES BUSINESS. The Company plans to strengthen its parts and accessories business, which generates a recurring stream of high-margin sales. The Company's initiatives to strengthen its parts and accessories business include redesigned packaging and an advertising program that will provide a consistent brand image and clearer product descriptions. - STRENGTHEN MARKET-DRIVEN PRODUCT DEVELOPMENT EFFORTS. The Company has developed a reputation as a leader in marine engineering capabilities. Since the Company's founding in 1936, the Company has continually introduced advanced engineering designs, applications and technologies to the marine industry. Management plans to make better use of the Company's superior engineering capabilities by focusing the Company's product development efforts on the features and capabilities most demanded by customers and on product designs that maximize the cost effectiveness of its manufacturing operations. Management believes that its development of the FICHT fuel-injection technology is a result of this market-driven product development initiative, and that this initiative should help the Company increase market share among all of its product lines. PRODUCTS The Company manufactures a wide variety of outboard engines and boats and distributes these products throughout the world, as shown below. [FISCAL 1997 SALES BY DIVISION PIE CHART] [FISCAL 1997 SALES BY GEOGRAPHY PIE CHART] (1) Revenue composition for Fiscal 1997 Sales by Division includes value of intercompany engine sales in the Engine Group. Outboard Engines The Company's Johnson and Evinrude brands are two of the most recognized outboard engine brands worldwide. Johnson and Evinrude are competitively priced with other premium priced outboards and include offerings in virtually every segment of the outboard engine market. The Company manufactures two-stroke and certain four-stroke engines, including traditional carbureted models and two-stroke models incorporating the Company's FICHT fuel-injection technology. In addition, the Company has entered into a supply agreement with an affiliate of Suzuki Motor Corporation under which Suzuki will manufacture certain other four-stroke engines for sale by the Company under its Johnson and Evinrude brand names. 38 44 In 1997, the Company introduced the new Johnson and Evinrude 150-horsepower engine with FICHT fuel-injection technology. The Company currently offers engines incorporating its innovative FICHT fuel-injection technology in the 90, 115, 150 and 175-horsepower categories and is rapidly expanding this technology across its outboard engine product line. The Company anticipates introducing FICHT fuel-injected 200-horsepower and 225-horsepower models in the Summer of 1998. The FICHT fuel-injection system uses an electronically driven fuel injector, controlled by a powerful microprocessor-based engine management system, to blast short bursts of highly pressurized fuel directly into the combustion chamber at rates of up to 100 times per second. This high-pressure fuel pulse atomizes and positions each burst of gasoline in the cylinder for complete ignition once the exhaust port has been closed by the rising piston resulting in no unburned fuel escaping prior to combustion. The FICHT fuel-injection technology possesses several advantages over standard two-stroke engines, including smoother and quieter operation, 35% better fuel economy on average, up to 80% reduction in hydrocarbon emissions and virtually no smoke on start-up. In addition, two-stroke engines based on the FICHT fuel-injection technology offer several benefits relative to four-stroke engines, including increased low-end power, lighter weight and smaller size. Engines with FICHT fuel-injection technology meet the EPA emissions standards set for the Year 2006. Since the Company originally acquired the FICHT technology from the Ficht family, it has been actively engaged in research and development efforts aimed at improving the FICHT technology. The Company, directly or through its FICHT GmbH & Co. KG subsidiary, has entered into arrangements to sublicense the FICHT fuel-injection technology to manufacturers of snowmobiles, personal watercraft, motorcycles and lawn equipment, including Polaris Industries, Inc., Arctic Cat, Inc., Kawasaki Heavy Industries, Ltd., and two lawn and garden-care equipment manufacturers. See "--Strategic Alliances--FICHT Joint Venture" and "--Intellectual Property." The Company is currently evaluating other opportunities to sublicense the FICHT fuel-injection technology to manufacturers of non-automotive engines. The following table sets forth the number of engine models and price range by size of engine in terms of horsepower:
NUMBER OF HORSEPOWER RANGE MODELS RETAIL PRICE RANGE ($) ---------------- --------- ---------------------- 2-24 horsepower..................... 127 620-2,599 25-99 horsepower..................... 203 2,394-7,186 100-250 horsepower.................... 168 6,455-11,692 --- Total....................... 498
Boats The Company's boat brands are among the most recognized in the industry and are market leaders in several categories, including the fishing, aluminum and recreational boat segments. OMC's primary boat brands include Chris Craft, Four Winns, Seaswirl, Stratos, Javelin, Hydra-Sports, Lowe and Princecraft. The Company offers products that cover most segments in the recreational and fishing boat market, from ten foot aluminum boats to 32-foot luxury cruisers, and is the largest producer of boats in units and one of the two largest in dollars. The Company is rationalizing and realigning its boat brands to lower its manufacturing costs and better focus each of its brands on a particular niche in the boating industry, thereby reducing competition and inefficient overlap among its brands. As part of this rationalization plan, the Hydra-Sports brand will become the Company's flagship saltwater fishing boat line, the Stratos brand will become the Company's top-of-the-line, tournament-style freshwater fishing boat line and the Javelin brand will become the Company's entry to mid-level recreational fishing boat line. The production of the Company's Sunbird brand runabout boats for the 1999 model year will be suspended, and the Sunbird Neptune series saltwater fishing boat products will be moved under the Hydra-Sports brand. Hydra-Sports brand freshwater fishing boats and Stratos brand saltwater fishing boats will be discontinued. 39 45 The following table provides a brief description of the Company's 1998 model year boat products by category, including product line and trade name, overall length, retail price range, and description of boats manufactured:
PRODUCT LINE AND OVERALL RETAIL TRADE NAME LENGTH (FT.) PRICE RANGE ($) DESCRIPTION RECREATIONAL BOATS Chris Craft 19-32 19,995-130,000 Chris Craft is one of the world's most recognized brands in the marine industry, serving the "prestige" market for boaters seeking a "top-of-the-line" boat. In 1997, Powerboat Magazine named the Chris Craft 210 Bowrider "Boat of the Year." Four Winns 17-32 14,000-110,000 Four Winns is the nation's third most popular boat brand. Four Winns offers a premium line of family-oriented recreational boats. Seaswirl 17-26 8,975-37,240 Seaswirl is a mid-priced boat line, and is one of the leading boat brands in the Western United States. FISHING BOATS Stratos 15-22 10,981-27,515 Stratos is a performance line of freshwater fishing boats designed for the discriminating angler. The line includes bass, walleye and fish-'n-ski boats. Javelin 15-20 9,116-24,278 Javelin is a value-priced freshwater fishing boat line. Products include bass, walleye and fish-'n-ski boats. Hydra-Sports 16-31 14,325-101,730 Hydra-Sports is a full line of saltwater fishing boats designed for the fishing enthusiast. ALUMINUM BOATS Lowe 10-19 450-22,000 Lowe offers aluminum jon, fishing, pontoon and deck boats. Princecraft 10-24 485-28,420 Princecraft is a premium line of aluminum boats manufactured in Canada and sold throughout North America. Products include jon, fishing, fish-'n-ski, pontoon and deck boats. - ----------------------------------------------------------------------------------------------------
Parts and Accessories The Company also offers a wide line of marine parts and accessories through its Johnson and Evinrude dealers. Key products include engine parts, propellers and engine oil. Most of the parts business consists of replacement parts for outboard motors. The Company estimates that there are approximately seven million Johnson and Evinrude outboard motors in use, which produce a steady demand for high-margin replacement parts. In addition, in 1996, OMC launched a new value-line of marine accessories under the Nautic Pro brand name. This brand is marketed in part through a new distribution channel of marine and discount retailers, and is priced to compete with other private label and discount brands. Marine parts and accessories comprise approximately 19% of OMC's sales. Quality Assurance The Company maintains rigid quality controls and extensively tests its products and components in each of its manufacturing and assembly facilities. In addition to on-site testing, the Company maintains year-round, on-water testing facilities in Illinois and Florida. The Company continually monitors and endeavors to improve 40 46 its quality assurance programs and intends to expand these programs and further motivate its workforce towards achieving increasing quality standards. STRATEGIC ALLIANCES FICHT Joint Venture On April 30, 1992, the Company and FICHT GmbH of Kirchseeon, Germany entered into a license agreement (the "1992 License Agreement") pursuant to which FICHT granted to the Company an exclusive, worldwide right and license to manufacture, use, sell and sublicense marine engines that utilize the FICHT fuel-injection system. The 1992 License Agreement provides that the Company shall pay royalties to FICHT GmbH on a per cylinder basis for each marine engine that is sold by the Company which utilizes the FICHT fuel-injection system. The term of the license is for the duration of each patent that relates to the FICHT fuel-injection system existing at the time that the 1992 License Agreement was executed or filed within one year thereafter. On July 21, 1995, the Company acquired a majority ownership interest in FICHT GmbH to promote the development and worldwide manufacturing and marketing of the FICHT fuel-injection system. FICHT GmbH was subsequently converted to a limited partnership known as FICHT GmbH & Co. KG (together with any predecessor in interest, "FICHT GmbH"), in which the Company is the general partner and holds a 51% interest and in which members of the Ficht family collectively hold a 49% interest. The partnership agreement contains certain supermajority provisions which provide that the partnership may not sell the business of FICHT GmbH as a whole or in substantial parts without a unanimous vote of the partners and may not effect certain other actions, including acquisitions of other enterprises, without a majority of 75% of the votes of the partners. All ordinary course of business matters require only a simple majority vote. On February 7, 1997, the Company and FICHT GmbH entered into a license agreement (the "1997 License Agreement") pursuant to which FICHT GmbH granted to the Company an exclusive, worldwide license to manufacture, use, sell and sublicense the FICHT fuel-injection system for all non-marine, non-automotive applications, including but not limited to, snowmobiles, all-terrain vehicles, scooters, motorcycles, forest and garden equipment, lawn equipment and utility equipment. The terms of the 1997 License Agreement provide that the Company shall pay to FICHT GmbH a basic license fee in monthly installments through February 2000. The term of the license is for the duration of each patent that relates to the FICHT fuel-injection system existing at the time that the 1997 License Agreement was executed or filed within one year thereafter. Prior to the execution of the 1997 License Agreement, FICHT GmbH entered into non-exclusive sublicense agreements with two lawn and garden equipment manufacturers, pursuant to which FICHT GmbH granted non-exclusive licenses for the manufacture and sale of non-marine engines that utilize the FICHT fuel-injection system in return for certain royalty payments, of which the Company is entitled to a 51% interest. In addition, since entering into the 1997 License Agreement, the Company has executed separate sublicense agreements with each of Kawasaki Heavy Industries, Ltd., Arctic Cat, Inc. and Polaris Industries, Inc. Under these sublicense agreements, which, subject to certain exceptions, may be terminated by each sublicensee after five years, the Company has granted a non-exclusive license for the manufacture and sale of certain non-automotive, marine and non-marine applications of the FICHT fuel-injection system in return for certain license fees and/or royalty payments. OMC/Volvo Stern Drive Joint Venture On September 2, 1992, the Company and its wholly-owned subsidiary, OMC Partners, Inc., and AB Volvo Penta, Volvo Penta North America Inc. and V.P Partners, Inc. (collectively, "Volvo") entered into an agreement for the creation of the Volvo Penta Marine Products L.P. joint venture. The agreement contemplated ownership of the joint venture in a 40/60 ratio by the Company and Volvo respectively. VPMP Management Corporation serves as the managing general partner for the partnership and also is owned 40/60 by the Company and Volvo, respectively, with the Company having two directors and Volvo having three. The Company and Volvo created the joint venture for the purpose of developing, manufacturing and designing 41 47 sterndrive marine packages and inboard gasoline engines (the "JV Products"). The joint venture does not include diesel inboards or inboard or sterndrive-like packages or jet pumps powered by outboard powerheads. Also excluded from the joint venture are Volvo's duoprop sterndrives. Both parties licensed to the joint venture their intellectual property necessary for the manufacture of the JV Products on a non-exclusive, worldwide, perpetual and royalty-free basis. Volvo has the right to worldwide distribution of the JV Products and the Company has the right to distribute those same JV Products to its captive boat companies. Pursuant to the terms of the Agreement of Limited Partnership, profits from sales of aftermarket service parts and repowers are to be split in proportion to the number of units sold by each partner. As long as the Company owns an interest in the joint venture, it is (1) required to purchase its requirements for JV Products from the joint venture, (2) obligated to sell to the joint venture, at cost, the parts it manufactures for the joint venture, (3) required to participate in the funding of product development for JV Products which the Company wants to use, and (4) entitled to participate in the profit or loss of the joint venture to the extent of its 40% interest. On July 1, 1993, the parties entered into the Termination Option and Amendment Agreement ("TOAA") as an alternative method for the Company to withdraw from the joint venture. The joint venture can be terminated as follows: (1) by exercise of the option under the TOAA, (2) by utilizing the dispute resolution provision in the VPMP Management Corporation Stockholders Agreement, or (3) by agreement of the parties. On June 14, 1996, the Company notified Volvo of its intent to exercise the option to terminate under the TOAA. Subsequently, Volvo filed a motion for declaratory judgment against the Company in a Virginia state court seeking a determination of its obligations pursuant to the termination. The litigation has remained inactive while the Company and Volvo negotiate the structure of the relationship. Since the time of the Company's termination notice, the Company and Volvo have been actively engaged in these negotiations. Although the Company expects its negotiations with Volvo to result in a new relationship, there can be no assurance that this will occur. In the event such renegotiations are not successful, pursuant to the terms of the joint venture relationship the Company is assured of a low cost supply of stern drive product for a two-year period following the formal termination of the joint venture. Suzuki Agreement On June 13, 1997, the Company entered into a five-year Original Equipment Manufacturer Supply/ Purchase Agreement with Suzuki Motor Corporation for the purchase of certain four-stroke outboard engines and related parts and accessories. The products are manufactured by Suzuki and marketed and sold under the Johnson and Evinrude brands. The Company and Suzuki have recently participated in a joint evaluation of respective product performance characteristics. The Company and Suzuki are currently negotiating an agreement for the supply/purchase of OMC-manufactured engines and parts and accessories to be branded and sold under the Suzuki name. SALES AND DISTRIBUTION The Company believes that it has the world's largest marine dealer network with approximately 7,000 dealers worldwide, approximately 5,000 of which are in North America, and many of whom sell both the Company's boats and its engines. The Company's outboard engines and parts and accessories are distributed in the United States and Canada through separate Evinrude and Johnson dealer organizations, the majority of which operate under direct-from-factory dealerships. The Company's boats are sold primarily to direct-from-factory dealerships. Distribution of the Company's products outside the United States and Canada is handled by various divisions and subsidiaries of the Company, which sell to dealers and wholesale distributors throughout the world. The Company's dealership agreements are typically nonexclusive and are executed on an annual basis. 42 48 The Company sponsors various programs to provide its dealers with marketing and financial assistance and to encourage them to offer broader lines of the Company's products. Such programs include "cooperative" advertising, boat-show promotions, dealer rebate programs and "floor plan" financing assistance and various other credit arrangements. In a typical "floor plan" financing arrangement, an institutional lender agrees to provide a dealer with a line of credit in a specified amount for the purchase of inventory which secures such credit. For certain lenders the Company, in turn, agrees to repurchase products up to a specified amount in the event of repossession by the lender upon a dealer's default. The Company's "floor plan" financing arrangements contain provisions which limit the Company's obligations to $40.0 million per model year for a period not to exceed 30 months from the date of invoice. The Company resells any repurchased products at a discount. Losses incurred to date under this program have not been material. In fiscal 1997, the Company repurchased approximately $3.9 million of repossessed products, which were subsequently resold. The Company accrues for losses which are anticipated in connection with expected repurchases. The Company augments its dealers' marketing efforts by, among other methods, advertising in boating and other recreational magazines, by furnishing displays at regional, national or international boat shows and by sponsoring various fishing tournaments and fishing professionals. The Company is refocusing its marketing efforts to emphasize and reinforce its new brand-realignment strategy. As part of its sales efforts, the Company actively pursues original equipment manufacturer ("OEM") and pre-rig arrangements relating to its outboard engines. Among the Company's OEM arrangements are those with Mako Marine International, Inc., Smoker Craft, Inc. and Godfrey Conveyer Company. The Company also has pre-rig arrangements with certain boat manufacturers, including Genmar Holdings, Inc. and Pro Line. Each of these manufacturers has agreed to pre-rig certain of its products for outboard engines sold by OMC to such manufacturer's dealers. In return, OMC pays a fee to the boat manufacturer based on the number of pre-rigged boats sold by the manufacturer. MANUFACTURING OPERATIONS The Company's principal outboard engine manufacturing and assembly facilities are located in Illinois, Wisconsin, Georgia, North Carolina, Mexico, China, Brazil, and Hong Kong. Its principal boat manufacturing facilities are located in Michigan, Florida, Tennessee, South Carolina, Oregon, Indiana, Missouri, Australia and Canada. See "--Properties." The Company has taken significant steps to improve the efficiency of its manufacturing operations. In February 1998, the Company closed its Old Hickory, Tennessee plant and moved its production to the Company's Murfreesboro, Tennessee plant. The Murfreesboro plant now focuses on the production of fiberglass, freshwater fishing boats. Concurrently, production of the Company's saltwater fishing boats was moved to the Company's Columbia, South Carolina manufacturing facility. This move focused the Columbia facility exclusively on saltwater fishing boats and located production of the Company's saltwater fishing boats closer to the retail market for these boats. In addition, the Company has begun several important initiatives aimed at reducing costs in its engine manufacturing facilities. These initiatives include: (i) measures aimed at reducing purchasing costs through consolidation of vendors and improvement of the design process; (ii) improving factory layouts and work flows; (iii) standardizing labor inputs; (iv) outsourcing non-core capabilities; and (v) improving quality control. The Company has implemented the first phase of its lean manufacturing realignment at its main outboard engine manufacturing and assembly facility in Calhoun, Georgia. COMPETITION The Company faces competition on international, national, regional and local levels. Each of the markets in which the Company participates is highly competitive. In addition, the Company faces competition generally from other forms of recreational products and activities such as golf, camping and recreational vehicles. Management believes that the Company is the world's second largest manufacturer of outboard engines, the world's largest manufacturer of aluminum boats and freshwater fiberglass fishing boats, and the third largest manufacturer of recreational boats. 43 49 The marine engine market has high barriers to entry due to the capital investment and technological expertise required in manufacturing marine engines. As a result, the marine engine market is concentrated with two main U.S.-based competitors, OMC and Brunswick Corporation, and three main Japan-based manufacturers, Yamaha Motor Co., Ltd., American Honda Motor Co., Inc. and Suzuki Motor Corporation. There are hundreds of manufacturers of boats which compete with the Company, the largest of which in the United States are Brunswick, Genmar Industries, Inc. and Tracker Marine, L.P. Many of the Company's competitors in the boat manufacturing industry are smaller, regional builders who may possess cost advantages over the Company's boat manufacturing operations. Although the recreational boat market is fragmented, the top four boat builders (including the Company) accounted for approximately 45% of the U.S. market in 1997 in terms of unit sales. Many of the Company's competitors, including Brunswick and Yamaha, are large, vertically integrated companies that may have greater resources, including financial resources, than the Company. The Company believes, however, that it is well positioned within the recreational boating industry, as it is one of only two integrated domestic manufacturers of both marine engines and boats. The Company believes that this integration is a competitive advantage as the industry continues to trend towards sales of integrated boat and engine packages. INTELLECTUAL PROPERTY The Company's success is dependent in part on its technology. The Company relies upon a combination of patent, trademark and trade secret laws, together with licenses, confidentiality agreements and other contractual covenants, to establish and protect its technology and other intellectual property rights. The Company owns a considerable number of patents and patent applications throughout the world, primarily for the production of engines, including those related to the FICHT fuel-injection technology. The Company has recently received correspondence from Orbital alleging that the Company's FICHT fuel-injected 150- horsepower engines infringe two Australian Orbital patents, which correspond to three U.S. patents and to a number of foreign patents. The Company believes that it has substantial defenses to these allegations, including that the three corresponding U.S. patents are not infringed and/or are invalid. However, there can be no assurance that Orbital will not commence litigation against the Company with respect to this matter or, if such litigation is commenced, that the Company's defenses will be successful. If Orbital is successful in an action against the Company, the Company could be required to obtain a license from Orbital to continue the manufacture, sale, use or sublicense of FICHT products and technology or it may be required to redesign its FICHT products and technology to avoid infringement. There can be no assurance that any such license could be obtained or that any such redesign would be possible. There also can be no assurance that the failure to obtain any such license or effect any such redesign, or any cost associated therewith, would not have a material adverse effect on the Company. The Company also uses a number of trade names and trademarks in its business, including Chris Craft, Evinrude, FFI, FICHT, Four Winns, Grumman, Hydra-Sports, Javelin, Johnson, Lowe, OMC, Princecraft, Roughneck, Sea Horse, Sea Nymph, Seaswirl and Stratos. Wherever legally permissible and appropriate, the Company files applications to acquire its patents and register its trademarks and service marks in the United States and many foreign countries where the Company currently sells its products or could reasonably be expected to sell products in future years. In addition, the Company has license agreements with FICHT GmbH & Co. KG, Chris Craft Industries, Inc. and Northrop Grumman Corporation. The Company has an exclusive, worldwide license for the marine industry for the FICHT fuel-injection system. This license is royalty bearing and is active for the duration of each patent existing at the time that the license agreement was executed in April of 1992 or filed within one year thereafter. The Company also has an exclusive, worldwide license for all non-automotive applications of the FICHT technology. This license is royalty bearing and is active for the duration of each patent existing at the time that the license agreement was executed in February 1997 or filed within one year thereafter. The Company's license with Chris Craft Industries, Inc. is an exclusive, perpetual, royalty bearing license to use the Chris Craft trade name and trademark for boats and certain boat products worldwide. The Company's Grumman license is an exclusive, royalty-free license to use the Grumman trade name and trademark for 44 50 recreational aluminum boats and canoes in territories which include the United States and Europe. This license expires on December 31, 1999, however it is subject to unlimited ten year renewal terms at the Company's option. RESEARCH AND DEVELOPMENT In the fiscal years 1997, 1996 and 1995, OMC spent $38.2 million, $41.8 million and $41.6 million, respectively, on research and development activities relating to the development of new products and improvement of existing products, including the FICHT fuel-injection technology. All of these activities were OMC sponsored. The EPA has adopted regulations governing emissions from marine engines. As adopted, the regulations as they relate to outboard engines phase in over nine years, beginning in model year 1998 and concluding in model year 2006. With respect to personal watercraft, the regulations phase in over eight years, beginning in model year 1999 and concluding in model year 2006. Marine engine manufacturers will be required to reduce hydrocarbon emissions from outboard engines, on average, by 8.3% per year beginning with the 1998 model year, and emissions from personal watercraft by 9.4% per year beginning in model year 1999. In 1994, the Company announced Project LEAP, a project to develop new low-emission technologies and to convert its entire outboard product line to low-emission products within the next decade. To date, the Company estimates that it has spent approximately $50.0 million on Project LEAP, including the introduction of its new FICHT fuel-injection technology and four-stroke outboard engines, and by the Year 2006 the Company is expected to have expended an aggregate of approximately $90.0 million to meet the EPA's new emission standards. Compliance with these standards will add cost to the Company's engine products in the short-term. However, this situation is not seen as a major deterrent to sales since value will be added to its products at the same time that the entire industry is faced with developing solutions to the same regulatory requirements. The Company believes this situation will not have a material impact on future results of operations or the financial condition of the Company. RAW MATERIALS The principal raw materials required in the Company's manufacturing operations are aluminum, resin and fiberglass, all of which are purchased at competitive or prevailing market prices. The Company has supply arrangements for the purchase of resin and aluminum. From time to time, the Company has also purchased commodity options to hedge anticipated price fluctuations with respect to purchases of aluminum. The Company believes that adequate sources of supply exist and will continue to exist, at competitive prices, for all of the Company's raw material requirements. EMPLOYEES As of March 31, 1998, approximately 6,438 people were employed by OMC and its subsidiaries, consisting of 1,476 salaried and 4,962 hourly employees. Salaried and hourly employees of MPPG have an average tenure of approximately 16 and 14 years, respectively. Approximately 21% of the Company's employees are represented by one of three unions. The Laborers International Union of North America ("LIUNA") represents approximately 550 employees at the Calhoun, Georgia facility; the independent Marine Machinists Association ("IMMA") represents approximately 450 employees at the Waukegan, Illinois facility; and the United Steel Workers of America ("USWA") represents approximately 340 employees at the Milwaukee, Wisconsin facility. The Company's agreements with the LIUNA, IMMA and USWA are effective through September 30, 1998, October 30, 1999 and March 31, 2003, respectively. The Company believes that its labor relations are satisfactory. 45 51 PROPERTIES The following table sets forth the Company's material facilities as of March 31, 1998.
OWNED OR LEASED LOCATION FACILITY TYPE/USE (LEASE EXPIRATION) SQUARE FOOTAGE -------- ----------------- ------------------ -------------- Waukegan, IL Worldwide headquarters; Owned 1,400,000 outboard engine component manufacturing Delavan, WI Outboard engine component Leased (Aug. 2006) 40,000 manufacturing Milwaukee, WI Outboard engine component Owned 375,000 manufacturing Burnsville, NC Outboard engine component Owned 290,000 manufacturing Spruce Pine, NC Outboard engine component Owned 100,000 manufacturing Andrews, NC Outboard engine component Owned 150,000 manufacturing Calhoun, GA Outboard engine assembly Owned 290,000 Beloit, WI Worldwide parts and accessories Owned 483,000 distribution center Waukegan, IL Distribution center Leased (Jan. 2003) 180,000 Morrow, GA Distribution center Owned 86,000 Parsippany, NJ Distribution center Owned 88,000 Dallas, TX Distribution center Owned 86,000 Kent, WA Distribution center Leased (Dec. 2000) 56,000 Sunrise, FL Sales Office Leased (Sept. 2001) 8,000 Cadillac, MI Boat manufacturing Owned 364,000 Lebanon, MO Boat manufacturing Owned 227,000 Murfreesboro, TN Boat manufacturing Owned 275,000 Columbia, SC Boat manufacturing Owned 178,000 Culver, OR Boat manufacturing Owned 166,000 Syracuse, IN Boat manufacturing Owned 235,000 Sarasota, FL Boat manufacturing Owned 190,000 Princeville, Quebec, Canada Boat manufacturing Owned 417,000 Juarez, Chihuahua, Mexico Outboard engine component Owned 200,000 manufacturing Dongguan, China Outboard engine component Leased (Apr. 1999) 65,000 manufacturing Hong Kong Outboard engine and component Leased (June 2047) 35,000 manufacturing and distribution center; Manaus, Brazil Outboard engine and component Leased (Aug. 1999) 46,000 assembly and fabrication Altona, Australia Boat manufacturing and assembly Owned 28,000 Yatala, Australia Boat manufacturing and assembly Owned 37,000 Bankstown, Australia Office; distribution center Leased (Dec. 1998) 54,000 Gent, Belgium Office; warehouse Leased (Apr. 2003) 13,000 Bankstown, Australia Office; warehouse Leased (Apr. 2001) 54,000
46 52 ENVIRONMENTAL MATTERS The Company is subject to regulation under various federal, state and local laws relating to the environment and to employee safety and health. These laws include those relating to the generation, storage, transportation, disposal and emission into the environment of various substances, those relating to drinking water quality initiatives, and those which allow regulatory authorities to compel (or seek reimbursement for) clean-up of environmental contamination at its owned or operated sites and at facilities where its waste is or has been disposed. Permits are required for operation of the Company's business (particularly air emission permits), and these permits are subject to renewal, modification and, in certain circumstances, revocation. The Company believes that it is in substantial compliance with such laws and permitting requirements, except where such non-compliance is not expected to have a material adverse effect. CERCLA imposes joint, strict, and several liability on (i) owners or operators of facilities at, from, or to which a release of hazardous substances has occurred; (ii) parties who generated hazardous substances that were released at such facilities; and (iii) parties who transported or arranged for the transportation of hazardous substances to such facilities. A majority of states have adopted Superfund statutes comparable to, and in some cases more stringent than, CERCLA. The Company has been notified that it is named a PRP at various sites for study and clean-up costs. In some cases there are several named PRPs and in others there are hundreds. The Company generally participates in the investigation or clean-up of these sites through cost sharing agreements with terms which vary from site to site. Costs are typically allocated based upon the volume and nature of the materials sent to the site. However, as a PRP, the Company can be held jointly and severally liable for all environmental costs associated with a site. Once the Company becomes aware of its potential liability at a particular site, it uses its 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 accrues for normal operating and maintenance costs for site monitoring and compliance requirements. The Company also accrues for environmental close-down costs associated with discontinued operations or facilities, including the environmental costs of operation and maintenance until disposition. At March 31, 1998, the Company has accrued approximately $23.0 million for costs relating to remediation at contaminated sites including operation and maintenance for continuing and closed-down operations. The possible recovery of insurance proceeds has not been considered in estimating contingent environmental liabilities. 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. Therefore, the Company believes the accruals accurately reflect the Company's liability based upon current information. The EPA has adopted regulations governing emissions from marine engines. As adopted, the regulations as they relate to outboard engines phase in over nine years, beginning in model year 1998 and concluding in model year 2006. With respect to personal watercraft, the regulations phase in over eight years, beginning in model year 1999 and concluding in model year 2006. Marine engine manufacturers will be required to reduce hydrocarbon emissions from outboard engines, on average, by 8.3% per year beginning with the 1998 model year, and emissions from personal watercraft by 9.4% per year beginning in model year 1999. In 1994, the Company announced Project LEAP, a project to convert its entire outboard product line to low-emission products within the next decade. To date, the Company estimates that it has spent approximately $50.0 million on Project LEAP, including the introduction of its new FICHT fuel-injection technology, and by the Year 2006 the Company is expected to have expended an aggregate of approximately $90.0 million to meet the EPA's new emissions standards. The Company does not believe that compliance with these 47 53 standards, which will add cost to the Company's engine products and will initially result in a lower margin to the Company, will be a major deterrent to sales. The Company believes that its new compliant technology will add value to its products at the same time that the entire industry is faced with developing solutions to the same regulatory requirements. The Company does not believe that compliance with these new EPA regulations will have a material adverse effect on its financial condition or future results of operations. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation Liabilities", which provides authoritative guidance on the recognition, measurement, display and disclosure of environmental remediation liabilities. The Company adopted SOP 96-1 in the quarter ended September 30, 1997. The change in accounting estimate required the Company to accrue for future normal operating and maintenance costs for site monitoring and compliance requirements at particular sites. The initial expense for implementation of SOP 96-1 was $7.0 million, charged to selling, general and administrative expense in the quarter ended September 30, 1997. LEGAL MATTERS The Company is engaged in a substantial number of legal proceedings arising in the ordinary course of business. While the result of these proceedings cannot be predicted with any certainty, based upon the information presently available, the Company is of the opinion that the final outcome of all such proceedings should not have a material adverse effect on the financial condition or the results of operations of the Company. Products sold or serviced by the Company may expose it to potential liability for personal injury or property damage claims relating to the use of those products. Historically, the resolution of product liability claims has not materially affected the Company. The Company maintains a Domestic Products Liability/ Protection and Indemnity Self-Insured Retention Program. The Company has a Primary Self-Insured Retention for any one accident or occurrence of $250,000 with an underlying Self-Insured Retention of $2,000,000 per accident with a $2,000,000 per year aggregate. Product liability claims occurring outside the United States are covered by insurance with a limit of $1,000,000 per occurrence, $2,000,000 aggregate. In the event that the underlying products liability insurance or retentions are exhausted, there is excess coverage up to $100,000,000 per occurrence and in the aggregate. For a discussion of certain allegations relating to the FICHT technology, see also "Risk Factors--Reliance on Patents and Intellectual Property; Certain Allegations Regarding FICHT Technology." 48 54 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Set forth below is certain information regarding each director and executive officer of the Company:
NAME AGE POSITION ---- --- -------- Alfred D. Kingsley.............. 55 Chairman of the Board Gary K. Duberstein.............. 43 Vice Chairman of the Board and Assistant Secretary Richard Katz.................... 56 Vice Chairman of the Board Ron Hiram....................... 45 Director David D. Jones, Jr.............. 54 President and Chief Executive Officer; Director Andrew P. Hines................. 58 Executive Vice President and Chief Financial Officer; Director Kimberly K. Bors................ 37 Vice President--Human Resources Paul R. Rabe.................... 49 Vice President--MPPG North American Sales and Marketing Robert S. Romano................ 43 Vice President--General Counsel and Secretary Leslie M. Savickas.............. 52 Vice President--Treasurer Joseph P. Tomczak............... 42 Vice President--Controller
Alfred D. Kingsley has been Chairman of the Board of Directors since September 12, 1997. Since 1993, Mr. Kingsley has been Senior Managing Director of Greenway Partners, L.P., an investment partnership. Prior to that, Mr. Kingsley held various positions at Icahn & Co., Inc., including senior adviser until 1992. Mr. Kingsley is also a director of ACF Industries, Incorporated, and a director of the general partner of American Real Estate Partners, L.P. Mr. Kingsley is Chairman of the Compensation and Benefits Committee and a member of the Audit Committee. Gary K. Duberstein has been Vice Chairman of the Board of Directors and Assistant Secretary since September 12, 1997. Since 1993, Mr. Duberstein has been a Managing Director of Greenway Partners, L.P., an investment partnership. Prior to that, Mr. Duberstein served as general counsel to Icahn & Co., Inc., and as vice president of certain companies operated by Carl Icahn from 1985 to 1993. Mr. Duberstein is a member of the Compensation and Benefits Committee and Chairman of the Audit Committee. Richard Katz has been Vice Chairman of the Board of Directors since September 12, 1997. From 1977 to 1993, Mr. Katz was a director of NM Rothschild & Sons Limited, London, England. Since 1986, he has served as a Supervisory Director for a number of entities affiliated with Soros Fund Management LLC. Mr. Katz is a member of the Compensation and Benefits Committee. Ron Hiram has been a director since September 30, 1997. Mr. Hiram has been associated with Soros Fund Management LLC, an investment management company, since 1995 and has been a Managing Director thereof since 1997. From 1992 to 1995, Mr. Hiram was a Managing Director of Lehman Brothers Incorporated. Mr. Hiram is a member of the Compensation and Benefits Committee and Audit Committee. David D. Jones, Jr. has been President and Chief Executive Officer and a director since September 25, 1997. From 1990 to 1997, Mr. Jones held numerous positions with the Mercury Marine Division of Brunswick Corporation and most recently as President of the Mercury Marine Division. Mr. Jones is also a director of National Exchange Bank, Fond du Lac, WI and the ASHA Corporation, Santa Barbara, CA. Andrew P. Hines has been the Executive Vice President and Chief Financial Officer since October 6, 1997. Mr. Hines has been a director since October 7, 1997. Prior to joining the Company, Mr. Hines held the position of Senior Vice President and Chief Financial Officer for Woolworth Corporation since 1994. During 1993, Mr. Hines was a consultant to Pentland PLC, England. From 1989 to 1992, Mr. Hines held the position of Executive Vice President and Chief Financial Officer with adidas USA. Prior to that, Mr. Hines held various senior financial positions with RJR Nabisco, Inc. from 1976 to 1989. 49 55 Kimberly K. Bors has been Vice President--Human Resources since October 1, 1997. Prior to her election to such position, Ms. Bors held the position of Director, Compensation and Organizational Development with the Company since 1995. Prior to joining the Company, Ms. Bors held the position of Director of Compensation and Human Resources Services with Browning-Ferris Industries, Inc. since 1990. Paul R. Rabe has been Vice President--MPPG North American Sales and Marketing since December 17, 1997. Prior to his election to such position, Mr. Rabe held the position of Division Vice President, MPPG since joining the Company in 1996. Prior to joining the Company, Mr. Rabe held the position of Vice President and General Manager of Cummins Marine Division of Cummins Engine Company since 1992. Robert S. Romano has been Vice President--General Counsel and Secretary since October 9, 1997. Prior to his election to such position, Mr. Romano was appointed Assistant Secretary and Assistant General Counsel in 1996 and 1994, respectively. Mr. Romano has held various positions within the Company's legal department since joining the Company in 1980. Leslie M. Savickas has been Vice President--Treasurer since March 16, 1998. Prior to that, Ms. Savickas was a treasury consultant to the Company from December 3, 1997. From 1995 to 1997, Ms. Savickas held the position of Vice President, Finance for The LINC Group, Inc. Ms. Savickas held the position of CEO of The Comparative Advantage, Inc. from 1994 to 1995 and, prior to that, the position of treasurer of XL/Datacomp, Inc. from 1988 to 1993. Joseph P. Tomczak was named Vice President--Controller on May 1, 1998 and formally joined the Company on June 1, 1998. Mr. Tomczak previously served as Vice President and Corporate Controller for Alliant Foodservice, Inc. Prior to that, Mr. Tomczak held various financial positions of increasing responsibility with Heller International Corporation and American Hospital Supply. To the knowledge of the Company, there are no family relationships between any director or executive officer and any other director or executive officer. 50 56 ADDITIONAL KEY PERSONNEL Including the executive officers, since the Greenmarine Acquisition, 25 key positions have been filled or replaced with members of the new management team. The following sets forth certain information with respect to certain additional key personnel of the Company:
NAME POSITION ---- -------- John A. Anderson............................. President and General Manager--Four Winns John T. Aylsworth............................ Vice President--Marketing Support and Advertising Robert L. Beagle............................. General Manager--Freshwater Fishing Operations Francois Bouffard............................ General Manager--MPPG Canada Leslie E. Crawford........................... President and General Manager--OMC Aluminum Boat Group, Inc. Charles D. Eckert............................ President and General Manager--OMC Europe William J. Miller............................ Vice President, Manufacturing--MPPG Susan M. Opeka............................... Division Vice President, Finance--MPPG Paula S. Rummage............................. Vice President, Finance and Administration--Boat Group Peter J. VanLancker.......................... Vice President, Product Design and Engineering--Boat Group Russell J. Van Rens.......................... Vice President--Quality Chris R. Wainscott........................... President and General Manager--Saltwater Fishing Boats Division Robert J. Werner............................. Vice President--Supply Management and Logistics Jack J. White, Jr. .......................... President--Freshwater Division George Wishart............................... Vice President--Parts and Accessories Donald P. Wood............................... Division Vice President--North American Sales, MPPG Robert F. Young.............................. Division Vice President, Product Development and Research--MPPG Charles J. Yunger............................ President and General Manager--Chris Craft
John A. Anderson is President and General Manager of the Company's Four Winns boat group. Mr. Anderson joined the Company in October 1997, and prior thereto served as President of Shamrock, a division of KCS International which manufactures inboard sport fishing boats. Mr. Anderson has also previously served as Director of Sales for Sea Doo, a division of Bombardier Motor Corporation of America, and as Senior Vice President, Marketing at Sea Ray Boats, Inc., a wholly-owned subsidiary of Brunswick Corporation. John T. Aylsworth is Vice President of Marketing Support and Advertising for the Company's engine and boat brands. Mr. Aylsworth joined the Company in December 1997, and prior thereto spent ten years developing programs to support marketing efforts for some of the industry's most prominent companies, including Tracker Marine, L.P., Volvo Penta of the Americas, Inc., and the Sea-Doo jet boats and water craft divisions of Bombardier Motor Corporation of America. Robert L. Beagle is General Manager of the Company's Freshwater Fishing Operations. Mr. Beagle joined the Company in February 1998, and prior thereto served as General Manager of Marine Group LLC, a manufacturer and distributor of Procraft and Astro bass boats. 51 57 Francois Bouffard is General Manager--MPPG Canada. Mr. Bouffard has more than 20 years of experience in sales and marketing, a majority of which has been in Canada. He most recently served as Executive Vice President, Sales and Marketing of Motor Coach Industries, Inc. Prior to that, Mr. Bouffard held various positions with Prevost Car Inc. and Xerox Canada, Inc. Leslie E. Crawford is President and General Manager--OMC Aluminum Boat Group, Inc. Mr. Crawford has extensive experience in the manufacturing and sales of aluminum boats. Mr. Crawford joined the Company in March 1998, and prior thereto served as President of Wellcraft Marine, a division of Genmar Holdings, Inc., where he had earlier served as Vice President for the fishing boat group. Prior to that, Mr. Crawford was Executive Vice President of Tracker Marine, L.P. Charles D. Eckert is President and General Manager--OMC Europe. Prior to assuming this position in March 1998, Mr. Eckert held various positions of increasing responsibility during his thirty years with the Company, including, most recently, Controller of the International Group. William J. Miller is Vice President, Manufacturing--MPPG. Prior to joining the Company in March 1998, Mr. Miller served as Vice President, Operations at the Toro Company, where he was responsible for 12 U.S. manufacturing facilities. Prior to that Mr. Miller held positions of increasing responsibility at Frigidaire Company, Consolidated Diesel Company, Ford Motor Company and General Motors Corporation. Susan M. Opeka is Division Vice President, Finance--MPPG. Prior to joining the Company in January 1998, Ms. Opeka spent twelve years at Tenneco Automotive, a Division of Tenneco, Inc., most recently as Executive Director Strategic Planning. Paula S. Rummage is Vice President, Finance and Administration--Boat Group. Prior to assuming this position in September 1997, Ms. Rummage held various positions of increasing responsibility within the Company, most recently President of OMC Fishing Boat Group. Peter J. VanLancker is Vice President, Product Design and Engineering--Boat Group. Mr. VanLancker joined the Company in July 1996. Prior thereto, Mr. VanLancker served as Vice President, Design and Advanced Technology of Boston Whaler Company. Russel J. Van Rens is Vice President--Quality. Prior to assuming this position in February 1998, Mr. Van Rens served as OMC's Vice President, Engine Manufacturing. He has been with the Company since 1971, serving in increasingly responsible positions. Chris R. Wainscott is President and General Manager of the Company's Saltwater Fishing Boats Division. Prior to assuming this position in February 1998, Mr. Wainscott served as Vice President of Sales and Marketing for the Company's fishing boat products, including the Stratos, Javelin and Hydra-Sports freshwater and saltwater brands. Prior to that, Mr. Wainscott was Regional Sales Manager, Hydra-Sports, and General Manager of one of the largest Hydra-Sports retail dealerships. Mr. Wainscott has 11 years of experience with the Company's products. Robert J. Werner is Vice President--Supply Management and Logistics. Prior to joining the Company in March 1998, Mr. Werner served as Manager, Sourcing, Global Services Operation for General Electric Corporation. He has over 18 years of hands-on international experience, with a focus on identification, development, and expansion of worldwide sources of supply. Jack J. White, Jr. is President of the Company's Freshwater Division. Prior to joining the Company in April 1998, Mr. White owned the Marine Group, LLC, a manufacturer and distributor of Procraft and Astro bass boats. George Wishart is Vice President--Parts and Accessories. Prior to joining the Company in April 1998, Mr. Wishart spent 11 years at Kraft Foods, Inc., most recently serving as Business Director, Enhancers Division. Donald P. Wood is Division Vice President, North American Sales--MPPG. Mr. Wood returned to the Company in November 1997 from Tracker Marine, L.P., a manufacturer of aluminum boats, where he was 52 58 Vice President of Sales. Prior to his tenure at Horizon Marine Company, Mr. Wood worked with the Company in various positions of increasing responsibility. Robert F. Young is Division Vice President, Product Development Engineering and Research--MPPG. Prior to assuming this position in January 1997, Mr. Young held numerous positions of increasing responsibility within the Company's Engineering and Product Development departments, including most recently, Vice President, Engineering. Charles J. Yunger is President and General Manager of the Company's Chris Craft boat group. Prior to joining the Company in April 1998, Mr. Yunger served as Director of Operations of the Hatteras Yachts division of Genmar Industries, Inc., and prior to that as Director of Product Development of Genmar's Wellcraft division. Mr. Yunger has over 33 years of marine industry experience. COMPENSATION OF DIRECTORS Directors of the Company do not receive any compensation, as such, for services provided to the Company as a director, including participation on any committees. Directors may be entitled to reimbursement for travel expenses associated with Board activities. PERSONAL REWARDS AND OPPORTUNITIES PROGRAM On March 10, 1998, the Board of Directors of the Company adopted the Outboard Marine Corporation Personal Rewards and Opportunities Program ("PROP"). PROP was designed to recognize and reward, through cash bonuses, stock options and other equity-based awards, the personal contributions and achievements of key employees of the Company, both individually and as members of the management and key employee team. All employees of the Company and its subsidiaries are eligible to participate in PROP. PROP replaced all prior long and short-term incentive plans of the Company. PROP provides for (i) cash and/or equity annual bonuses based on performance targets, and (ii) grants of stock options, shares of restricted stock, phantom shares of stock or stock appreciation rights. The aggregate number of shares of stock available for equity awards under PROP is 1,500,000 shares of currently authorized common stock of the Company. PROP is administered by the Board of Directors of the Company or a committee or subcommittee of the Board appointed by the Board among its members, which, in either case, has authority, at its discretion, to determine the persons to whom equity awards will be granted and the specifics of those grants. EXECUTIVE COMPENSATION The following table sets forth information concerning the annual and long-term compensation paid or to be paid to those persons who were, at September 30, 1997, (i) the Chief Executive Officer or served in such capacity during fiscal 1997, (ii) the other four most highly compensated Executive Officers of the Company, who were serving in such capacity as of September 30, 1997 and (iii) individuals who would have been one of the four most highly paid Executive Officers but for the fact that they were not serving as an Executive Officer on September 30, 1997 (collectively the "Named Executives") for services rendered in all capacities to the Company for the 1997, 1996 and 1995 fiscal years. Messrs. Schueppert, Vitulli, Medland and Baddeley are no longer employed by the Company. Mr. Bowman is currently serving as a consultant to the Company pursuant to the terms of a Consulting Agreement between the Company and Mr. Bowman. 53 59 For a discussion of the terms of Mr. Bowman's Consulting Agreement, and a discussion of compensation payable to each of Messrs. Jones and Hines, see "Management--Employment Contracts and Severance Agreements".
ANNUAL COMPENSATION LONG-TERM COMPENSATION -------------------------------- ----------------------------------- OTHER RESTRICTED SECURITIES ANNUAL STOCK UNDERLYING LTIP ALL OTHER SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(2) SARS # ($) ($)(3) - --------------------------- ---- ------- ------- ------------ ---------- ---------- --------- ------------ D.D. Jones, Jr.(4)....... 1997 7,692 0 0 0 0 0 0 President and Chief 1996 -- -- -- -- -- -- -- Executive Officer 1995 -- -- -- -- -- -- -- H.W. Bowman(5)........... 1997 466,059 0 0 0 25,500 0 112,929 Former Chairman of the 1996 428,341 0 0 0 38,200 0 16,856 Board, President and 1995 246,928 240,000 0 0 150,000 0 12,812 Chief Executive Officer G.L. Schueppert(6)....... 1997 298,076 120,000 0 0 11,000 0 90,834 Former Executive Vice 1996 225,000 0 0 810,000 10,000 0 80,031 President and Chief 1995 -- -- -- -- -- -- -- Financial Officer C.J. Vitulli(7).......... 1997 306,076 0 0 0 12,000 0 95,851 Former Senior Vice 1996 93,269 0 0 385,000 0 0 0 President and President, 1995 -- -- -- -- -- -- -- OMC Boat Group R.H. Medland(8).......... 1997 230,670 0 30,331 0 6,500 0 65,105 Former Senior Vice 1996 193,083 0 0 303,750 6,000 45,056 13,939 President and Chief 1995 183,000 96,716 0 0 0 52,024 16,316 Administrative Officer D.J. Baddeley(9)......... 1997 228,951 0 28,032 0 6,000 0 75,084 Former Vice President, 1996 199,170 0 0 303,750 7,500 52,096 15,374 Secretary and General 1995 190,000 100,415 0 0 0 39,366 15,269 Counsel
- ------------------------------ (1) For Mr. Medland, $17,230 for a company car and $13,101 for accounting and legal fees, and for Mr. Baddeley, $16,772 for a company car and $11,260 for accounting and legal fees. No other Named Executive's Other Annual Compensation reached the level required for disclosure. (2) In fiscal 1996 the Named Executives, except Mr. Bowman, and certain other employees of the Company received grants of restricted stock at prices of $16.00-$20.25 per share based on the closing price of a share of common stock of the pre-Merger Company on the date of grant. The number of shares granted were 255,000, having an aggregate value on the date of grant of $5,037,500. Based on the value of a share of common stock of the pre-Merger Company as of September 30, 1997, the aggregate value of all outstanding restricted stock was $4,590,000. With the exception of one grant of 5,000 shares which was not to vest for a period of three years, the restricted stock granted in fiscal year 1996, like prior grants of restricted stock, was not to vest for a period of five years. However, as a result of the change of control resulting from the Greenmarine Acquisition, all restricted stock fully vested and was either paid-out in cash in an amount equal to $18.00 per share or held by the Company pending negotiations on employment or severance agreements. (3) For fiscal 1997, includes matching contributions to the OMC Employees Taxed Deferred Savings Plan in the amount of $1,640, $93, $25, $1,712 and $1,667; the dollar value of insurance premiums paid by the pre-Merger Company of $31,604, $44,161, $2,289, $19,000 and $21,363 for the benefit of Messrs. Bowman, Schueppert, Vitulli, Medland and Baddeley, respectively; restricted stock dividends in the amount of $12,205, $6,037, $5,576 and $7,066 for the benefit of Messrs. Schueppert, Vitulli, Medland and Baddeley, respectively; and stock option cash-outs in the amount of $79,687, $37,500, $34,375, $37,387 and $44,987 for the benefit of Messrs. Bowman, Schueppert, Vitulli, Medland and Baddeley, respectively. In addition, Mr. Vitulli received a sign-on bonus in the amount of $50,000. (4) Mr. Jones was hired by the Company on September 25, 1997 and, therefore, information prior to that date does not exist. (5) Mr. Bowman was hired by the pre-Merger Company on February 19, 1995 and, therefore, information prior to that date does not exist. Mr. Bowman ceased serving in the capacity noted on September 25, 1997. (6) Mr. Schueppert was hired by the pre-Merger Company on January 2, 1996 and, therefore, information prior to that date does not exist. Mr. Schueppert ceased serving in the capacity noted on October 6, 1997. (7) Mr. Vitulli was hired by the pre-Merger Company on June 10, 1996 and, therefore, information prior to that date does not exist. Mr. Vitulli ceased serving in the capacity noted on October 15, 1997. (8) Mr. Medland ceased serving in the capacity noted on December 31, 1997. (9) Mr. Baddeley ceased serving in the capacity noted on October 6, 1997. 54 60 OPTION GRANTS IN THE 1997 FISCAL YEAR The following table provides information on the grants of options to purchase common stock of the Pre-Merger Company given to the Named Executives on February 3, 1997. As a result of the cancellation of all outstanding options in connection with the Greenmarine Acquisition, no information is provided regarding the potential realizable value of the options granted in fiscal 1997. Any value received by the Named Executives during fiscal 1997 as a result of the cancellation is reflected in the summary compensation table above and the section below titled "Option Exercises in the 1997 Fiscal Year and Fiscal Year End Option Values".
# OF % OF TOTAL SECURITIES OPTIONS UNDERLYING GRANTED TO ALL EXERCISE GRANT OPTIONS/SARS EMPLOYEES PRICE PER NAME DATE GRANTED(#) IN 1997(1) SHARE $(2) EXPIRED(3) - ---- ------ ------------ -------------- ---------- ---------- H.W. Bowman...................... 2/3/97 25,500 11.40 16.375 9/30/97 G.L. Schueppert.................. 2/3/97 11,000 4.94 16.375 9/30/97 C.J. Vitulli..................... 2/3/97 12,000 5.36 16.375 9/30/97 R.H. Medland..................... 2/3/97 6,500 2.91 16.375 9/30/97 D.J. Baddeley.................... 2/3/97 6,000 2.68 16.375 9/30/97
- ------------------------------ (1) In the 1997 fiscal year 139 employees received stock options. (2) The exercise price of $16.375 was the closing price of a share of common stock of the pre-Merger Company on the New York Stock Exchange on February 3, 1997. (3) Pursuant to the change of control resulting from the Greenmarine Acquisition, all outstanding options were fully vested and then cancelled effective September 30, 1997. OPTION EXERCISES IN THE 1997 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The following table shows information on the exercise in the 1997 fiscal year of options to purchase common stock of the pre-Merger Company by the Named Executives or the payout of limited stock appreciation rights associated therewith. As a result of the cancellation of all outstanding options in connection with the Greenmarine Acquisition, no information is provided regarding unexercised options as of September 30, 1997 or the value of in-the-money options as of such date.
SHARES ACQUIRED OR VALUE NAME EXERCISED(#) REALIZED($) ---- ------------ ----------- H.W. Bowman......................................... 25,500 79,687 G.L. Schueppert..................................... 11,000 37,500 C.J. Vitulli........................................ 12,000 34,375 R.H. Medland........................................ 22,700 37,387 D.J. Baddeley....................................... 20,200 44,987
LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL YEAR 1997 The following table describes the performance shares granted to the Named Executive Officers during the Company's 1997 fiscal year under the 1994 OMC Long-Term Incentive Plan (the "LTIP"). The LTIP plan has been terminated and all awards thereunder to Named Executive Officers have been cancelled. Accordingly, the following table is provided for information purposes only. The grants were awarded to cover the three year award cycle October 1, 1996 through September 30, 1999. No distribution of performance shares, whether in cash or stock, was to be made until after the end of the three year award cycle and a Compensation and Benefits Committee had determined the extent to which the Company had achieved the performance goals set at the beginning of each award cycle. The initial value of each performance share granted under the LTIP was $16.00. The initial value was the average of the closing price for a share of common stock of the pre-Merger Company on the New York Stock Exchange for the month of September 1996. The performance goals set for these performance shares were (1) the average of the absolute return on net assets for the three year award cycle, (2) return on net assets improvement for the three year award cycle 55 61 over the prior three year award cycle and (3) total shareholder return on the common stock of the pre-Merger Company as compared to the return on the S&P 400 for grants prior to October 1, 1996 and the S&P 500 for grants thereafter measured over the three year award cycle.
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS PERFORMANCE PERIOD (1) (POTENTIAL SHARES) SHARES UNIT --------------------------------------- GRANTED (2) PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#) ----------- ----------- ------------ --------- ---------- H.W. Bowman................... 15,300 3 Years 7,650 15,300 30,600 G.L. Schueppert............... 7,100 3 Years 3,550 7,100 14,200 C.J. Vitulli.................. 6,400 3 Years 3,200 6,400 12,800 R.H. Medland.................. 3,900 3 Years 1,950 3,500 7,800 D.J. Baddeley................. 3,800 3 Years 1,900 3,800 7,600
- ------------------------------ (1) The number of shares to be paid upon the completion of an award cycle would have depended entirely on the extent to which the pre-Merger Company achieved the performance goals set at the beginning of the award cycle. The payout at the Threshold level would have been 50%, the payout at the Target level would have been 100% and the payout at the Maximum level would have been 200% of the number of performance shares originally granted. (2) As a condition of the agreements governing the resignation or termination, as the case maybe, of the Named Executives Officers listed above, all outstanding grants of performance shares, including the above, were cancelled or forfeited. RETIREMENT PLANS The approximate annual benefits shown in the table below are for the Named Executive participants and are not subject to social security offset but are subject to offset for any benefits payable from retirement programs of the Company's foreign subsidiaries. The total annual benefit payable from the Outboard Marine Corporation Employees Retirement Plan (the "Retirement Plan") and the supplemental non-qualified retirement plan is shown in the table below for selected average base earnings levels and years of service based upon certain assumptions including all years of credited service as an Executive Officer, retirement at age 65 and election of a single life annuity for the benefit payment.
20 OR AVERAGE ANNUAL BASE EARNINGS 5 YEARS 10 YEARS 15 YEARS MORE YEARS ---------------------------- -------- -------- -------- ---------- $ 150,000..................................... $ 19,125 $ 38,250 $ 57,375 $ 76,500 $ 250,000..................................... $ 31,875 $ 63,750 $ 95,625 $127,500 $ 300,000..................................... $ 38,250 $ 76,500 $114,750 $153,000 $ 500,000..................................... $ 63,750 $127,500 $191,250 $255,000 $ 900,000..................................... $114,750 $229,500 $344,250 $459,000 $1,300,000..................................... $165,750 $331,500 $497,250 $663,000
The Retirement Plan provides a fixed benefit determined on the basis of years of service and final average base earnings. In addition to the benefits from the Retirement Plan, certain participants in the Company's annual incentive compensation plan(s) are eligible for retirement benefits from a supplemental non-qualified retirement plan. The retirement benefits under the non-qualified plan are based upon amounts paid under the annual bonus plan as well as salary, and the total retirement benefits payable under the plans may exceed the maximum benefits payable under the Employee Retirement Income Security Act of 1974, as amended. The basis for benefits under both plans can be those amounts contained in the Summary Compensation Table above if the years disclosed are one or more of the three highest annual earnings in the last ten years as discussed below. Participants in the plans who are not Executive Officers receive an aggregate benefit equal to 1.2% of total pay and .5% above social security covered compensation for each year of credited service times the average of the five highest consecutive annual earnings (base annual salary rate plus incentive compensation earned in the same year under an annual incentive compensation plan) during such participant's last ten years of employment. An Executive Officer who participates in the plans will receive the 1.2% of total pay and .5% above social security covered compensation for each year of credited service as a non-Executive Officer and 56 62 2.55% for each year of credited service as an Executive Officer times the average of the three highest annual earnings during such participant's last ten years of employment. As of December 31, 1997, Messrs. Bowman, Schueppert, Vitulli, Medland and Baddeley will have 2.67, 1.76, 1.34, 6.50 and 7.75, respectively, credited years of service under the Company's retirement plans. The total estimated vested annual benefit payable from these two plans for Messrs. Bowman, Schueppert, Vitulli, Medland and Baddeley based upon certain assumptions including actual years of credited service as a non-Executive Officer and Executive Officer, as the case may be, current age and base earning levels, and election of a single life annuity for the benefit payment is $120,500, $0, $0, $47,704 and $55,707, respectively, which payments are not subject to social security offset but are subject to offset for any benefits payable from retirement programs of the Company's foreign subsidiaries. EMPLOYMENT CONTRACTS AND SEVERANCE AGREEMENTS David D. Jones, Jr. The Company and David D. Jones, Jr. have entered into an employment agreement, effective as of September 25, 1997 (the "Jones Employment Agreement"). Pursuant to the Jones Employment Agreement, Mr. Jones will serve as President and Chief Executive Officer of the Company and as a member of the Board of Directors of the Company. The term of Mr. Jones's employment under the Jones Employment Agreement expires on September 30, 2000, or, if OMC changes its fiscal year to a calendar year, on December 31, 2000 (in either case, the "Jones Initial Term"), which term shall automatically renew for an additional two years on the initial expiration date and each expiration date thereafter until the end of the fiscal year during which Mr. Jones attains age 65, unless Mr. Jones's employment is otherwise terminated pursuant to the terms of the Jones Employment Agreement. In exchange for his services, Mr. Jones will receive (1) a base salary of $500,000 per annum for the first six months of his employment and $600,000 per annum for the remainder of the term of Mr. Jones's employment subject to increases at the Board of Director's discretion, (2) an annual bonus of up to 200% of base salary contingent on OMC's achieving certain financial performance goals, of which, during the Jones Initial Term, one-fourth shall be paid in cash and three-fourths shall be paid in common stock of OMC using a value of $18.00 per share, (3) an incentive option to purchase 61,105 shares of common stock of OMC at an exercise price of $18.00 per share, 5,555 shares of which vested upon grant, and with annual vesting of 5,555 shares each January 1st until fully exercisable, (4) a non-qualified option to purchase 238,895 shares of common stock of OMC at an exercise price of $18.00 per share with scheduled annual vesting each year over a three-year period, and (5) (i) payment by OMC of $643,470 in cash, (ii) the issuance of a non-qualified stock option to purchase 107,245 shares of common stock of OMC at an exercise price of $18.00 per share, 90,578 shares of which vested upon grant, with the remaining 16,667 shares vesting on December 31, 1998, and (iii) a deferred compensation obligation of the Company to him in the amount of $1,930,410 reduced by the product of (A) any decrease in the per share value of the common stock of OMC below $18.00 per share and (B) 107,245, in consideration of the incentive compensation, unvested options and restricted stock forfeited by Mr. Jones solely as a result of his severance from Brunswick Corporation to accept employment with the Company. The Jones Employment Agreement provides that Mr. Jones will be entitled to participate in or receive benefits under any employee benefit plan, program or arrangement made available generally by OMC to its similarly situated executives and that Mr. Jones is entitled to participate in OMC's Supplemental Non-Qualified Retirement Plan for Elected Officers. If OMC terminates Mr. Jones's employment for cause or Mr. Jones voluntarily resigns from his employment with OMC other than for good reason, OMC will be obligated to pay Mr. Jones his base salary through the date of termination. If OMC terminates Mr. Jones's employment with OMC without cause or Mr. Jones terminates his employment with OMC for good reason, Mr. Jones will be entitled to receive (1) his base salary through the date of termination plus any accrued vacation, (2) his annual bonus, if any, for the fiscal year in which such termination occurred prorated for the number of full months Mr. Jones was employed during such fiscal year, (3) an amount equal to the greater of his base salary for one year or his base salary for the remainder of the term of the Jones Employment Agreement, and (4) the benefit of continued participation in the OMC employee benefit plans, programs or arrangements in which Mr. Jones participated prior to his termination until the greater of one year or the end of the then remaining term of the Jones Employment Agreement, and (5) any remaining unvested stock options granted by OMC to Mr. Jones 57 63 pursuant to the Jones Employment Agreement, which stock options shall automatically vest as of the date of termination and be exercisable for 90 days thereafter. If Mr. Jones's employment with OMC terminates as a result of his death, (1) OMC will be obligated to pay to Mr. Jones's estate his base salary to the date of his death plus any accrued vacation, and Mr. Jones's annual bonus, if any, for the fiscal year in which his death occurs prorated for the number of full months Mr. Jones was employed during such fiscal year, (2) in the event Mr. Jones dies during any twelve-month period during the term of his employment, any unvested stock options granted by OMC to Mr. Jones pursuant to the Jones Employment Agreement which would have become vested if Mr. Jones continued his employment during such twelve-month vesting period shall vest pro-rata for the number of full months Mr. Jones was employed during such twelve-month period in which his death occurs and be exercisable for 12 months after Mr. Jones's death, and (3) Mr. Jones's surviving spouse shall be entitled to participate in OMC's group medical and dental plans for the remainder of the term of the Jones Employment Agreement. If Mr. Jones's employment with OMC is terminated as a result of his total disability, (1) OMC will be obligated to pay Mr. Jones his base salary to the date on which total disability is deemed to have occurred plus any accrued vacation, and Mr. Jones's annual bonus, if any, for the fiscal year in which his total disability occurs prorated for the number of full months Mr. Jones was employed during such fiscal year, (2) in the event total disability occurs during any twelve-month period during the term of Mr. Jones's employment, any unvested stock options granted by OMC to Mr. Jones pursuant to the Jones Employment Agreement which would have become vested if Mr. Jones continued his employment during such twelve-month vesting period shall vest pro rata for the number of full months Mr. Jones was employed during such twelve-month period in which his total disability occurs and be exercisable for 12 months after Mr. Jones's total disability, and (3) Mr. Jones shall be permitted to participate in OMC's employee benefit plans, programs or arrangements in which he participated prior to he termination of his employment until the end of the then remaining term of the Jones Employment Agreement. Pursuant to the Jones Employment Agreement, OMC will have the right to repurchase all shares of common stock of OMC owned by Mr. Jones and vested stock options granted by OMC to Mr. Jones upon the termination of Mr. Jones's employment with OMC for any reason. Upon the termination by OMC of Mr. Jones's employment without cause, the termination by Mr. Jones of his employment for good reason, the voluntary termination by Mr. Jones of his employment at or after the expiration of the term of the Jones Employment Agreement, the voluntary termination by Mr. Jones of his employment at or after his attaining age 62, or the termination of Mr. Jones's employment as a result of his death or total disability, Mr. Jones or his estate, as applicable, will have the right to require OMC purchase all shares of common stock of OMC owned by Mr. Jones and vested stock options granted by OMC to Mr. Jones. Mr. Jones is prohibited from disposing his shares of OMC common stock without the prior written consent of OMC. However, pursuant to the Jones Employment Agreement, Mr. Jones will have a tag-along right, subject to certain exceptions, with respect to certain dispositions of common stock of OMC by Greenmarine Holdings. Greenmarine Holdings will have certain take-along rights to require Mr. Jones to sell his shares of OMC common stock if Greenmarine Holdings proposes to sell not less than 50% of the OMC common stock owned by Greenmarine Holdings. Mr. Jones is subject to confidentiality, non-competition and non-solicitation provisions, which are enforceable during the term of the Jones Employment Agreement and for a one-year period commencing on the expiration or termination of Mr. Jones's employment with OMC. See also "Certain Relationships and Related Transactions." Andrew P. Hines. The Company and Andrew P. Hines have entered into an employment agreement, effective as of October 6, 1997 (the "Hines Employment Agreement"). Pursuant to the Hines Employment Agreement, Mr. Hines will serve as Executive Vice President and Chief Financial Officer of the Company and as a member of the Board of Directors of the Company. The term of Mr. Hines's employment under the Hines Employment Agreement expires on October 6, 2000, which term shall automatically renew for an additional year on the initial expiration date and each expiration date thereafter, unless Mr. Hines's employment is otherwise terminated pursuant to the terms of the Hines Employment Agreement. In exchange for his services, Mr. Hines will receive (1) a base salary of $325,000 per annum, which was increased to $375,000 per 58 64 annum by the Board of Directors in June 1998 and may be increased at the discretion of the Board of Directors and (2) a non-qualified option to purchase 180,000 shares of common stock of OMC at an exercise price of $18.00 per share with annual vesting in equal proportions over a three-year period. Simultaneously with the execution of the Hines Employment Agreement, Mr. Hines purchased from OMC 14,444 shares of OMC common stock, of which 2,777 shares were issued in consideration of a $50,000 cash payment and 11,667 shares were issued in consideration of Mr. Hines issuing a promissory note in favor of OMC in the principal amount of $210,000. On April 6, 1998, Mr. Hines purchased an additional 5,556 shares of common stock issued in consideration of a $100,000 cash payment. The Hines Employment Agreement provides that Mr. Hines, in certain circumstances, will be entitled to participate in the short-term and long-term incentive and stock option or other equity or quasi-equity participation plans, programs or arrangements in which similarly situated executives are entitled to participate. Mr. Hines will also be entitled to receive benefits under any employee benefit plan, program or arrangement made available generally by OMC to its similarly situated executives. If OMC terminates Mr. Hines's employment for cause or Mr. Hines voluntarily resigns from his employment with OMC other than for good reason, OMC will be obligated to pay Mr. Hines's base salary through the date of termination. If OMC terminates Mr. Hines's employment with OMC without cause or Mr. Hines terminates his employment with OMC for good reason, Mr. Hines will be entitled to receive (1) his base salary through the date of termination plus any accrued vacation, (2) an amount equal to the greater of his base salary for one year or his base salary for the remainder of the term of the Hines Employment Agreement, (3) the benefit of continued participation in OMC's employee benefit plans, programs or arrangements in which Mr. Hines participated prior to his termination until the greater of one year or the end of the then remaining term of the Hines Employment Agreement, and (4) any remaining unvested stock options granted by OMC to Mr. Hines, which stock options shall automatically vest as of the date of termination and be exercisable for 90 days thereafter. If Mr. Hines's employment with OMC terminates as a result of his death, (1) OMC will be obligated to pay to Mr. Hines's estate Mr. Hines's base salary to the date of his death plus any accrued vacation, and any bonus for the fiscal year in which his death occurs prorated for the number of full months Mr. Hines was employed during such fiscal year, and (2) Mr. Hines's estate will have one year from the date of Mr. Hines's death to exercise all vested and unexercised stock options granted by OMC to Mr. Hines. If Mr. Hines's employment with OMC is terminated as a result of his total disability, (1) OMC will be obligated to pay Mr. Hines his base salary to the date on which total disability is deemed to have occurred plus any accrued vacation, and any bonus for the fiscal year in which his total disability occurs prorated for the number of full months Mr. Hines was employed during such fiscal year, (2) any stock options granted by OMC to Mr. Hines that have vested as of the date of such total disability shall be exercisable for 90 days after the date of such termination, and (3) Mr. Hines shall be permitted to participate in OMC's employee benefit plans, programs or arrangements in which he participated prior to he termination of his employment until the end of the then remaining term of the Hines Employment Agreement. Pursuant to the Hines Employment Agreement, OMC will have the right to repurchase all shares of common stock of OMC owned by Mr. Hines and vested stock options granted by OMC to Mr. Hines upon the termination of Mr. Hines's employment with OMC for any reason. Upon the termination by OMC of Mr. Hines' employment without cause, the termination by Mr. Hines of his employment for good reason, the voluntary termination by Mr. Hines of his employment at or after the expiration of the term of the Hines Employment Agreement, the voluntary termination by Mr. Hines of his employment at or after his attaining age 62, or the termination of Mr. Hines's employment as a result of his death or total disability, Mr. Hines or his estate, as applicable, will have the right to require OMC purchase all shares of common stock of OMC owned by Mr. Hines and stock options granted by OMC to Mr. Hines. Mr. Hines is prohibited from disposing his shares of OMC common stock without the prior written consent of OMC. However, pursuant to the Hines Employment Agreement, Mr. Hines will have a tag-along right, subject to certain exceptions, with respect to certain dispositions of common stock of OMC by Greenmarine Holdings. Greenmarine Holdings will have certain take-along rights to require Mr. Hines to sell 59 65 his shares of OMC common stock if Greenmarine Holdings proposes to sell not less than 50% of the OMC common stock owned by Greenmarine Holdings. Mr. Hines is subject to confidentiality, non-competition and non-solicitation provisions, which are enforceable during the term of the Hines Employment Agreement and for a one-year period commencing on the expiration or termination of Mr. Hines's employment with OMC. See also "Certain Relationships and Related Transactions." Certain Severance Arrangements. The Company has severance agreements with George L. Broughton, P.W. Brown, Raymond M. Cartade, Jack L. Feurig, John D. Flaig, Grainger B. McFarlane, James P. Murphy, Paul R. Rabe, Robert S. Romano, Paula S. Rummage, Peter J. VanLancker, Russell J. Van Rens and Robert F. Young. Each of these agreements was entered into prior to the Greenmarine Acquisition, and the Company's potential severance obligations thereunder became effective upon the change in control of the Company resulting from the Greenmarine Acquisition. The agreements provide that if such employee elects to resign his employment for specified reasons, or is terminated by the Company other than for cause, the Company will pay such employee an amount in cash equal to not more than one times (except for Mr. Flaig who will be paid two times) (1) salary plus (2) the amount of the highest annual incentive compensation received by such employee in the five (5) fiscal years preceding the fiscal year of the change in control (or, for certain employees, the two (2) fiscal years immediately following the fiscal year of the change in control, if greater). Additionally, for certain employees for a period of twelve (12) months following the termination date (the "Continuation Period"), the Company will arrange to provide the employee with benefits substantially similar to those the employee was receiving or entitled to receive immediately prior to the termination date. Further, the Company will pay to certain employees a lump sum cash payment in an amount equal to the actuarial equivalent of the excess of (1) the retirement, pension, medical, life and other benefits that will be payable to the employee under the Company's retirement plans if the employee continued to be employed through the Continuation Period given the employee's base salary over (2) the retirement, pension, medical, life and other benefits that employee is entitled to receive under the Company's retirement plans. As a result of the Greenmarine Acquisition, the severance agreements have, or will be, paid in accordance with their terms for those employees who have satisfied the conditions discussed above. The terms of these severance agreements will remain in force until September 12, 2000, or as otherwise may be negotiated by the employee and the Company. Harry W. Bowman. The Company and Harry W. Bowman entered into a Consulting Agreement, effective as of September 24, 1997 (the "Bowman Consulting Agreement"). Pursuant to the Bowman Consulting Agreement, Mr. Bowman agreed to resign from his positions as President, Chief Executive Officer and Chairman of the Board of OMC and was to receive certain benefits from the Company, including (1) a cash payment in the amount of $940,000, (2) a fee in the amount of $230,000 for employment services to OMC from the date of the agreement through March 31, 1998, (3) a consulting fee in the amount of $230,000 for consulting services from April 1, 1998 through September 30, 1998, (4) in exchange for his agreement not to engage in any competitive activity or make any disparaging statements about the Company or any of its employees, officers, or directors, a cash payment in the amount of $700,000, (5) the retirement benefits to which Mr. Bowman was entitled under the Employment Agreement entered into between the Company and Mr. Bowman dated February 14, 1995, (6) coverage under the Company's welfare and benefit plans through September 30, 1998, (7) compensation for outplacement services and reimbursement for certain financial advisory services, and (8) gross-up payments for any excise tax resulting from the application imposed by Section 4999 of the Internal Revenue Code of 1986 resulting from the change of control provisions of Section 280G of the Internal Revenue Code of 1986. In consideration of these benefits, Mr. Bowman agreed that the Employment Agreement dated February 14, 1995, except those provisions which survive through the Consulting Agreement, and the Severance Agreement dated March 31, 1997 between the Company and Mr. Bowman would be terminated. 60 66 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the beneficial ownership of common stock of OMC as of June 1, 1998 by (i) any person or group who beneficially owns more than 5% of the outstanding common stock of OMC and (ii) each director and executive officer of OMC and all directors and executive officers of OMC as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock of OMC subject to options currently exercisable, or exercisable within 60 days of the date of this Prospectus, are deemed outstanding for computing the percentage of the person holding such options but are not deemed outstanding for computing the percentage of any other person. Except as otherwise indicated, beneficial ownership in the following tables includes sole voting and dispositive power.
SHARES BENEFICIALLY PERCENT NAME AND ADDRESS OWNED OF CLASS ---------------- ------------ -------- Greenmarine Holdings LLC(1)................................. 20,400,000 99.9% 277 Park Avenue, 27th Floor New York, New York 10172 Alfred D. Kingsley(2)....................................... 20,400,000 99.9% 277 Park Avenue, 27th Floor New York, New York 10172 Gary K. Duberstein(2)....................................... 20,400,000 99.9% 277 Park Avenue, 27th Floor New York, New York 10172 Richard Katz(3)............................................. 20,400,000 99.9% Villa La Sirena Vico dell'Olivetta 12 18039 Martola Inferiore Ventimiglia, Italy Ron Hiram(4)................................................ 20,400,000 99.9% 888 Seventh Avenue, 33rd Floor New York, New York 10106 David D. Jones, Jr.(5)...................................... 101,688 * c/o Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 Andrew P. Hines(6).......................................... 20,000 * c/o Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 Directors and Executive Officers as a group (11 persons).... 121,688 *
- ------------------------------ * Less than 1%. (1) The members of Greenmarine Holdings are Greenlake Holdings LLC, a Delaware limited liability company ("Greenlake"), Quasar Strategic Partners LDC, a Cayman Islands limited duration company ("QSP"), and Quantum Industrial Partners LDC, a Cayman Islands limited duration company ("QIP"). Greenlake, QSP and QIP have approximately a 30.5%, 34.75% and 34.75% interest in Greenmarine Holdings, respectively. Greenlake is controlled by Mr. Alfred D. Kingsley and Mr. Gary K. Duberstein. QSP is an indirect subsidiary of Quasar International Fund N.V., a Netherlands Antilles limited liability company ("Quasar"). QIP is the principal operating subsidiary of Quantum Industrial Holdings Ltd., a British Virgin Islands corporation ("QIH"). Quasar and QIH are investment funds which have as their principal investment advisors Soros Fund Management LLC, of which Mr. George Soros serves as Chairman. Greenmarine Holdings is controlled by a Management Committee comprised of up to a total of four Managers. Pursuant to the Operating Agreement of Greenmarine Holdings, Greenlake has the 61 67 right to appoint two designees to Greenmarine Holdings's Management Committee and the holders of a majority of Greenmarine Holdings' interest held by QSP and QIP have the right to appoint two members of Greenmarine Holdings' Management Committee. Greenmarine Holdings' Management Committee is currently comprised of Messrs. Alfred D. Kingsley, Gary K. Duberstein and Richard Katz. From and after September 12, 1998, the holders of a majority of Greenmarine Holdings' interests held by QSP and QIP may elect to increase the size of Greenmarine Holdings' Management Committee to five members, three of whom will be designated by the holders a majority of Greenmarine Holdings' interests held by QSP and QIP and two of whom will be designated by Greenlake. The vote of three of the members of Greenmarine Holdings's Management Committee is required for action by the Management Committee. (2) Each of Alfred D. Kingsley and Gary K. Duberstein is a director of the Company. In addition, each of Messrs. Kingsley and Duberstein are members of Greenmarine Holdings's Management Committee and they control Greenlake. All of the shares indicated as owned by each of Messrs. Kingsley and Duberstein are owned directly by Greenmarine Holdings and are included because of their affiliation with Greenmarine Holdings. As such, Messrs. Kingsley and Duberstein may be deemed to have beneficial ownership of these shares within the meaning of Rule 13d-3 under the Exchange Act. (3) Richard Katz is a director of the Company. In addition, Mr. Katz is a member of Greenmarine Holdings's Management Committee. All of the shares indicated as owned by Mr. Katz are owned directly by Greenmarine Holdings and are included because of his affiliation with Greenmarine Holdings. The reference to such shares shall not be deemed admission that Mr. Katz may be deemed to have beneficial ownership of these shares within the meaning of Rule 13d-3 under the Exchange Act. (4) Ron Hiram is a director of the Company. All of the shares indicated as owned by Mr. Hiram are owned directly by Greenmarine Holdings and are included because of his affiliation with Greenmarine Holdings. The reference to such shares shall not be deemed admission that Mr. Hiram may be deemed to have beneficial ownership of these shares within the meaning of Rule 13d-3 under the Exchange Act. (5) Represents 101,688 shares of OMC common stock issuable upon exercise of options granted to Mr. Jones pursuant to the Jones Employment Agreement, which options are currently exercisable. Does not include 305,557 shares of OMC common stock issuable upon exercise of options granted to Mr. Jones pursuant to the Jones Employment Agreement, which options will not become exercisable within 60 days of the date of this Prospectus. See "Management-- Employment Contracts and Severance Agreements." (6) Of the 20,000 shares indicated as owned by Mr. Hines, 8,333 were purchased in consideration of $150,000 in cash payments and 11,667 were purchased in consideration of Mr. Hines issuing a promissory note in favor of the Company in the principal amount of $210,000. Mr. Hines has pledged 14,444 shares, and will pledge such additional 5,556 shares, to the Company to secure his obligations under such promissory note. Does not include 180,000 shares of OMC common stock issuable upon exercise of options granted to Mr. Hines pursuant to the Hines Employment Agreement, which options will not become exercisable within 60 days of the date of this Prospectus. See "Management--Employment Contracts and Severance Agreements." 62 68 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company is party to an employment agreement with each of David D. Jones, Jr. and Andrew P. Hines, and to severance agreements with certain other personnel. See "Management--Employment Contracts and Severance Agreements." OMC has agreed to reimburse Mr. Jones for his reasonable moving expenses incurred in connection with his relocation to the geographical vicinity of Chicago, Illinois. Through March 31, 1998, such expenses have been approximately $8,580. In addition, OMC has agreed to make a loan to Mr. Jones for the purchase of a new residence in the Chicago area, or make an equity investment in such residence, in an amount up to $300,000, and, during the term of Mr. Jones's employment with OMC, OMC will pay to Mr. Jones an amount equal to the interest payable on any such loan or the fair rental value of the OMC-owned portion of such residence, as the case may be. Any such loan shall be evidenced by a promissory note and secured by a second mortgage in favor of OMC. OMC has agreed to bear the "first-loss" position in the event that Mr. Jones's new residence is sold for an amount less than its original cost plus improvements. In the event Mr. Jones's employment with OMC is terminated for any reason and such new residence has not been sold, within 120 days after such termination, Mr. Jones will be obligated to repay such loan or repurchase such equity investment, as the case may be, at an appraised value to be determined by an independent appraiser. OMC has also agreed to reimburse Mr. Jones for any loss he incurs on the sale of his current residence. To enable Mr. Jones to exercise at any time during his employment with OMC all or any portion of the non-qualified option to purchase 238,895 shares of OMC common stock granted by OMC to Mr. Jones pursuant to the Jones Employment Agreement, OMC has agreed to loan to Mr. Jones an amount equal to the aggregate exercise price of the portion of such option being exercised. Any such loan shall be due and payable in full within 30 days following Mr. Jones's termination of employment for any reason. In addition, pursuant to the Jones Employment Agreement, OMC has purchased for the benefit of Mr. Jones and his heirs a term life insurance policy with a death benefit of $1,500,000. OMC has agreed to reimburse Mr. Hines until the earlier of the date he permanently relocates to the Chicago, Illinois geographical vicinity or October 6, 1998, Mr. Hines's rental fees for a temporary residence in the Chicago, Illinois area, including all utilities, and for round trip coach airfares between New Jersey and Chicago for reasonable travel between such locations by Mr. Hines and his wife. Through March 31, 1998, such expenses have been approximately $21,787. If Mr. Hines is unable to sell his current residence before the earlier of October 6, 1999 or the date on which he purchases a residence in the Chicago, Illinois area, OMC shall obtain an appraisal of Mr. Hines's New Jersey residence and advance to Mr. Hines the equity value of such residence, which equity value shall be the greater of such appraisal or $850,000 less any outstanding mortgage balance. Any such advance shall be secured by a second mortgage in favor of OMC. If OMC so advances to Mr. Hines the equity value of his New Jersey residence, OMC shall have the right to sell such residence and shall assume all mortgage payment obligations for such residence. OMC will be entitled to any profits and will suffer any losses that result from the difference between such equity value and the actual sale price of Mr. Hines's New Jersey residence. Pursuant to the Hines Employment Agreement, the Company loaned to Mr. Hines the amount of $210,000 for the sole purpose of purchasing 11,666.66 shares of common stock of the Company. The loan is evidenced by a promissory note and secured by a pledge and security agreement with the shares of OMC common stock issued to Mr. Hines as collateral. OMC has agreed to loan to Paul R. Rabe the amount of $83,500 to assist in the purchase of a new permanent residence. The loan is interest free and is evidenced by a promissory note. Mr. Rabe is obligated to repay the loan upon the earlier to occur of (i) the sale of his former residence or (ii) termination of his employment with the Company for any reason. As of June 1, 1998, the amount outstanding remained at $83,500. 63 69 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Old Notes were originally sold by the Company on May 27, 1998 to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. As a condition to the Purchase Agreement, the Company and the Subsidiary Guarantors (collectively, the "Issuers") and the Initial Purchasers entered into the Registration Rights Agreement on May 27, 1998, the date of the Initial Offering (the "Issue Date"). Pursuant to the Registration Rights Agreement, the Company and the Subsidiary Guarantors agreed to file a registration statement on Form S-4 with respect to the Exchange Offer (the "Exchange Offer Registration Statement") with the Commission on or prior to 60 days after the Issue Date, and use their respective best efforts to have it declared effective on or prior to 150 days after the Issue Date. The Company and the Subsidiary Guarantors have also agreed to use their best efforts to cause the Exchange Offer Registration Statement to be effective continuously, to keep the Exchange Offer open for a period of not less than 20 business days and cause the Exchange Offer to be consummated no later than the 30th business day after it is declared effective by the Commission. The Exchange Offer is being made to satisfy certain of the contractual obligations of the Company and the Subsidiary Guarantors under the Registration Rights Agreement and the Purchase Agreement. If (i) the Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Old Notes which are Transfer Restricted Securities notifies the Company prior to the 20th business day following the consummation of the Exchange Offer that (a) it is prohibited by law or Commission policy from participating in the Exchange Offer, (b) it may not resell the Series B Notes acquired by it in the Exchange Offer to the public without delivering a prospectus, and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by it, or (c) it is a broker-dealer and holds Old Notes acquired directly from the Company or any of the Company's affiliates, the Company and the Subsidiary Guarantors will file with the Commission a Shelf Registration Statement to register for public resale the Transfer Restricted Securities held by any such Holder who provide the Company with certain information for inclusion in the Shelf Registration Statement. For the purposes of the Registration Rights Agreement, "Transfer Restricted Securities" means each Old Note until the earliest date on which (i) such Old Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (ii) such Old Note has been disposed of in accordance with the Shelf Registration Statement, or (iii) such Old Note is distributed to the public pursuant to Rule 144 under the Securities Act, and each Exchange Note until the date on which such Exchange Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). The Registration Rights Agreement provides that (i) if the Exchange Offer Registration Statement is not declared effective by the Commission on or prior to the 150th day after May 27, 1998, (ii) if the Exchange Offer is not consummated on or before the 30th business day after the Exchange Offer Registration Statement is declared effective, (iii) if obligated to file the Shelf Registration Statement and the Company and the Subsidiary Guarantors fail to file the Shelf Registration Statement with the Commission on or prior to the 60th day after such filing obligation arises, (iv) if obligated to file a Shelf Registration Statement and the Shelf Registration Statement is not declared effective on or prior to the 90th day after the obligation to file a Shelf Registration Statement arises, or (v) if the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is declared effective but thereafter ceases to be effective or useable in connection with resales of the Transfer Restricted Securities, for such time of non-effectiveness or non-usability (each, a "Registration Default"), the Company and the Subsidiary Guarantors agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages ("Liquidated Damages") in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day 64 70 period immediately following the occurrence of such Registration Default. The amount of the Liquidated Damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.35 per week per $1,000 in principal amount of Transfer Restricted Securities. The Company and the Subsidiary Guarantors shall not be required to pay Liquidated Damages for more than one Registration Default at any given time. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. All accrued Liquidated Damages shall be paid by the Company or the Subsidiary Guarantors to Holders entitled thereto by wire transfer of immediately available same day funds to the accounts specified by them or by mailing checks to their registered address if no such accounts have been specified. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in integral multiples of $1,000. The form and terms of the Exchange Notes are the same as the form and terms of the Old Notes except that (i) the Exchange Notes bear a Series B designation and a different CUSIP Number from the Old Notes, (ii) the Exchange Notes have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (iii) the holders of the Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Old Notes in certain circumstances relating to the timing of the Exchange Offer, all of which rights will terminate when the Exchange Offer is terminated. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered. As of the date of this Prospectus, $160,000,000 aggregate principal amount of Old Notes were outstanding. Holders of Old Notes do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the Exchange Notes from the Company. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See "--Fees and Expenses." 65 71 EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. The Company reserves the right, in its sole discretion, (i) to delay accepting any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "--Conditions" shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. Any such extension, delay in acceptance, termination or amendment will be followed promptly by oral (confirmed in writing) or written notice thereof to the Exchange Agent and by making a public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make any public announcement and subject to applicable law, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to an appropriate news agency. INTEREST ON THE EXCHANGE NOTES The Exchange Notes will bear interest from their date of issuance. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the date of issuance of the Exchange Notes. Such interest will be paid with the first interest payment on the Exchange Notes on December 1, 1998. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the Exchange Notes. Interest on the Exchange Notes is payable semi-annually on each June 1 and December 1, commencing on December 1, 1998. PROCEDURES FOR TENDERING Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. For a holder to validly tender Old Notes pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantee, or (in the case of a book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal, and any other required documents must be received by the Exchange Agent at the address set forth under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, prior to 5:00 p.m., New York City time, on the Expiration Date, either (a) certificates for tendered Old Notes must be received by the Exchange Agent at such address or (b) such Old Notes must be transferred pursuant to the procedures for book-entry transfer described below (and a confirmation of such tender received by the Exchange Agent, including an Agent's Message if the tendering holder has not delivered a Letter of Transmittal). The term "Agent's Message" means a message, transmitted by the book-entry transfer facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant that such participant has received and agrees to be bound by the Letter of Transmittal and that the Company may enforce such Letter of Transmittal against such participant. By tendering, each holder of Old Notes will represent to the Company that, among other things, (i) the Exchange Notes to be acquired by such holder of Old Notes in connection with the Exchange Offer are being acquired by such holder in the ordinary course of business of such holder, (ii) such holder is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, (iii) except as otherwise disclosed in writing, such holder is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, and (iv) such holder 66 72 acknowledges and agrees that any person participating in the Exchange Offer with the intention or for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Commission set forth in the no-action letters that are discussed under "Resale of the Exchange Notes." In addition, by accepting the Exchange Offer, such holder will (i) represent and warrant that, if such holder is a Participating Broker-Dealer, such Participating Broker-Dealer acquired the Old Notes for its own account as a result of market-making activities or other trading activities and has not entered into any arrangement or understanding with the Company or any "affiliate" of the Company (within the meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes to be received in the Exchange Offer, and (ii) acknowledges that, by receiving Exchange Notes for its own account in exchange for Old Notes, where such Old Notes were acquired as a result of market-making activities or other trading activities, such Participating Broker-Dealer will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. The tender by a holder and the acceptance thereof by the Company will constitute agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included with the Letter of Transmittal. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a recognized participant in the Securities Transfer Agent Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each a "Medallion Signature Guarantor"), unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of a member firm of a registered national securities exchange, a member of the NASD or a commercial bank or trust company having an office or correspondent in the United States (each of the foregoing being an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Old Notes with the signature thereon guaranteed by a Medallion Signature Guarantor. If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, offices of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Old Notes at the Book-Entry Transfer Facility for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution 67 73 that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Old Notes by causing such Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account with respect to the Old Notes in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of the Old Notes may be effected through book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee (or, in the case of book-entry transfer, an Agent's Message in lieu thereof) and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, the Letter of Transmittal (or, in the case of book-entry transfer, an Agent's Message) or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer (including delivery of an Agent's Message), prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution (i) an Agent's Message with respect to guaranteed delivery that is accepted by the Company, or (ii) a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Old Notes (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility), and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal or facsimile thereof (or, in the case of book-entry transfer, an Agent's Message), as well as the certificate(s) representing all tendered Old Notes in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility), and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. 68 74 Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Notes in the Exchange Offer, a letter or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number(s) and principal amount of such Old Notes, or, in the case of Old Notes transferred by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited), (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange Exchange Notes for, any Old Notes, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Old Notes, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries; (b) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (c) any governmental approval has not been obtained, which approval the Company shall, in its sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its sole discretion that any of the conditions are not satisfied, the Company may (i) refuse to accept any Old Notes and return all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Old Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Old Notes which have not been withdrawn. 69 75 EXCHANGE AGENT State Street Bank and Trust Company has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: STATE STREET BANK AND TRUST COMPANY By Mail: Overnight Courier: State Street Bank and Trust Company State Street Bank and Trust P.O. Box 778 Company Boston, Massachusetts 02102 Two International Place Attention: Corporate Trust Department Boston, Massachusetts 02110 Kellie Mullen Attention: Corporate Trust To Confirm by Telephone Department or for Information Call: Kellie Mullen (617) 664-5587 By Hand: in New York State Street Bank and Trust Company, N.A. 61 Broadway, 15th Floor By Hand: in Boston Corporate Trust Window State Street Bank and Trust New York, New York 10006 Company Two International Plaza Fourth Floor, Corporate Trust Boston, Massachusetts 02110
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telecopy, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. ACCOUNTING TREATMENT The Exchange Notes will be recorded at the same carrying value as the Old Notes, which is the original principal amount, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. Certain expenses of the Exchange Offer will be amortized over the term of the Exchange Notes. CONSEQUENCES OF FAILURE TO EXCHANGE The Old Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Notes may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person 70 76 inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel reasonably acceptable to the Company), (iii) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. RESALE OF THE EXCHANGE NOTES With respect to resales of Exchange Notes, based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that a holder or other person who receives Exchange Notes, whether or not such person is the holder (other than a person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in exchange for Old Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, will be allowed to resell the Exchange Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the Exchange Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires Exchange Notes in the Exchange Offer for the purpose of distributing or participating in a distribution of the Exchange Notes, such holder cannot rely on the position of the staff of the Commission enunciated in such no-action letters or any similar interpretive letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each Participating Broker-Dealer that receives Exchange Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a description of the procedures for such resales by Participating Broker-Dealers, see "Plan of Distribution." 71 77 DESCRIPTION OF NOTES GENERAL The Exchange Notes offered hereby will be issued as a separate series under the Indenture (the "Indenture") dated as of May 27, 1998 among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee"). The form and terms of the Exchange Notes are the same as the form and terms of the Old Notes (which they replace) except that (i) the Exchange Notes will bear a Series B designation, (ii) the Exchange Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (iii) holders of the Exchange Notes will not be entitled to certain rights of holders of Old Notes under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Old Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. The Old Notes issued in the Initial Offering and the Exchange Notes offered hereby are referred to collectively as the "Notes." The following summary of certain provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to all of the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part of the Indenture by reference to the Trust Indenture Act, as in effect on the date of the Indenture. The definitions of certain terms used in the following summary are set forth below under "--Certain Definitions." For purposes of this summary, the term "Company" refers only to Outboard Marine Corporation and not to any of its Subsidiaries. The Notes will be general unsecured obligations of the Company (except to the limited extent provided in connection with the applicable Interest Reserve Account) and will rank pari passu in right of payment with all current and future unsubordinated Indebtedness of the Company. However, the Company and the Subsidiary Guarantors are parties to the Credit Agreement and all borrowings under the Credit Agreement are secured by a first priority Lien on the accounts receivable, inventories and certain other assets of the Company and the Subsidiary Guarantors. The operations of the Company are conducted, in part, through its Subsidiaries and, therefore, the Company is, in part, dependent upon the cash flow of its Subsidiaries to meet its obligations, including its obligations under the Notes. As of the date of the Indenture, all of the Company's Subsidiaries will be Restricted Subsidiaries. However, under certain circumstances, the Company will be able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to the restrictive covenants set forth in the Indenture. The Company's obligations under the Notes will be jointly and severally guaranteed (the "Subsidiary Guarantees") by each of the Company's Significant Subsidiaries, other than any Foreign Subsidiaries (each such Person, a "Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors"). The Subsidiary Guarantees will be senior unsecured obligations of the Subsidiary Guarantors (except to the limited extent provided in connection with the applicable Interest Reserve Account) and will rank pari passu in right of payment with all current and future unsubordinated Indebtedness of the Subsidiary Guarantors and senior to all subordinated Indebtedness of the Subsidiary Guarantors. However, the Notes will be effectively subordinated to all secured Indebtedness of the Subsidiary Guarantors, including Indebtedness under the Credit Agreement, and all Indebtedness and other liabilities and commitments (including trade payables and lease obligations) of each Subsidiary of the Company that is not a Subsidiary Guarantor (the "Non-Guarantor Subsidiaries"). Any right of the Company to receive assets of any such Non-Guarantor Subsidiary upon the latter's liquidation or reorganization (and the consequent right of the Holders of the Notes to participate in those assets) will be effectively subordinated to the claims of the creditors of such Non-Guarantor Subsidiary. For the twelve months ended September 30, 1997 and the six months ended March 31, 1998, the combined revenues of the Company and the Subsidiary Guarantors represented approximately 78% and 79%, respectively, of the Company's total revenues and for the same periods the combined total assets of the Company and the Subsidiary Guarantors represented approximately 84% and 83%, respectively, of the Company's 72 78 consolidated total assets. At March 31, 1998, pro forma for the Initial Offering and the application of the net proceeds therefrom, the aggregate principal amount of secured Indebtedness of the Company and the Subsidiary Guarantors would have been $83.8 million and the Indebtedness and other obligations of the Company's Non-Guarantor Subsidiaries, which would have effectively ranked senior to the Notes, would have been approximately $24.5 million. The Indenture permits the Company and its Restricted Subsidiaries to incur additional Indebtedness, including secured Indebtedness, subject to certain limitations. See "Risk Factors--Ranking." PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $160.0 million and will mature on June 1, 2008. Interest on the Notes will accrue at the rate of 10 3/4% per annum and will be payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 1998, to Holders of record on the immediately preceding May 15 and November 15, respectively. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal, premium, if any, and interest and Liquidated Damages on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages with respect to Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. INTEREST RESERVE ACCOUNTS The Trustee has, pursuant to the Depositary Agreement, appointed State Street Bank and Trust Company (the "Depositary Agent") as the Depositary Agent and securities intermediary with respect to the Interest Reserve Accounts (as defined), in which approximately $28.6 million of cash, including approximately $4.1 million of the net proceeds realized from the sale of the Notes and approximately $24.5 million of available cash was deposited on the Issue Date. The actual amount of funds deposited equaled one year of Projected Senior Debt Interest Expense (as defined) on all Senior Debt (as defined) outstanding on the Issue Date (the "Required Amount"). Pursuant to the terms of that certain Depositary Agreement among the Company, the Trustee, the Administrative Agent under the Credit Agreement, and the Depositary Agent (the "Depositary Agreement"), the Depositary Agent will hold, invest and disburse the amounts on deposit from time to time in the Interest Reserve Accounts (the "Interest Reserve Funds") in accordance with the Depositary Agreement and the Company shall have no right of withdrawal under the Interest Reserve Accounts except under circumstances established in the Depositary Agreement. The Accounts The following accounts (each an "Interest Reserve Account" and collectively, the "Interest Reserve Accounts") have been established and created with the Depositary Agent: (i) Notes Interest Account; (ii) Other Senior Debt Interest Account; and (iii) Distribution Account. The Notes Interest Account is pledged to the Trustee as security for the benefit of the Trustee and the holders of the Notes. The Other Senior Debt Interest Account and the Distribution Account are pledged to the Administrative Agent as security for the benefit of the Administrative Agent and the lenders under the Credit Agreement. All amounts deposited with the Depositary Agent, at the written request and direction of 73 79 the Company, will be invested by the Depositary Agent in U.S. Government Securities. The Required Amount was deposited on the Issue Date into the Notes Interest Account in an amount equal to that portion of one year of Projected Senior Debt Interest Expense attributable to the Notes and into the Other Senior Debt Interest Account in an amount equal to one year of Projected Senior Debt Interest Expense attributable to all other Senior Debt. Disbursements from Interest Reserve Accounts In the event that the Company's Excess Available Cash for any given fiscal quarter ending after the Issue Date is less than the Company's Projected Senior Debt Interest Expense for the next fiscal quarter (as certified by the Company or its duly authorized agent for such purposes), the Depositary Agent shall be authorized, at the request of the Company, to disburse funds from the applicable Interest Reserve Account, as set forth in a certificate from the Company (a "Certificate of Authorization") requesting that funds be disbursed, for the payment of interest on the Notes or any other Senior Debt, as applicable; provided that the aggregate amount disbursed in any fiscal quarter (including the amount of all Deemed Payments made in such fiscal quarter, but excluding the actual disbursement of any Deemed Payments) does not exceed the difference between the Excess Available Cash for the prior fiscal quarter and the Company's actual Fixed Charges with respect to Senior Debt paid in the specified fiscal quarter. The Depositary Agent shall disburse funds from the applicable Interest Reserve Account, in accordance with the Certificate of Authorization, on any date on which interest is payable on Senior Debt; provided, however, that an instruction to pay interest expense on any particular Senior Debt shall include (and be deemed to constitute) a request to disburse (from the applicable Interest Reserve Account) all accrued but unpaid interest on all other outstanding Senior Debt (which payments (the "Deemed Payments") shall be held in a sub-account of the applicable Interest Reserve Account and shall be paid by the Depositary Agent on the next date on which interest becomes due and payable with respect to any such other Senior Debt, including the Notes). Additions to Interest Reserve Accounts In the event that (i) the Company's Excess Available Cash for any given fiscal quarter is greater than its Projected Senior Debt Interest Expense for the next fiscal quarter (the amount of such excess, the "Excess Cash") and (ii) either (a) the Notes Required Amount exceeds the difference between (x) the amount of funds on deposit in the Notes Interest Account and (y) the amount of all Deemed Payments with respect to the Notes which have not yet been distributed, or (b) the Other Senior Debt Required Amount exceeds the difference between (x) the amount of funds on deposit in the Other Senior Debt Interest Account and (y) the amount of all Deemed Payments with respect to the other Senior Debt which have not yet been distributed, then the Company shall deposit into the applicable Interest Reserve Account, an amount equal to such excess; provided that if the Excess Cash is less than the amount of such required deposits, then the amount of Excess Cash shall be deposited ratably into the Notes Interest Account and the Other Senior Debt Interest Account (based on the amount of their respective required deposits). Interest Income In the event that either Interest Reserve Account is fully funded to the applicable Required Amount plus applicable Deemed Payments, if any, as of the end of any fiscal quarter, the Depositary Agent shall distribute any amounts in excess of the applicable Required Amount plus applicable Deemed Payments, if any, to the Distribution Account; provided that the Company's Excess Available Cash for such quarter exceeds the Projected Senior Debt Interest Expense for the following fiscal quarter. So long as no Default or Event of Default shall have occurred and be continuing, amounts distributed to the Distribution Account shall be made available to the Company for general corporate purposes. Termination The Company is required to maintain the Interest Reserve Accounts until the earlier of (i) the later of (x) three years from the Issue Date and (y) such time as the Company's Fixed Charge Coverage Ratio for the four consecutive fiscal quarter periods ending as of the last day of the most recent fiscal quarter is greater 74 80 than 2.5 to 1.0, and (ii) the date upon which all obligations with respect to the Notes have been indefeasibly paid in full. At such time, after notice to the Depositary Agent, the Interest Reserve Funds shall be placed in the Distribution Account and made available to the Company for general corporate purposes. Upon delivery of such notice to the Depositary Agent, the Trustee and the Administrative Agent, the Depositary Agreement shall automatically terminate and, except as expressly provided therein, be of no further force and effect. Remedies The Depositary Agreement provides that, upon receipt of notice of an event of default, the Depositary Agent shall cease making further distributions and the Trustee may foreclose on the Notes Interest Account and/or the Administrative Agent may foreclose on the Other Senior Debt Interest Account, as applicable, and the Trustee and the Administrative Agent may exercise other rights and remedies, upon the occurrence of any Default or Event of Default, after the expiration of any applicable cure period under the Indenture (with respect to the Notes Interest Account) or any default or event of default, after the expiration of any applicable cure period under the Credit Agreement (with respect to the Other Senior Debt Interest Account and the Distribution Account). The ability of the holders of Notes to realize upon the Interest Reserve Funds may be subject to certain bankruptcy law limitations in the event of the bankruptcy of the Company. See "Risk Factors--Bankruptcy Risk Related to Interest Reserve Accounts." SUBSIDIARY GUARANTEES Each of the Company's Significant Subsidiaries (other than any Foreign Subsidiary, as designated by the Company) as of the Issue Date is a Subsidiary Guarantor under the Indenture. Each Subsidiary Guarantor unconditionally guarantees on a senior basis, jointly and severally, the full and prompt performance of the Company's obligations under the Indenture and the Notes, including the payment of principal and interest on the Notes. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee is limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. The Indenture provides that no Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with such Subsidiary Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and the Indenture and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. The Indenture provides that in the event of (i) the designation of any Subsidiary Guarantor as an Unrestricted Subsidiary or (ii) a sale or other disposition of all or substantially all of the properties or assets of any Subsidiary Guarantor to a third party or an Unrestricted Subsidiary, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Subsidiary Guarantor, in either case, in a transaction or manner that does not violate any of the covenants in the Indenture, then such Subsidiary Guarantor (in the event of such a designation or a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Subsidiary Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the properties or assets of such Subsidiary Guarantor) will be released from and relieved of any obligations under its Subsidiary Guarantee, provided that any Net Proceeds of such sale or other disposition are applied in accordance with the covenant described under the caption "--Repurchase at the Option of Holders--Asset Sales;" and provided, further, however, that any such termination shall occur only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security 75 81 interests that secure, any other Indebtedness of the Company or its Restricted Subsidiaries shall also terminate upon such release, sale or disposition. The Indenture requires the Company to cause certain other Restricted Subsidiaries to become Subsidiary Guarantors under certain circumstances. See "--Certain Covenants--Additional Subsidiary Guarantees." OPTIONAL REDEMPTION The Notes will not be redeemable at the Company's option prior to June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2003.............................................. 105.375% 2004.............................................. 103.583% 2005.............................................. 101.792% 2006 and thereafter............................... 100.000%
Notwithstanding the foregoing, prior to June 1, 2001, the Company may on any one or more occasions redeem up to an aggregate of 35% of the original aggregate principal amount of Notes at a redemption price of 110.750% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes originally issued remain outstanding immediately after the occurrence of such redemption; and provided, further that any such redemption shall occur within 60 days of the date of the closing of any such offering. The Indenture does not restrict the ability of the Company to separately make open-market purchases or other privately negotiated purchases of Notes from time to time. SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. MANDATORY REDEMPTION Except as set forth below under "--Repurchase at the Option of Holders," the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. REPURCHASE AT THE OPTION OF HOLDERS Change of Control Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any 76 82 Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Company's ability to repurchase Notes pursuant to a Change of Control Offer may be limited by a number of factors. The Credit Agreement provides that certain change of control events with respect to the Company would constitute a default thereunder permitting the lending parties thereto to accelerate the Indebtedness thereunder. In addition, certain events that may obligate the Company to offer to repay all outstanding obligations under the Credit Agreement may not constitute a Change of Control under the Indenture. However, the Company may not have sufficient resources to repay all outstanding Indebtedness under the Credit Agreement and to repurchase tendered Notes. Furthermore, any future credit agreements or other agreements relating to senior Indebtedness to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is directly or indirectly prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the purchase of Notes would remain prohibited. The failure by the Company to purchase tendered Notes would constitute a breach of the Indenture which would, in turn, constitute a default under the Credit Agreement and could lead to the acceleration of the indebtedness thereunder. In any such event, the security granted in respect of the Credit Agreement could result in the Holders of the Notes receiving less ratably than the lenders under the Credit Agreement. See "Risk Factors--Change of Control." In addition, the terms of the Convertible Debentures include provisions similar to those contained in the Notes which require the Company to make an offer to repurchase all or any part of such securities under circumstances constituting a Change of Control. However, the repurchase of any tendered Debentures may constitute a default under the terms of the Credit Agreement and the Indenture. The failure to repurchase any tendered Convertible Debentures would also constitute a default under the Convertible Debentures Indenture (as defined). See "Description of Certain Other Indebtedness--Subordinated Debt Securities--7% Convertible Debentures due 2002." The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. 77 83 The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Company and its Restricted Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain. Asset Sales The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed or satisfied by the transferee of any such assets pursuant to a customary novation or other agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any marketable securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option, (a) to purchase, redeem, repay or prepay Indebtedness under the Credit Agreement or other secured Indebtedness of the Company or a Restricted Subsidiary (and, in the case of any such Indebtedness that was borrowed under a revolving credit line, to correspondingly reduce commitments with respect thereto), (b) to cash collateralize letters of credit to the extent such letters of credit have not been drawn upon or returned undrawn; provided, however, that any such cash collateral released to the Company upon the expiration of such letters of credit shall again be deemed to be Net Proceeds (and, in the case of any such letters of credit established under a revolving credit line to correspondingly reduce commitments with respect thereto), or (c) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other long-term assets that are used or useful, in each case, in a Permitted Business; provided, however, that if the Company or any Restricted Subsidiary has entered into a definitive agreement with respect to any such acquisition or capital expenditure within such 365 day period, it may defer the application of such Net Proceeds to effect such acquisition or capital expenditure for up to an additional 90 days or the fifth Business Day following the termination of any such definitive agreement, whichever occurs first. Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any general corporate purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. 78 84 CERTAIN COVENANTS Restricted Payments The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less than the sum, without duplication, of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment (including any Investment in an Unrestricted Subsidiary) that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (iv) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the lesser of (A) the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation or (B) such fair market value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary. The foregoing provisions do not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition 79 85 shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (v) Investments in any Person (other than the Company or a Wholly-Owned Restricted Subsidiary or any Unrestricted Subsidiary) engaged in a Permitted Business having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (v) that are at that time outstanding not to exceed $25 million; (vi) the repurchase of Convertible Debentures in an amount not to exceed $7.1 million, plus any accrued and unpaid interest thereon, in connection with any offer required to be made to the holders thereof following a Change of Control or similar event; provided, that the Company has previously paid all amounts required to be paid in connection with any Change of Control Offer for the Notes; (vii) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company held by any management employee of the Company (or any Restricted Subsidiary) pursuant to any management equity subscription agreement or stock option, phantom stock or other equity incentive plan; provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed the sum of (a) $2 million in each fiscal year (provided that any unused amounts may be carried over to any subsequent fiscal year, subject to a maximum amount of $4 million in any fiscal year) plus (b) the amount of net cash proceeds received by the Company from the Sale of Equity Interests (other than Disqualified Stock) to management employees of the Company or any Restricted Subsidiary; provided that any such net cash proceeds shall be excluded from any computation under clause (c)(ii) above; (viii) loans to employees of the Company or any Restricted Subsidiary to purchase Equity Interests issued by the Company in an amount not to exceed $2 million at any time outstanding; (ix) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (ix) that are at that time outstanding, not to exceed $5 million; (x) the payment of consulting or similar fees to Holdings in an aggregate amount not to exceed $250,000 in any fiscal year; provided, that the requirement set forth in clause (b) of the preceding paragraph is satisfied with respect to any such payment; or (xi) other Restricted Payments in an aggregate amount not to exceed $5 million; provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (iii) through (xi) above, no Default or Event of Default shall have occurred and be continuing or would occur as consequence thereof. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default; provided that in no event shall the business currently operated by any Subsidiary Guarantor be transferred to or held by an Unrestricted Subsidiary. In the event of any such designation, all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Restricted Investments in an amount equal to the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such redesignation would not cause a Default. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $20 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "--Restricted Payments" were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. 80 86 Incurrence of Indebtedness and Issuance of Preferred Stock The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company or any Subsidiary Guarantor (or, to the extent specified in clause (viii) of the definition of Permitted Debt, any Foreign Subsidiary) may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least (a) 2.0 to 1.0, if such date is prior to December 31, 1999, (b) 2.25 to 1.0, if such date is on or after December 31, 1999 and prior to June 30, 2001 and (c) 2.5 to 1.0 thereafter, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be and the proceeds thereof applied, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of revolving credit Indebtedness and letters of credit pursuant to the Credit Agreement (including Indebtedness under any Receivables Facility); provided that the aggregate principal amount of all such Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder) outstanding under the Credit Agreement after giving effect to such incurrence does not exceed the greater of (a) $150.0 million or (b) the Borrowing Base less, in either case, the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Subsidiaries to permanently reduce the commitments for revolving credit Indebtedness under the Credit Agreement pursuant to the covenant described above under the caption "--Asset Sales"; (ii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company and the Subsidiary Guarantors of the Indebtedness represented by the Notes and the Subsidiary Guarantees issued pursuant to the Indenture; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or Purchase Money Obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment (including tooling) used in the business of the Company or such Restricted Subsidiary or other expenditures which would be included within clause (a) of the definition of "Consolidated Capital Expenditures" (whether through the direct purchase of assets or the Capital Stock of any Person owning such Assets), in an aggregate principal (or accreted value, as applicable) amount at any time outstanding, not to exceed $25 million; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace any Indebtedness (other than Indebtedness incurred pursuant to clauses (i), (vi), (vii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv) or (xvi) hereof) that was permitted by the Indenture to be incurred; (vi) Indebtedness of the Company and its Restricted Subsidiaries in connection with performance, surety, statutory, appeal or similar bonds in the ordinary course of business; (vii) the incurrence of intercompany Indebtedness between or among the Company and any Wholly-Owned Restricted Subsidiary; provided, however, that (a) if the Company or a Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and the Subsidiary Guarantees, and 81 87 (b) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly-Owned Restricted Subsidiary and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly-Owned Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be that was not permitted by this clause; (viii) the incurrence by any Foreign Subsidiary of Indebtedness under Foreign Credit Facilities; provided that the aggregate principal amount of all Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of Foreign Subsidiaries thereunder) outstanding under all Foreign Credit Facilities after giving effect to such incurrence does not exceed $5 million or such greater amount, not to exceed $30 million outstanding at any time, as may be incurred by any Foreign Subsidiary pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph above; (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations; (x) the guarantee by the Company or any of the Subsidiary Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; (xi) Indebtedness of the Company and its Restricted Subsidiaries from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts, which will not be, and will not be deemed to be, inadvertent) drawn against any insufficient funds in the ordinary course of business; (xii) the incurrence by the Company or any Restricted Subsidiary of Indebtedness pursuant to the issuance of promissory notes in an amount not to exceed $2 million at any time outstanding in order to repurchase or otherwise acquire or retire for value Equity Interests of the Company held by any employee of the Company as permitted by clause (vii) of the second paragraph of the covenant described under the caption "Restricted Payment"; provided, however, that any such Indebtedness incurred pursuant to this clause (xii) shall be expressly subordinated in right of payment to the Notes; (xiii) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including without limitation to letters of credit in respect to workers' compensation claims or self-insurance (and including letters of credit issued with respect to the Designated Obligation), or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (xiv) Indebtedness arising from the agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment or purchase price of similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, that the maximum aggregate liability of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company or a Restricted Subsidiary in connection with such disposition; (xv) guarantees by the Company or any of its Restricted Subsidiaries of Indebtedness of Persons who are not Affiliates of the Company incurred in the ordinary course of business in an aggregate principal amount not to exceed $15 million at any time outstanding; and (xvi) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness, in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $15 million. 82 88 The Indenture also provides that the Company will not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. For purposes of determining compliance with this covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xvi) above as of the date of incurrence thereof, or is entitled to be incurred pursuant to the first paragraph of this covenant as of the date of incurrence thereof, the Company shall, in its sole discretion, classify such item of Indebtedness on the date of its incurrence in any manner that complies with this covenant. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued. Liens The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind upon any of their property or assets, now owned or hereafter acquired, except Permitted Liens. Sale and Leaseback Transactions The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company may enter into a sale and leaseback transaction if (i) the Company could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption "--Certain Covenants--Liens," (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (in the case of transactions having a fair market value in excess of $5.0 million, as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales." Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness or other agreements as in effect on the date of the Indenture, (b) the Credit Agreement as in effect as of the date of the Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restric- 83 89 tive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the date of the Indenture, (c) the Indenture and the Notes, (d) applicable law, rule, regulation or order, (e) any agreement or other instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (f) customary non-assignment provisions in licenses, leases or other contracts or agreements entered into in the ordinary course of business and consistent with past practices, (g) Purchase Money Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, (i) contracts for the sale of assets, including without limitation, customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary that is otherwise permitted by the Indenture; (j) Indebtedness secured by Liens otherwise permitted to be incurred pursuant to the provisions of the covenant described above under the caption "--Liens" that limits the right of the debtor to dispose of the assets securing such Indebtedness; (k) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (l) agreements relating to the financing of the acquisition of real or tangible personal property acquired after the date of the Indenture; provided, that such encumbrance or restriction relates only to the property which is acquired and in the case of any encumbrance or restriction that constitutes a Lien, such Lien constitutes a Purchase Money Lien. Merger, Consolidation, or Sale of Assets The Indenture provides that the Company may not, directly or indirectly, consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; (iv) except in the case of a merger of the Company with or into a Wholly-Owned Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, immediately after such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock;" and (v) each Subsidiary Guarantor, unless it is the other party to the transaction described above, shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply to the Company's or the surviving Person's obligations under the Indenture and the Notes. Transactions with Affiliates The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or 84 90 purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction") unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that the following shall not be deemed to be Affiliate Transactions: (A) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, including reasonable loans to officers contemplated by such employment agreements, (B) transactions between or among the Company and/or its Restricted Subsidiaries, (C) Permitted Investments or Restricted Payments that are permitted by the provisions of the Indenture described above under the caption "--Certain Covenants--Restricted Payments," (D) customary compensation paid to, and indemnity or insurance provided on behalf of, directors and officers of the Company or any of its Restricted Subsidiaries as determined in good faith by the Company's Board of Directors, including customary programs related to the testing and evaluation of the Company's products; (E) transactions with customers, suppliers, joint venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) which are at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and (F) payments under any agreement in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) and any replacement agreement thereto so long as any such amendment or replacement agreement is no less favorable to the Company and its Restricted Subsidiaries in any material respect than the original agreement as in effect on the Issue Date. Business Activities The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. Additional Subsidiary Guarantees The Indenture provides that if the Company or any of its Restricted Subsidiaries shall after the date of the Indenture (i) transfer or cause to be transferred in one or a series of transactions (whether or not related), any assets, business, divisions, real property or equipment having an aggregate fair market value (as determined in good faith by the Board of Directors) in excess of $1.0 million to any Restricted Subsidiary that is a Significant Subsidiary (other than a Foreign Subsidiary) that is not a Subsidiary Guarantor; (ii) acquire or create another Restricted Subsidiary that is a Significant Subsidiary (other than a Foreign Subsidiary); or (iii) cause any Restricted Subsidiary of the Company, that is not a Subsidiary Guarantor, to guarantee any Indebtedness of the Company other than the Notes, or pledge any of its assets to secure any Indebtedness of the Company other than the Notes, then, in each case, the Company will cause such Restricted Subsidiary to (A) execute and deliver to the Trustee a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally Guarantee all of the Company's obligations under the Notes on the terms set forth in such supplemental indenture and (B) deliver to the Trustee an opinion of counsel reasonably satisfactory to the Trustee that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary. Notwithstanding the foregoing, if such transferee or acquired Subsidiary has been properly designated as an Unrestricted Subsidiary in accordance with the Indenture, then for so long as it continues to constitute an Unrestricted Subsidiary, that 85 91 transferee or acquired Subsidiary shall not be required to execute a Subsidiary Guarantee or deliver to the Trustee an opinion of counsel in accordance with the terms of the Indenture. Reports The Indenture provides that, whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case within 15 days after the time periods specified for such filings in the Commission's rules and regulations. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, at all times that the Commission does not accept the filings provided for in the preceding sentence, the Company and the Subsidiary Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company or any of its Subsidiaries to comply with the provisions described under the captions "--Repurchase at the Option of the Holders--Change of Control" or "Certain Covenants Merger, Consolidation or Sale of Assets"; (iv) failure by the Company or any of its Subsidiaries to comply with the provisions described under the caption "--Repurchase at the Option of the Holders--Asset Sales," and "--Certain Covenants--Restricted Payments," "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," which failure continues for 30 days; (v) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vii) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries; or (ix) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person 86 92 acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to June 1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to June 1, 2003, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option, and the Subsidiary Guarantors may, at the option of their respective Boards of Directors, and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes and all obligations of the Subsidiary Guarantors under the Subsidiary Guarantees ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are 87 93 described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "--Events of Default and Remedies" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit and the granting of Liens to secure such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (viii) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. 88 94 AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture, Depositary Agreement and Registration Rights Agreement without charge by writing to Outboard Marine Corporation, 100 Sea Horse Drive, Waukegan, Illinois 60085, Attention: General Counsel. 89 95 GOVERNING LAW The Indenture provides that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of laws to the extent that the application if the law of another jurisdiction would be required thereby. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Adjusted Senior Debt Amount" shall mean, on any date, the aggregate principal amount (or accreted value) of all outstanding Senior Debt of the Company and its Restricted Subsidiaries; provided, however, that the amount of outstanding Indebtedness under the Credit Agreement and any other revolving credit facilities shall be deemed to be the amount specified by the Chief Financial Officer of the Company as the Company's good faith estimate of its average outstanding daily balances under all such revolving credit facilities during the specified Forecast Period (which average daily balances shall in no event exceed 150% of its average daily balances under all revolving credit facilities during the corresponding fiscal quarter in the prior fiscal year). "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Asset Sale" means (i) the sale, lease, conveyance, transfer or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) of the Company or any Restricted Subsidiaries other than sales (or resales) of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "--Repurchase at Option of Holders--Change of Control" and/or the provisions described above under the caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2.0 million or (b) for Net Proceeds in excess of $2.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary; (iii) a Restricted Payment that is permitted by the covenant described above under the caption "--Certain Covenants--Restricted Payments"; (iv) any sale of Equity Interests of the Company; (v) any surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind, in each case in the ordinary course of business; (vi) any grant of any license of patents, trademarks, trade names, registrations therefor or similar intellectual property, in the ordinary course of business; (vii) any sale of the Company's facility in Juarez, Mexico in a transaction which (a) satisfies the requirements of clauses (i) and (ii) of the first paragraph under the caption "-- Repurchase at the Option of Holders -- Asset Sales" (but substituting "50%" in lieu of "75%" in said clause (ii)) and 90 96 (b) is consummated no later than 18 months following the Issue Date pursuant to a definitive agreement signed no later than one year subsequent to the Issue Date; provided, that any cash Net Proceeds received therefrom will be deemed to be Net Proceeds from an Asset Sale for all purposes under the Indenture; (viii) the sale and leaseback of any assets within 90 days of the acquisition of such assets; (ix) any disposition of Cash Equivalents in the ordinary course of business; (x) sales of accounts receivable, or participation, therein, in connection with any Receivables Facility; and (xi) sales of damaged, fully-depreciated or obsolete equipment or assets that, in the Company's reasonable judgment, are no longer used or useful in the business of the Company or its Restricted Subsidiaries. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Borrowing Base" means, as of any date, an amount equal to the sum of (a) 75% of the face amount of all accounts receivable owned by the Company and its Restricted Subsidiaries as of such date that are not more than 60 days past due, and (b) 50% of the book value of all inventory owned by the Company and its Subsidiaries as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding twelve months and overnight bank deposits, in each case with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition, and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (v) of this definition. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder or a Related Party of a Permitted Holder (as defined below), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Permitted Holders and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the 91 97 beneficial ownership of any particular "person," such "person" shall be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company or Holdings (measured by voting power rather than number of shares), (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors or (v) the Company or Holdings consolidates with, or merges with or into, any Person, or sells, assigns, conveys, transfers, leases or otherwise disposes of substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company or Holdings, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or Holdings is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company or Holdings outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance). "Consolidated Capital Expenditures" means, for any period, an amount equal to (i) the sum of (a) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of the Company and its Restricted Subsidiaries) by the Company and its Restricted Subsidiaries during that period that, in conformity with GAAP, are included in "property, plant or equipment" or comparable items reflected in the consolidated balance sheets of the Company and its Subsidiaries plus (b) to the extent not covered by clause (i)(a) of this definition, the aggregate of all expenditures by the Company and its Restricted Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets (other than current assets consisting of inventory or accounts receivable) of any Person, or the stock or other evidence of beneficial ownership of any Person that, as a result of such acquisition, becomes a Restricted Subsidiary of the Company minus (ii) the sum of (a) the proceeds of Indebtedness permitted under clause (iv) of the definition of Permitted Indebtedness, (b) an amount equal to the proceeds received by the Company or any of its Subsidiaries from a sale-leaseback transaction permitted under the covenant in the Indenture entitled "Sale and Leaseback Transactions" so long as such transaction occurs within 180 days of the acquisition of the related property or equipment and to the extent prior expenditures, up to an equivalent amount for the asset so sold and leased back, constituted Consolidated Capital Expenditures (as defined above) in such period or in any prior period, and (c) expenditures in an amount not to exceed the proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments received from third parties, so long as such expenditures were made for purposes of replacing or repairing the assets in respect of which such proceeds, awards or payments were received and so long as such expenditures are made not later than 12 months of the occurrence of the damage to or loss of the assets being replaced or repaired. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, in each case to the extent deducted in computing Consolidated Net Income (i) an amount equal to any extraordinary loss recorded in such period, plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), plus (v) any other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid expense that was paid in a prior period) of such Person and its Subsidiaries for such period, minus, to the extent included in the computation of Consolidated Net Income, any non-cash items increasing such Consolidated Net Income for such period in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision 92 98 for taxes based on the income or profits of, the interest expense of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of a Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly-Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Credit Agreement" means that certain Amended and Restated Loan and Security Agreement, dated as of January 6, 1998, by and among the Company and NationsBank of Texas, N.A., as amended, modified, increased, renewed, refunded, replaced or refinanced from time to time. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Designated Obligations" means the obligation of the Company with respect to certain "Rabbi Trust" arrangements in existence on the Issue Date in an aggregate amount not to exceed $14 million. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Distribution Account" means that certain account, to be maintained by the Depositary Agent pursuant to the terms of the Depositary Agreement, into which the Depositary Agent shall, under certain circumstances, distribute amounts in excess of the Required Amount (other than any Deemed Payments) in accordance with the terms of the Depositary Agreement. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means an offering of common stock (other than Disqualified Stock) of the Company pursuant to an effective registration statement filed with the Commission pursuant to the Securities Act, other than an offering pursuant to Form S-8 (or any successor thereto). 93 99 "Excess Available Cash" means for any fiscal quarter ending after the Issue Date (each a "Reference Period") an amount (not less than zero), determined as of the last day of such Reference Period, equal to (i) the sum (without duplication) of the amounts for such Reference Period of (a) the Consolidated Net Income of the Company and its Restricted Subsidiaries; plus (b) the amount of Net Proceeds of Asset Sales received by the Company or any Restricted Subsidiary during such Reference Period, to the extent not otherwise included in Consolidated Net Income; plus (c) the amount of cash proceeds (net of underwriting discounts, placement fees and similar commissions and reasonable costs and expenses related thereto) received by the Company or any Restricted Subsidiary during such Reference Period from the issuance of Equity Interests or the incurrence of Indebtedness (other than any proceeds from the issuance of the Notes or borrowings under revolving credit facilities, including the Credit Agreement); plus, (d) consolidated depreciation and amortization expense for the Company and its Restricted Subsidiaries for such Reference Period; plus (e) the net decrease, if any, in working capital for the Company and its Restricted Subsidiaries during such Reference Period; plus (f) to the extent not included in Consolidated Net Income, the amount of any cash extraordinary gains recognized by the Company or any Restricted Subsidiary; plus (g) any other non-cash expenses reducing the Consolidated Net Income of the Company and its Restricted Subsidiaries for such Reference Period (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid expense that was paid in a prior period); minus (ii) the sum (without duplication) of the amounts for such Reference Period of (a) the aggregate amount of Consolidated Capital Expenditures paid for in cash by the Company or any Restricted Subsidiary during such Reference Period; plus (b) cash payments made to permanently repay or retire the principal amount of any Indebtedness of the Company or any Restricted Subsidiary (excluding the repayment of any revolving credit facility unless a corresponding amount of the related commitments are permanently reduced); plus (c) the net increase (if any) in deferred tax assets and the net decrease (if any) in deferred tax liabilities of the Company and its Restricted Subsidiaries during the Reference Period; plus (d) the net increase, if any, in working capital for the Company and its Restricted Subsidiaries during such Reference Period; plus (e) cash payments in respect of restructuring reserves and other long-term accrued liabilities; plus (f) other non-cash items increasing Consolidated Net Income for the Company and its Restricted Subsidiaries during such Reference Period; all of the foregoing as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP. "Existing Indebtedness" means up to $104.1 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than letters of credit and Indebtedness under the Credit Agreement) in existence on the Issue Date, until such amounts are repaid. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of 94 100 such Person and its Restricted Subsidiaries for such period. In the event that the referent Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred and the proceeds thereof applied at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "Foreign Credit Facilities" means, with respect to the Company's Foreign Subsidiaries, one or more debt facilities or other debt securities or commercial paper facilities with banks or other institutional lenders providing for overdraft, revolving credit loans, terms loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit to which one or more Foreign Subsidiary is a party, in each case, as amended, restated, modified, increased, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Foreign Subsidiary" means any Subsidiary of the Company, more than 80% of the sales, earnings or assets (determined on a consolidated basis) of which are located or derived from operations outside the United States. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate or currency swap agreements, cap agreements and collar agreements and (ii) other agreements or arrangements (including foreign exchange or commodity hedge, exchange, purchase or similar agreements) designed to protect such Person against fluctuations in interest rates, value of assets owned, financed or sold, value of raw materials purchased, or of liabilities incurred or assumed or of pre-funding arrangements, or against fluctuations in foreign currency exchange rates or commodity prices, in any case, in the ordinary course of business of such Person and not for speculative purposes. "Holdings" means Greenmarine Holding, L.L.C., a Delaware limited liability company. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing 95 101 Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person; provided, however, that Indebtedness shall not include the obligations of the Company in respect of "floor plan financing" or similar arrangements entered into in the ordinary course of business for the benefit of dealers in connection with the sale of the Company's products. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances (excluding commission, travel, relocation and similar advances to officers and employees made in the ordinary course of business) or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Issue Date" means the first date on which any Notes are issued under the Indenture. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gains or losses, together with any related provision for taxes on such gains or losses, realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the Credit Agreement), and any reserve for adjustment in respect of the sale price of, or warranties and indemnities made with respect to, such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or 96 102 (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing (including in any written agreement) that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes Interest Account" means that certain account, to be maintained by the Depositary Agent pursuant to the terms of the Depositary Agreement, into which an amount equal to that portion of one year of Projected Senior Debt Interest Expense attributable to the Notes was deposited on the Issue Date. "Notes Required Amount" means $17.2 million. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Other Senior Debt Interest Account" means that certain account, to be maintained by the Depositary Agent pursuant to the terms of the Depositary Agreement, into which an amount equal to that portion of one year of Projected Senior Debt Interest Expense attributable to all Senior Debt other than the Notes was deposited on the Issue Date. "Other Senior Debt Required Amount" means $11.4 million. "Permitted Business" means any of the businesses engaged in by the Company and its respective Restricted Subsidiaries on the date of the Indenture, and any similar, complementary or related business with respect to any such businesses, including, without limitation, any business related to the development or application of the Company's FICHT technology as described in this Prospectus. "Permitted Holders" means, collectively, (i) Holdings and its Affiliates, and their respective managers, members, employees and directors, (ii) Greenlake Holdings LLC and its Affiliates, and their respective managers, members and directors, (iii) Quasar Strategic Partners LDC and its Affiliates, and their respective managers, members, partners, employees and directors, (iv) Quantum Industrial Partners LDC and its Affiliates, and their respective managers, members, partners, employees and directors, (v) Quasar Industrial Fund N.V. and its Affiliates, and their respective managers, members, partners, employees and directors, (vi) Quantum Industrial Holdings Ltd. and its Affiliates, and their respective managers, members partners, employees and directors, and (vii) with respect to any natural persons described in the foregoing clauses (i) through (vi), (A) any spouse, lineal descendent (including by adoption and stepchildren), or sibling of such natural persons and (B) any trust, corporation, limited liability company or partnership, the beneficiaries, stockholders or partners of which consist entirely of such natural persons or the individuals described in subclause (A) above. "Permitted Investments" means (a) any Investment in the Company or in a Wholly-Owned Restricted Subsidiary of the Company that is engaged in a Permitted Business; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly-Owned Restricted Subsidiary of the Company that is engaged in a Permitted Business or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly-Owned Restricted Subsidiary of the Company that is engaged in a Permitted Business; (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) any Investment in residential real estate obtained in connection with employment or relocation arrangements entered into in the ordinary course of business; provided, that the aggregate amount of such Investments does not exceed $1.5 million at any time outstanding; (g) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owning to the Company or any Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or 97 103 similar arrangement upon the bankruptcy or insolvency of the Company's or any of its Subsidiaries' trade creditors or customers. "Permitted Liens" means (i) Liens on assets securing Indebtedness and other Obligations under the Credit Agreement, to the extent that the assets securing such Indebtedness are of the same general type of assets as those securing the Indebtedness and other Obligations under the Credit Agreement on the Issue Date (including any such assets of Foreign Subsidiaries); (ii) Liens in favor of the Company; (iii) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that such Liens were not incurred in contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens existing on the date of the Indenture; (vii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings and which are not being foreclosed, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of the second paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock," which Liens attach only to the assets acquired with such Indebtedness; (ix) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (x) Purchase Money Liens (including extensions and renewals thereof); (xi) Liens securing Indebtedness under Hedging Obligations; (xii) Liens securing obligations of the Company or any of its Restricted Subsidiaries under any "floor-plan" financing arrangement; (xiii) statutory Liens of landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made therefor; and (xiv) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Subsidiary. "Permitted Refinancing Indebtedness" means any Indebtedness (including prepayment fees and premiums) of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, or other business entity or government or agency 98 104 or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Projected Senior Debt Interest Expense" means with respect to any fiscal quarter of the Company commencing after the Issue Date (each a "Forecast Period"), (a) the pro forma Fixed Charges which will accrue during such Forecast Period on the Adjusted Senior Debt Amount outstanding on the last day of the immediately preceding fiscal quarter, whether or not any such Fixed Charges will be payable during such Forecast Period plus (b) all accrued and unpaid Fixed Charges with respect to Senior Debt, calculated as of the day immediately prior to the first day of such Forecast Period minus (c) the amount of all Deemed Payments with respect to Senior Debt which have not been distributed. "Purchase Money Obligations" of any Person means any obligations of such Person to any seller or any other Person incurred or assumed to finance the purchase, or the cost of construction of improvement, or real or personal property to be used in the business of such person or any of its Restricted Subsidiaries in an amount that is not more than 100% of the cost, or fair market value, as appropriate, of such property, and incurred within 180 days after the date of such acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business). "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Receivables Facility" means one or more receivables financing facilities, as amended from time to time, pursuant to which the Company and/or any of its Restricted Subsidiaries sells its accounts receivable to a Person that is not a Restricted Subsidiary. "Senior Debt" means, as of any date, the outstanding Indebtedness of the Company or any Restricted Subsidiary attributable to the Notes, borrowings (including letters of credit outstanding) under the Credit Agreement and any other Existing Indebtedness then outstanding which is not subordinated in right of payment to other Indebtedness of the Company or any Restricted Subsidiary. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly, owned by such Person (a "subsidiary"), by one or more subsidiaries of such Person or by such Person and one or more subsidiaries of such Person or (ii) a partnership in which such Person or a subsidiary of such Person is, at the date of determination, a general partner of such partnership, or (iii) any partnership, limited liability company or other Person in which such Person, a subsidiary of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or appoint or direct the election or appointment of the managing partner or member of such Person or, if applicable, a majority of the directors or other governing body of such Person. "Subsidiary Guarantors" means each of (i) the Company's direct or indirect Restricted Subsidiaries that are Significant Subsidiaries (other than Foreign Subsidiaries) on the date of the Indenture and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. 99 105 "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under the caption "Certain Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Government Securities" means securities (i) issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, or (ii) interests in money market mutual funds which invest solely in assets or securities of the type described in clause (i) above. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries of such Person and one or more Wholly-Owned Restricted Subsidiaries of such Person. 100 106 DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS CREDIT AGREEMENT The Company and its principal operating subsidiaries, OMC Aluminum Boat Group, Inc., OMC Fishing Boat Group, Inc., OMC Latin America/Caribbean, Inc., Recreational Boat Group Limited Partnership and OMC Recreational Boat Group, Inc. entered into an Amended and Restated Loan and Security Agreement, effective as of January 6, 1998 (the "Credit Agreement") with a syndicate of lenders, for which NationsBank Montgomery Securities LLC is syndication agent, and NationsBank of Texas, N.A. is administrative and collateral agent (the "Administrative Agent"). The Credit Agreement provides for a revolving credit facility of up to $150.0 million (the "Revolving Credit Facility") to finance working capital, with a $30.0 million sublimit for letters of credit. Availability of loans under the Credit Agreement will be limited to a maximum amount based on specific percentages of the Company's eligible receivables and eligible inventory. The maturity date for loans made under the Credit Agreement is December 31, 2000. In addition, loans under the Revolving Credit Facility must be repaid if at any time the outstanding principal amount thereof exceeds the borrowing base in effect at such time. Loans under the Revolving Credit Facility may be repaid and reborrowed. At the election of the Company, interest is payable on borrowings under the Credit Agreement at either a "Base Rate" or a "Euro-Dollar Rate" plus a margin of 0.50% and 2.00% respectively. On March 31, 1998, the weighted average interest rate on all borrowings outstanding under the Credit Agreement was 8.01%, excluding fees and usage charges. Indebtedness under the Credit Agreement is secured by the Company's existing and after-acquired accounts receivable, inventory, chattel paper, documents and instruments pertaining to collateral, deposit accounts, contract rights, patents, trademarks and general intangibles. In addition, OMC Aluminum Boat Group, Inc., OMC Fishing Boat Group, Inc., OMC Latin America/Caribbean, Inc. and Recreational Boat Group Limited Partnership and OMC Recreational Boat Group, Inc. have guaranteed the Company's obligations under the Credit Agreement. The Credit Agreement contains a number of negative covenants, including, among other things, covenants that limit the ability of the Company to: (i) create or incur additional indebtedness; (ii) merge, consolidate or sell all or a substantial portion of its assets; (iii) invest in other entities; (iv) guarantee the obligations of other persons; (v) make certain capital and tooling expenditures; (vi) engage in transactions with affiliates; or (vii) create and incur certain capital lease obligations. The Credit Agreement also contains a number of financial covenants, including those requiring the Company to satisfy specific levels of (i) consolidated tangible net worth; (ii) interest coverage ratios; and (iii) leverage ratios. On May 21, 1998, the Company entered into a First Amendment to Amended and Restated Loan and Security Agreement (the "Credit Agreement Amendment") with the lenders under the Credit Agreement, pursuant to which the Company's compliance with the consolidated tangible net worth covenant for the period ended June 30, 1998 was waived, and the Company's tangible net worth requirement for the period ended September 30, 1998 was amended. The Credit Agreement Amendment also included an amendment to the borrowing base to include therein eligible intellectual property, which, when added to eligible receivables and eligible inventory, increases availability under the Revolving Credit Facility, for any six month period selected by the Company, by $30.0 million through December 31, 1998, $20.0 million from January 1, 1999 through December 31, 1999, and $10.0 million from January 1, 2000 through December 31, 2000. In addition, pursuant to the Credit Agreement Amendment, the sublimit for the issuance of letters of credit was increased from $25.0 million to $30.0 million, and the lenders consented to certain other matters related to the Offering. The Company is required to pay to the lenders under the Credit Agreement an aggregate commitment fee as follows: (i) for each day from January 6, 1998 through the end of the fiscal quarter of the Company in which the lenders receive the Company's financial statements dated September 30, 1998, an amount equal to the product of (A) 0.375% multiplied by (B) the unused portion to the Revolving Credit Facility for such day; and (ii) thereafter through December 31, 2000, an amount equal to the product of (A) 0.375% per annum, to 101 107 the extent the Company's leverage ratio is greater than or equal to 4.0 to 1.0 (as determined by reference to the most recent financial statements of the Company delivered to the lenders), or 0.25% per annum, to the extent the Company's leverage ratio is less than 4.0 to 1.0 (as determined by reference to the most recent financial statements of the Company delivered to the lenders), in either case, multiplied by (B) the unused portion of the Revolving Credit Facility for such day. This commitment fee shall be payable in arrears on each interest payment date and on the date of any permanent reduction in the Revolving Credit Facility. The Company is also required to pay to the lenders letter of credit fees equal to 2.00% on the average daily aggregate amount of letters of credit outstanding from time to time. The letters of credit fees are payable quarterly in arrears on the first business day of each January, April, July and October. Events of default under the Credit Agreement include, among other things, defaults in payment, breaches of representations and warranties, noncompliance with covenants, defaults under certain other agreements or instruments of indebtedness, certain bankruptcy or insolvency events, certain termination events under ERISA, certain change in control events, and the occurrence of any event or condition which constitutes a "material adverse effect" under the Credit Agreement. A copy of the Credit Agreement was filed with the Commission as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997. See "Available Information." SENIOR DEBT SECURITIES The Company entered into an Indenture, dated as of April 1, 1987 (as supplemented, the "Global Debt Indenture") with LaSalle National Bank, as trustee, pursuant to which up to $200.0 million principal amount of debt securities of varying series (the "Debt Securities") may be issued. The Debt Securities issued under the Global Debt Indenture are unsecured obligations of the Company and will rank on parity with all other unsecured and unsubordinated indebtedness of the Company. The Global Debt Indenture contains certain restrictive covenants including: (i) restrictions on the Company's ability to create, incur, issue, assume or guarantee any indebtedness for borrowed money secured by certain real property or shares of any capital stock or indebtedness of any subsidiary, without effectively providing that the Debt Securities shall be secured by such a mortgage equally and ratably with such indebtedness so long as such indebtedness shall be so secured; and (ii) restrictions upon certain sale and lease-back transactions by the Company or any subsidiary of certain real property. The following are events of default under the Global Debt Indenture with respect to Debt Securities of any series: (i) default of the payment of any interest on any Debt Security of that series when due that continues for 30 days; (ii) default in the payment of principal of or a premium, if any, on any Debt Security of that series at its maturity; (iii) default in the deposit of any sinking fund payment in respect to any Debt Security of that series when due; (iv) default in the performance or breach of any other covenant of the Company in the Indenture that continues for 90 days after written notice as provided in the Global Debt Indenture; and (v) certain events of bankruptcy and solvency or reorganization relating to the Company. If an event of default with respect to Debt Securities of any series at the time outstanding shall occur and be continuing, either the trustee or the holders of at least 25% in principal amount of the outstanding Debt Securities of that series may declare the principal amount of all Debt Securities of that series to be due and payable immediately, subject to the Company's right to cure as provided in the Indenture. 9 1/8% Debentures Due 2017 At March 31, 1998, $65.2 million principal amount of 9 1/8% Debentures due 2017 (the "9 1/8% Debentures") was outstanding under the Global Debt Indenture. The 9 1/8% Debentures mature on April 15, 2017, and interest thereon is payable semi-annually on April 15 and October 15 of each year. The 9 1/8% Debentures are unsecured obligations of the Company and rank pari passu in right of payment with all other unsecured and unsubordinated indebtedness of the Company. The 9 1/8% Debentures are redeemable through the operation of a sinking fund beginning on April 15, 1998, and each year thereafter to and including April 15, 2016 at a sinking fund redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date. On or prior to April 15 in each of the years 1998 to 2016 inclusive, the Company is 102 108 required to make a mandatory sinking fund payment in cash to LaSalle National Bank in an amount sufficient to redeem 9 1/8% Debentures in the aggregate principal amount of $5,000,000 plus accrued interest thereon. However, 9 1/8% Debentures reacquired or redeemed by the Company may be used at the principal amount thereof to reduce the amount of any one or more mandatory Sinking Fund payments. As of March 31, 1998, the Company had repurchased and deposited with LaSalle National Bank $34.8 million principal amount of 9 1/8% Debentures, which will be used to satisfy its mandatory sinking fund obligations through April 15, 2004. The Company at its option may make an optional sinking fund payment in cash in each year from 1998 to 2016 inclusive in an amount sufficient to redeem up to an additional $10,000,000 principal amount of 9 1/8% Debentures. In addition to the events of default contained in the Global Debt Indenture, an event of default with respect to the 9 1/8% Debentures also includes: (i) default in the payment when due of any principal of or interest on any of the indebtedness for borrowed money of the Company or any restricted subsidiary aggregating in excess of $15,000,000 in principal amount; (ii) default in the performance of any covenant and any bond, note or other evidence of indebtedness in respect of any indebtedness for borrowed money of the Company or restricted subsidiary aggregating in excess of $15,000,000 in principal amount, or (iii) default in the performance of any covenant in any mortgage, indenture or instrument under which any indebtedness for borrowed money of the Company or any restricted subsidiary aggregating in excess of $15,000,000 may be issued. Medium-Term Notes At March 31, 1998, an aggregate of $20,775,000 principal amount of Medium-Term Notes Series A (the "Medium-Term Notes") were outstanding under the Global Debt Indenture. Rates on the Medium-Term Notes range from 8.160% to 8.625%. The maturity dates of the Medium-Term Notes include March 15, 1999, March 15, 2000 and March 15, 2001. Interest on each of the outstanding Medium-Term Notes is payable semi-annually each March 30 and September 30 and at maturity. The Medium-Term Notes are unsecured obligations of the Company and rank pari passu in right of payment with all other unsecured and unsubordinated indebtedness of the Company. In addition to the events of default described in the Global Note Indenture, an event of default with respect to the Medium-Term Notes also includes; (i) default in the payment when due of any principal (and any premium, if any) or interest on any indebtedness for borrowed money of the Company aggregating in excess of $25,000,000 in principal amount; (ii) default in the performance of any covenant in any bond, note or other evidence of indebtedness in respect of any indebtedness for borrowed money of the Company aggregating in excess of $25,000,000 in principal amount; or (iii) default in the performance of any covenant and any mortgage, indenture or instrument under which any indebtedness for borrowed money of the Company aggregating in excess of $25,000,000 may be issued or by which the same may be secured in any such case, if such default had resulted in indebtedness for borrowed money of the Company aggregating in excess of $25,000,000 in principal amount becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable. SUBORDINATED DEBT SECURITIES 7% Convertible Subordinated Debentures Due 2002 At March 31, 1998, $7.1 million principal amount of the Company's 7% Convertible Subordinated Debentures due 2002 (the "Convertible Debentures") were outstanding. The Convertible Debentures were issued under an Indenture dated June 22, 1992 (the "7% Debentures Indenture") between the Company and LaSalle National Bank, as successor trustee. The Convertible Debentures are unsecured and subordinated in right of payment to all "senior indebtedness" (as defined in the 7% Debentures Indenture) of the Company. Following the Merger, the Company was required to offer to purchase for cash any and all of the then outstanding Convertible Debentures at a purchase price equal to 100% of the outstanding principal amount of each Convertible Debenture plus any accrued and unpaid interest thereon. On November 12, 1997, the Company consummated such offer to purchase and, as a result thereof, purchased $67.7 million principal amount of Convertible Debentures. Immediately prior to the Merger, the Convertible Debentures were convertible into shares of common stock of the Company at the conversion price of $22.25 per share. As a result of the Merger, the remaining $7.1 million principal amount of outstanding Convertible Debentures are convertible at a conversion price of $22.25 per share of common stock into the right to receive $18.00 per share of common stock into which the Convertible Debentures would have been convertible had the Convertible 103 109 Debentures been converted into Pre-Merger Company Shares prior to the Merger. Accordingly, on September 30, 1997, the Company and the trustee entered into a Supplemental Indenture which provided that, in accordance with the terms of the 7% Debentures Indenture, the remaining outstanding Convertible Debentures are convertible into the right to receive a cash payment equal to $809 for each $1,000 principal amount of Convertible Debentures so converted. The outstanding Convertible Debentures are convertible at any time prior to their maturity on July 1, 2002. The Convertible Debentures may be redeemed by the Company, in whole or from time-to-time in part, at the specified redemption prices (ranging from 102.8% of principal amount during the twelve-month period beginning July 1, 1998 to 100.7% of principal amount during the twelve-month period beginning July 1, 2000), together with accrued and unpaid interest. The 7% Debentures Indenture provides that in the event of any default in the payment when due of principal or interest on a senior indebtedness or after notice from the holders of at least $20.0 million in principal amount of senior indebtedness to which such event of default relates or any other event of default with respect to any senior indebtedness shall have occurred and be continuing, then no payment shall be made by the Company on account of the principal of or interest on the Convertible Debentures or on account of the purchase or redemption or other acquisition of the Convertible Debentures unless or until the senior indebtedness to which such default relates is discharged or such event of default shall be cured or waived or shall have ceased to exist or the holders of such senior indebtedness or their agents shall have waived the benefits of such provision. In the event of certain change of control events, each holder of Convertible Debentures will have the right to require the Company to purchase for cash all or any part of the holder's Convertible Debentures for a purchase price equal to 100% of the principal amount thereof, plus interest accrued and unpaid interest thereon. Events of default under the 7% Debentures Indenture include, among other things, failure to make interest payments when due (if not cured within 30 days), failure to make principal payments at maturity, acceleration of certain other indebtedness of the Company and certain events of bankruptcy, insolvency, reorganization, receivership or liquidation involving the Company. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following general discussion summarizes certain of the material U.S. federal income tax aspects of the Exchange Offer. This summary is for general information only and does not consider all aspects of federal income taxation that may be relevant to a prospective investor in light of that investor's personal circumstances. The exchange of the Old Notes for Exchange Notes pursuant to the Exchange Offer should not be a taxable exchange for federal income tax purposes. As a result, there should be no federal income tax consequences to Holders exchanging the Old Notes for the Exchange Notes pursuant to the Exchange Offer. Moreover, even were the Exchange Offer a taxable event for federal income tax purposes, it should qualify as a tax free recapitalization exchange under Section 368 of the Internal Revenue Code of 1986, as amended, with Holders not recognizing any gain or loss and maintaining their same tax basis and holding period in the Exchange Notes received. In either case, the tax consequences to a Holder of the ownership and disposition of the Exchange Notes should be the same as those for the Old Notes exchanged therefor. THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW. 104 110 PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of 270 days after the Expiration Date, they will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, until , 1998 (90 days after the commencement of the Exchange Offer), all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of the Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer and/or the purchasers of any such Exchange Notes. Any Participating Broker-Dealer that resells the Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 270 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. BOOK-ENTRY; DELIVERY; FORM AND TRANSFER The Notes initially will be in the form of one or more permanent global certificates in definitive, duly registered form (the "Global Notes"). Upon issuance, the Global Notes will be deposited with the Trustee, as custodian for DTC, in New York, New York, and registered in the name of Cede & Co., as nominee of DTC for credit to the accounts of DTC's Direct and Indirect Participants (as defined below). Transfer of beneficial interests in any Global Notes will be subject to the applicable rules and procedures of DTC and its Direct or Indirect Participants (each as defined below), which may change from time to time. The Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee in certain limited circumstances. Beneficial interests in the Global Notes may be exchanged for Notes in certificated form in certain limited circumstances. See "--Transfer of Interests in Global Notes for Certificated Notes." Initially, the Trustee will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. 105 111 Depositary Procedures DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Direct Participants") and to facilitate the clearance and settlement of transactions in those securities between Direct Participants through electronic book-entry changes in accounts of Participants. The Direct Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities that clear through or maintain a direct or indirect, custodial relationship with a Direct Participant (collectively, the "Indirect Participants"). DTC has advised the Company that, pursuant to DTC's procedures, (i) upon deposit of the Global Notes, DTC will credit the accounts of the Direct Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes that have been allocated to them by the Initial Purchasers, and (ii) DTC will maintain records of the ownership interests of such Direct Participants in the Global Notes and the transfer of ownership interests by and between Direct Participants. DTC will not maintain records of the ownership interests of, or the transfer of ownership interests by and between, Indirect Participants or other owners of beneficial interests in the Global Notes. Direct Participants and Indirect Participants must maintain their own records of the ownership interests of, and the transfer of ownership interests by and between, Indirect Participants and other owners of beneficial interests in the Global Notes. Investors in the Global Notes may hold their interests therein directly through DTC if they are Direct Participants in DTC or indirectly through organizations that are Direct Participants in DTC. All ownership interests in any Global Notes may be subject to the procedures and requirements of DTC. The laws of some states in the United States require that certain persons take physical delivery in definitive, certificated form, of securities that they own. This may limit or curtail the ability to transfer beneficial interests in a Global Note to such persons. Because DTC can act only on behalf of Direct Participants, which in turn act on behalf of Indirect Participants and others, the ability of a person having a beneficial interest in a Global Note to pledge such interest to persons or entities that are not Direct Participants in DTC, or to otherwise take actions in respect of such interests, may be affected by the lack of physical certificates evidencing such interests. For certain other restrictions on the transferability of the Notes, see "--Transfers of Interests in Global Notes for Certificated Notes." EXCEPT AS DESCRIBED IN "-- TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES", OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Under the terms of the Indenture, the Company, the Subsidiary Guarantors and the Trustee will treat the persons in whose names the Notes are registered (including Notes represented by Global Notes) as the owners thereof for the purpose of receiving payments and for any and all other purposes whatsoever. Payments in respect of the principal, premium, Liquidated Damages, if any, and interest on Global Notes registered in the name of Cede & Co., as nominee of DTC, will be payable by the Trustee to DTC or its nominee as the registered holder under the Indenture. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for (i) any aspect of DTC's records or any Direct Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Direct Participant's or Indirect Participant's records relating to the beneficial ownership interests in any Global Note or (ii) any other matter relating to the actions and practices of DTC or any of its Direct Participants or Indirect Participants. DTC has advised the Company that its current payment practice (for payments of principal, interest and the like) with respect to securities such as the Notes is to credit the accounts of the relevant Direct Participants with such payment on the payment date in amounts proportionate to such Direct Participant's respective ownership interests in the Global Notes as shown on DTC's records. Payments by Direct Participants and Indirect Participants to the beneficial owners of the Notes will be governed by standing instructions and customary practices between them and will not be the responsibility of DTC, the Trustee, the 106 112 Company or the Subsidiary Guarantors. Neither the Company, the Subsidiary Guarantors nor the Trustee will be liable for any delay by DTC or its Direct Participants or Indirect Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee as the registered owner of the Notes for all purposes. The Global Notes will trade in DTC's Same-Day Funds Settlement System and, therefore, transfers between Direct Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in immediately available funds. Transfers between Indirect Participants who hold an interest through a Direct Participant will be effected in accordance with the procedures of such Direct Participant but generally will settle in immediately available funds. DTC has advised the Company that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more Direct Participants to whose account interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of the Notes to which such Direct Participant or Direct Participants has or have given direction. However, if there is an Event of Default under the Notes, DTC reserves the right to exchange Global Notes (without the direction of one or more of its Direct Participants) for legended Notes in certificated form, and to distribute such certificated forms of Notes to its Direct Participants. See "--Transfers of Interests in Global Notes for Certificated Notes." Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among Direct Participants, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. None of the Company, the Subsidiary Guarantors, the Initial Purchasers or the Trustee shall have any responsibility for the performance by DTC or its Direct and Indirect Participants of their respective obligations under the rules and procedures governing any of their operations. The information in this section concerning DTC and its book-entry system has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. Transfers of Interests in Global Notes for Certificated Notes An entire Global Note may be exchanged for definitive Notes in registered, certificated form without interest coupons ("Certificated Notes") if (i) DTC (x) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes and the Company thereupon fails to appoint a successor depositary within 90 days or (y) has ceased to be a clearing agency registered under the Exchange Act, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Certificated Notes or (iii) there shall have occurred and be continuing a Default or an Event of Default with respect to the Notes. In any such case, the Company will notify the Trustee in writing that, upon surrender by the Direct and Indirect Participants of their interest in such Global Note, Certificated Notes will be issued to each person that such Direct and Indirect Participants and the DTC identify as being the beneficial owner of the related Notes. Beneficial interests in Global Notes held by any Direct or Indirect Participant may be exchanged for Certificated Notes upon request to DTC, by such Direct Participant (for itself or on behalf of an Indirect Participant), to the Trustee in accordance with customary DTC procedures. Certificated Notes delivered in exchange for any beneficial interest in any Global Note will be registered in the names, and issued in any approved denominations, requested by DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's customary procedures). Neither the Company, the Subsidiary Guarantors nor the Trustee will be liable for any delay by the holder of any Global Note or DTC in identifying the beneficial owners of Notes, and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the holder of the Global Note or DTC for all purposes. 107 113 Same Day Settlement and Payment The Indenture requires that payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, interest and Liquidated Damages, if any) be made by wire transfer of immediately available same day funds to the accounts specified by the holder of interests in such Global Note. With respect to Certificated Notes, the Company will make all payments of principal, premium, if any, interest and Liquidated Damages, if any, by wire transfer of immediately available same day funds to the accounts specified by the holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. The Company expects that secondary trading in the Certificated Notes will also be settled in immediately available funds. LEGAL MATTERS Certain legal matters with respect to the validity of the issuance of the Exchange Notes offered hereby will be passed upon for the Company by Weil, Gotshal & Manges LLP, New York, New York. INDEPENDENT ACCOUNTANTS The consolidated financial statements of the Company as of September 30, 1996 and 1997, and for each of the three years in the period ended September 30, 1997 included in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in its report appearing elsewhere herein. 108 114 GLOSSARY OF MARINE TERMS BASS BOAT. Low freeboard boat, normally including forward flipping deck and stern casting platform; designed for day fishing in protected waters. BOWRIDER. A fiberglass recreational boat with seating forward of the windshield, normally in the 16 to 22 foot range. CRUISER. A boat designed primarily for cruising and characterized by a starboard side control station aft of the main cabin and a cockpit. The interior is typically an enclosed cabin with one or more berth/stateroom areas, one or more enclosed heads, a full galley and generally a dinette or other eating facility. DECK BOAT. A V-hull boat made of either fiberglass or aluminum with seating on a deck, similar to a pontoon boat deck, as opposed to in the cockpit. FOUR-STROKE. Four-stroke engines have four discrete activities that occur to produce power. The four activities are fuel intake, compression, combustion (power) and exhaust. To accomplish this the piston moves up and down four times and the crankshaft rotates twice for each power cycle. Intake and exhaust is accomplished through valves which open and close. INBOARD BOAT. A boat with the engine concealed in the boat. The propeller is under the boat in a fixed position, and the boat is steered with a rudder. JON BOAT. A flat-bottom boat, usually aluminum, with a squared-off bow and stern. OUTBOARD BOAT. A boat designed to use an outboard engine as its power source. PONTOON BOAT. A boat with either two or three aluminum pontoon floats with a deck on top for seating, fishing, lounging, picnicking and other recreational activities. PRE-RIG. The process of attaching to a boat, by the manufacturer of the boat as opposed to the dealer, the wiring and controls necessary for the attachment of a specific type of outboard engine. RECREATIONAL BOATS. Cruisers and runabouts. RUNABOUT. A boat with covered bow or open bow seating, equipped primarily for daytime multi-recreational use. May include minimal accommodations, such as vee berth, small galley unit and portable head for possible overnight use. SALTWATER FISHING BOAT. As named, designed primarily for offshore fishing, characterized by control stations aft of the main cabin, either on center or either side and also on a tower. It may or may not have a windshield. The large cockpit is equipped with baitwells, fish boxes and a prep center. For models with cabins, the interior typically contains one stateroom area, one enclosed head, a full galley and generally a dinette or other eating facility. STERN DRIVE BOAT. A boat with the engine concealed in the boat and having a drive similar to an outboard's lower unit attached to the stern. The drive unit pivots from side to side to steer the boat. TWO-STROKE. Two-stroke engines produce power with two cycles of the piston. Intake and exhaust is accomplish simultaneously while the piston moves downward. Compression and power occur while the piston moves up, thus producing power every time the crankshaft rotates. Fuel enters and exhausts through port (holes) in the side of the cylinder wall. V-HULL. The hull of a boat that rises from its bottom to the sides and forms a "V" shape when viewed from the front or back WALLEYE BOAT. A boat that is similar in design to a bass boat but is designed for larger open water. It typically has a deeper V-hull and higher freeboard. It also provides for seating in the boat as opposed to seating on a deck. 109 115 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following Unaudited Pro Forma Condensed Statements of Consolidated Earnings are derived from the historical financial statements of the Company and certain assumptions deemed appropriate by management. The Unaudited Pro Forma Condensed Statements of Consolidated Earnings for the fiscal year ended September 30, 1997 gives effect to the Greenmarine Acquisition and the Initial Offering as if they had occurred on October 1, 1996, for the six months ended March 31, 1997 and the six months ended March 31, 1998, gives effect to the Initial Offering as if it had occurred on October 1, 1997. The adjusted pro forma data included in the Unaudited Pro Forma Condensed Statements of Consolidated Earnings reflect the pro forma adjustments described above and further reflect the effects of the following actions (collectively, the "Cost Savings Initiatives") taken by the Company's new management team following the consummation of the Greenmarine Acquisition: (i) the closure of the Company's boat manufacturing plant in Old Hickory, Tennessee in January 1998 and (ii) a workforce reduction of approximately 540 employees which began in December 1997. In addition, the adjusted pro forma data included in the Unaudited Pro Forma Condensed Statements of Consolidated Earnings reflect adjustments relating to approximately $24.9 million of charges which occurred in 1997 and which management deems to be unusual and non-recurring in nature ("Special Charges"). The Greenmarine Acquisition has been accounted for under the purchase method of accounting. Accordingly, the purchase price has been allocated to assets acquired and liabilities assumed based on fair market values at the date of acquisition. The purchase accounting adjustments reflected on the Company's statement of consolidated financial position at September 30, 1997 reflect the Company's preliminary determination of the adjustments based upon available information. There can be no assurance that the actual adjustments will not vary significantly from the estimated adjustments reflected herein. See Note 1 to the Consolidated Financial Statements. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the Greenmarine Acquisition and the Initial Offering been consummated, or the Cost Savings Initiatives been implemented, at the dates indicated, nor is it necessarily indicative of future operating results or financial position. In addition, the pro forma adjustments have not been prepared in accordance with the requirements of Article 11 of Regulation S-X under the Securities Act and are included for the purpose of providing additional information which the Company believes may be useful to investors. Neither Arthur Andersen LLP, the Company's independent certified public accountants, nor the Initial Purchasers have compiled or examined the Adjusted Pro Forma data and, accordingly, they express no opinion or any other form of assurance with respect to, assume no responsibility for, and disclaim any association with, the Adjusted Pro Forma data. The unaudited pro forma condensed consolidated financial data should be read in conjunction with the financial statements of the Company and the related notes thereto included elsewhere herein. PF-1 116 UNAUDITED PRO FORMA CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS YEAR ENDED SEPTEMBER 30, 1997
SPECIAL CHARGES PRE-MERGER PRO FORMA ADJUSTMENTS AND COMPANY ------------------------ COST SAVING AS ADJUSTED HISTORICAL ACQUISITION OFFERING PRO FORMA ADJUSTMENTS PRO FORMA ---------- ----------- -------- --------- ----------- ----------- (DOLLARS IN MILLIONS) OPERATING DATA: Net Sales............... $979.5 $ -- $ -- $979.5 $ -- $979.5 Cost of goods sold...... 826.5 (1.4)(a) -- 825.1 (20.9)(f) 804.2 ------ ------ ----- ------ ------ ------ Gross earnings....... 153.0 1.4 -- 154.4 20.9 175.3 Selling, general and administrative expense.............. 215.4 7.4(b) -- 222.8 (21.2)(g) 201.6 ------ ------ ----- ------ ------ ------ Earnings (loss) from operations......... (62.4) (6.0) -- (68.4) 42.1 (26.3) Non-operating expense (income): Interest expense..... 16.2 12.2(c) 2.8(e) 31.2 -- 31.2 Change in control expenses........... 26.9 (26.9)(d) -- -- -- -- Other, Net........... (29.2) -- (29.2) -- (29.2) ------ ------ ----- ------ ------ ------ Earnings (loss) before provision for income taxes................ (76.3) 8.7 (2.8) (70.4) 42.1 (28.3) Provision for income taxes................ 2.8 -- -- 2.8 -- 2.8 ------ ------ ----- ------ ------ ------ Net (earnings) loss..... $(79.1) $ 8.7 $(2.8) $(73.2) $ 42.1 $(31.1) ====== ====== ===== ====== ====== ====== OTHER DATA: Depreciation and amortization(h)...... $ 57.0 $ 6.0 $ -- $ 63.0 $ -- $ 63.0 EBITDA(i)............... (0.9) -- -- (0.9) 42.1 41.2 Capital expenditures.... 36.3 -- -- 36.3 -- 36.3
See accompanying Notes to Unaudited Pro Forma Condensed Statements of Consolidated Earnings. PF-2 117 UNAUDITED PRO FORMA CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS SIX MONTHS ENDED MARCH 31, 1997
PRE-MERGER PRO FORMA ADJUSTMENTS COMPANY ------------------------ COST SAVING AS ADJUSTED HISTORICAL ACQUISITION OFFERING PRO FORMA ADJUSTMENTS PRO FORMA ---------- ----------- -------- --------- ----------- ----------- (DOLLARS IN MILLIONS) OPERATING DATA: Net Sales.................. $434.1 $ -- $ -- $434.1 $ -- $434.1 Cost of goods sold......... 374.9 (0.7)(a) -- 374.2 (6.4)(j) 367.8 ------ ----- ----- ------ ----- ------ Gross earnings.......... 59.2 0.7 -- 59.9 6.4 66.3 Selling, general and administrative expense................. 91.9 3.7(b) -- 95.6 (2.2)(k) 93.4 ------ ----- ----- ------ ----- ------ Earnings (loss) from operations............ (32.7) (3.0) -- (35.7) 8.6 (27.1) Non-operating expense (income): Interest expense........ 8.4 6.1(c) 1.4(e) 15.9 -- 15.9 Other, Net.............. (21.3) -- -- (21.3) -- (21.3) ------ ----- ----- ------ ----- ------ Earnings (loss) before provision for income taxes................... (19.8) (9.1) (1.4) (30.3) 8.6 (21.7) Provision for income taxes................... 1.8 -- -- 1.8 -- 1.8 ------ ----- ----- ------ ----- ------ Net (earnings) loss........ $(21.6) $(9.1) $(1.4) $(32.1) $ 8.6 $(23.5) ====== ===== ===== ====== ===== ====== OTHER DATA: Depreciation and amortization(h)......... $ 27.0 $ 3.0 $ -- $ 30.0 $ -- $ 30.0 EBITDA(i).................. (3.9) -- -- (3.9) 8.6 4.7 Capital expenditures....... 22.7 -- -- 22.7 -- 22.7
See accompanying Notes to Unaudited Pro Forma Condensed Statements of Consolidated Earnings. PF-3 118 UNAUDITED PRO FORMA CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS SIX MONTHS ENDED MARCH 31, 1998
POST-MERGER PRO FORMA COST COMPANY ADJUSTMENTS SAVINGS AS ADJUSTED HISTORICAL OFFERING PRO FORMA ADJUSTMENTS PRO FORMA ----------- ----------- --------- ----------- ----------- (DOLLARS IN MILLIONS) OPERATING DATA: Net Sales.............................. $475.5 $ -- $475.5 $ -- $475.5 Cost of goods sold..................... 377.9 -- 377.9 (6.3)(l) 371.6 ------ ------ ----- ------ Gross earnings...................... 97.6 97.6 6.3 103.9 Selling, general and administrative expense............................. 102.5 -- 102.5 (2.1)(m) 100.4 ------ ------ ----- ------ Earnings (loss) from operations..... (4.9) -- (4.9) 8.4 3.5 Non-operating expense (income): Interest expense.................... 14.4 1.4(e) 15.8 -- 15.8 Other, Net.......................... (4.9) -- (4.9) -- (4.9) ------ ----- ------ ----- ------ Loss before provision for income taxes............................... (14.4) (1.4) (15.8) 8.4 (7.4) Provision for income taxes............. 1.8 -- 1.8 -- 1.8 ------ ----- ------ ----- ------ Net earnings (loss).................... $(16.2) $(1.4) $(17.6) $ 8.4 $ (9.2) ====== ===== ====== ===== ====== OTHER DATA: Depreciation and amortization(h)....... $ 27.4 $ -- $ 27.4 $ -- $ 27.4 EBITDA(i).............................. 21.7 -- 21.7 8.4 30.1 Capital expenditures................... 11.9 -- 11.9 -- 11.9
See accompanying Notes to Unaudited Pro Forma Condensed Statements of Consolidated Earnings. PF-4 119 NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS (a) Adjustments reflect lower depreciation on computer equipment and lower amortization on tooling, offset in part by higher depreciation expense on machinery and equipment, based on the Company's purchase price allocation following the Greenmarine Acquisition. (b) Adjustments reflect additional amortization related to $334.1 million of intangibles and goodwill based on the Company's purchase price allocation following the Greenmarine Acquisition, less amortization of $1.6 million per year related to $38.3 million of intangibles and goodwill relating to the Pre-Merger Company. (c) Adjustment to interest expense assumes that (i) the Company's $150.0 million Term Loan was outstanding as of October 1, 1996 at a 10% interest rate, (ii) the tendered and repurchased amount of the Company's Convertible Debentures was repaid as of October 1, 1996, and (iii) the Company incurred additional interest expense on additional borrowings related to change in control expenses, in each case, as if the Greenmarine Acquisition had occurred on October 1, 1996. (d) Reflects elimination of one-time change of control expenses in connection with the Greenmarine Acquisition. (e) Adjustment to interest expense assumes (i) for the year ended September 30, 1997 and for the six months ended March 31, 1997, that the Initial Offering and the application of the net proceeds therefrom occurred as of October 1, 1996, and (ii) for the six months ended March 31, 1998, that the Initial Offering and the application of the net proceeds therefrom occurred as of October 1, 1997. (f) Adjusted pro forma cost of goods sold for the year ended September 30, 1997 reflects adjustments to the Company's pro forma income statement data (giving effect to the Offering and the Greenmarine Acquisition) in order to exclude the effect of certain charges recorded in fiscal 1997 which are deemed by management to be unusual and non-recurring in nature, including: the write-off of impaired assets relating to the Chris Craft line of boats and write-offs of inventory and tooling relating to discontinued products and technology ($4.6 million); additional reserves relating to changes in the method of estimating surplus parts and accessories inventory and recognizing certain pre-rigging rebate expense ($1.8 million); an additional accrual relating to salt water intrusion issues on certain engines, which have since been resolved ($1.0 million); and certain non-recurring expenses associated with the introduction of the FICHT technology ($0.8 million). Adjusted pro forma cost of goods sold for the year ended September 30, 1997 also reflects the pro forma benefit to cost of goods sold of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including employee reductions ($11.2 million of which relates to employees who have either been terminated or are scheduled to be terminated and $1.0 million of which are based on management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized) and the closing of the Company's Old Hickory facility ($0.5 million). (g) Adjusted pro forma selling, general and administrative expense for the year ended September 30, 1997 reflects adjustments to the Company's pro forma income statement data (giving effect to the Offering and the Greenmarine Acquisition) in order to exclude the effect of certain charges deemed by management to be unusual and non-recurring in nature, including charges resulting from the early adoption of the AICPA Statement of Position 96-1 "Environmental Remediation Liabilities" ($7.0 million); and additional accruals for warranty expenses at the Company's Boat Group as a result of changes in the method used to estimate warranty reserves ($9.7 million). Adjusted selling, general and administrative expense for the year ended September 30, 1997 also reflects the pro forma benefit to selling, general and administrative expense of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including employee reductions ($3.0 million of which relates to employees who have either been terminated or are scheduled to be terminated and $1.5 million of which are based on management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized). PF-5 120 (h) Depreciation and amortization includes debt discount amortization. (i) "EBITDA" represents earnings from operations (including income derived from the Company's stern drive joint venture, net of joint venture expenses) before depreciation and amortization (excluding debt discount amortization). The Company accrues for income from the stern drive joint venture, net of joint venture expenses, in Other Income and has included it in EBITDA because it reflects a recurring stream of revenue from the sale of the Company's stern drive parts and accessories products. Income from the stern drive joint venture, net of joint venture expenses, was $7.2 million in fiscal 1997, and $2.1 million and $0.1 million for the six months ended March 31, 1997 and 1998, respectively. EBITDA is widely used by securities analysts and is presented here to provide additional information about the Company's operations. However, EBITDA as presented herein may be calculated differently by other companies and, accordingly, the amounts presented herein may not be comparable to similarly titled measurements of other companies. EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (j) Adjusted pro forma cost of goods sold for the six months ended March 31, 1997 reflects the pro forma benefit of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including employee reductions ($5.6 million of which relates to employees who have either been terminated or are scheduled to be terminated and $0.5 million of which are based an management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized) and the closing of the Old Hickory facility ($0.3 million). (k) Adjusted pro forma selling, general and administrative expense for the six months ended March 31, 1997 reflects the pro forma benefit of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including employee reductions ($1.5 million of which relates to employees who have been terminated or are scheduled to be terminated and $0.7 million of which are based on management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized). (l) Adjusted pro forma cost of goods sold for the six months ended March 31, 1998 reflects the pro forma benefit of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including for employee reduction ($5.5 million of which relates to employees who have been terminated or are scheduled to be terminated and $0.5 million of which are related to management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized) and the closing of the Company's Old Hickory facility ($0.3 million). (m) Adjusted pro forma selling, general and administrative expense for the six months ended March 31, 1998 reflects the pro forma benefit of certain actions taken by the Company's new senior management team since the Greenmarine Acquisition, including for employee reduction ($1.4 million of which relates to employees who have been terminated or are scheduled to be terminated and $0.7 million of which are based an management's estimated cost savings with respect to workforce reductions that have been announced but not yet finalized). PF-6 121 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE OUTBOARD MARINE CORPORATION AND SUBSIDIARIES Report of Independent Public Accountants.................. F-2 Statements of Consolidated Earnings for the years ended September 31, 1997, 1996 and 1995...................... F-3 Statements of Consolidated Financial Position as of September 30, 1997 and 1996............................ F-4 Statements of Consolidated Cash Flows for the years ended September 30, 1997, 1996 and 1995............................................... F-5 Statements of Changes in Consolidated Stockholders' Investment for the years ended September 30, 1997, 1996 and 1995............................................... F-6 Notes to Consolidated Financial Statements................ F-7 Condensed Statements of Consolidated Earnings for the three-month periods ended March 31, 1998 and December 31, 1997, and six-month periods ended March 31, 1998 and 1997 (unaudited)................................... F-35 Condensed Statements of Consolidated Financial Position as of March 31, 1998 and 1997, and September 30, 1997 (unaudited)............................................ F-36 Condensed Statements of Consolidated Cash Flows for the three and six-month periods ended March 31, 1998 and 1997 (unaudited)....................................... F-37 Condensed Statement of Changes in Consolidated Stockholders' Investment for the six-month period ended March 31, 1998 (unaudited)............................. F-38 Notes to Condensed Consolidated Interim Financial Statements (unaudited)................................. F-39
F-1 122 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Outboard Marine Corporation: We have audited the accompanying Statement of Consolidated Financial Position of Outboard Marine Corporation (a Delaware corporation) and subsidiaries ("Post-Merger Company" or "Company") as of September 30, 1997 and the related Statements of Cash Flows and Changes in Consolidated Shareholders' Investment from inception (see Note 1) to September 30, 1997. We have also audited the accompanying Statements of Consolidated Financial Position of Outboard Marine Corporation (a Delaware corporation) and subsidiaries ("Pre-Merger Company") as of September 30, 1996 and the related Statements of Consolidated Earnings, Cash Flows and Changes in Consolidated Shareholders' Investment for each of the three years in the period ended September 30, 1997. These financial statements are the responsibility of the Post-Merger and Pre-Merger Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Post-Merger Company as of September 30, 1997 and their cash flows from inception to September 30, 1997, and the financial position of the Pre-Merger Company as of September 30, 1996 and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1997, in conformity with generally accepted accounting principles. By: Arthur Andersen LLP ------------------------------------ Arthur Andersen LLP Chicago, Illinois January 12, 1998 F-2 123 OUTBOARD MARINE CORPORATION STATEMENTS OF CONSOLIDATED EARNINGS
(DOLLARS IN MILLIONS, EXCEPT AMOUNTS PER SHARE) ------------------------------------------------ PRE-MERGER COMPANY ------------------------------------------------ YEARS ENDED SEPTEMBER 30 ------------------------------------------------ 1997 1996 1995 Net sales............................................... $979.5 $1,121.5 $1,229.2 Cost of goods sold...................................... 826.5 892.2 931.8 ------ -------- -------- Gross earnings........................................ 153.0 229.3 297.4 Selling, general and administrative expense............. 215.4 210.3 230.2 Restructuring charges................................... -- 25.6 -- ------ -------- -------- Earnings (loss) from operations....................... (62.4) (6.6) 67.2 Non-operating expense (income): Interest expense...................................... 16.2 12.3 23.1 Change in control expenses............................ 26.9 -- -- Other, net............................................ (29.2) (8.5) (16.7) ------ -------- -------- 13.9 3.8 6.4 ------ -------- -------- Earnings (loss) before provision for income taxes..... (76.3) (10.4) 60.8 Provision (credit) for income taxes..................... 2.8 (3.1) 9.4 ------ -------- -------- Net earnings (loss)................................... $(79.1) $ (7.3) $ 51.4 ====== ======== ======== Net earnings (loss) per share of common stock Primary............................................... $(3.91) $ (0.36) $ 2.56 ====== ======== ======== Fully diluted......................................... $(3.91) $ (0.36) $ 2.33 ====== ======== ========
The accompanying notes are an integral part of these statements. F-3 124 OUTBOARD MARINE CORPORATION STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(DOLLARS IN MILLIONS) ------------------------- POST-MERGER PRE-MERGER COMPANY COMPANY ----------- ---------- SEPTEMBER 30 ------------------------- 1997 1996 ASSETS Current Assets: Cash and cash equivalents................................. $ 54.4 $ 95.5 Receivables (less reserve for doubtful receivables of $6.7 million in 1997 and $11.6 million in 1996)............. 153.2 167.6 Inventories............................................... 176.9 165.1 Deferred income tax benefits.............................. 19.0 15.6 Other current assets...................................... 67.5 23.7 -------- ------ Total Current Assets................................... 471.0 467.5 Product tooling, net........................................ 34.2 51.6 Plant and equipment, net.................................... 210.2 218.9 Goodwill.................................................... 250.2 29.1 Trademarks, patents and other intangibles................... 83.9 9.2 Pension asset............................................... 74.4 50.1 Other assets................................................ 55.1 47.3 -------- ------ Total Assets........................................... $1,179.0 $873.7 ======== ====== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Loan payable.............................................. $ 96.0 $ -- Accounts payable.......................................... 142.0 90.0 Accrued liabilities....................................... 182.0 151.9 Accrued income taxes...................................... 6.6 11.2 Current maturities and sinking fund requirements of long-term debt......................................... 72.9 0.2 -------- ------ Total Current Liabilities.............................. 499.5 253.3 Long-Term debt.............................................. 103.8 177.6 Postretirement benefits other than pensions................. 96.0 100.7 Other non-current liabilities............................... 202.7 104.5 Shareholders' Investment: Common stock--25 million shares authorized at $.01 par value with 20.4 million shares outstanding in 1997; 90 million shares authorized at $.15 par value with 20.1 million shares outstanding in 1996..................... 0.2 3.0 Capital in excess of par value of common stock............ 276.8 114.1 Accumulated earnings employed in the business............. -- 134.4 Minimum pension liability adjustment...................... -- (3.1) Cumulative translation adjustments........................ -- (8.5) Treasury stock at cost, .1 million shares in 1996......... -- (2.3) -------- ------ Total shareholders' investment......................... 277.0 237.6 -------- ------ Total Liabilities and Shareholders' Investment.... $1,179.0 $873.7 ======== ======
The accompanying notes are an integral part of these statements. F-4 125 OUTBOARD MARINE CORPORATION STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN MILLIONS) --------------------------------- PRE-MERGER COMPANY AND POST-MERGER COMPANY PRE-MERGER COMPANY ----------- ------------------ YEARS ENDED SEPTEMBER 30 --------------------------------- 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)......................................... $ (79.1) $ (7.3) $ 51.4 Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization............................. 57.0 54.7 47.6 Restructuring charges..................................... -- 21.6 -- Changes in current accounts excluding the effects of acquisitions and noncash transactions: Decrease (increase) in receivables..................... 9.6 32.4 (32.4) Decrease (increase) in inventories..................... 26.5 27.3 (29.5) Decrease (increase) in other current assets............ (0.4) (3.6) (13.2) Increase (decrease) in accounts payable, accrued liabilities and income taxes......................... (5.3) (15.1) 14.1 Increase (decrease) in deferred items.................. (15.8) (20.6) 13.7 Other, net............................................. (1.7) 1.7 (0.3) ------- ------ ------ Net cash provided by (used for) operating activities...................................... (9.2) 91.1 51.4 CASH FLOWS FROM INVESTING ACTIVITIES: Investments................................................. -- -- (9.9) Expenditures for plant and equipment, and tooling........... (36.3) (52.7) (66.5) Proceeds from sale of plant and equipment................... 13.0 2.7 11.8 Other, net.................................................. (2.8) (0.5) (1.2) ------- ------ ------ Net cash used for investing activities............ (26.1) (50.5) (65.8) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt, including current maturities.... -- (0.2) (1.1) Cash dividends paid......................................... (6.0) (6.1) (8.0) Other, net.................................................. 2.3 3.4 1.0 ------- ------ ------ Net cash used for financing activities............ (3.7) (2.9) (8.1) Exchange Rate Effect on Cash................................ (2.1) (0.5) 0.5 ------- ------ ------ Net increase (decrease) in Cash and Cash Equivalents........ (41.1) 37.2 (22.0) Cash and Cash Equivalents at Beginning of Year.............. 95.5 58.3 80.3 ------- ------ ------ Pre-Merger Company Cash and Cash Equivalents at End of Year...................................................... $ 54.4 $ 95.5 $ 58.3 ======= ====== ====== - ----------------------------------------------------------------------------------------------- Post-Merger Company Cash and Cash Equivalents prior to merger--September 30, 1997................................ $ 54.4 CASH FLOWS FROM FINANCING ACTIVITIES (POST-MERGER COMPANY): Proceeds from short-term borrowings......................... 96.0 Issuance of Post-Merger Company common stock................ 277.0 Purchase of Pre-Merger Company common stock................. (373.0) ------- Post-Merger Company Cash and Cash Equivalents--September 30, 1997...................................................... $ 54.4 ======= SUPPLEMENTAL CASH FLOW DISCLOSURES (PRE-MERGER COMPANY): Interest paid............................................... $ 21.0 $ 15.4 $ 19.7 Income taxes paid........................................... $ 3.4 $ 3.5 $ 3.4 ======= ====== ======
The accompanying notes are an integral part of these statements F-5 126 OUTBOARD MARINE CORPORATION STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' INVESTMENT
(DOLLARS IN MILLIONS) -------------------------------------------------------------------------------------------------- ACCUMULATED EARNINGS MINIMUM ISSUED CAPITAL IN EXCESS EMPLOYED PENSION CUMULATIVE COMMON STOCK OF PAR VALUE IN THE LIABILITY TRANSACTION TREASURY SHARES AMOUNT OF COMMON STOCK BUSINESS ADJUSTMENT ADJUSTMENTS STOCK ------ ------ ----------------- ----------- ---------- ----------- -------- BALANCE--SEPTEMBER 30, 1994....................... 20.2* $ 3.0 $ 110.7 $106.3 $ -- $ (6.6) $ (4.4) Net earnings................. -- -- -- 51.4 -- -- -- Dividends declared--40 cents per share.................. -- -- -- (8.0) -- -- -- Shares issued under stock plans...................... -- -- 1.5 -- -- -- 0.8 Translation adjustments...... -- -- -- -- -- 1.1 -- ----- ----- ------- ------ ------ ------ ------ BALANCE--SEPTEMBER 30, 1995....................... 20.2* $ 3.0 $ 112.2 $149.7 $ -- $ (5.5) $ (3.6) Net loss..................... -- -- -- (7.3) -- -- -- Dividends declared--40 cents per share.................. -- -- -- (8.0) -- -- -- Minimum pension liability adjustment................. -- -- -- -- (3.1) -- -- Shares issued under stock plans...................... -- -- 1.9 -- -- -- 1.3 Translation adjustments...... -- -- -- -- -- (3.0) -- ----- ----- ------- ------ ------ ------ ------ BALANCE--SEPTEMBER 30, 1996....................... 20.2* $ 3.0 $ 114.1 $134.4 $ (3.1) $ (8.5) $ (2.3) Net loss..................... -- -- -- (79.1) -- -- -- Dividends declared--20 cents per share.................. -- -- -- (4.0) -- -- -- Minimum pension liability adjustment................. -- -- -- -- (.4) -- -- Shares issued under stock plans...................... 0.3 0.1 3.8 -- -- -- -- Translation adjustments...... -- -- -- -- -- (7.3) -- ----- ----- ------- ------ ------ ------ ------ BALANCE--SEPTEMBER 30, 1997-- PRE-MERGER COMPANY......... 20.5* $ 3.1 $ 117.9 $ 51.3 $ (3.5) $(15.8) $ (2.3) ===== ===== ======= ====== ====== ====== ====== - --------------------------------------------------------------------------------------------------------------------------------- BALANCE--SEPTEMBER 30, 1997-- POST-MERGER COMPANY PRIOR TO MERGER.................. 20.5* $ 3.1 $ 117.9 $ 51.3 $ (3.5) $(15.8) $ (2.3) Cancellation of Pre-Merger Company shares upon merger..................... (20.5)* (3.1) (117.9) (51.3) 3.5 15.8 2.3 Issuance of Post-Merger Company shares upon merger..................... 20.4 0.2 276.8 -- -- -- -- ----- ----- ------- ------ ------ ------ ------ BALANCE--SEPTEMBER 30, 1997--POST-MERGER COMPANY.................... 20.4 $ 0.2 $ 276.8 $ -- $ -- $ -- $ -- ===== ===== ======= ====== ====== ====== ======
- ------------------------------ * Includes shares of treasury stock The accompanying notes are an integral part of these statements. F-6 127 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. MERGER WITH GREENMARINE ACQUISITION CORP. On September 12, 1997, Greenmarine Acquisition Corp. ("Greenmarine") acquired control of Outboard Marine Corporation (the "Pre-Merger Company") when shareholders tendered approximately 90 percent of the outstanding shares of the Pre-Merger Company's common stock to Greenmarine for $18 per share in cash. Greenmarine was formed solely to purchase the shares of the Pre-Merger Company and merged with and into the Pre-Merger Company in a non-taxable transaction on September 30, 1997. Outboard Marine Corporation was the sole surviving entity of the merger with Greenmarine (the "Post-Merger Company" or the "Company"). All of the outstanding Pre-Merger Company common stock was cancelled on September 30, 1997 and 20.4 million shares of new common stock were issued to Greenmarine Holdings LLC (the "Parent") the parent company of Greenmarine. Greenmarine's total purchase price of common stock and related acquisition costs amounted to $373.0 million. The Statement of Consolidated Financial Position at September 30, 1997 is not comparable to the prior year because of purchase accounting adjustments. The acquisition and the merger were accounted for using the purchase method of accounting. Accordingly, the purchase price has been allocated to assets acquired and liabilities assumed based on fair market values at the date of acquisition. The fair values of tangible assets acquired and liabilities assumed were $844.9 million and $902.0 million, respectively. In addition, $83.9 million of the purchase price was allocated to intangible assets for trademarks, patents and dealer network. Purchase accounting included liabilities of $136.9 million for implementation and execution of business reorganizations. The financial statements reflect the preliminary allocation of purchase price as the purchase price allocation has not been finalized. The excess purchase price over fair value of the net assets acquired was $250.2 million and has been classified as goodwill in the Statement of Consolidated Financial Position. The goodwill related to the acquisition will be amortized using the straight-line method over a period of 40 years. The acquisition and the merger have been accounted for as if the acquisition and merger had taken place simultaneously on September 30, 1997. In the opinion of management, accounting for the acquisition and the merger as of September 30, 1997 as opposed to accounting for the acquisition and the merger on September 12, 1997 did not materially impact the Statement of Consolidated Earnings. Unaudited pro forma combined results of operations of the Company and Greenmarine on the basis that the acquisition had taken place at the beginning of fiscal 1997 and 1996 are presented in Note 19. 2. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS. The Company, and its subsidiaries, is a multinational company which operates in the marine recreation business. The Company manufactures and markets marine engines, boats and marine parts and accessories. BASIS OF PRESENTATION. The Statement of Consolidated Financial Position at September 30, 1997 for the Post-Merger Company was prepared using a new basis of purchase accounting. The Pre-Merger Company's historical basis of accounting was used prior to September 30, 1997. The Statement of Consolidated Financial Position as of September 30, 1997, which was prepared under the new basis of accounting, reflected the preliminary fair values of assets acquired and liabilities assumed, and the related debt incurred in connection with the merger with Greenmarine on September 30, 1997. PRINCIPLES OF CONSOLIDATION. The accounts of all significant subsidiaries were included in the Consolidated Financial Statements. Intercompany accounts, all material transactions and earnings have been eliminated in consolidation. At September 30, 1997, all subsidiaries were wholly owned except those referred to in Note 3 to the Consolidated Financial Statements. ACCOUNTING ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial F-7 128 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS. For purposes of the Statements of Consolidated Cash Flows, marketable securities with an original maturity of three months or less are considered cash equivalents. The Company's domestic banking system provides for the daily replenishment of major bank accounts for check clearing requirements. Accordingly, outstanding checks of $18.3 million and $21.1 million which had not yet been paid by the banks at September 30, 1997 and 1996, respectively, were reflected in trade accounts payable in the Statements of Consolidated Financial Position. RESTRICTED CASH. At September 30, 1997, the Post-Merger Company has $37.0 million in restricted cash held in a trust depository to fund the redemption of remaining untendered old outstanding shares of stock. This asset is classified as other current assets and substantially funds the corresponding liability classified as accrued liabilities. INVENTORIES. The Company's domestic inventory is carried at the lower of cost or market using principally the last-in, first-out (LIFO) cost method. All other inventory (19% in 1997 and 23% in 1996) is carried at the lower of first-in, first-out (FIFO) cost or market. The book basis for inventories at September 30, 1997 exceeds the tax basis by $39.1 million as a result of applying purchase accounting in connection with the merger. During 1997 and 1996, the liquidation of LIFO inventory quantities acquired at lower costs prevailing in prior years as compared with the costs of 1997 and 1996 purchases, increased earnings before tax by $1.0 million and $1.3 million, respectively. There were no material liquidations of LIFO inventory quantities in 1995. PRODUCT TOOLING, PLANT AND EQUIPMENT AND DEPRECIATION. Product tooling costs are amortized over a period not exceeding five years, beginning the first year the related product is sold. Plant and equipment are recorded at cost and depreciated substantially on a straight-line basis over their estimated useful lives as follows: buildings, 10 to 40 years; machinery and equipment, 3 to 12 1/2 years. Depreciation is not provided on construction in progress until the related assets are placed into service. Amortization of tooling and depreciation of plant and equipment was $52.7 million, $52.1 million and $45.4 million for the years ended September 30, 1997, 1996 and 1995, respectively. When plant and equipment is retired or sold, its cost and related accumulated depreciation are written-off and the resulting gain or loss is included in net earnings. Maintenance and repair costs are charged directly to earnings as incurred and were $26.5 million, $29.4 million and $32.4 million for 1997, 1996 and 1995, respectively. Major rebuilding costs which substantially extend the useful life of an asset are capitalized and depreciated. INTANGIBLES. The Statements of Consolidated Financial Position (Post-Merger Company) included preliminary purchase accounting goodwill of $250.2 million and trademarks, patents and other intangibles of $83.9 million on September 30, 1997. Intangibles are amortized over 15 to 40 years. The carrying value of the intangible assets is periodically reviewed by the Company based on the expected future operating earnings of the related units. Amortization of intangibles on the Pre-Merger Company was $1.6 million, $1.8 million and $1.2 million for 1997, 1996 and 1995, respectively. REVENUE RECOGNITION. The Company recognizes sales and related expenses including estimated warranty costs upon shipment of products to unaffiliated customers. F-8 129 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED ADVERTISING COSTS. Advertising costs are charged to expense as incurred and were $33.7 million, $31.8 million and $35.9 million for 1997, 1996 and 1995, respectively. WARRANTY. The Company generally provides the ultimate consumer a warranty with each product and accrues warranty expense at time of sale based upon actual claims history. Actual warranty costs incurred are charged against the accrual when paid. In the year ended September 30, 1997, warranty accruals were increased $9.7 million due to a change in accounting estimate. RESEARCH AND DEVELOPMENT COSTS. Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Such expenditures were $38.2 million, $41.8 million and $41.6 million for 1997, 1996 and 1995, respectively. TRANSLATION OF NON-U.S. SUBSIDIARY FINANCIAL STATEMENTS. The financial statements of non-U.S. subsidiaries are translated to U.S. dollars substantially as follows: all assets and liabilities at year-end exchange rates; sales and expenses at average exchange rates; shareholders' investment at historical exchange rates. Gains and losses from translating non-U.S. subsidiaries' financial statements are recorded directly in shareholders' investment. The Statements of Consolidated Earnings for 1997 and 1995 include foreign exchange losses (gains) of $1.0 million and $(0.6) million, respectively, which resulted primarily from commercial transactions and forward exchange contracts. In 1996, there was no net foreign exchange gain or loss. IMPAIRMENT OF LONG-LIVED ASSETS. Effective October 1, 1996, the Pre-Merger Company adopted the Financial Accounting Standards Board's Statement of Accounting Standards No. 121 (SFAS 121), "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS 121 requires that long-lived assets and certain identifiable intangibles held and used by a company be reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS 121 also requires that long-lived assets and certain identifiable intangibles held for sale, other than those related to discontinued operations, be reported at the lower of carrying amount or fair value less cost to sell. The Company evaluates the long-lived assets and certain identifiable intangibles for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment charge of $2.0 million was recognized in the year ended September 30, 1997. EARNINGS PER SHARE OF COMMON STOCK. Primary earnings (loss) per share of common stock is computed based on the weighted average number of shares of common stock and common stock equivalents outstanding of 20.2 million, 20.1 million and 20.1 million for the years ended September 30, 1997, 1996 and 1995, respectively. The computation of fully diluted earnings (loss) per share of common stock assumed conversion of the 7% convertible subordinated debentures due 2002; accordingly, net earnings (loss) were increased by after-tax interest and related expense amortization on the debentures. For the fully diluted earnings (loss) per share computations for 1997, 1996 and 1995, shares were computed to be 23.6 million, 23.6 million and 23.5 million, respectively. For 1997 and 1996, the computation of fully diluted earnings (loss) per share was antidilutive; therefore, the amounts reported for primary and fully diluted earnings (loss) per share are identical. On September 30, 1997, all of the old outstanding common stock was cancelled and 20.4 million shares of new common stock were issued. See Note 9 concerning the redemption of the 7% convertible subordinated debentures due 2002. The Financial Accounting Standards Board's Statement No. 128 (SFAS 128), "Earnings per Share" was issued in February, 1997. The new standard simplifies the computation of earnings per share (EPS) and provides improved comparability with international standards. SFAS 128 replaces primary EPS with "Basic" EPS, which excludes dilution and is computed by dividing net earnings or (loss) by the weighted-average number of common shares outstanding for the period. "Diluted" EPS (which replaces fully diluted EPS) is F-9 130 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED computed similarly to fully diluted EPS by reflecting the potential dilution that occurs if securities or other contracts to issue common stock were exercised or converted to common stock or resulted in the issuance of common stock that then shared in the earnings. Effective October 1, 1997, the Company will report EPS as required by SFAS 128. SFAS 128 will require restatement of earnings per share for previous periods; however, such restatement will not be material for the Company. 3. JOINT VENTURE AND INVESTMENTS In July 1995, the Pre-Merger Company and FICHT GmbH of Kirchseeon, Germany announced the formation of a strategic alliance for the development and worldwide manufacturing and marketing of high pressure fuel injection systems and other technologies. Under the terms of the strategic alliance, the Pre- Merger Company acquired a 51% interest in FICHT GmbH. The Ficht family retained a 49% interest and continues to operate the business. FICHT GmbH and Co. KG (FICHT) is the name of the resulting business. The Company has an exclusive license for the marine industry for the FICHT fuel injection system. In addition, the Company has an exclusive worldwide license agreement for all non-automotive applications. Royalty income, if any, resulting from other licensing of the technology will be distributed through FICHT. In July 1993, the Pre-Merger Company and AB Volvo Penta and Volvo Penta of the Americas, Inc. formed a joint venture company to produce gasoline stern drive and gasoline inboard marine power systems. The joint venture is 60% owned by Volvo Penta of the Americas, Inc. (Volvo Penta) and 40% owned by the Company. The jointly produced marine power systems are marketed by Volvo Penta to independent boat builders worldwide and are used in boats manufactured by subsidiaries of the Company. The units carry the Volvo Penta and SX Cobra brand names. The equity method of accounting is used for the joint venture. At September 30, 1997 and 1996, the Company's investment including current net accounts receivable was $19.7 and $13.6 million, respectively. The joint venture is a manufacturing and after-market joint venture. The Company recognizes gross profit relating to certain parts sales and incurs expenses for product development that are part of the joint venture. The Pre-Merger Company's share of the joint venture's earnings was $7.2 million, $4.4 million and $4.9 million in 1997, 1996 and 1995, respectively, which were included in other expense (income) in the Statements of Consolidated Earnings. 4. RESTRUCTURING CHARGES During fiscal year 1996, the Pre-Merger Company recorded $25.6 million in restructuring charges. Included was $20.1 million for closings of distribution operations and write-down of manufacturing facilities outside the United States. The North American and European sales and marketing operations were realigned to more effectively meet market needs. Accrued liabilities included restructuring charges of $6.0 million and $18.5 million at September 30, 1997 and 1996, respectively. The remaining accrual at September 30, 1997, represents amounts primarily for severance payments and other closure costs of overseas manufacturing companies. The remaining restructuring reserves are expected to be utilized during the 1998 fiscal year. F-10 131 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 5. INVENTORIES The various components of inventory were as follows:
POST-MERGER PRE-MERGER COMPANY COMPANY ----------- ---------- 1997 1996 SEPTEMBER 30 (DOLLARS IN MILLIONS) Finished product..................................... $ 62.1 $ 75.6 Raw material, work in process and service parts...... 114.8 131.2 ------ ------ Inventory at current cost which is less than market.......................................... 176.9 206.8 Excess of current cost over LIFO cost................ -- 41.7 ------ ------ Net inventory...................................... $176.9 $165.1 ====== ======
6. PLANT AND EQUIPMENT Plant and equipment components were as follows:
POST-MERGER PRE-MERGER COMPANY COMPANY ----------- ---------- 1997 1996 SEPTEMBER 30 (DOLLARS IN MILLIONS) Land and improvements................................ $ 13.2 $ 21.0 Buildings............................................ 65.0 149.5 Machinery and equipment.............................. 126.1 379.7 Construction in progress............................. 5.9 14.9 ------ ------ 210.2 565.1 Accumulated depreciation............................. -- 346.2 ------ ------ Plant and equipment, net........................... $210.2 $218.9 ====== ======
F-11 132 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 7. ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES
POST-MERGER PRE-MERGER COMPANY COMPANY ----------- ---------- 1997 1996 SEPTEMBER 30 (DOLLARS IN MILLIONS) Accrued liabilities were as follows: Compensation, pension programs and current postretirement medical............................. $ 24.2 $ 25.1 Warranty............................................. 24.6 23.3 Marketing program.................................... 32.8 35.3 Restructuring........................................ 6.0 18.5 Accruals for business reorganizations................ 50.9 -- Other................................................ 43.5 49.7 ------ ------ Accrued liabilities................................ $182.0 $151.9 ====== ====== Other non-current liabilities were as follows: Accruals for business reorganizations................ $ 86.0 $ -- Pension programs..................................... 17.3 16.8 Environmental remediation............................ 18.4 11.1 Other................................................ 81.0 76.6 ------ ------ Accrued non-current liabilities.................... $202.7 $104.5 ====== ======
For both accrued liabilities and other non-current liabilities, accruals for business reorganizations represent adjustments made in purchase accounting at September 30, 1997. These adjustments include accruals for rationalization of the product range, terminations, plant consolidations and closures. 8. SHORT-TERM BORROWINGS AND ACCOUNTS RECEIVABLE SALES AGREEMENTS A summary of short-term borrowing activity was as follows (the balance outstanding at September 30, 1997 was Post-Merger Company):
1997 1996 1995 (DOLLARS IN MILLIONS) Outstanding at September 30 Credit agreement......................................... $96.0 $ -- $ -- Bank borrowing........................................... $ -- $ -- $ -- Average bank borrowing for the year Borrowing................................................ $ 2.9 $ 5.7 $ 55.3 Interest rate............................................ 7.1% 6.6% 7.2% Maximum month end borrowing.............................. $29.0 $15.0 $100.0 ===== ===== ======
The Company became obligated under a credit agreement, as amended, with AFG which provides for loans of up to $150 million (the "Acquisition Debt"). Amounts outstanding under this credit agreement are secured by 20.4 shares of common stock of the Post-Merger Company and bear interest at 10%. The Acquisition Debt matures on June 16, 1998. On November 12, 1997, the Company borrowed the remaining $54.0 million principal amount of Acquisition Debt in connection with the purchase of all properly tendered 7% convertible subordinated debentures of Outboard Marine Corporation (see Note 9 to the Consolidated Financial Statements). Under the Acquisition Debt agreement, the Company is required to meet certain covenants. The Company is in compliance with these covenants. F-12 133 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED The full amount of the Acquisition Debt matures on June 16, 1998. Although the Company does not currently have the funds to refinance such debt, the Company and its Parent believe the Company will be able to raise such funds through the sale of debt or equity in the public or private markets by the maturity date of the Acquisition Debt. In addition to the credit agreement, the Company's non-U.S. subsidiaries had additional uncommitted lines of credit of approximately $0.9 million on September 30, 1997. The Company entered into a Financing and Security Agreement effective November 12, 1997, which provided for loans of up to $50 million. Effective January 6, 1998, the Company entered into a $150 million Amended and Restated Loan and Security Agreement which expires December 31, 2000 which replaced the November 12, 1997 agreement. Under this agreement the Company is required to meet certain covenants. Any loans outstanding under the January 6, 1998 agreement will be secured by the Company's inventory, receivables and intellectual property and are guaranteed by certain of the Company's operating subsidiaries. In connection with the change of control, the Pre-Merger Company terminated a previous revolving credit agreement which had provided for loans up to $150 million. The Pre-Merger Company had a $55 million receivable sales agreement whereby it agreed to sell an ownership interest in a designated pool of domestic trade accounts receivable ("Receivables"). These receivable sales agreements were terminated as of April 30, 1997. During the course of fiscal year 1997, monthly sales of receivables averaged $7.4 million with maximum sales of $29.0 million in February 1997. The Pre-Merger Company retained substantially the same credit risk as if the Receivables had not been sold. The costs associated with the receivable sales agreements were included in non-operating expense--other, net in the Statements of Consolidated Earnings for the years ended September 30, 1997 and 1996. 9. LONG-TERM DEBT Long-term debt on September 30, 1997 and 1996, net of sinking fund requirements included in current liabilities, consisted of the following:
POST-MERGER PRE-MERGER COMPANY COMPANY ----------- ---------- 1997 1996 SEPTEMBER 30 (DOLLARS IN MILLIONS) 7% convertible subordinated debentures due 2002...... $ 74.8 $ 74.8 9 1/8% sinking fund debentures due through 2017...... 62.6 64.8 Medium-term notes due 1998 through 2001 with rates ranging from 8.16% to 8.625%....................... 26.2 24.8 Industrial revenue bonds and other debt with rates ranging from 6.0% to 12.037%....................... 13.1 13.4 ------ ------ $176.7 $177.8 Less current maturities.............................. (72.9) (0.2) ------ ------ $103.8 $177.6 ====== ======
On September 30, 1997, the Company held $34.8 million of its 9 1/8% sinking fund debentures, which will be used to meet sinking fund requirements of $5.0 million per year in the years 1998 through 2004. Amounts are recorded as a reduction of outstanding debt. Due to the change of control and the merger with Greenmarine, the Company was required to offer to purchase its 7% convertible subordinated debentures due 2002. Debentures tendered and repurchased on November 12, 1997 totaled $67.7 million leaving $7.1 million outstanding and a continuing obligation of the Company. Accordingly, $67.7 million was reflected in current maturities. F-13 134 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED The agreements covering both long and short-term debt instruments have restrictive financial covenants. At September 30, 1997, the Company was in compliance with these financial covenants. Maturities and sinking fund requirements of long-term debt for each of the next five years are as follows:
(DOLLARS IN MILLIONS) 1998....................................... $72.9 1999....................................... $11.2 2000....................................... $ 7.0 2001....................................... $ 6.3 2002....................................... $ 8.4
10. FINANCIAL INSTRUMENTS The carrying values of cash and cash equivalents, receivables, accounts payable, and current maturities of long-term debt approximate fair values due to the short term nature of these instruments. The fair value of the long-term debt was $103.8 million and $171.7 million at September 30, 1997 and 1996, respectively, versus carrying amounts of $103.8 and $177.6 million at September 30, 1997 and 1996, respectively. The fair value of long-term debt was based on quoted market prices where available or discounted cash flows using market rates available for similar debt of the same remaining maturities. The Company uses various financial instruments to manage interest rate, foreign currency, and commodity pricing exposures. The agreements are with major financial institutions which are expected to fully perform under the terms of the instruments, thereby mitigating the credit risk from the transactions. The Company does not hold or issue financial instruments for trading purposes. The notional amounts of these contracts do not represent amounts exchanged by the parties and, thus, are not a measure of the Company's risk. The net amounts exchanged are calculated on the basis of the notional amounts and other terms of the contracts, such as interest rates or exchange rates, and only represent a small portion of the notional amounts. The Pre-Merger Company had entered into several interest rate swap agreements as a means of managing its proportion of fixed to variable interest rate exposure. The differential to be paid or received is accrued consistent with the terms of the agreements and market interest rates and is recognized in net earnings as an adjustment to interest expense. At September 30, 1996, the Pre-Merger Company had outstanding fixed to floating interest rate swap agreements having a total notional principal amount of $100 million expiring November 25, 1996. Also at September 30, 1997 and 1996, the Company had an outstanding floating to fixed interest rate swap agreement having a total notional principal amount of $5 million expiring February 15, 1999. The fair value of the interest rate swap agreements at September 30, 1997 and 1996 was an estimated termination liability of $0.3 and $0.5 million, respectively. This potential expense at each fiscal year end had not yet been reflected in net earnings as it represents the hedging of long-term activities to be amortized in future reporting periods. The fair value was the estimated amount the Company would have paid to terminate the swap agreements. The Company purchases currency options to hedge particular anticipated but not yet committed sales expected to be denominated in such currencies. The Company amortizes the cost of the options over the term of the instruments which is generally six to eighteen months. The recognition of gains or losses on these instruments is accrued as foreign exchange rates change and is recognized in net earnings as an adjustment to cost of goods sold. At September 30, 1997, the Company had Belgian franc put options for $32.1 million with a market value of $4.3 million and a French franc put option for $10 million with a market value of $1.0 million, both of which settled October 2, 1997. This potential income had been reflected in net earnings as cost of goods sold at September 30, 1997, as it represented a hedge of fiscal 1997 activities. The fair values were obtained from major financial institutions based upon the market values as of September 30, 1997. F-14 135 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED The Company purchases commodity options to hedge anticipated purchases of aluminum. The Company amortizes the cost of the options over the term of the instruments. Gains and losses on open hedging transactions are deferred until the options are exercised. Upon exercise, gains and losses are included in inventories as a cost of the commodities and reflected in net earnings when the product is sold. At September 30, 1997, the Company had options covering approximately 25% of annual forecasted aluminum purchases. The fair market value of these options was $0.3 million at September 30, 1997. The fair market value was obtained from a major financial institution based upon the market value of those options at September 30, 1997. 11. PREFERRED STOCK AND SHAREHOLDER RIGHTS PLAN Due to the change of control and the merger with Greenmarine, all rights existing under the shareholder rights plan adopted by the Pre-Merger Company on April 24, 1996 expired on September 30, 1997. In addition, as a result of the merger, all of the Pre-Merger Company's preferred stock, including those reserved for issuance under the shareholder rights plan, were cancelled. 12. COMMON STOCK On September 30, 1997, all of the old outstanding common stock was cancelled and 20.4 million shares of new common stock were issued. In 1992, the Pre-Merger Company issued $74.75 million, principal amount, of 7% subordinated convertible debentures. The debentures were convertible into 3,359,550 shares of the Pre-Merger Company's common stock (which were reserved) at a conversion price of $22.25 per share. Due to the change of control and the merger with Greenmarine, each holder of debentures had the right, at such holder's option, to require the Company to repurchase all or a portion of such holder's debentures at the purchase price by November 12, 1997. As a result of the offer to purchase, all but $7.1 million of the principal amount was tendered to, and purchased by, the Company. Due to the merger with Greenmarine, all stock options, stock appreciation rights and restricted stock granted under the OMC Executive Equity Incentive Plan and the OMC 1994 Long-Term Incentive Plan were fully vested and payable in accordance with the terms of the Plans or as provided in the terms of the grants, as amended. In the case of stock options, participants in the plans were entitled to receive in cash the difference, if any, between the purchase price of $18.00 per share (or limited stock appreciation rights at $19.50 per share as computed for officers) and the stock option purchase price. All amounts with respect to the above plans have been expensed and included in change of control expenses. With regard to restricted stock granted under either of the plans, participants were entitled to receive the cash value of the grants based on $18.00 per share or as may have otherwise been agreed to between the participant and the Pre-Merger Company. The Pre-Merger Company adopted the disclosure-only provision under Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," as of September 30, 1997, while continuing to measure compensation cost under APB Opinion No. 25, "Accounting for Stock Issued to Employees." If the accounting provisions of SFAS 123 had been adopted as of the beginning of 1996, the effect on net earnings for 1997 and 1996 would have been immaterial. F-15 136 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED A summary of option data for all plans was as follows:
NUMBER OF OPTION EXERCISE OPTION SHARES PRICE PER SHARE ------------- ---------------- Options outstanding and unexercised at September 30, 1994................................................ 1,112,220 $ 10.00 - 24.625 Options granted..................................... 153,200 $20.875 - 29.225 Options exercised................................... (41,715) $ 10.00 - 21.375 Options cancelled................................... (40,460) $ 18.50 - 24.625 --------- Options outstanding and unexercised at September 30, 1995................................................ 1,183,245 $ 10.00 - 29.225 Options granted..................................... 233,500 $ 16.00 - 20.00 Options exercised................................... (36,730) $ 10.00 - 19.375 Options cancelled................................... (102,415) $ 10.00 - 24.625 --------- Options outstanding and unexercised at September 30, 1996................................................ 1,277,600 $ 10.00 - 29.225 Options granted..................................... 223,700 $ 16.375 Options exercised................................... (526,620) $ 10.00 - 19.375 Options cancelled................................... (974,680) $16.375 - 29.225 --------- Options outstanding and unexercised at September 30, 1997*............................................... -- --------- Exercisable at September 30, 1997..................... -- ---------
- ------------------------------ * Due to the merger with Greenmarine, all options outstanding were paid out in cash and cancelled at September 30, 1997. 13. RETIREMENT BENEFIT AND INCENTIVE COMPENSATION PROGRAMS The Company and its subsidiaries have retirement benefit plans covering a majority of its employees. Worldwide pension calculations resulted in expense (income) of $2.4 million, $0.3 million and $(0.5) million in 1997, 1996 and 1995, respectively. The following schedule of pension expense (income) presents amounts relating to the Company's material pension plans, United States and Canada (all years presented were Pre-Merger Company):
YEARS ENDED SEPTEMBER 30 -------------------------- 1997 1996 1995 (DOLLARS IN MILLIONS) Benefits earned during the period........................ $ 6.6 $ 6.2 $ 5.4 Interest cost on projected benefit obligation............ 28.5 25.4 24.2 Return on pension assets................................. (88.5) (46.5) (66.0) Net amortization and deferral............................ 54.3 15.7 34.3 ------ ------ ------ Net periodic pension expense (income).......... $ .9 $ .8 $ (2.1) ====== ====== ======
Actuarial assumptions used for the Company's principal defined benefit plans (1997 was Post-Merger Company):
SEPTEMBER 30 -------------------- 1997 1996 1995 Discount rates.............................................. 7 1/2% 8% 7 3/4% Rate of increase in compensation levels (salaried employee plans).................................................... 5% 5% 5% Expected long-term rate of return on assets................. 9 1/2% 9 1/2% 9 1/2%
F-16 137 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED The funded status and pension liability were as follows (1997 was Post-Merger Company):
PLANS WHOSE PLANS WHOSE ACCUMULATED ASSETS EXCEED BENEFITS ACCUMULATED BENEFITS EXCEED ASSETS -------------------- -------------- SEPTEMBER 30 -------------------------------------- 1997 1996 1997 1996 (DOLLARS IN MILLIONS) Actuarial present value of benefit obligation Vested.......................................... $331.0 $298.5 $15.2 $14.0 Nonvested....................................... 27.7 32.8 1.0 1.2 ------ ------ ----- ----- Accumulated benefit obligation............... 358.7 331.3 16.2 15.2 Effect of projected future compensation increases....................................... 22.1 21.3 1.2 1.3 ------ ------ ----- ----- Projected benefit obligation................. 380.8 352.6 17.4 16.5 Plan assets at fair market value.................. 455.2 387.2 -- -- ------ ------ ----- ----- Plan assets (in excess of) less than projected benefit obligation.............................. (74.4) (34.6) 17.4 16.5 Unrecognized net loss............................. -- (16.8) -- (4.4) Prior service cost not yet recognized in net periodic pension expense........................ -- (15.7) -- (.7) Remaining unrecognized net asset (obligation) arising from the initial application of SFAS No. 87.............................................. -- 17.0 -- (.5) Adjustment required to recognize minimum liability....................................... -- -- -- 4.3 ------ ------ ----- ----- Pension liability (asset) recognized......... $(74.4) $(50.1) $17.4 $15.2 ====== ====== ===== =====
The provisions of SFAS No. 87, "Employers' Accounting for Pensions", require the recognition of an additional minimum liability for each defined benefit plan for which the accumulated benefit obligation exceeds plan assets. This amount has been recorded as a long-term liability with an offsetting intangible asset. Because the asset recognized may not exceed the amount of unrecognized prior service cost and transition obligation on an individual plan basis, the balance of $3.5 million is reported as a separate reduction of shareholders' investment at September 30, 1997 prior to the merger with Greenmarine. At September 30, 1997 in accordance with purchase accounting, plan assets in excess of or less than the projected benefit obligation have been recorded. The Company's major defined benefit plans had provided that upon a change of control of the Company and upon certain other actions by the acquirer, all participants of these plans would become vested in any excess of plan assets over total accumulated benefit obligations. Pursuant to the terms of the plan, this provision was deleted to avoid being triggered by the change of control which took place September 12, 1997. The Company provides certain health care and life insurance benefits for eligible retired employees, primarily employees of the Milwaukee, Wisconsin; Waukegan, Illinois; and former Galesburg, Illinois plants as well as Marine Power Products and the Corporate office. Employees at these locations become eligible if they have fulfilled specific age and service requirements. These benefits are subject to deductible, co-payment provisions and other limitations, which are amended periodically. The Company reserves the right to make additional changes or terminate these benefits in the future. On January 1, 1994, and to be effective in 1998, the Pre-Merger Company introduced a cap for the employer-paid portion of medical costs for non-union active employees. The cap is tied to the Consumer Price Index. F-17 138 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED The net cost of providing postretirement health care and life insurance benefits included the following components (all years presented were Pre-Merger Company):
YEARS ENDED SEPTEMBER 30 -------------------------- 1997 1996 1995 (DOLLARS IN MILLIONS) Service cost-benefits attributed to service during the period.................................................... $ 1.1 $ 1.0 $ 1.0 Interest cost on accumulated postretirement benefit obligation................................................ 7.3 6.4 6.9 Amortization of prior service cost and actuarial gain....... (1.8) (1.9) (1.8) ----- ----- ----- Net periodic postretirement benefit cost.......... $ 6.6 $ 5.5 $ 6.1 ===== ===== =====
The amounts recognized in the Statements of Consolidated Financial Position included (1997 was Post-Merger Company):
SEPTEMBER 30 ---------------------- 1997 1996 (DOLLARS IN MILLIONS) Accumulated postretirement benefit obligation Retirees.................................................. $ 65.3 $ 64.5 Fully eligible active plan participants................... 13.3 11.5 Other active plan participants............................ 24.2 19.3 Prior service credit...................................... -- 10.7 Unrecognized net gain..................................... -- 0.7 ------ ------ Net obligation.................................... $102.8 $106.7 ====== ======
The accumulated postretirement benefit obligation was determined using a 7 1/2% and 8% weighted average discount rate at September 30, 1997 and 1996, respectively. The health care cost trend rate was assumed to be 8% in fiscal year 1997, declining to 7% next year and remaining constant thereafter. In fiscal year 1996, the health care cost trend rate was assumed to be 9%, gradually declining to 7% over two years and remaining constant thereafter. A one percentage point increase of this annual trend rate would increase the accumulated postretirement benefit obligation at September 30, 1997 by approximately $7.0 million and the net periodic cost by $0.6 million for the year. Under the OMC Executive Bonus Plan, the compensation committee of the board of directors, which administers the plan and whose members are not participants in the plan, had authority to determine the extent to which the Pre-Merger Company meets, for any fiscal year, the performance targets for that fiscal year which are set by the committee no later than the third month of the fiscal year. In fiscal 1997, no incentive compensation was paid or provided under this plan. In fiscal years 1996 and 1995, $0.8 million and $5.1 million, respectively, was charged to earnings under this plan. The 1994 OMC Long-Term Incentive Plan and its predecessor plan authorized the awarding of performance units or performance shares, each with a value equal to the value of a share of common stock at the time of award. Performance shares for the three year cycle ended September 30, 1997 will be earned and paid based upon the judgment of the compensation committee of the Company's board of directors whose members are not participants in the plan, as to the achievement of various goals over multi-year award cycles. In 1997, 1996 and 1995, respectively, $(0.2) million, $(0.4) million and $1.1 million were charged (credited) to earnings for the estimated cost of performance units earned under the plan. F-18 139 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 14. OTHER EXPENSE (INCOME), NET Other non-operating expense (income) in the Statements of Consolidated Earnings consisted of the following items (all years presented were Pre-Merger Company):
YEARS ENDED SEPTEMBER 30 ------------------------- 1997 1996 1995 (DOLLARS IN MILLIONS) Expense (Income) Interest earned......................................... $ (4.5) $(4.1) $ (7.0) Insurance recovery and lawsuit settlement............... (10.7) -- -- Foreign exchange losses (gains)......................... 1.0 -- (0.6) (Gain) loss on disposition of plant and equipment....... (5.8) 0.9 (1.8) Joint venture earnings.................................. (7.2) (4.4) (4.9) Discount charges-- Accounts receivable sales............................ 0.6 1.7 -- Miscellaneous, net...................................... (2.6) (2.6) (2.4) ------ ----- ------ $(29.2) $(8.5) $(16.7) ====== ===== ======
15. INCOME TAXES The provision for income taxes consisted of the following components (all years presented were Pre-Merger Company):
YEARS ENDED SEPTEMBER 30 ------------------------- 1997 1996 1995 (DOLLARS IN MILLIONS) Provision for current income taxes Federal................................................. $(36.7) $(5.6) $ 19.8 State................................................... (2.3) -- 3.7 Non-U.S................................................. 2.8 2.5 10.6 ------ ----- ------ Total current........................................ (36.2) (3.1) 34.1 Changes to valuation allowance............................ 39.0 -- (24.7) ------ ----- ------ Total provision................................. $ 2.8 $(3.1) $ 9.4 ====== ===== ======
F-19 140 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED The significant short-term and long-term deferred tax assets and liabilities were as follows (1997 was Post-Merger Company):
SEPTEMBER 30 --------------------- 1997 1996 (DOLLARS IN MILLIONS) Deferred tax assets Litigation and claims..................................... $ 18.4 $ 16.9 Product warranty.......................................... 14.6 10.7 Marketing programs........................................ 13.7 15.3 Postretirement medical benefits........................... 41.2 42.7 Restructuring............................................. 7.3 7.6 Loss carryforwards........................................ 55.0 29.6 Net accruals for business reorganizations................. 13.6 -- Other..................................................... 50.5 46.5 Valuation allowance....................................... (131.8) (92.8) ------- ------ Total deferred tax assets.............................. $ 82.5 $ 76.5 ------- ------ Deferred tax liabilities Depreciation and amortization............................. $ (13.9) $(12.4) Employee benefits......................................... (12.8) (14.0) Other..................................................... (15.7) (12.3) ------- ------ Total deferred tax liabilities......................... (42.4) (38.7) ------- ------ Net deferred tax assets........................... $ 40.1 $ 37.8 ======= ======
The Company believes the recorded net deferred tax assets of $40.1 million, of which $21.1 million is reflected as a net long-term asset, will be realized. A valuation allowance of $131.8 million has been recorded at September 30, 1997, to reduce the deferred tax assets to their estimated net realizable value. Of this valuation allowance, $20.7 million relates to deferred tax assets established for foreign and state loss carryforwards. As of September 30, 1997, certain non-U.S. subsidiaries of the Company had net operating loss carryforwards for income tax purposes of $34.8 million. Of this amount, $4.0 million will expire by 2002, with the remaining balance being unlimited. In addition, the Company has $103.2 million of Federal net operating loss carryforwards expiring between 2009 and 2012 and $133.8 million of state net operating loss carryforwards expiring between 1998 and 2012. These carryforwards are entirely offset by the valuation allowance. No benefit has been recognized in the Consolidated Financial Statements. Several factors would generally enable the Company to recognize the deferred tax assets that have been offset by the valuation allowance. Historical profitability, forecasted earnings, and management's determination "it is more likely than not" the deferred tax assets will be realized against forecasted earnings, all affect whether the remaining U.S. deferred tax assets may be recognized, through a reversal of the valuation allowance. Because the deferred tax asset realization factors were adversely affected by the 1997 fiscal year results, it is unlikely the reversal of the valuation allowance will occur in 1998. F-20 141 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED The following summarizes the major differences between the actual provision for income taxes on earnings (losses) and the provision (credit) based on the statutory United States Federal income tax rate (all years presented were Pre-Merger Company):
YEARS ENDED SEPTEMBER 30 -------------------------- 1997 1996 1995 (% TO PRETAX EARNINGS) At statutory rate........................................... (35.0)% (35.0)% 35.0% State income taxes, net of Federal tax deduction............ (3.0) (0.2) 4.0 Tax effect of non-U.S. subsidiary earnings (loss) taxed at other than the U.S. rate.................................. 0.1 11.4 9.6 Tax benefit not provided on domestic and foreign operating losses.................................................... 41.8 20.6 1.2 Tax effect of goodwill amortization and write-offs.......... 0.4 3.3 8.7 Reversal of valuation allowance............................. -- -- (44.8) Federal tax effect prior year's state income taxes paid..... (0.2) 13.6 -- Tax effects of audit settlements............................ -- (50.5) -- Other....................................................... (0.5) 7.0 1.7 ----- ----- ----- Actual provision.......................................... N.M.% N.M.% 15.4% ===== ===== =====
Domestic and non-U.S. earnings before provision (credit) for income taxes consisted of the following (all years presented were Pre-Merger Company):
YEARS ENDED SEPTEMBER 30 ------------------------- 1997 1996 1995 (DOLLARS IN MILLIONS) Earnings (loss) before provision for income taxes United States........................................... $(68.7) $ (8.1) $46.8 Non-U.S................................................. (7.6) (2.3) 14.0 ------ ------ ----- Total........................................... $(76.3) $(10.4) $60.8 ====== ====== =====
The above non-U.S. loss of $(7.6) million is a net amount that includes both earnings and losses. Due to the integrated nature of the Company's operations, any attempt to interpret the above pretax earnings (loss) as resulting from stand-alone operations could be misleading. No U.S. deferred taxes have been provided on $84.0 million of undistributed non-U.S. subsidiary earnings. The Company has no plans to repatriate these earnings and, as such, they are considered to be permanently invested. While no detailed calculations have been made of the potential U.S. income tax liability should such repatriation occur, the Company believes that it would not be material in relation to the Company's Consolidated Financial Position or Consolidated Earnings. 16. GEOGRAPHIC BUSINESS DATA The Company, which operates in a single business segment, manufactures and distributes marine engines, boats, parts and accessories. The Company markets its products primarily through dealers in the United States, Europe and Canada, and through distributors in the rest of the world. F-21 142 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED Information by geographic area was as follows (all years presented were Pre-Merger Company, except total assets in 1997 were Post-Merger Company):
YEARS ENDED SEPTEMBER 30 -------------------------------- 1997 1996 1995 (DOLLARS IN MILLIONS) Net sales United States...................................... $ 721.0 $ 813.3 $ 906.8 Europe............................................. 90.9 114.8 117.1 Other.............................................. 167.6 193.4 205.3 -------- -------- -------- Total........................................... $ 979.5 $1,121.5 $1,229.2 ======== ======== ======== Sales between geographic areas from United States...................................... $ 152.2 $ 144.4 $ 179.7 Europe............................................. 2.1 7.4 7.9 Other.............................................. 47.0 45.6 58.0 -------- -------- -------- Total........................................... $ 201.3 $ 197.4 $ 245.6 ======== ======== ======== Total revenue United States...................................... $ 873.2 $ 957.7 $1,086.5 Europe............................................. 93.0 122.2 125.0 Other.............................................. 214.6 239.0 263.3 Eliminations....................................... (201.3) (197.4) (245.6) -------- -------- -------- Total........................................... $ 979.5 $1,121.5 $1,229.2 ======== ======== ======== Earnings (loss) from operations United States...................................... $ (36.3) $ 5.1 $ 55.1 Europe............................................. (9.1) (8.2) (3.2) Other.............................................. (7.4) 6.0 30.1 Corporate expenses................................. (9.6) (9.5) (14.8) -------- -------- -------- Total........................................... $ (62.4) $ (6.6) $ 67.2 ======== ======== ======== Total assets at September 30 United States...................................... $ 969.6 $ 593.6 $ 612.2 Europe............................................. 53.2 76.8 102.9 Other.............................................. 124.5 134.8 145.6 Corporate assets................................... 31.7 68.5 46.3 -------- -------- -------- Total........................................... $1,179.0 $ 873.7 $ 907.0 ======== ======== ========
Corporate assets consist of cash, securities and property. Due to the integrated nature of the Company's operations, any attempt to interpret the above geographic area data as resulting from unique or stand-alone types of operations could be misleading. F-22 143 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 17. QUARTERLY INFORMATION (UNAUDITED) A summary of pertinent quarterly data for the 1997 and 1996 fiscal years was as follows:
QUARTER ENDED ------------------------------------------------- DEC. 31 MAR. 31 JUNE 30 SEPT. 30 (DOLLARS IN MILLIONS, EXCEPT AMOUNTS PER SHARE) Fiscal 1997 Net sales............................................. $197.1 $237.0 $275.8 $269.6 Gross earnings........................................ 22.7 36.5 54.8 39.0 Net earnings (loss)................................... (14.3) (7.3) (5.1) (52.4) ------ ------ ------ ------ Net earnings (loss) per share: Primary............................................ $(0.71) $(0.36) $(0.25) $(2.58) ------ ------ ------ ------ Fully diluted...................................... $(0.71) $(0.36) $(0.25) $(2.58) ------ ------ ------ ------
QUARTER ENDED ----------------------------------------- DEC. 31 MAR. 31 JUNE 30 SEPT. 30 Fiscal 1996* Net sales............................................. $232.1 $285.5 $291.0 $312.9 Gross earnings........................................ 39.4 61.3 59.6 69.0 Net earnings (loss)................................... (12.4) 1.1 (3.6) 7.6 ------ ------ ------ ------ Net earnings (loss) per share: Primary............................................ $(0.62) $ 0.05 $(0.18) $ 0.38 ------ ------ ------ ------ Fully diluted...................................... $(0.62) $ 0.05 $(0.18) $ 0.36 ------ ------ ------ ------
- ------------------------------ - - Includes restructuring charges of $11.9 million in the 3rd quarter and $13.7 million in the 4th quarter. Earnings per share amounts for each quarter are required to be computed independently and, therefore, may not equal the amount computed for the total year. Due to the seasonal nature of the Company's business, it is not appropriate to compare the results of operations of different fiscal quarters. The price range at which the Pre-Merger Company's common stock traded on the New York Stock Exchange and the dividends declared per share during the last eight fiscal quarters were as follows:
MARKET PRICE --------------------------- DIVIDEND QUARTER ENDED HIGH LOW CLOSING DECLARED September 30, 1997............................. $18.00 $16.50 $18.00 $ -- June 30, 1997.................................. 18.13 14.00 17.75 -- March 31, 1997................................. 17.88 12.00 12.63 .10 December 31, 1996.............................. 17.50 14.88 16.50 .10 September 30, 1996............................. 18.50 14.38 15.38 .10 June 30, 1996.................................. 20.25 18.13 18.13 .10 March 31, 1996................................. 21.88 18.88 19.13 .10 December 31, 1995.............................. 22.38 19.75 20.38 .10
Old shares of common stock were cancelled September 30, 1997 and new shares were issued which are not publicly traded. 18. COMMITMENTS AND 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 F-23 144 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 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 $40 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. Minimum commitments under operating leases having initial or remaining terms greater than one year are $8.2 million, $6.2 million, $4.3 million, $2.2 million, $1.4 million and $4.0 million for the years ending September 30, 1998, 1999, 2000, 2001, 2002 and after 2002, respectively. 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. 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. Once the Company becomes aware of its potential liability at a particular site, it uses its 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. In October 1996, the AICPA issued Statement of Position 96-1 (SOP 96-1), "Environmental Remediation Liabilities", which provides authoritative guidance on the recognition, measurement, display and disclosure of environmental remediation liabilities. The Company has elected early adoption of SOP 96-1 in the quarter ended September 30, 1997. The change in accounting estimate required the Company to accrue for future normal operating and maintenance costs for site monitoring and compliance requirements at particular sites. The initial expense for implementation of SOP 96-1 was $7.0 million, charged to selling, general and administrative expense in the quarter ended September 30, 1997. As a general rule, the Company accrues remediation costs for continuing operations on an undiscounted basis and accrues for normal operating and maintenance costs for site monitoring and compliance requirements. The Company also accrues for environmental close-down costs associated with discontinued operations or facilities, including the environmental costs of operation and maintenance until disposition. At September 30, 1997, the Company has accrued approximately $23 million for costs related to remediation at contaminated sites including operation and maintenance for continuing and closed-down operations. The F-24 145 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED 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. 19. PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(UNAUDITED) The following unaudited pro forma Condensed Statements of Consolidated Earnings (the "Pro Forma Statements") were prepared to illustrate the estimated effects of the merger with Greenmarine Acquisition Corp. as if the transaction had occurred for statements of consolidated earnings purposes as of the beginning of the period presented. The pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable. The Pro Forma Statements do not purport to represent what the Company's results of operations would actually have been if such transactions in fact had occurred at the beginning of the period indicated or to project the Company's results of operation for any future period. The Pro Forma Statements include adjustments, with respect to the merger, to reflect additional interest expense and depreciation expense, amortization of goodwill, and elimination of non-recurring fees and expenses incurred by the Pre-Merger Company in 1997 in connection with the merger.
FOR THE YEARS ENDED SEPTEMBER 30 -------------------- 1997 1996 (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net sales................................................... $979.5 $1,121.5 Cost of goods sold.......................................... 825.1 890.8 ------ -------- Gross earnings............................................ 154.4 230.7 Selling, general and administrative expense................. 222.8 217.5 Restructuring charges....................................... -- 25.6 ------ -------- Earnings (loss) from operations........................... (68.4) (12.4) Interest expense............................................ 28.4 24.3 Other (income) expense, net................................. (29.2) (8.5) ------ -------- Loss before provision for income taxes.................... (67.6) (28.2) Provision (credit) for income taxes......................... 2.8 (3.1) ------ -------- Net loss.................................................. $(70.4) $ (25.1) ====== ======== Net loss per share of common stock (primary and fully diluted).................................................. $(3.45) $ (1.23) ====== ======== Shares outstanding.......................................... 20.4 20.4 ====== ========
20. SUBSIDIARY GUARANTOR INFORMATION The Company issued $160,000,000 10 3/4% Senior Notes due 2008 ("Notes") on May 21, 1998. The Company's payment obligations under the Notes are to be guaranteed by certain of the Company's wholly-owned subsidiaries ("Guarantor Subsidiaries"). Such guarantees are full, unconditional, unsecured and unsubordinated on a joint and several basis by each of the Guarantor Subsidiaries. As of and through June 1, 1998, the Guarantor Subsidiaries were wholly-owned, but not the only wholly-owned, subsidiaries of the F-25 146 OUTBOARD MARINE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED Company. Separate financial statements of the Guarantor Subsidiaries are not presented because management of the Company has determined that they are not material to investors. The following condensed consolidating financial data illustrates the composition of the Company ("Parent Company"), the Guarantor Subsidiaries and the Company's non-guarantor subsidiaries ("Other Subsidiaries"). Investments in subsidiaries are accounted for by the Company under the equity method of accounting for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are, therefore, reflected in the Company's investment accounts and earnings. The Company has not allocated goodwill to the Guarantor Subsidiaries or the other subsidiaries in association with the acquisition by and merger with Greenmarine. F-26 147 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING EARNINGS YEAR ENDED SEPTEMBER 30, 1997 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) Net sales................................ $607.2 $439.0 $255.4 $(322.1) $979.5 Cost of goods sold....................... 518.8 423.6 203.0 (318.9) 826.5 ------ ------ ------ ------- ------ Gross earnings......................... 88.4 15.4 52.4 (3.2) 153.0 Selling, general and administrative expense................................ 103.1 66.0 46.3 -- 215.4 ------ ------ ------ ------- ------ Earnings (loss) from operations........ (14.7) (50.6) 6.1 (3.2) (62.4) Non-operating expense (income)........... 21.8 0.1 (8.0) -- 13.9 Equity earnings (loss)--subsidiaries..... (39.4) -- -- 39.4 -- ------ ------ ------ ------- ------ Earnings (loss) before provision for income taxes........................ (75.9) (50.7) 14.1 36.2 (76.3) Provision for income taxes............... -- -- 2.8 -- 2.8 ------ ------ ------ ------- ------ Net earnings (loss)............ $(75.9) $(50.7) $ 11.3 $ 36.2 $(79.1) ====== ====== ====== ======= ======
F-27 148 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING EARNINGS YEAR ENDED SEPTEMBER 30, 1996 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) Net sales................................ $650.9 $488.0 $308.5 $(325.9) $1,121.5 Cost of goods sold....................... 552.1 433.1 235.8 (328.8) 892.2 ------ ------ ------ ------- -------- Gross earnings......................... 98.8 54.9 72.7 2.9 229.3 Selling, general and administrative expense................................ 92.8 62.6 54.9 -- 210.3 Restructuring charges.................... 9.0 0.4 16.2 -- 25.6 ------ ------ ------ ------- -------- Earnings (loss) from operations........ (3.0) (8.1) 1.6 2.9 (6.6) Non-operating expense (income)........... -- 3.3 0.5 -- 3.8 Equity earnings (loss)-- subsidiaries.... (12.5) -- -- 12.5 -- ------ ------ ------ ------- -------- Earnings (loss) before provision for income taxes........................ (15.5) (11.4) 1.1 15.4 (10.4) Provision (credit) for income taxes...... (5.3) -- 2.2 -- (3.1) ------ ------ ------ ------- -------- Net earnings (loss)............ $(10.2) $(11.4) $ (1.1) $ 15.4 $ (7.3) ====== ====== ====== ======= ========
F-28 149 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING EARNINGS YEAR ENDED SEPTEMBER 30, 1995 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) Net sales................................ $770.6 $521.4 $331.0 $(393.8) $1,229.2 Cost of goods sold....................... 606.9 456.5 258.2 (389.8) 931.8 ------ ------ ------ ------- -------- Gross earnings......................... 163.7 64.9 72.8 (4.0) 297.4 Selling, general and administrative expense................................ 106.0 64.0 60.2 -- 230.2 ------ ------ ------ ------- -------- Earnings (loss) from operations........ 57.7 0.9 12.6 (4.0) 67.2 Non-operating expense (income)........... 5.1 2.9 (1.6) -- 6.4 Equity earnings (loss) -- subsidiaries... 2.3 -- -- (2.3) -- ------ ------ ------ ------- -------- Earnings (loss) before provision for income taxes........................ 54.9 (2.0) 14.2 (6.3) 60.8 Provision (credit) for income taxes...... (0.5) -- 9.9 -- 9.4 ------ ------ ------ ------- -------- Net earnings (loss)............ $ 55.4 $ (2.0) $ 4.3 $ (6.3) $ 51.4 ====== ====== ====== ======= ========
F-29 150 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING FINANCIAL POSITION SEPTEMBER 30, 1997 POST-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) ASSETS Current Assets: Cash and cash equivalents......... $ 27.3 $ 0.5 $ 26.6 $ -- $ 54.4 Receivables....................... 75.3 38.1 39.8 -- 153.2 Intercompany receivables (payables)..................... 3.6 (17.5) 13.9 -- -- Inventories....................... 76.2 66.1 42.2 (7.6) 176.9 Other current assets.............. 72.8 4.8 5.0 3.9 86.5 -------- ------ ------ ------- -------- Total Current Assets...... 255.2 92.0 127.5 (3.7) 471.0 Product tooling, net................ 30.7 2.2 1.3 -- 34.2 Intangibles......................... 327.2 -- 6.9 -- 334.1 Pension and other assets............ 117.2 0.4 12.9 (1.0) 129.5 Property, plant and equipment, net............................... 160.2 24.5 25.5 -- 210.2 Intercompany notes, net............. 85.6 -- (85.6) -- -- Investment in subsidiaries.......... 121.6 -- -- (121.6) -- -------- ------ ------ ------- -------- Total Assets.............. $1,097.7 $119.1 $ 88.5 $(126.3) $1,179.0 ======== ====== ====== ======= ======== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Loan payable...................... $ 96.0 $ -- $ -- $ -- $ 96.0 Accounts payable.................. 116.6 16.8 8.6 -- 142.0 Accrued and other................. 145.4 24.7 17.0 1.5 188.6 Current maturities and sinking fund requirements of long-term debt........................... 72.7 -- 0.2 -- 72.9 -------- ------ ------ ------- -------- Total Current Liabilities............. 430.7 41.5 25.8 1.5 499.5 Long-term debt...................... 101.2 -- 2.6 -- 103.8 Other non-current liabilities....... 282.6 8.0 8.1 -- 298.7 Shareholders' Investment............ 283.2 69.6 52.0 (127.8) 277.0 -------- ------ ------ ------- -------- Total Liabilities and Shareholders' Investment.............. $1,097.7 $119.1 $ 88.5 $(126.3) $1,179.0 ======== ====== ====== ======= ========
F-30 151 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING FINANCIAL POSITION SEPTEMBER 30, 1996 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) ASSETS Current Assets: Cash and cash equivalents.............. $ 54.5 $ 0.6 $ 40.4 $ -- $ 95.5 Receivables............................ 34.3 6.1 127.2 -- 167.6 Intercompany receivables (payables).... 30.6 0.8 (31.4) -- -- Inventories............................ 54.2 64.3 50.9 (4.3) 165.1 Other current assets................... 24.8 5.9 7.5 1.1 39.3 ------ ------ ------- ------- ------ Total Current Assets........... 198.4 77.7 194.6 (3.2) 467.5 Product tooling, net..................... 45.2 4.9 1.5 -- 51.6 Intangibles.............................. 0.6 28.4 9.3 -- 38.3 Pension and other assets................. 84.9 1.0 11.5 -- 97.4 Property, plant and equipment, net....... 155.6 29.8 33.5 -- 218.9 Intercompany notes, net.................. 122.2 (0.1) (122.1) -- -- Investment in subsidiaries............... 183.7 -- -- (183.7) -- ------ ------ ------- ------- ------ Total Assets................... $790.6 $141.7 $ 128.3 $(186.9) $873.7 ====== ====== ======= ======= ====== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Accounts payable....................... $ 63.3 $ 16.6 $ 10.1 $ -- $ 90.0 Accrued and other...................... 112.9 18.9 31.6 (0.3) 163.1 Current maturities and sinking fund requirements of long-term debt...... -- -- 0.2 -- 0.2 ------ ------ ------- ------- ------ Total Current Liabilities...... 176.2 35.5 41.9 (0.3) 253.3 Long-term debt........................... 174.7 -- 2.9 -- 177.6 Other non-current liabilities............ 199.4 0.6 5.4 (0.2) 205.2 Shareholders' Investment................. 240.3 105.6 78.1 (186.4) 237.6 ------ ------ ------- ------- ------ Total Liabilities and Shareholders' Investment..... $790.6 $141.7 $ 128.3 $(186.9) $873.7 ====== ====== ======= ======= ======
F-31 152 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING CASH FLOWS YEAR ENDED SEPTEMBER 30, 1997 PRE-MERGER AND POST-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)......................... $(75.9) $(50.7) $ 11.3 $ 36.2 $ (79.1) Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization............. 44.9 7.1 5.0 -- 57.0 Changes in current accounts excluding the effects of acquisitions and noncash transactions: Decrease (increase) in receivables...... (39.5) (32.0) 82.7 (1.6) 9.6 Decrease (increase) in intercompany accounts............................. 45.0 56.1 (101.1) -- -- Decrease (increase) in inventories...... 14.1 4.0 5.4 3.0 26.5 Decrease (increase) in other current assets............................... (0.5) 1.0 1.9 (2.8) (0.4) Increase (decrease) in accounts payable and accrued liabilities.............. 3.0 5.9 (15.8) 1.6 (5.3) Other, net.............................. (27.1) 7.5 (0.9) 3.0 (17.5) ------- ------ ------ ------- ------- Net cash provided by (used for) operating activities............. (36.0) (1.1) (11.5) 39.4 (9.2) CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling................................... (32.3) (2.4) (1.6) -- (36.3) Proceeds from sale of plant and equipment... 10.9 1.4 0.7 -- 13.0 Equity earnings -- subsidiaries............. 39.4 -- -- (39.4) -- Other, net.................................. (5.3) 2.0 0.5 -- (2.8) ------- ------ ------ ------- ------- Net cash provided by (used for) investing activities............. 12.7 1.0 (0.4) (39.4) (26.1) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt, including current maturities........................ 0.3 -- (0.3) -- -- Cash dividends paid......................... (6.0) -- -- -- (6.0) Other, net.................................. 1.8 -- 0.5 -- 2.3 ------- ------ ------ ------- ------- Net cash provided by (used for) financing activities............. (3.9) -- 0.2 -- (3.7) Exchange Rate Effect on Cash................ -- -- (2.1) -- (2.1) ------- ------ ------ ------- ------- Net decrease in Cash and Cash Equivalents... (27.2) (0.1) (13.8) -- (41.1) Cash and Cash Equivalents at Beginning of Year...................................... 54.5 0.6 40.4 -- 95.5 ------- ------ ------ ------- ------- Pre-Merger Cash and Cash Equivalents at End of Year............................... $ 27.3 $ 0.5 $ 26.6 $ -- $ 54.4 ======= ====== ====== ======= ======= - ----------------------------------------------------------------------------------------------------------------- Post-Merger Cash and Cash Equivalents prior to merger -- September 30, 1997........... $ 27.3 $ 0.5 $ 26.6 -- $ 54.4 Cash Flows from Financing Activities (Post Merger Company): Proceeds from short term borrowings......... 96.0 -- -- -- 96.0 Issuance of Post-Merger company common stock..................................... 283.2 69.6 42.5 (118.3) 277.0 Purchase of Pre-Merger company common stock..................................... (379.2) (69.6) (42.5) 118.3 (373.0) ------- ------ ------ ------- ------- Post-Merger Cash and Cash Equivalents at End of Year................................... $ 27.3 $ 0.5 $ 26.6 $ -- $ 54.4 ======= ====== ====== ======= =======
F-32 153 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING CASH FLOWS YEAR ENDED SEPTEMBER 30, 1996 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------- ------------ ------------ ------------ ------------ (DOLLARS IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)...................... $(10.2) $(11.4) $ (1.1) $ 15.4 $ (7.3) Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization.......... 41.6 6.9 6.2 -- 54.7 Restructuring charges.................. 12.9 -- 8.7 -- 21.6 Changes in current accounts excluding the effects of acquisitions and noncash transactions: Decrease (increase) in receivables....................... 35.0 26.8 (32.2) 2.8 32.4 Decrease (increase) in intercompany accounts.......................... 54.1 (32.9) (21.2) -- -- Decrease (increase) in inventories....................... 3.9 (1.3) 13.0 11.7 27.3 Decrease (increase) in other current assets.................... (4.5) -- 1.8 (0.9) (3.6) Increase (decrease) in accounts payable and accrued liabilities... 0.7 (1.0) (12.3) (2.5) (15.1) Other, net.......................... (59.3) 16.2 38.2 (14.0) (18.9) ------ ------ ------ ------ ------ Net cash provided by (used for) operating activities......... 74.2 3.3 1.1 12.5 91.1 CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling............................ (44.4) (4.6) (3.7) -- (52.7) Proceeds from sale of plant and equipment.............................. -- 1.6 1.1 -- 2.7 Equity earnings -- subsidiaries.......... 12.5 -- -- (12.5) -- Other, net............................... (0.4) (0.3) 0.2 -- (0.5) ------ ------ ------ ------ ------ Net cash provided by (used for) investing activities......... (32.3) (3.3) (2.4) (12.5) (50.5) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt, including current maturities..................... -- -- (0.2) -- (0.2) Cash dividends paid...................... (6.1) -- -- -- (6.1) Other, net............................... 3.4 -- -- -- 3.4 ------ ------ ------ ------ ------ Net cash provided by (used for) financing activities......... (2.7) -- (0.2) -- (2.9) Exchange Rate Effect on Cash............. -- -- (0.5) -- (0.5) ------ ------ ------ ------ ------ Net increase (decrease) in Cash and Cash Equivalents............................ 39.2 -- (2.0) -- 37.2 Cash and Cash Equivalents at Beginning of Year................................ 15.3 0.6 42.4 -- 58.3 ------ ------ ------ ------ ------ Cash and Cash Equivalents at End of Year................................ $ 54.5 $ 0.6 $ 40.4 $ -- $ 95.5 ====== ====== ====== ====== ======
F-33 154 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING CASH FLOWS YEAR ENDED SEPTEMBER 30, 1995 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)...................... $ 55.4 $ (2.0) $ 4.3 $ (6.3) $ 51.4 Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization.......... 35.8 6.9 4.9 -- 47.6 Changes in current accounts excluding the effects of acquisitions and noncash transactions: Decrease (increase) in receivables....................... (36.7) (1.0) 7.2 (1.9) (32.4) Decrease (increase) in intercompany accounts.......................... (25.2) 2.0 23.4 (0.2) -- Decrease (increase) in inventories....................... (12.3) (11.3) (9.5) 3.6 (29.5) Decrease (increase) in other current assets.................... (12.3) (0.4) (0.5) -- (13.2) Increase (decrease) in accounts payable and accrued liabilities... 16.8 9.5 (9.3) (2.9) 14.1 Other, net.......................... 19.7 0.5 (12.2) 5.4 13.4 ------ ------ ------ ------ ------ Net cash provided by (used for) operating activities......... 41.2 4.2 8.3 (2.3) 51.4 CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling............................ (50.6) (5.8) (10.1) -- (66.5) Proceeds from sale of plant and equipment.............................. 1.5 0.3 10.0 -- 11.8 Equity earnings -- subsidiaries.......... (2.3) -- -- 2.3 -- Other, net............................... (10.4) -- (0.7) -- (11.1) ------ ------ ------ ------ ------ Net cash provided by (used for) investing activities......... (61.8) (5.5) (0.8) 2.3 (65.8) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt, including current maturities..................... (0.9) -- (0.2) -- (1.1) Cash dividends paid...................... (8.0) -- -- -- (8.0) Other, net............................... (2.1) -- 3.1 -- 1.0 ------ ------ ------ ------ ------ Net cash provided by (used for) financing activities......... (11.0) -- 2.9 -- (8.1) Exchange Rate Effect on Cash............. -- -- 0.5 -- 0.5 ------ ------ ------ ------ ------ Net increase (decrease) in Cash and Cash Equivalents............................ (31.6) (1.3) 10.9 -- (22.0) Cash and Cash Equivalents at Beginning of Year................................ 46.9 1.9 31.5 -- 80.3 ------ ------ ------ ------ ------ Cash and Cash Equivalents at End of Year................................ $ 15.3 $ 0.6 $ 42.4 $ -- $ 58.3 ====== ====== ====== ====== ======
F-34 155 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS (UNAUDITED)
POST-MERGER COMPANY SIX MONTHS ENDED ---------------------------- MARCH 31 THREE MONTHS THREE MONTHS ------------------------- ENDED ENDED POST-MERGER PRE-MERGER ------------ ------------ COMPANY COMPANY MARCH 31, DECEMBER 31, ----------- ---------- 1998 1997 1998 1997 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net sales................................ $264.3 $211.2 $475.5 $434.1 Cost of goods sold....................... 204.2 173.7 377.9 374.9 ------ ------ ------ ------ Gross earnings......................... 60.1 37.5 97.6 59.2 Selling, general and administrative expense................................ 58.2 44.3 102.5 91.9 ------ ------ ------ ------ Earnings (loss) from operations........ 1.9 (6.8) (4.9) (32.7) Non-operating expense (income): Interest expense....................... 6.7 7.7 14.4 8.4 Other, net............................. (2.5) (2.4) (4.9) (21.3) ------ ------ ------ ------ 4.2 5.3 9.5 (12.9) ------ ------ ------ ------ Earnings (loss) before provision for income taxes........................ (2.3) (12.1) (14.4) (19.8) Provision for income taxes............... 1.0 0.8 1.8 1.8 ------ ------ ------ ------ Net earnings (loss)............ $ (3.3) $(12.9) $(16.2) $(21.6) ====== ====== ====== ====== Net earnings (loss) per share of common stock Basic.................................. $(0.16) $(0.63) $(0.79) $(1.07) ====== ====== ====== ====== Diluted................................ $(0.16) $(0.63) $(0.79) $(1.07) ====== ====== ====== ====== Average shares of common stock outstanding............................ 20.4 20.4 20.4 20.2
The accompanying notes are an integral part of these statements. F-35 156 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION (UNAUDITED)
(DOLLARS IN MILLIONS) ------------------------------------------- PRE-MERGER POST-MERGER COMPANY COMPANY ---------------------------- ----------- MARCH 31, MARCH 31 1998 SEPTEMBER 30, 1997 (UNAUDITED) 1997 (UNAUDITED) ASSETS Current assets: Cash and cash equivalents........................... $ 49.1 $ 54.4 $ 69.5 Receivables......................................... 179.3 153.2 161.7 Inventories Finished products................................... 79.4 62.1 64.5 Raw material, work in process and service parts..... 114.4 114.8 108.9 -------- -------- -------- Total inventories................................ 193.8 176.9 173.4 Other current assets.................................. 40.7 86.5 38.2 -------- -------- -------- Total current assets............................. 462.9 471.0 442.8 Product tooling, net.................................. 33.1 34.2 49.4 Goodwill.............................................. 247.1 250.2 28.6 Trademarks, patents and other intangibles............. 82.3 83.9 8.1 Other assets.......................................... 127.8 129.5 97.8 Plant and equipment at cost........................... 210.2 210.2 552.2 Less accumulated depreciation....................... (11.2) -- (343.5) -------- -------- -------- 199.0 210.2 208.7 -------- -------- -------- Total assets................................ $1,152.2 $1,179.0 $ 835.4 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Loan payable........................................ $ 220.7 $ 96.0 $ -- Accounts payable.................................... 66.6 142.0 83.3 Accrued and other................................... 200.2 182.0 146.5 Accrued income taxes................................ 5.9 6.6 9.8 Current maturities and sinking fund requirements of long-term debt................................... 11.2 72.9 6.0 -------- -------- -------- Total current liabilities........................ 504.6 499.5 245.6 Long-term debt........................................ 92.9 103.8 172.6 Postretirement benefits other than pensions........... 95.4 96.0 100.3 Other non-current liabilities......................... 202.2 202.7 106.7 Shareholders' Investment: Common stock and capital surplus.................... 277.1 277.0 115.2 Accumulated earnings employed in the business....... (16.2) -- 105.7 Cumulative translation adjustments.................. (3.8) -- (10.7) -------- -------- -------- Total shareholders' investment................... 257.1 277.0 210.2 -------- -------- -------- Total liabilities and shareholders' investment................................ $1,152.2 $1,179.0 $ 835.4 ======== ======== ========
The accompanying notes are an integral part of these statements. F-36 157 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31 MARCH 31 ------------------------- ------------------------- POST-MERGER PRE-MERGER POST-MERGER PRE-MERGER COMPANY COMPANY COMPANY COMPANY ----------- ---------- ----------- ---------- 1998 1997 1998 1997 (DOLLARS IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)........................... $ (3.3) $ (7.3) $(16.2) $(21.6) Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization............... 14.1 14.3 27.4 27.0 Changes in current accounts excluding the effects of acquisitions and noncash transactions: Decrease (increase) in receivables....... (52.0) (22.0) (27.6) 3.9 Decrease (increase) in inventories....... 3.5 0.3 (17.8) (9.3) Decrease in other current assets......... 13.9 2.3 45.7 0.8 Increase (decrease) in accounts payable and accrued liabilities................ 11.4 35.1 (57.1) (3.8) Other, net............................... (0.5) (6.0) (3.9) (5.9) ------ ------ ------ ------ Net cash provided by (used for) operating activities.............. (12.9) 16.7 (49.5) (8.9) CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling..................................... (5.6) (10.6) (11.9) (22.7) Proceeds from sale of plant and equipment..... 6.2 6.8 6.3 12.3 Other, net.................................... (0.3) (0.3) 0.5 (0.3) ------ ------ ------ ------ Net cash used for investing activities........................ 0.3 (4.1) (5.1) (10.7) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short-term debt............... 45.0 -- 124.7 -- Payments of long-term debt, including current maturities.................................. (7.4) -- (75.1) -- Cash dividends paid........................... -- (2.0) -- (6.0) Other, net.................................... 0.1 (0.2) 0.1 0.1 ------ ------ ------ ------ Net cash used for financing activities........................ 37.7 (2.2) 49.7 (5.9) Exchange Rate Effect on Cash.................. (0.1) (0.8) (0.4) (0.5) ------ ------ ------ ------ Net decrease in Cash and Cash Equivalents..... 25.0 9.6 (5.3) (26.0) Cash and Cash Equivalents at Beginning of Period...................................... 24.1 59.9 54.4 95.5 ------ ------ ------ ------ Cash and Cash Equivalents at End of Period.... $ 49.1 $ 69.5 $ 49.1 $ 69.5 ====== ====== ====== ====== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid............................... $ 5.6 $ 3.8 $ 12.8 $ 8.0 Income taxes paid........................... $ 1.1 $ 0.6 $ 2.4 $ 3.3 ====== ====== ====== ======
The accompanying notes are an integral part of these statements F-37 158 OUTBOARD MARINE CORPORATION CONDENSED STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' INVESTMENT (UNAUDITED)
ACCUMULATED EARNINGS ISSUED CAPITAL IN EXCESS EMPLOYED CUMULATIVE COMMON STOCK OF PAR VALUE IN THE TRANSACTION SHARES AMOUNT OF COMMON STOCK BUSINESS ADJUSTMENTS ------ ------ ----------------- ----------- ----------- (DOLLARS IN MILLIONS) BALANCE--SEPTEMBER 30, 1997......... 20.4 $ 0.2 $ 276.8 $ -- $ -- Net loss............................ -- -- -- $(16.2) -- Shares issued....................... -- -- 0.1 -- -- Translation adjustments............. -- -- -- -- (3.8) ----- ----- ------- ------ ------ Balance -- March 31, 1998........... 20.4 $ 0.2 $ 276.9 $(16.2) $ (3.8) ===== ===== ======= ====== ======
The accompanying notes are an integral part of these statements. F-38 159 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. MERGER WITH GREENMARINE ACQUISITION CORP. On September 12, 1997, Greenmarine Acquisition Corp. ("Greenmarine") acquired control of Outboard Marine Corporation (the "Pre-Merger Company") when shareholders tendered approximately 90 percent of the outstanding shares of the Pre-Merger Company's common stock to Greenmarine for $18 per share in cash. Greenmarine was formed solely to purchase the shares of the Pre-Merger Company and merged with and into the Pre-Merger Company in a non-taxable transaction on September 30, 1997. Outboard Marine Corporation was the surviving entity of the merger with Greenmarine (the "Post-Merger Company") (in either case, unless specifically referenced, Pre-Merger Company or Post-Merger Company are also defined as "OMC" or the "Company"). All of the outstanding Pre-Merger Company common stock was cancelled on September 30, 1997 and 20.4 million shares of new common stock were issued to Greenmarine Holdings LLC (the "Parent") the parent company of Greenmarine. Greenmarine's total purchase price of common stock and related acquisition costs amounted to $373.0 million. The Post-Merger Company Condensed Statement of Consolidated Financial Position as of March 31, 1998 and the related Post-Merger Company Condensed Statement of Consolidated Earnings for the three and six months ended March 31, 1998 and Consolidated Condensed Cash Flow for the six months ended March 31, 1998 are not comparable to the prior year because of purchase accounting adjustments. The acquisition and the merger were accounted for using the purchase method of accounting. Accordingly, the purchase price at September 30, 1997 has been allocated to assets acquired and liabilities assumed based on fair market values at the date of acquisition. The fair values of tangible assets acquired and liabilities assumed were $844.9 million and $902.0 million, respectively. In addition, $83.9 million of the purchase price was allocated to intangible assets for trademarks, patents and dealer network. Purchase accounting included liabilities of $136.9 million for implementation and execution of business reorganizations. The financial statements reflect the preliminary allocation of purchase price as the purchase price allocation has not been finalized. The excess purchase price over fair value of the net assets acquired was $250.2 million and has been classified as goodwill in the Statement of Consolidated Financial Position at September 30, 1997. The goodwill related to the acquisition will be amortized using the straight-line method over a period of 40 years. 2. 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/A for the year ended September 30, 1997. The 1998 interim results are not necessarily indicative of the results which may be expected for the remainder of the year. 3. SHORT-TERM BORROWINGS The Company became obligated under a credit agreement, as amended, which provides for loans of up to $150 million (the "Acquisition Debt"). Amounts outstanding under this credit agreement are secured by 20.4 million shares of common stock of the Post-Merger Company and bear interest at 10%. The Acquisition Debt matures on June 16, 1998. On November 12, 1997, the Company borrowed the remaining $54.0 million principal amount of Acquisition Debt in connection with the purchase of all properly tendered 7% convertible subordinated debentures of Outboard Marine Corporation due 2002. At March 31, 1998, the full $150 million principal amount of the Acquisition Debt was outstanding. F-39 160 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The full amount of the Acquisition Debt matures on June 16, 1998. The Company and its Parent believe the Company will be able to raise funds to refinance such debt through the sale of debt or equity in the public or private markets by the maturity date of the Acquisition Debt. Effective January 6, 1998, the Company entered into a $150 million Amended and Restated Loan and Security Agreement which expires December 31, 2000 and at March 31, 1998, $70.7 million was outstanding. Any loans outstanding under this agreement will be secured by the Company's inventory, receivables, intellectual property and other current assets and are guaranteed by certain of the Company's operating subsidiaries. Under the various credit agreements, the Company is required to meet certain financial covenants throughout the year. The Company is in compliance with terms and conditions of these agreements. 4. 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 $40 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. 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. 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. Once the Company becomes aware of its potential liability at a particular site, it uses its 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 accrues for normal operating and maintenance costs for site monitoring and compliance requirements. The Company also accrues for environmental close-down costs associated with discontinued operations or facilities, including the environmental costs of operation and F-40 161 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) maintenance until disposition. At March 31, 1998, the Company has accrued approximately $23 million for costs related to remediation at contaminated sites including operation and maintenance for continuing and closed-down operations. The possible recovery of insurance proceeds has not been considered in estimating contingent environmental liabilities. In the six months ended March 31, 1997, the Company recovered insurance proceeds of $6.1 million for prior environmental charges which is included in non-operating expense (income) in the Statement of Consolidated Earnings. 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. 5. PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(UNAUDITED) The following unaudited pro forma Condensed Statement of Consolidated Earnings (the "Pro Forma Statement") was prepared to illustrate the estimated effects of the merger with Greenmarine Acquisition Corp. as if the transaction had occurred for statement of consolidated earnings purposes as of the beginning of fiscal 1997. The pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable. The Pro Forma Statement does not purport to represent what the Company's results of operations would actually have been if such transactions in fact had occurred at the beginning of the period indicated or to project the Company's results of operation for any future period. The Pro Forma Statement includes adjustments, with respect to the merger, to reflect additional interest expense, depreciation expense and amortization of goodwill.
SIX MONTHS ENDED MARCH 31, 1997 ---------------- (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net sales.................................. $434.1 Cost of goods sold......................... 374.2 ------ Gross earnings........................... 59.9 Selling, general and administrative expense.................................. 95.6 ------ Earnings (Loss) from operations.......... (35.7) Interest expense........................... 14.5 Other (income) expense, net................ (21.3) ------ Loss before provision for income taxes... (28.9) Provision for income taxes................. 1.8 ------ Net loss................................. $(30.7) ------ Net loss per share of common stock (basic and diluted)............................. $(1.50) ------ Shares outstanding....................... 20.4 ------
6. STOCK OPTION PLAN On March 10, 1998, the Company adopted the Outboard Marine Corporation Personal Rewards and Opportunities Program ("PROP"). PROP was designed to recognize and reward, through cash bonuses, stock F-41 162 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) options and other equity-based awards, the personal contributions and achievements of key employees of the Company. All employees are eligible to participate in PROP. PROP replaced all long and short-term incentive plans of the Company. PROP provides for (i) cash and/or equity annual bonuses based on performance targets, and (ii) grants of stock options, shares of restricted stock, phantom shares of stock or stock appreciation rights. The aggregate number of shares of stock available for equity awards under PROP is 1,500,000 shares of currently authorized common stock of the Company. Grants under PROP are discretionary. Stock option grants under PROP through March 31, 1998 were 587,245, of which, 96,133 were vested upon grant. The remaining grants vest as follows: 94,445 in fiscal 1998, 176,667 in fiscal 1999, 121,115 in fiscal 2000, and 98,885 thereafter. The grants are exercisable at $18 per share and expire ten years after date of grant. The Company accounts for PROP under APB Opinion No. 25, and has not recorded any compensation expense for grants through March 31, 1998 as the exercise price of the stock option approximates fair market value of the Company's stock on the date of grant. 7. RECENTLY ADOPTED ACCOUNTING STANDARDS In fiscal 1999, the Company will implement three accounting standards issued by the Financial Accounting Standards Board, SFAS 130, "Reporting Comprehensive Income," SFAS 131, "Disclosures About Segments of an Enterprise and Related Information," and SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The Company believes that these changes will have no effect on its financial position or results of operations as they require only changes in or additions to current disclosures. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation Liabilities", which provides authoritative guidance on the recognition, measurement, display and disclosure of environmental remediation liabilities. The Company adopted SOP 96-1 in the quarter ended September 30, 1997. The change in accounting estimate required the Company to accrue for future normal operating and maintenance costs for site monitoring and compliance requirements at particular sites. The initial expense for implementation of SOP 96-1 was $7.0 million, charged to selling, general and administrative expense in the quarter ended September 30, 1997. 8. SUBSIDIARY GUARANTOR INFORMATION The Company issued $160,000,000 10 3/4% Senior Notes due 2008 ("Notes") on May 21, 1998. The Company's payment obligations under the Notes are to be guaranteed by certain of the Company's wholly-owned subsidiaries ("Guarantor Subsidiaries"). Such guarantees are full, unconditional, unsecured and unsubordinated on a joint and several basis by each of the Guarantor Subsidiaries. As of and through June 1, 1998, the Guarantor Subsidiaries were wholly-owned, but not the only wholly-owned, subsidiaries of the Company. Separate financial statements of the Guarantor Subsidiaries are not presented because management of the Company has determined that they are not material to investors. The following condensed consolidating financial data illustrates the composition of the Company ("Parent Company"), the Guarantor Subsidiaries and the Company's non-guarantor subsidiaries ("Other Subsidiaries"). Investments in subsidiaries are accounted for by the Company under the equity method of accounting for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are, therefore, reflected in the Company's investment accounts and earnings. The Company has not allocated goodwill to the Guarantor Subsidiaries or the other subsidiaries in association with the acquisition by and merger with Greenmarine. F-42 163 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING EARNINGS SIX MONTHS ENDED MARCH 31, 1998 POST-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) Net sales............................ $311.1 $211.2 $119.8 $(166.6) $475.5 Cost of goods sold................... 257.3 191.3 98.2 (168.9) 377.9 ------ ------ ------ ------- ------ Gross earnings..................... 53.8 19.9 21.6 2.3 97.6 Selling, general and administrative expense............................ 60.4 25.0 17.1 -- 102.5 ------ ------ ------ ------- ------ Earnings (loss) from operations.... (6.6) (5.1) 4.5 2.3 (4.9) Non-operating expense (income)....... 7.9 0.7 0.9 -- 9.5 Equity earnings (loss) -- subsidiaries............. (3.1) -- -- 3.1 -- ------ ------ ------ ------- ------ Earnings (loss) before provision for income taxes................ (17.6) (5.8) 3.6 5.4 (14.4) Provision for income taxes........... 0.9 -- 0.9 -- 1.8 ------ ------ ------ ------- ------ Net earnings (loss)........ $(18.5) $ (5.8) $ 2.7 $ 5.4 $(16.2) ====== ====== ====== ======= ======
F-43 164 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING EARNINGS SIX MONTHS ENDED MARCH 31, 1997 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) Net Sales................................. $254.1 $216.2 $113.9 $(150.1) $434.1 Cost of goods sold........................ 234.3 200.9 90.7 (151.0) 374.9 ------ ------ ------ ------- ------ Gross earnings.......................... 19.8 15.3 23.2 0.9 59.2 Selling, general and administrative expense................................. 44.7 26.0 21.2 -- 91.9 ------ ------ ------ ------- ------ Earnings (loss) from operations......... (24.9) (10.7) 2.0 0.9 (32.7) Non-operating expense (income)............ (14.9) 0.8 1.2 -- (12.9) Equity earnings (loss) -- subsidiaries.... (12.0) -- -- 12.0 -- ------ ------ ------ ------- ------ Earnings (loss) before provision for income taxes......................... (22.0) (11.5) 0.8 12.9 (19.8) Provision for income taxes................ 0.5 -- 1.3 -- 1.8 ------ ------ ------ ------- ------ Net earnings (loss)............. $(22.5) $(11.5) $ (0.5) $ 12.9 $(21.6) ====== ====== ====== ======= ======
F-44 165 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING FINANCIAL POSITION MARCH 31, 1998 POST-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) ASSETS Current assets: Cash and cash equivalents......... $ 36.4 $ 2.2 $ 10.5 $ -- $ 49.1 Receivables....................... 90.6 39.2 49.5 -- 179.3 Intercompany receivables (payables)..................... 8.4 (11.1) 2.7 -- -- Inventories....................... 92.2 48.9 53.4 (0.7) 193.8 Other current assets.............. 27.3 4.3 4.7 4.4 40.7 -------- ------ ------ ------- -------- Total current assets...... 254.9 83.5 120.8 3.7 462.9 Product tooling, net................ 29.6 3.1 0.4 -- 33.1 Intangibles......................... 322.8 -- 6.6 -- 329.4 Pension and other assets............ 116.8 0.2 11.7 (0.9) 127.8 Property, plant and equipment, net............................... 151.0 23.1 24.9 -- 199.0 Intercompany notes, net............. 65.6 -- (65.6) -- -- Investment in subsidiaries.......... 130.0 -- -- (130.0) -- -------- ------ ------ ------- -------- Total assets.............. $1,070.7 $109.9 $ 98.8 $(127.2) $1,152.2 ======== ====== ====== ======= ======== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Loan payable...................... $ 220.7 $ -- $ -- $ -- $ 220.7 Accounts payable.................. 49.2 10.6 6.8 -- 66.6 Accrued and other................. 161.6 27.8 15.1 1.6 206.1 Current maturities and sinking fund requirements of long-term debt........................... 11.0 -- 0.2 -- 11.2 -------- ------ ------ ------- -------- Total current liabilities............. 442.5 38.4 22.1 1.6 504.6 Long-term debt...................... 90.4 -- 2.5 -- 92.9 Other non-current liabilities....... 281.9 7.9 7.8 -- 297.6 Shareholders' investment............ 255.9 63.6 66.4 (128.8) 257.1 -------- ------ ------ ------- -------- Total liabilities and shareholders' investment.............. $1,070.7 $109.9 $ 98.8 $(127.2) $1,152.2 ======== ====== ====== ======= ========
F-45 166 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING FINANCIAL POSITION MARCH 31, 1997 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) ASSETS Current assets: Cash and cash equivalents.............. $ 31.3 $ 0.6 $ 37.6 $ -- $ 69.5 Receivables............................ 36.5 4.1 121.1 -- 161.7 Intercompany receivables (payables).... 21.4 (6.3) (15.1) -- -- Inventories............................ 62.4 65.8 50.1 (4.9) 173.4 Other current assets................... 29.6 5.2 2.3 1.1 38.2 ------ ------ ------- ------- ------ Total current assets........... 181.2 69.4 196.0 (3.8) 442.8 Product tooling, net..................... 44.2 3.9 1.3 -- 49.4 Intangibles.............................. 0.6 27.9 8.2 -- 36.7 Pension and other assets................. 82.2 0.4 15.0 0.2 97.8 Property, plant and equipment, net....... 152.2 28.4 28.1 -- 208.7 Intercompany notes, net.................. 110.7 -- (110.7) -- -- Investment in subsidiaries............... 193.8 -- -- (193.8) -- ------ ------ ------- ------- ------ Total assets................... $764.9 $130.0 $ 137.9 $(197.4) $835.4 ====== ====== ======= ======= ====== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Accounts payable....................... $ 59.8 $ 12.5 $ 11.0 $ -- $ 83.3 Accrued and other...................... 114.9 22.7 18.9 (0.2) 156.3 Current maturities and sinking fund requirements of long-term debt...... 5.8 -- 0.2 -- 6.0 ------ ------ ------- ------- ------ Total current liabilities 180.5 35.2 30.1 (0.2) 245.6 Long-term debt........................... 169.9 -- 2.7 -- 172.6 Other non-current liabilities............ 200.9 0.5 5.6 -- 207.0 Shareholders' investment................. 213.6 94.3 99.5 (197.2) 210.2 ------ ------ ------- ------- ------ Total liabilities and shareholders' investment..... $764.9 $130.0 $ 137.9 $(197.4) $835.4 ====== ====== ======= ======= ======
F-46 167 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING CASH FLOWS SIX MONTHS ENDED MARCH 31, 1998 POST-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss).................. $(18.5) $ (5.8) $ 2.7 $ 5.4 $(16.2) Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization...... 23.1 2.3 2.0 -- 27.4 Changes in current accounts excluding the effects of acquisitions and noncash transactions: Decrease (increase) in receivables................... (14.8) (1.2) (11.2) (0.4) (27.6) Decrease (increase) in intercompany accounts......... 17.2 (6.5) (10.7) -- -- Decrease (increase) in inventories................... (21.0) 12.9 (12.0) 2.3 (17.8) Decrease (increase) in other current assets................ 45.5 0.5 0.1 (0.4) 45.7 Increase (decrease) in accounts payable and accrued liabilities................... (52.1) (4.1) (2.4) 1.5 (57.1) Other, net...................... (10.0) 5.5 5.9 (5.3) (3.9) ------ ------ ------ ----- ------ Net cash provided by (used for) operating activities............... (30.6) 3.6 (25.6) 3.1 (49.5) CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling........................ (8.8) (1.9) (1.2) -- (11.9) Proceeds from sale of plant and equipment.......................... 4.9 0.2 1.2 -- 6.3 Equity earnings -- subsidiaries...... 3.1 -- -- (3.1) -- Other, net........................... 3.3 (0.2) (2.6) -- 0.5 ------ ------ ------ ----- ------ Net cash provided by (used for) investing activities............... 2.5 (1.9) (2.6) (3.1) (5.1) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short-term debt...... 124.7 -- -- -- 124.7 Payments of long-term debt, including current maturities................. (75.0) -- (0.1) -- (75.1) Other, net........................... (12.5) -- 12.6 -- 0.1 ------ ------ ------ ----- ------ Net cash provided by (used for) financing activities............... 37.2 -- 12.5 -- 49.7 Exchange Rate Effect on Cash......... -- -- (0.4) -- (0.4) ------ ------ ------ ----- ------ Net increase (decrease) in Cash and Cash Equivalents................... 9.1 1.7 (16.1) -- (5.3) Cash and Cash Equivalents at Beginning of Period................ 27.3 0.5 26.6 -- 54.4 ------ ------ ------ ----- ------ Cash and Cash Equivalents at End of Period............................. $ 36.4 $ 2.2 $ 10.5 $ -- $ 49.1 ====== ====== ====== ===== ======
F-47 168 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATING CASH FLOWS SIX MONTHS ENDED MARCH 31, 1997 PRE-MERGER COMPANY
PARENT GUARANTOR OTHER CONSOLIDATED COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL (DOLLARS IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)...................... $(22.5) $(11.5) $ (0.5) $ 12.9 $(21.6) Adjustments to reconcile net earnings (loss) to net cash provided by operations: Depreciation and amortization.......... 19.6 4.1 3.3 -- 27.0 Changes in current accounts excluding the effects of acquisitions and noncash transactions: Decrease (increase) in receivables....................... (11.8) 2.0 13.7 -- 3.9 Decrease (increase) in intercompany accounts (6.8) 7.0 (0.2) -- -- Decrease (increase) in inventories....................... (8.3) (1.4) (0.2) 0.6 (9.3) Decrease (increase) in other current assets............................ (4.7) 0.7 4.8 -- 0.8 Increase (decrease) in accounts payable and accrued liabilities... 2.2 (0.3) (8.3) 2.6 (3.8) Other, net.......................... 16.5 (1.0) (17.3) (4.1) (5.9) ------ ------ ------ ------ ------ Net cash provided by (used for) operating activities......... (15.8) (0.4) (4.7) 12.0 (8.9) CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling................................ (20.3) (1.3) (1.1) -- (22.7) Proceeds from sale of plant and equipment.............................. 7.6 1.7 3.0 -- 12.3 Equity earnings -- subsidiaries.......... 12.0 -- -- (12.0) -- Other, net............................... (0.9) -- 0.6 -- (0.3) ------ ------ ------ ------ ------ Net cash provided by (used for) investing activities......... (1.6) 0.4 2.5 (12.0) (10.7) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short-term debt.......... 0.2 -- (0.2) -- -- Cash dividends paid...................... (6.0) -- -- -- (6.0) Other, net............................... -- -- 0.1 -- 0.1 ------ ------ ------ ------ ------ Net cash provided by (used for) financing activities......... (5.8) -- (0.1) -- (5.9) Exchange Rate Effect on Cash............. -- -- (0.5) -- (0.5) ------ ------ ------ ------ ------ Net decrease in Cash and Cash Equivalents............................ (23.2) -- (2.8) -- (26.0) Cash and Cash Equivalents at Beginning of Period................................. 54.5 0.6 40.4 -- 95.5 ------ ------ ------ ------ ------ Cash and Cash Equivalents at End of Period................................. $ 31.3 $ 0.6 $ 37.6 $ -- $ 69.5 ====== ====== ====== ====== ======
F-48 169 APPENDIX A PROJECTED FINANCIAL INFORMATION THE PROJECTIONS ARE FORWARD-LOOKING STATEMENTS BASED UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES THAT, WHILE PRESENTED WITH NUMERICAL SPECIFICITY AND CONSIDERED REASONABLE BY THE COMPANY, ARE INHERENTLY SPECULATIVE IN NATURE AND SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE AND OPERATIONAL UNCERTAINTIES, CONTINGENCIES AND RISKS, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. IT CAN BE EXPECTED THAT ONE OR MORE OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS WILL PROVE NOT TO BE ACCURATE AND THAT UNANTICIPATED EVENTS AND CIRCUMSTANCES WILL OCCUR. AS A RESULT, ACTUAL RESULTS WILL VARY FROM THE PROJECTIONS AND THOSE VARIATIONS MAY BE MATERIAL DUE TO VARIOUS RISKS, INCLUDING, THE INABILITY OF THE COMPANY'S MANAGEMENT TEAM TO SUCCESSFULLY RESTRUCTURE ITS BOAT AND ENGINE MANUFACTURING OPERATIONS IN THE MANNER AND WITHIN THE TIME FRAME PRESENTLY CONTEMPLATED. CONSEQUENTLY, THIS PROSPECTUS SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE FINANCIAL PROJECTIONS WILL BE ACHIEVED. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH PUBLISHED GUIDELINES OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, OR ANY OTHER REGULATORY OR PROFESSIONAL AGENCY OR BODY OR GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. NEITHER ARTHUR ANDERSEN LLP, THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, NOR THE INITIAL PURCHASERS HAVE COMPILED OR EXAMINED THE PROJECTIONS AND, ACCORDINGLY, THEY EXPRESS NO OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO, ASSUME NO RESPONSIBILITY FOR, AND DISCLAIM ANY ASSOCIATION WITH, THE PROJECTIONS. FURTHERMORE, THE COMPANY DOES NOT INTEND TO UPDATE OR REVISE THE PROJECTIONS TO REFLECT EVENTS OR CIRCUMSTANCES EXISTING OR ARISING AFTER THE DATE OF THIS PROSPECTUS OR TO REFLECT THE OCCURRENCE OF ANY UNANTICIPATED EVENTS. POTENTIAL INVESTORS ARE CAUTIONED NOT TO RELY ON THE PROJECTIONS IN MAKING AN INVESTMENT DECISION. INDEX TO PROJECTED FINANCIAL INFORMATION
PAGE Introduction................................................ A-2 Summary of Significant Financial Projection Assumptions..... A-2 Summary Projected Financial Information..................... A-3 Discussion of Significant Projection Assumptions............ A-4
A-1 170 INTRODUCTION The projected financial information included in this Prospectus (the "Projections") represents the Company's best estimates as of May 1998 (except with respect to interest expense, which has been updated to reflect the final terms of the Initial Offering) of the Company's results of operations for the fiscal year ending September 30, 1998. The Projections were prepared by the Company and are qualified by, and subject to, the assumptions set forth below and the other information contained in this Prospectus. No independent expert has reviewed the Projections. The Arthur Andersen LLP reports included in this Prospectus relate to the Company's historical financial information. They do not extend to the projected financial data and should not be read to do so. The Projections should be read together with the information contained in "Risk Factors--Risks Related to Projections," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and Unaudited Pro Forma Condensed Consolidated Financial Statements. SUMMARY OF SIGNIFICANT FINANCIAL PROJECTION ASSUMPTIONS The Company's ability to achieve the projected financial results is dependent upon a number of factors. For instance, the Projections assume the success of the Company's operating strategy. The success of the Company's operating strategy assumes, among other things, that the Company: (i) successfully stems the recent loss in engine and boat market share and increases retail sales of its engine and boat products; (ii) successfully rationalizes its brand names and pricing strategy; (iii) successfully launches its new product line and pricing strategy for future model years; (iv) successfully reduces its purchasing costs through the integration of purchasing functions between the Boat and Engine Groups; (v) completes the previously announced closure of its boat manufacturing operations in Old Hickory, Tennessee and successfully consolidates its boat manufacturing operations in Murfreesboro, Tennessee and Columbia, South Carolina; (vi) successfully rationalizes its boat manufacturing operations and completes the lean manufacturing initiatives with respect to the Engine Group's manufacturing facility in Calhoun, Georgia; and (vii) is able to successfully implement the new management team's strategic initiatives without additional cash costs in excess of management's current strategic plan. See "Business--Business Strategy." The success of a significant portion of the management team's strategy is subject to uncertainties and contingencies beyond the Company's control, and no assurance can be given that the strategy will be effective or that the anticipated benefits from the strategy will be realized in the period for which the Projections have been prepared. The Projections also assume that: (i) there will be no material change in the existing political, fiscal or economic conditions, including changes in foreign exchange rates, that are material to the Company's revenues or costs; (ii) there will be no material change in legislation or regulations or the administration thereof, or changes in technology or industry standards that will have an unexpected effect on the business of the Company; (iii) there will be no material response by any of the Company's competitors to the Company's strategic initivities; (iv) there will be no material change in any of the Company's existing material contracts or customer relationships; (v) there will be no change in generally accepted accounting principles that will have a material effect on the financial results of the Company; (vi) there will be no labor or other disturbances that would materially affect the operations or revenues of the Company; (vii) there will be no material costs, gains or losses in revenues arising from legal proceedings; (viii) there will be no material change in economic conditions which might adversely affect demand or overall consumer confidence; (ix) there will be no further decline in the Company's market share; (x) there will be no abnormal weather conditions; and (xi) there will be no inflation. Although no standard rate of inflation was applied to the Projections, each number was projected to reflect the actual number at such point in the future to which such figure relates. See Notes to Consolidated Financial Statements for a review of other assumptions underlying the Projections. The assumptions described herein are those that the Company believes are significant to the Projections. However, not all assumptions used in preparing the Projections have been set forth herein. The failure by the Company to successfully implement its operating strategy or the occurrence of any of the events or circumstances set forth in the immediately preceding paragraph or elsewhere herein could result in the Company's actual operating results being different than the Projections, and such differences may be adverse and material. A-2 171 SUMMARY PROJECTED FINANCIAL INFORMATION
ACTUAL SIX PROJECTED SIX PROJECTED FISCAL MONTHS ENDED MONTHS ENDING YEAR ENDING MARCH 31, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 -------------- ------------------ ------------------ (DOLLARS IN MILLIONS) INCOME STATEMENT DATA: Revenue..................................... $475.5 $594.1 $1,069.6 Cost of goods sold.......................... 377.9 454.4 832.3 Gross earnings.............................. 97.6 139.7 237.3 Selling, general and administrative......... 102.5 107.6 210.1 Earnings (loss) from operations............. (4.9) 32.1 27.2 OTHER DATA: EBITDA...................................... 21.7 66.7 88.4 Interest expense............................ 14.4 14.9 29.3 Capital expenditures........................ 11.9 15.5 27.4 Gross earnings margin....................... 20.5% 23.5% 22.2% EBITDA margin............................... 4.6% 11.2% 8.3%
A-3 172 DISCUSSION OF SIGNIFICANT PROJECTION ASSUMPTIONS ACCOUNTING POLICIES The significant accounting policies described in Note 1 of the "Notes to Consolidated Financial Statements" have been applied in preparing these Projections. REVENUE The Company anticipates significant improvements in sales for both its Engine and Boat Groups during the second half of fiscal 1998 as compared to the Company's actual results for the first half of 1998. The recreational marine industry in general is seasonal, with peak revenue periods typically occurring during the Spring and Summer seasons. The Company forecasts that sales volume will increase substantially during the second half of the year in accordance with historical seasonal patterns. The following table presents the revenue contribution expected for the second half of 1998 relative to the average contribution in the second half of fiscal years 1993 through 1996. Fiscal 1997 was excluded from this analysis in order to avoid distorting the average with the financial results of a fiscal year in which the Company's operations were disrupted with its pending sale. As shown in the table, the Company's revenue expectations for the second half of 1998 relative to the first half is in line with historical averages. SEASONAL REVENUE CONTRIBUTION
QUARTERLY PERCENT CONTRIBUTION -------------------------------- Q1 Q2 Q3 Q4 FIRST HALF SECOND HALF -- -- -- -- ---------- ----------- CONSOLIDATED REVENUE Average ('93-'96)....................... 18.8% 25.6% 27.7% 27.9% 44.4% 55.6% 1998E................................... 19.7 24.7 27.9 27.7 44.5 55.5 TOTAL ENGINE REVENUE Average ('93-'96)....................... 18.5 25.1 27.4 29.0 43.5 56.5 1998E................................... 19.5 23.5 28.4 28.6 43.0 57.0 BOAT REVENUE Average ('93-'96)....................... 19.9 26.9 28.4 24.8 46.8 53.2 1998E................................... 20.3 28.3 26.5 24.9 48.6 51.4
Engine Group Engine Group revenues are expected to increase by 32.5%, from $340.6 million during the first half of fiscal 1998 to $451.4 million during the second half of the year. Management expects that the Engine Group revenue increase will be driven primarily by an increase of 18.5% in engine units sold during the third quarter, as the Company enters its peak selling season during the Spring and Summer seasons. The unit volume increase is expected to be offset partially by a 3.0% decrease in average engine unit prices during the third quarter and a 3.4% decrease during the fourth quarter. The anticipated third quarter reduction is due to a product mix shift toward lower horsepower engines, which typically occurs as the peak selling season begins in the northern part of the United States. The projected fourth quarter decrease is attributable to the Company's 1999 model year rollout in July. Boat Group The Company forecasts that Boat Group revenues will increase by 5.6%, from $135.0 million during the first half of fiscal 1998 to $142.6 million during the second half of the fiscal year. The expected revenue increase is driven primarily by (i) a 5.1% increase in boat units sold from the first six months of fiscal 1998 to the second half of the fiscal year as the Company enters its peak selling season and introduces its new products in the Summer, and (ii) an increase of 1.8% in average unit prices during the third quarter, offset by a 10.8% A-4 173 decrease in average unit price during the fourth quarter related to the Company's discounting in connection with the introduction of its new models during the Summer. GROSS PROFIT Engine Group Engine Group gross profit is expected to increase from $80.6 million during the first half of fiscal 1998 to $117.0 million, attributable to the expected growth in Engine Group revenue. As a percent of revenue, Engine Group gross margins are anticipated to improve slightly to 26.3% of revenue in the third quarter and 25.5% in the fourth quarter as compared to 20.8% in the first quarter and 26.0% in the second quarter, due to the Company's expected increase in Engine Group revenue offset partially by increased costs of goods sold. Specifically, average engine labor and material cost per unit are forecasted to increase 6.3% during the third quarter of fiscal 1998 and decrease 1.0% during the fourth quarter. The anticipated increase in the third quarter is due to (i) ongoing quality improvements implemented by the Company's new management team as part of its strategic initiatives and (ii) higher sales of the Company's new FICHT fuel injection engines, which have a higher cost per unit. The projected decrease in costs during the fourth quarter is due to a shift in product mix towards the value-based models highlighted during the Summer promotional programs. The expected improvement in Engine Group gross margins is also attributable to the higher mix of sales of parts and accessories, which are forecasted to increase to 26.5% of overall Engine Group revenue during the third quarter and 29.4% during the fourth quarter from 20.2% in the first quarter and 22.2% in the second quarter. These increases in parts and accessories sales in the third and fourth quarters are due to the seasonal nature of marine engine repair and tune up activity, which takes place predominantly in the Spring and Summer months. Given the higher gross margins generated by sales of parts and accessories relative to engine unit sales, the increase in mix toward parts and accessories sales increases overall Engine Group gross margins. The Engine Group's forecasted gross margin in the third and fourth quarter is also anticipated to benefit from the ability of the Company to leverage its increased sales over its relatively stable manufacturing overhead. The following table summarizes the Engine Group's average gross margin contribution and margin percentages between 1993 and 1996 as compared to actual and projected gross margin contribution and percentages for fiscal 1998. As shown in the table, the Company generated gross margins in the first half of 1998 that were 2.0% higher than the average first half margin in 1993 through 1996; however, the Company's second half margin projections conservatively project a gross margin in the second half of 1998 that is only 0.3% higher than the average for 1993 through 1996. ENGINE GROUP SEASONAL GROSS MARGIN TRENDS
PERCENT CONTRIBUTION MARGIN PERCENTAGE ------------------------ ------------------------ FIRST HALF SECOND HALF FIRST HALF SECOND HALF ---------- ----------- ---------- ----------- Gross Profit Average ('93-'96).................................. 39.5% 60.5 21.7% 25.6% 1998E.............................................. 40.8 59.2 23.7 25.9 Difference......................................... 1.3 (1.3) 2.0 0.3
Boat Group The Company anticipates significant improvements in the Boat Group's gross margin in connection with its recently announced strategy to rationalize and realign its boat brands to lower manufacturing costs. Gross margins reached 12.7% in the first half of 1998, and are projected to increase by 3 percentage points to 15.7% in the second half of 1998, resulting in a 14.3% gross margin assumed for the full year of fiscal 1998. The Company forecasts a 4.5% decrease in Boat Group labor and material costs per unit during the third quarter and a further 2.5% decrease during the fourth quarter due to its boat rationalization strategy. The Company also anticipates a decrease in shipping costs, to 1.2% of revenue during the third quarter and 1.6% during the fourth quarter as compared to 2.2% during the first quarter and 1.4% during the second quarter, as the Company is able to leverage transportation efficiencies during the peak selling season. The projected A-5 174 improvement in Boat Group gross margins is also attributable to the Company's ability to leverage relatively stable manufacturing overhead over a growing revenue base. The Company expects $0.5 million in annual cost savings from the closing of its boat manufacturing operations in Old Hickory, Tennessee and the consolidation of its freshwater fishing boat operations in Murfreesboro, Tennessee and its saltwater fishing boat operations in Columbia, South Carolina. Management anticipates further gross profit improvements as the Company expands its boat rationalization strategy. EBITDA Engine Group The Engine Group is anticipated to generate EBITDA of $65.4 million, or 14.5% of revenue, during the second half of fiscal 1998, compared to $30.7 million, or 9.0% of revenue, during the first half of 1998. The Engine Group typically generates a larger amount of EBITDA during the second half of the year due to seasonality patterns. The anticipated improvement in EBITDA margin during the second half of fiscal 1998 compared to the first half of 1998 is driven primarily by the following factors: (i) decrease in selling expense to 14.0% of net engine revenue in the third quarter and 14.6% in the fourth quarter following the annual peak in selling expense during the second quarter (16.7% of engine revenue) due to the number of boat shows and promotions from January through March; (ii) improvement in warranty expense from 3.7% of engine revenue in the second quarter to 2.6% in the third quarter and 2.4% in the fourth quarter, due to over-accruals in the first half of fiscal 1998. The following table summarizes the Engine Group's average EBITDA margin contribution and margin percentages between 1993 and 1996 as compared to actual and projected EBITDA margin contribution and percentages for fiscal 1998. As shown in the table, the Company generated EBITDA margins in the first half of 1998 that were 3.1% higher than the average first half margin in 1993 through 1996; however, the Company's second half EBITDA margin projections conservatively project an EBITDA margin in the second half of 1998 that is only 2.5% higher than the average for 1993 through 1996. ENGINE GROUP SEASONAL EBITDA MARGIN TRENDS
PERCENT CONTRIBUTION MARGIN PERCENTAGE ------------------------ ------------------------ FIRST HALF SECOND HALF FIRST HALF SECOND HALF ---------- ----------- ---------- ----------- EBITDA Average (93-96).................................... 26.2% 73.8% 5.9% 12.0% 1998E.............................................. 32.0 68.0 9.0 14.5 Difference......................................... 5.8 (5.8) 3.1 2.5
Boat Group The Boat Group is forecasted to generate EBITDA of $4.9 million, or 3.4% of revenue, during the second half of fiscal 1998 as compared to a loss of $5.0 million, or (3.7%) of revenue, during the first half of the year. In addition to the improvement in profitability which typically occurs during the Company's peak selling season during the second half of the year, the Company forecasts steady improvement in Boat Group selling and warranty expense, from 14.1% of revenue in the first quarter and 13.3% in the second quarter to 11.4% in the third quarter and 9.4% in the fourth quarter, attributable primarily to the Company's boat rationalization strategy. In addition, the Company anticipates lower selling expenses in the Boat Group during the second half of fiscal 1998 because a larger share of the trade show and promotional spending is spent during the Company's second fiscal quarter. INTEREST EXPENSE The Projections give pro forma effect to the Initial Offering and the use of net proceeds therefrom, as if the Initial Offering had been completed as of March 31, 1998. The Projections assume that the net proceeds from the Initial Offering are used to repay all outstanding principal and interest on the Term Loan. The A-6 175 average interest rate on the Credit Agreement is assumed to be 8.5% based on the terms of the Credit Agreement. Interest income on average cash balances is projected using rates averaging between 4% and 6%. The Projections assume that the costs associated with the issuance of the Notes are amortized over a ten-year period and the costs associated with the Credit Agreement are amortized over a three-year period. CAPITAL EXPENDITURES The Projections assume total capital expenditures during fiscal 1998 of approximately $27.4 million, $15.3 million of which is assumed to be related to capital equipment and $12.1 million of which is assumed to be related to tooling. Of the total capital expenditures, the Company spent approximately $11.9 million during the six months ended March 31, 1998. The Company anticipates that approximately $24.9 million of the total forecasted capital expenditures will be related to the Company's Engine Group, and $2.5 million will be spent in the Boat Group. In addition, the Company forecasts that approximately $2.6 million of total capital expenditures will be related to converting the Company's engine product lines to include FICHT technology. Management estimates that maintenance capital spending for fiscal 1998 will be approximately $14.6 million and that $5.9 million has been spent by the Company as of March 31, 1998. A-7 176 ====================================================== NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SUBSIDIARY GUARANTORS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO BUY SUCH SECURITIES TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE Available Information................. iii Summary............................... 1 Risk Factors.......................... 15 The Greenmarine Acquisition........... 23 Use of Proceeds....................... 23 Capitalization........................ 24 Selected Historical Consolidated Financial Data...................... 25 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 27 Business.............................. 35 Management............................ 49 Security Ownership of Certain Beneficial Owners and Management.... 61 Certain Relationships and Related Transactions........................ 63 The Exchange Offer.................... 64 Description of Notes.................. 72 Description of Certain Other Indebtedness........................ 101 Certain Federal Income Tax Consequences........................ 104 Plan of Distribution.................. 105 Book-Entry; Form and Transfer......... 105 Legal Matters......................... 108 Independent Accountants............... 108 Glossary of Marine Terms.............. 109 Unaudited Pro Forma Condensed Consolidated Financial Statements... PF-1 Index to Consolidated Financial Statements.......................... F-1 Projected Financial Information....... A-1
====================================================== ====================================================== $160,000,000 OUTBOARD MARINE CORPORATION 10 3/4% SENIOR NOTES DUE 2008 -------------------- PROSPECTUS -------------------- , 1998 ====================================================== 177 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Outboard Marine Corporation (the "Registrant") is a Delaware corporation. Subsection (b)(7) of Section 102 of the Delaware General Corporation Law (the "DGCL"), enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director to the corporation or its stockholders for monetary damages for violations of the director's fiduciary duty, except (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. Article 6 of the Registrant's Restated Certificate of Incorporation has eliminated the personal liability of directors to the fullest extent permitted by law. Subsection (a) of Section 145 of the DGCL empowers a corporation to indemnify any director, officer, employee or agent or former director, officer, employee or agent who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding; provided that such director, officer, employee or agent acted in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, provided further that such director, officer, employee or agent had no reasonable cause to believe his conduct was unlawful. Subsection (b) of Section 145 empowers a corporation to indemnify any director, officer, employee or agent, or former director, officer, employee or agent, who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit provided that such director, officer, employee or agent acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such director, officer, employee or agent shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such director, officer, employee or agent is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 145 further provides that to the extent a director, officer, employee or agent of a corporation has been successful on the merits in defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith; that indemnification and advancement of expenses provided for, by, or granted pursuant to, Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liabilities under Section 145. II-1 178 All of the directors and officers of the Company are covered by insurance policies maintained and held in effect by the Company against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1(a) -- Restated Certificate of Incorporation of the Company (filed as Exhibit 3(A) to the Company's Annual Report on Form 10-K/A for the year ended September 30, 1997 (the "1997 10-K"))* (b) -- Certificate of Incorporation of OMC Fishing Boat Group, Inc., as amended (c) -- Certificate of Incorporation of OMC Aluminum Boat Group, Inc., as amended (d) -- Certificate of Incorporation of OMC Recreational Boat Group, Inc. (e) -- Certificate of Incorporation of OMC Latin America/Caribbean, Inc., as amended (f) -- Certificate of Limited Partnership of Recreational Boat Group Limited Partnership 3.2(a) -- Amended and Restated by-laws of the Company (filed as Exhibit 3(B) to the 1997 10-K)* (b) -- By-laws of OMC Fishing Boat Group, Inc. (c) -- By-laws of OMC Aluminum Boat Group, Inc. (d) -- By-laws of OMC Recreational Boat Group, Inc. (e) -- By-laws of OMC Latin America/Caribbean, Inc. (f) -- Agreement of Limited Partnership of Recreational Boat Group Limited Partnership, as amended 4.1 -- Indenture for the 10 3/4% Senior Notes due 2008, Series A (the "Old Notes") and 10 3/4% Senior Notes due 2008, Series B (the "Exchange Notes"), dated as of May 27, 1998 among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as trustee 4.2 -- Form of Old Note (included in Exhibit 4.1) 4.3 -- Form of Exchange Note 4.4 -- Form of Subsidiary Guarantee (included in Exhibit 4.1) 4.5 -- Registration Rights Agreement dated as of May 27, 1998 among the Company, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co., Inc. 4.6 -- Depositary Agreement dated as of May 27, 1998 among the Company, State Street Bank and Trust Company, as trustee, NationsBank, N.A., as administrative agent, and State Street Bank and Trust Company, as depositary agent 4.7 -- With respect to rights of holders of the Company's 9 1/8% Sinking Fund Debentures due 2017, reference is made to Exhibit 4(A) to the Company's Registration Statement Number 33-12759 filed on March 20, 1987* 4.8 -- With respect to rights of holders of the Company's 7% Convertible Subordinated Debentures due 2002, reference is made to the Company's Registration Statement Number 33-47354 filed on April 28, 1992* 4.9 -- With respect to the Supplemental Indenture dated September 30, 1997 related to the Company's 7% Convertible Subordinated Debentures due 2002, reference is made to Exhibit 4(C) to the 1997 10-K* 5 -- Opinion of Weil, Gotshal & Manges LLP as to the validity of the Exchange Notes to be issued by the Company 10.1 -- With respect to Severance Agreements between the Company and certain elected and appointed officers and certain other executives of the Company, reference is made to Exhibits 99.3 and 99.4 of the Company's Schedule 14D-9 filed with the Securities and Exchange Commission on July 15, 1997*
II-2 179
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.2 -- With respect to the Consulting Agreement for Mr. Bowman dated September 24, 1997, reference is made to Exhibit 10(I) to the 1997 10-K* 10.3 -- With respect to the Employment Agreement of Mr. Hines dated October 6, 1997, reference is made to Exhibit 10(J) to the 1997 10-K* 10.4 -- With respect to the Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated January 6, 1998, reference is made to Exhibit 10(E) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1997* 10.5 -- First Amendment to Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated May 21, 1998 10.6 -- With respect to the Employment Agreement of Mr. Jones dated March 10, 1998, reference is made to Exhibit 10(F) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998* 10.7 -- With respect to the Personal Rewards and Opportunity Program, reference is made to Exhibit 10(G) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998* 11 -- Computation of per share income (loss) (filed as Exhibit 11 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998)* 12 -- Statement of Computation of Ratios of Earnings to Fixed Charges 21 -- Subsidiaries of Registrant (filed as Exhibit 21 to the 1997 10-K)* 23.1 -- Consent of Arthur Andersen LLP 23.2 -- Consent of Weil, Gotshal & Manges LLP (included in the opinion filed as Exhibit 5 to this Registration Statement) 24 -- Power of Attorney (included on signature pages of this Part II) 25 -- Statement of Eligibility and Qualification of State Street Bank and Trust Company, as Trustee on Form T-1 with respect to the 10 3/4% Senior Notes due 2008 27 -- Financial Data Schedule 99.1 -- Form of Letter of Transmittal 99.2 -- Form of Notice of Guaranteed Delivery 99.3 -- Form of Instructions to Registered Holders and/or Book-Entry Facility Participant from Beneficial Owner 99.4 -- Form of Exchange Agent Agreement
- --------------- * Incorporated herein by reference. (b) Schedules All Schedules are omitted as the required information is presented in the Registrant's consolidated financial statements or related notes or such schedules are not applicable. ITEM 22. UNDERTAKINGS. (a) Each of the undersigned registrants hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which individually or in the aggregate, represent a fundamental change in the information set forth in the registration II-3 180 statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such posteffective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Each of the undersigned registrants hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of a registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions, or otherwise, each of the registrants has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (d) Each of the undersigned registrants hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (e) Each of the undersigned registrants hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-4 181 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Outboard Marine Corporation has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Waukegan, State of Illinois. Date: June 29, 1998 OUTBOARD MARINE CORPORATION By: /s/ ANDREW P. HINES ------------------------------------ Andrew P. Hines Executive Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below hereby constitutes Andrew P. Hines and Leslie M. Savickas, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution, to sign for such person and in such person's name, place and stead, in any and all capacities, any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite to be done, as fully to all intents and purposes as such person might or could do personally, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement and the foregoing Power of Attorney has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALFRED D. KINGSLEY Chairman of the Board June 29, 1998 - --------------------------------------------------- Alfred D. Kingsley /s/ GARY K. DUBERSTEIN Vice Chairman and Assistant June 29, 1998 - --------------------------------------------------- Secretary Gary K. Duberstein /s/ RICHARD KATZ Vice Chairman June 29, 1998 - --------------------------------------------------- Richard Katz /s/ RON HIRAM Director June 29, 1998 - --------------------------------------------------- Ron Hiram /s/ DAVID D. JONES, JR. President and Chief Executive June 29, 1998 - --------------------------------------------------- Officer; Director (Principal David D. Jones, Jr. Executive Officer) /s/ ANDREW P. HINES Executive Vice President and Chief June 29, 1998 - --------------------------------------------------- Financial Officer; Director Andrew P. Hines (Principal Financial Officer) /s/ JOSEPH P. TOMCZAK Vice President and Controller June 29, 1998 - --------------------------------------------------- Joseph P. Tomczak
II-5 182 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, OMC Fishing Boat Group, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Waukegan, State of Illinois. Date: June 29, 1998 OMC FISHING BOAT GROUP, INC. By: /s/ ROBERT S. ROMANO, ESQ. ------------------------------------ Robert S. Romano, Esq. President and Secretary POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below hereby constitutes David D. Jones, Jr. and Robert S. Romano, Esq., and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution, to sign for such person and in such person's name, place and stead, in any and all capacities, any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite to be done, as fully to all intents and purposes as such person might or could do personally, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement and the foregoing Power of Attorney has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DAVID D. JONES, JR. Chairman of the Board June 29, 1998 - --------------------------------------------------- David D. Jones, Jr. /s/ ROBERT S. ROMANO, ESQ. President and Secretary; Director June 29, 1998 - --------------------------------------------------- (Principal Executive Officer) Robert S. Romano, Esq. /s/ GORDON G. REPP Assistant Secretary and Treasurer; June 29, 1998 - --------------------------------------------------- Director (Principal Financial Gordon G. Repp Officer) /s/ PAULA S. RUMMAGE Vice President June 29, 1998 - --------------------------------------------------- Paula S. Rummage
II-6 183 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, OMC Aluminum Boat Group, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Waukegan, State of Illinois. Date: June 29, 1998 OMC ALUMINUM BOAT GROUP, INC. By: /s/ ROBERT S. ROMANO, ESQ. ------------------------------------ Robert S. Romano, Esq. President and Secretary POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below hereby constitutes David D. Jones, Jr. and Robert S. Romano, Esq., and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution, to sign for such person and in such person's name, place and stead, in any and all capacities, any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite to be done, as fully to all intents and purposes as such person might or could do personally, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement and the foregoing Power of Attorney has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DAVID D. JONES, JR. Chairman of the Board June 29, 1998 - --------------------------------------------------- David D. Jones, Jr. /s/ ROBERT S. ROMANO, ESQ. President and Secretary; Director June 29, 1998 - --------------------------------------------------- (Principal Executive Officer) Robert S. Romano, Esq. /s/ GORDON G. REPP Assistant Secretary and Treasurer; June 29, 1998 - --------------------------------------------------- Director (Principal Financial Gordon G. Repp Officer) /s/ STEVE M. HANSLEY Vice President, Finance June 29, 1998 - --------------------------------------------------- Steve M. Hansley
II-7 184 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, OMC Latin America/ Caribbean, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Waukegan, State of Illinois. Date: June 29, 1998 OMC LATIN AMERICA/CARIBBEAN BY: /s/ RAYMOND M. CARTADE ---------------------------------------------- Raymond M. Cartade President
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below hereby constitutes David D. Jones, Jr. and Raymond M. Cartade, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution, to sign for such person and in such person's name, place and stead, in any and all capacities, any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite to be done, as fully to all intents and purposes as such person might or could do personally, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement and the foregoing Power of Attorney has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DAVID D. JONES, JR. Chairman of the Board June 29, 1998 - --------------------------------------------------- David D. Jones, Jr. /s/ ROBERT S. ROMANO, ESQ. Vice President and Secretary; June 29, 1998 - --------------------------------------------------- Director Robert S. Romano, Esq. /s/ GORDON G. REPP Assistant Secretary; Director June 29, 1998 - --------------------------------------------------- Gordon G. Repp /s/ RAYMOND M. CARTADE President June 29, 1998 - --------------------------------------------------- (Principal Executive Officer) Raymond M. Cartade /s/ JULIO DE ALMEIDA PIRES Vice President and Treasurer June 29, 1998 - --------------------------------------------------- (Principal Financial Officer) Julio de Almeida Pires
II-8 185 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, OMC Recreational Boat Group, Inc. has duly caused this Registration Statement to be signed on its behalf, and as general partner on behalf of Recreational Boat Group Limited Partnership, by the undersigned, thereunto duly authorized, in the City of Waukegan, State of Illinois. Date: June 29, 1998 OMC RECREATIONAL BOAT GROUP, INC. By: /s/ ROBERT S. ROMANO, ESQ. ---------------------------------------------- Robert S. Romano, Esq. Vice President and Secretary RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP By: OMC Recreational Boat Group, Inc., General Partner By: /s/ ROBERT S. ROMANO, ESQ. ---------------------------------------------- Robert S. Romano, Esq. Vice President and Secretary
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below hereby constitutes David D. Jones, Jr. and Robert S. Romano, Esq., and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution, to sign for such person and in such person's name, place and stead, in any and all capacities, any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite to be done, as fully to all intents and purposes as such person might or could do personally, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement and the foregoing Power of Attorney has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DAVID D. JONES, JR. Chairman of the Board and President June 29, 1998 - --------------------------------------------------- (Principal Executive Officer) David D. Jones, Jr. /s/ ROBERT S. ROMANO, ESQ. Vice President and Secretary; June 29, 1998 - --------------------------------------------------- Director Robert S. Romano, Esq. /s/ GORDON G. REPP Assistant Secretary; Director June 29, 1998 - --------------------------------------------------- (Principal Financial Officer) Gordon G. Repp
II-9 186 EXHIBIT INDEX
EXHIBIT EXEMPTION NUMBER DESCRIPTION INDICATION ------- ----------- ---------- 3.1(a) -- Restated Certificate of Incorporation of the Company (filed as Exhibit 3(A) to the Company's Annual Report on Form 10-K/A for the year ended September 30, 1997 (the "1997 10-K"))*.................................................... (b) -- Certificate of Incorporation of OMC Fishing Boat Group, Inc., as amended............................................ (c) -- Certificate of Incorporation of OMC Aluminum Boat Group, Inc., as amended............................................ (d) -- Certificate of Incorporation of OMC Recreational Boat Group, Inc......................................................... (e) -- Certificate of Incorporation of OMC Latin America/Caribbean, Inc., as amended............................................ (f) -- Certificate of Limited Partnership of Recreational Boat Group Limited Partnership................................... 3.2(a) -- Amended and Restated by-laws of the Company (filed as Exhibit 3(B) to the 1997 10-K)*............................. (b) -- By-laws of OMC Fishing Boat Group, Inc...................... (c) -- By-laws of OMC Aluminum Boat Group, Inc..................... (d) -- By-laws of OMC Recreational Boat Group, Inc................. (e) -- By-laws of OMC Latin America/Caribbean, Inc................. (f) -- Agreement of Limited Partnership of Recreational Boat Group Limited Partnership, as amended............................. 4.1 -- Indenture for the 10 3/4% Senior Notes due 2008, Series A (the "Old Notes") and 10 3/4% Senior Notes due 2008, Series B (the "Exchange Notes"), dated as of May 27, 1998 among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as trustee................................... 4.2 -- Form of Old Note (included in Exhibit 4.1).................. 4.3 -- Form of Exchange Note....................................... 4.4 -- Form of Subsidiary Guarantee (included in Exhibit 4.1)...... 4.5 -- Registration Rights Agreement dated as of May 27, 1998 among the Company, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co., Inc......................................................... 4.6 -- Depositary Agreement dated as of May 27, 1998 among the Company, State Street Bank and Trust Company, as trustee, NationsBank, N.A., as administrative agent, and State Street Bank and Trust Company, as depositary agent................. 4.7 -- With respect to rights of holders of the Company's 9 1/8% Sinking Fund Debentures due 2017, reference is made to Exhibit 4(A) to the Company's Registration Statement Number 33-12759 filed on March 20, 1987*........................... 4.8 -- With respect to rights of holders of the Company's 7% Convertible Subordinated Debentures due 2002, reference is made to the Company's Registration Statement Number 33-47354 filed on April 28, 1992*.................................... 4.9 -- With respect to the Supplemental Indenture dated September 30, 1997 related to the Company's 7% Convertible Subordinated Debentures due 2002, reference is made to Exhibit 4(C) to the 1997 10-K*.............................. 5 -- Opinion of Weil, Gotshal & Manges LLP as to the validity of the Exchange Notes to be issued by the Company..............
187
EXHIBIT EXEMPTION NUMBER DESCRIPTION INDICATION ------- ----------- ---------- 10.1 -- With respect to Severance Agreements between the Company and certain elected and appointed officers and certain other executives of the Company, reference is made to Exhibits 99.3 and 99.4 of the Company's Schedule 14D-9 filed with the Securities and Exchange Commission on July 15, 1997*........ 10.2 -- With respect to the Consulting Agreement for Mr. Bowman dated September 24, 1997, reference is made to Exhibit 10(I) to the 1997 10-K*........................................... 10.3 -- With respect to the Employment Agreement of Mr. Hines dated October 6, 1997, reference is made to Exhibit 10(J) to the 1997 10-K*.................................................. 10.4 -- With respect to the Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated January 6, 1998, reference is made to Exhibit 10(E) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1997*............................ 10.5 -- First Amendment to Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated May 21, 1998.......................................... 10.6 -- With respect to the Employment Agreement of Mr. Jones dated March 10, 1998, reference is made to Exhibit 10(F) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998*............................... 10.7 -- With respect to the Personal Rewards and Opportunity Program, reference is made to Exhibit 10(G) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998*............................................. 11 -- Computation of per share income (loss) (filed as Exhibit 11 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998)*....................... 12 -- Statement of Computation of Ratios of Earnings to Fixed Charges..................................................... 21 -- Subsidiaries of Registrant (filed as Exhibit 21 to the 1997 10-K)*...................................................... 23.1 -- Consent of Arthur Andersen LLP.............................. 23.2 -- Consent of Weil, Gotshal & Manges LLP (included in the opinion filed as Exhibit 5 to this Registration Statement).................................................. 24 -- Power of Attorney (included on signature pages of this Part II)......................................................... 25 -- Statement of Eligibility and Qualification of State Street Bank and Trust Company, as Trustee on Form T-1 with respect to the 10 3/4% Senior Notes due 2008........................ 27 -- Financial Data Schedule..................................... 99.1 -- Form of Letter of Transmittal............................... 99.2 -- Form of Notice of Guaranteed Delivery....................... 99.3 -- Form of Instructions to Registered Holders and/or Book-Entry Facility Participant from Beneficial Owner.................. 99.4 -- Form of Exchange Agent Agreement............................
- --------------- * Incorporated herein by reference. EX-3.1.B 2 CERTIFICATE OF INCORPORATION 1 Exhibit 3.1(b) Certificate of Incorporation of OMC Fishing (see attached) 2 Exhibit 3.1(b) CERTIFICATE OF AMENDMENT of CERTIFICATE OF INCORPORATION ***** STRATOS BOATS, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, at a meeting duly held or by the unanimous written consent of its members, filed with the minutes of the board, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of STRATOS BOATS, INC. be amended by changing the First Article thereof so that, as amended, said Article shall be and read as follows: "FIRST: The name of the corporation shall be OMC FISHING BOAT GROUP, INC." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said STRATOS BOATS, INC. has caused this certificate to be signed by Howard Malovany, its Vice President and attested by D. Jeffrey Baddeley, its Assistant Secretary, this 3rd day of April, 1992. 3 STRATOS BOATS, NC. By /s/ Howard Malovany ------------------- Howard Malovany Vice President ATTEST: By /s/ Jeffrey Baddeley -------------------- D. Jeffrey Baddeley Assistant Secretary 2 4 CERTIFICATE OF MERGER OF HYDRA-SPORTS, INC INTO STRATOS BOATS INC. ********** The undersigned corporation DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger is as follows: NAME STATE OF INCORPORATION STRATOS BOATS, INC. Delaware HYDRA-SPORTS, INC Tennessee SECOND: That an Agreement of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of section 252 of the General Corporation Law of Delaware. THIRD: That the name of the surviving corporation of the merger is STRATOS BOATS, INC. a Delaware corporation. FOURTH: That the Certificate of Incorporation of STRATOS BOATS, INC, a Delaware corporation which is surviving the merger, shall be the Certificate of Incorporation of the surviving corporation. 5 FIFTH: That the executed Agreement of Merger is on file at the principal place of business of the surviving corporation, the address of which is 100 Sea-Horse Drive, Waukegan, IL 60085. SIXTH: That a copy of the Agreement of Merger will be furnished on request and without cost, to any stockholder of any constituent corporation. SEVENTH: The authorized capital stock of each foreign corporation which is a party to the merger is as follows:
Corporation Class Number of Shares Par Value Per Share or Statement that shares are without par value HYDRA SPORTS, INC. Common 1,000 Without par value
Dated: September 25, 1991 STRATOS BOATS, INC. By /s/ L. Earl Bentz --------------------- L. Earl Bentz, President ATTEST: By /s/ Howard Malovany ------------------- Howard Malovany, Assistant Secretary 2 6 CERTIFICATE OF CHANGE OF REGISTERED AGENT AND REGISTERED OFFICE ********** STRATOS BOATS, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: The present registered agent of the corporation is United States Corporation Company and the present registered office of the corporation is in the county of Kent. The Board of Directors of STRATOS BOATS, INC. adopted the following resolution on the 18th day of April, 1988. Resolved, that the registered office of STRATOS BOATS, INC. in the state of Delaware be and it hereby is changed to Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, and the authorization of the present registered agent of this corporation be and the same is hereby withdrawn, and THE CORPORATION TRUST COMPANY, shall be and is hereby constituted and appointed the registered agent of this corporation at the address of its registered office. 7 IN WITNESS WHEREOF, STRATOS BOATS, INC. has caused this statement to be signed by Dennis E. McArdle its Vice President and attested by Howard Malovany, its Secretary this 18th day of April, 1988. By /s/ Dennis E. McArdle --------------------- Vice President ATTEST: By /s/ Howard Malovany ------------------- Assistant Secretary 2 8 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF OMC ACQUISITIONS, INC. ----------------------------------------- Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware ----------------------------------------- We, Samuel J. Winett, Vice President and Howard Malovany, Secretary of OMC Acquisitions, Inc., a corporation existing under the laws of the State of Delaware, do hereby certify as follows: FIRST: That the name of the corporation is OMC Acquisitions, Inc. SECOND: That the Certificate of Incorporation of the corporation was filed by the Secretary of State of Delaware on the 29th day of December, 1986. THIRD: That the Certificate of Incorporation of said Corporation has been amended as follows: Article FIRST of the corporation's Certificate of Incorporation shall be changed to read as follows: "FIRST: The name of the corporation is Stratos Boats, Inc." 9 FOURTH: That such amendment has been duly adopted in accordance with provisions of the General Corporation Law of the State of Delaware by the unanimous written consent of the holders of all outstanding shares entitled to vote. IN WITNESS WHEREOF, we have signed this certificate this 24th day of February, 1987. OMC ACQUISITIONS, INC By:/s/ Samuel J. Winett -------------------- Vice President, Samuel J. Winett ATTEST: /s/ Howard Malovany ------------------- Secretary, Howard Malovany 2 10 CERTIFICATE OF INCORPORATION OF OMC ACQUISITIONS, INC. ********** THE UNDERSIGNED, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the corporation is OMC Acquisitions, Inc. SECOND: The registered office of the corporation is to be located at 229 South State Street, in the City of Dover, in the County of Kent, in the State of Delaware. The name of its registered agent at that address is the United States Corporation Company. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The total number of common shares of stock which the corporation is authorized to issue is 100 and the par value of each of such shares if $1.00. FIFTH: The names and addresses of the persons who are to serve as directors until the first annual meeting of the 11 stockholders or until respective successors are elected and qualified are as follows: J. C. Chapman 100 Sea Horse Drive Waukegan, Illinois 60085 S.J. Winett 100 Sea Horse Drive Waukegan, Illinois 60085 D.E. McArdle 100 Sea Horse Drive Waukegan, Illinois 60085 SIXTH: The name and address of the Sole Incorporator are as follows: Lindsay E. Roberts 8000 Sears Tower Chicago, Illinois 60606 SEVENTH: The number of directors of the corporation shall be such as from time to time shall be fixed by, or in the manner provided in, the by-laws. Election of directors need not be by ballot unless the by-laws so provide. EIGHTH: The Board of Directors shall have power without the assent or vote of the stockholders to make, alter, amend, change, add to or repeal the by-laws of the corporation. NINTH: The corporation is to have perpetual existence. IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of December, 1986 /s/ Lindsay E Roberts --------------------- Lindsay E Roberts Sole Incorporator 2 EX-3.1.C 3 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1(c) Certificate of Incorporation of OMC Aluminum (see attached) 2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION ********** OMCGB, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, by the unanimous written consent of its members, filed with the minutes of the Board, a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of OMCGB, INC. be amended by changing the FIRST Article thereof so that, as amended, said Article shall be and read as follows: "The name of the corporation is OMC ALUMINUM BOAT GROUP, INC." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. 3 THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General corporation Law of the State of Delaware. IN WITNESS WHEREOF, said OMCGB, INC. has caused this certificate to be signed by Howard Malovany, its President (or Vice-President) and attested by D.J. Baddeley, its Secretary (or Assistant Secretary), this 21st day of October, 1991. OMCGB, INC. By /s/ Howard Malovany --------------------- Howard Malovany Vice President & Secretary ATTEST: By /s/ D.J. Baddeley -------------------- Secretary (or Assistant Secretary) D.J. Baddeley, Assistant Secretary 2 4 CERTIFICATE OF INCORPORATION OF OMCGB INC 1. The name of the corporation is: OMCGB INC. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is One Thousand (1,000) and the par value of each of such shares is One Dollar ($1.00) amounting in the aggregate to One Thousand Dollars ($1,000.00). 5. The board of directors is authorized to make, alter or repeal the by-laws of the corporation. Election of directors need not be by written ballot. 6. The name and mailing address of the incorporator is: V.A. Brookens Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 23rd day of March, 1990. /s/ V.A. Brookens ----------------- V.A. Brookens 5 CERTIFICATE OF MERGER CARL A. LOWE INDUSTRIES, INC. AND SEA NYMPH, INC. INTO OMCG INC ********** The undersigned corporation DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger is as follows: NAME STATE OF INCORPORATION CARL A. LOWE INDUSTRIES, INC. Missouri SEA NYMPH, INC. Nevada OMCGB INC. Delaware SECOND: That an Agreement of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of section 252 of the General Corporation Law of Delaware. THIRD: That the name of the surviving corporation of the merger is OMCGB INC., a Delaware corporation. FOURTH: That the Certificate of Incorporation of OMCGB INC., a Delaware corporation which is surviving the merger, shall be the Certificate of Incorporation of the surviving corporation. 6 FIFTH: That the executed Agreement of Merger is on file at the principal place of business of the surviving corporation, the address of which is 100 Sea-Horse Drive, Waukegan, IL 60085. SIXTH: That a copy of the Agreement of Merger will be furnished on request and without cost, to any stockholder of any constituent corporation. SEVENTH: The authorized capital stock of each foreign corporation which is a party to the merger is as follows:
Corporation Class Number of Shares Par Value per share or statement that shares are without par value CARL A. LOWE A Common 150,000 1.00 INDUSTRIES, INC, B Common 150,000 1.00 SEA NYMPH, INC. Common 1,000 1.00
Dated: September 25, 1991 OMCGB INC. By /s/ William J. Ek ----------------------- William J. Ek, President ATTEST: By /s/ Howard Malovany -------------------- Howard Malovany, Secretary 2 EX-3.1.D 4 CERTIFIACE OF INCORPORATION 1 EXHIBIT 3.1(d) Certificate of Incorporation of OMC Recreational (see attached) 2 CERTIFICATE OF INCORPORATION OF OMC RECREATIONAL BOAT GROUP, INC FIRST: The name of the Corporation is OMC Recreational Boat Group, Inc. (hereinafter the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL"). FOURTH: Total number of shares of stock which the Corporation shall have authority to issue is 1000 shares of Common Stock, each having a par value of one penny ($O.1). FIFTH: The name and mailing address of the Sole Incorporator is as follows: Name Mailing Address ---- --------------- Catherine D. Ledyard P.O. Box 636 Wilmington, DE 19899 SIXTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the 3 Corporation and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: (1) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. (2) The directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation. (3) The number of directors of the Corporation shall be as from time to time fixed by or in the manner provided in, the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide. (4) No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. (5) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as nay 2 4 be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted. SEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by such Board of Directors or in the By-Laws of the Corporation. EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the GCL, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 23rd day of September 1993. /s/ Catherine D. Ledyard ------------------------ Catherine D. Ledyard Sole Incorporator 3 EX-3.1.E 5 CERTIFICATE OF INCORPORATION 1 Exhibit 3.1(e) Certificate of Incorporation of OMC LAC (see attached) 2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION * * * * * OUTBOARD MARINE INTERNATIONAL, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware. DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of OUTBOARD MARINE INTERNATIONAL, INC. be amended by changing the First Article thereof so that, as amended, said Article shall be and read as follows: "The name of the corporation is OMC LATIN AMERICA/CARIBBEAN INC." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given written consent to said amendment in accordance with the provisions of section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly in accordance with the applicable provisions of 242 and 228 of the General Corporation Law of the Delaware. IN WITNESS WHEREOF, said OUTBOARD MARINE INTERNATIONAL, INC. has caused this certificate to be signed by D.L. Jacobson, 3 (Vice) President and attested by Howard Malovany, its (Asst.) Secretary, this 31st day of December, 1990. OUTBOARD MARINE INTERNATIONAL, INC. By /s/ D.L. Jacobson (Vice) President ATTEST: By /s/ Howard Malovany (Asst.) Secretary 2 4 CERTIFICATE OF INCORPORATION OF OUTBOARD MARINE INTERNATIONAL, INC. * * * * FIRST: The name of the corporation is OUTBOARD MARINE INTERNATIONAL, INC. SECOND: Its principal office in the State of Delaware is located at No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name and address of its resident agent is The Corporation Trust Company, No. 100 West Tenth Street, Wilmington 99, Delaware. THIRD: The nature of the business, or objects or purposes to be transacted, promoted or carried on are: To manufacture, purchase, receive, import or otherwise acquire, own, hold, use, and otherwise deal in and with, sell, export, lease, mortgage, pledge or otherwise dispose of goods, wares, merchandise, articles, materials and personal property of all kinds, and to carry on any of the trades, businesses, undertakings or functions that are in any manner incidental or contributory thereto. To establish, build, take, receive, lease as lessee and otherwise acquire, own, hold, operate, conduct, use, maintain, improve, sell, convey, mortgage, pledge, lease as lessor and 5 otherwise dispose of stores, offices, warehouses, buildings, structures, machinery, equipment and facilities of all kinds. To borrow or raise moneys for any of the purposes of the corporation. To carry on all or any of its business within the geographical limits of North, Central or South America, or in the West Indies. In general, to have and exercise all of the powers conferred by law upon corporations organized under the act herein referred to, and to do all the things hereinbefore set forth to the same extent as natural persons could do. FOURTH: The total number of shares of stock which the corporation shall have authority to issue is fifteen thousand (15,000) and the par value of each of such shares is Ten Dollars ($10.00) amounting in the aggregate to One Hundred Fifty Thousand Dollars ($150,000.00). FIFTH: The minimum amount of capital with which the corporation will commence business is One Thousand Dollars ($1,000.00). SIXTH: The names and places of residence of the incorporators are as follows: NAMES RESIDENCES A. D. Atwell Wilmington, Delaware F. J. Obara, Jr. Wilmington, Delaware S. H. Livesay Wilmington, Delaware 2 6 SEVENTH: The corporation is to have perpetual existence. EIGHTH: The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. NINTH: In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized: To make, alter or repeal the by-laws of the corporation. To authorize and cause to be executed mortgages and liens upon the real and personal property of the corporation. To set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. By resolution passed by a majority of the whole board, to designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in the resolution or in the by-laws of the corporation, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the 3 7 by-laws of the corporation or as may be determined from time to time by resolution adopted by the board of directors. When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, to sell, lease or exchange all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as its board of directors shall deem expedient and for the best interests of the corporation. TENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the implication of trustees in dissolution or of any receiver or receivers appointed for the corporation under the provisions of Section 279 of Title 8 of the Delaware Code 4 8 order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. ELEVENTH: Meetings of stockholders may be held outside the State of Delaware, if the by-laws so provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Election of directors need not be by ballot unless the by-laws of the corporation shall so provide. TWELFTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter 5 9 prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set our hands and seals this 4th day of September, A.D. 1964. A. D. ATWELL (SEAL) F. J. OBARA, JR. (SEAL) S. H. LIVESAY (SEAL) 6 10 STATE OF DELAWARE ) ) SS: COUNTY OF NEW CASTLE ) BE IT REMEMBERED that on this 4th day of September, A. D. 1964, personally came before me, a Notary Public for the State of Delaware, A. D. Atwell, F. J. Obara, Jr. and S. H. Livesay all of the parties to the foregoing certificate of incorporation, known to me personally to be such, and severally acknowledged the said certificate to be the act and deed of the signers respectively and that the facts therein stated are truly set forth. GIVEN under my hand and seal of office the day and year aforesaid. HOWARD K. WEBB NOTARY PUBLIC EX-3.1.F 6 CERTIFICATE OF LIMITED PARTNERSHIP 1 Exhibit 3.1(f) Certificate of Limited Partnership of RBGLP (see attached) 2 CERTIFICATE OF LIMITED PARTNERSHIP OF RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP The undersigned, being the sole general partner of Recreational Boat Group Limited Partnership, and desiring to form a limited partnership pursuant to the laws of the State of Delaware, certifies as follows: 1. The name of the limited partnership is Recreational Boat Group Limited Partnership. 2. The address of the registered office in the State of Delaware is 1209 Orange Street, City of Wilmington in the County of New Castle. The nature of the registered agent at the address is The Corporation Trust Company. 3. The name and address of each general partner is as follows: OMC Recreational Boat Group, Inc 100 Sea-Horse Drive Waukegan, IL 60085 Date: September 24 1993 OMC RECREATIONAL BOAT GROUP, INC Robert D. Randolph By: /s/ Robert D. Randolph Its: Chairman EX-3.2.B 7 BY-LAWS OF OMC FISHING BOAT GROUP, INC. 1 Exhibit 3.2(b) BYLAWS of OMC Fishing Group, Inc. ARTICLE I Location Section 1. The principal office of the corporation shall be located in the City of Wilmington, New Castle County, Delaware. Section 2. The corporation shall have such other offices, either in or outside of the State of Delaware, as the Board of Directors, the Chief Executive Officer or the Chief Operating Officer shall from time to time direct. ARTICLE II Stockholders Section 1. The Board of Directors shall determine the place, which may be in or outside of the State of Delaware, for holding any meeting of the stockholders of the corporation. Section 2. No change of the time or place for the annual meeting for the election of Directors shall be made within 60 days of the day on which such election is to be held unless required by law. If any change is required, notice of such change shall be given by the Secretary of the corporation to each stockholder entitled to notice thereof no less than 20 days before such election is to be held. Section 3. The annual meeting of stockholders shall be held on the third Thursday in January in each year, if not a holiday. If such day is a holiday, the meeting shall be held on the first day thereafter that is not a holiday, Saturday or Sunday or at such time, which shall not be more than 30 days from the date of the original meeting or the immediately preceding adjournment, as may be set by the Board of Directors. At the annual meeting, the stockholders shall elect Directors and transact such other and proper business as may come before the meeting. 2 Section 4. Special meetings of stockholders, for any purpose other than the election of Directors, may be held at such time, on such date and at such place as shall be specified in the notice of such meeting. Special meetings of stockholders may be called by the Chairman of the Board, the President, or by three-quarters of the Board of Directors. 3 Section 5. The holders of a majority of the shares of common stock entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of stockholders. A majority of the quorum shall decide any matter properly brought before the meeting, except as may otherwise be required by these Bylaws, by the Certificate of Incorporation or by statute. If a quorum is not present at any such meeting, a majority of those stockholders present, in person or by proxy, shall have the power to adjourn the meeting from time to time without notice, other than announcement at the meeting, until a quorum shall be present. At any adjourned meeting, any business may be transacted which might have been transacted at the original or immediately preceding adjourned meeting. Section 6. At each meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy or other writing, duly executed by a stockholder, provided such proxy or other writing is not dated more than 3 years prior to said meeting, unless such proxy specifically provides for a longer period. Execution of such proxy or other writing may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such proxy or other writing or causing his or her signature to be affixed to such proxy or other writing by any reasonable means including, but not limited to, by facsimile signature. A stockholder may authorized another person(s) to act for him as proxy or other writing by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or other writing or to a proxy or other writing solicitation firm, proxy or other writing support service organization or like agent duly authorized by the person who will be the holder of the proxy or other writing to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the proxy or other writing or transmission 3 4 created pursuant to the above may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original proxy or other writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original proxy or other writing or transmission. 4 5 Section 7. Written notice of each annual or special meeting of stockholders shall be prepared and mailed by or shall be caused to be prepared and mailed by the Secretary of the corporation. These notices shall be mailed to the address of each stockholder as it appears on the books and records of the corporation as of the record date for such meeting. The notice for any annual meeting shall be mailed no less than 10 days and no more than 60 days before the meeting. The notice for any special meeting shall be mailed no less than 10 days and no more than 60 days before such special meeting, and shall state the purpose or purposes of such meeting. In no event shall any irregularity in such notice affect the validity of any annual meeting of stockholders or any proceeding at any such meeting duly constituted. Section 8. The Chairman of the Board shall act as chairman at all meetings of stockholders. In the absence of the Chairman of the Board, the President shall preside. In the absence of the President, a Vice President, as designated by the Board of Directors, shall preside and, in the absence of any such designation, a Vice President, in the order of seniority as Vice President, shall preside. In the absence of any Vice President, the Board of Directors shall designate any other Director, officer or employee of the corporation to preside at such meetings. The Secretary shall act as secretary at all stockholders and Directors meetings, and, upon request, at the meetings of the committees of the Board of Directors. In the absence of the Secretary, the Board of Directors may designate an Assistant Secretary to act as secretary at such meetings and, in the absence of any such designation, an Assistant Secretary, in order of seniority as Assistant Secretary, shall act as secretary at such meetings. Section 9. The Board of Directors, in advance of any meeting of stockholders, may appoint one or more Inspectors of Election ("Inspectors") to act at the meeting and make a written report thereof. If Inspectors are not so appointed or if any person so appointed fails to appear, the Chairman of the meeting may appoint one or more Inspectors to act at the meeting. Each Inspector shall, before undertaking to perform the duties of an Inspector, take and sign an oath to execute the duties of Inspector faithfully, honestly and impartially, according to the best of such Inspector's skill and ability. The date and time of the opening and the closing of the polls for each matter upon which the 5 6 stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies, votes or other writings purporting to vote, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls. The Inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, shall receive vote, ballots or consents, shall hear and determine all challenges and questions arising in connection with the right to vote, shall count and tabulate all votes, ballots or consents, certify their determination of the number of shares represented at the meeting and perform such acts as are proper to conduct the election or vote with fairness to all stockholders and. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, and information provided in accordance with Article II, Section 6 of these Bylaws, ballots and the regular books and records of the Company, except that the Inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the Inspectors consider other reliable information for the limited purpose permitted herein, the Inspectors at the time they make their certification pursuant to this Section 9 shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the Inspectors belief that such information is accurate and reliable. Section 10. At any annual meeting of stockholders, only that business which is properly brought before the meeting shall be conducted. To be properly brought before the meeting, such business must be specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors or otherwise properly brought before the meeting by the Board of Directors or by a stockholder. For a stockholder to properly bring business before the meeting, the stockholder must have given written notice thereof; such notice to be received by the Secretary, Outboard Marine Corporation, at the corporation's principal executive offices, no less than 60 days prior to the date 6 7 one year from the date of the immediately preceding annual meeting of stockholders. The notice must contain a brief description of the business intended to be brought before the meeting, the stockholder's name and address, the class and number of shares the stockholder beneficially owns and a description of any material interest the stockholder has in the corporation. If the corporation provides less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, to be timely received the stockholders' notice must be received by the Secretary no later than the close of business on the tenth day after that notice was mailed to stockholders or public disclosure of the notice was made. Section 11. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholders of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days following the receipt of such a request, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of stockholders meetings are recorded, to the attention of the Secretary of the Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing 7 8 without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. ARTICLE III Directors Section 1. The general management and control of the business and property of the corporation shall be vested in the Board of Directors, subject to any restrictions imposed upon them by these Bylaws, by the Certificate of Incorporation or by statute. Section 2. The Board of Directors shall have the power to fix the compensation of its members and shall provide for the payment of the expenses of the Directors attending meetings of the Board of Directors and of any committee of the Board. Section 3. There shall be three (3) members on the Board of Directors. The election and term of office of each Director shall be in accordance with the provisions of Article FOURTEENTH of the Certificate of Incorporation. Section 4. A majority of the Board of Directors then in office shall constitute a quorum for the transaction of business at any meeting of Directors. If a quorum is not present, a majority of those present may adjourn the meeting. The act of a majority of the Directors present at any meeting shall be the act of the Board of Directors, except as provided by these Bylaws, by the Certificate of Incorporation or by statute. Section 5. Any action required or permitted to be taken at any meeting of the Board of Directors or committee of the Board may be taken without a meeting, if all members of the Board of Directors or the committee, as the case may be, shall consent in writing, and such writing is filed with the minutes of the Board of Directors or the committee, as the case may be. Section 6. In the event of any vacancy in the Board of Directors for any reason other than an increase in the number of Directors, a majority of the Directors then in office, or if only one director remains, that director, may elect a successor to fill 8 9 any such vacancy. In the case of any vacancy due to an increase in the number of Directors, a majority of the Directors then in office may elect to fill such vacancy. The successor Director shall serve for the unexpired term of the vacant directorship. Section 7. The Board of Directors shall meet to elect the officers of the corporation as promptly as practical after the adjournment of the annual meeting of stockholders. Other meetings of the Directors may be held at such time, on such date and in such place as the Board of Directors may from time to time direct. Special meetings of the Directors may be called at any time by the Chairman of the Board, the President or the written request of two-thirds of the Directors then in office. The Secretary shall give notice to the Directors of the time, date and place of each such meeting no less than 3 days prior to any such meeting. The notice shall be sent to the last known address of each such director as shown on the corporation's books and records. Any Director may waive, before or after any meeting, notice of such meeting. Section 8. The Board of Directors may, by a resolution passed by a majority of the entire Board of Directors, designate such committee or committees of the Board as it deems necessary or appropriate. Each committee shall consist of two or more Directors. In the absence or disqualification of a member of any committee, the member or members present at any meeting and not disqualified from voting may unanimously appoint another director to act at the meeting in place of such absent or disqualified member. Each committee shall have such power and authority as may be provided in a resolution of the Board of Directors, except that no committee shall have the power or authority to amend the Certificate of Incorporation or the Bylaws, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property or assets or recommend to the stockholders a dissolution of the corporation or revocation of a dissolution; and, unless the resolution, bylaws or certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of shares of stock (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Corporation Law ("DGCL"), as amended, fix the designations and any of the preferences or rights of such shares 9 10 relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of the stock of the corporation, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series) or to adopt a certificate of ownership and merger. Section 9. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors, or by any stockholder of the corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 9. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received by the Secretary of the corporation at the principal executive offices of the corporation not less than 60 days prior to the date one year from the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth: (a) as to each person who the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of stock of the corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Rule 14a under the Securities Exchange Act of 1934 or any successor rule thereto; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by the stockholder as of 10 11 the record date for such meeting. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a Director of the corporation. Section 10. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the absence of the Chairman of the Board, the presiding officer at such meetings shall be chosen pursuant to Article II, Section 8 of these Bylaws. Section 11. Members of the Board of Directors or any Committee designated by the Board may participate in a meeting of the Board or such Committee by means of telephone or similar communications equipment provided that all Directors participating in such meeting can hear each other. Participation in such a telephone meeting shall constitute presence in person at such meeting. ARTICLE IV Officers Section 1. The Board of Directors shall elect a Chairman of the Board, one or more Vice Presidents, a General Counsel, a Secretary and a Treasurer or such other officers as may be designated by the Board of Directors, and may appoint certain other officers of the corporation. Each officer shall have such power and authority as may be prescribed by the Board of Directors or as may be specified by these Bylaws, by the Certificate of Incorporation or by statute. Any 2 offices, except that of President and Vice President, may be held by the same person at the same time. Section 2. Except where otherwise expressly provided in a contract duly authorized by a majority of the Board of Directors, all officers elected or appointed by the Board shall hold office until the annual meeting of stockholders held next after such election or appointment and until his successor shall have been duly chosen and qualified or until such officer shall have resigned or shall have been removed. All appointed officers and agents of the corporation shall be subject to removal at any time by a 11 12 majority of the Board of Directors with or without cause. All officers elected by the Board of Directors shall be subject to removal with or without cause at any time by two-thirds of the Directors then in office. Any vacancy occurring in any office shall be filled by the vote of a majority of the Directors then in office. Notwithstanding the foregoing, any such removal shall be without prejudice to such officer's contractual rights. Section 3. The Chairman of the Board may be the Chief Executive Officer and shall be primarily responsible for formulating and carrying into effect the Corporation's missions, goals, objectives and strategies, for managing the Corporation's financial condition and results of operations and shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have such other powers, authority and duties as the Board of Directors may assign to such office. Section 4. The President may be the Chief Executive Officer and the Chief Operating Officer. The President shall be primarily responsible for the day-to-day operation of the Corporation and shall ensure that all orders and resolutions of the Board of Directors are carried into effect, except with respect to any specific authority as the Board of Directors may grant to any other officer or agent of the Corporation. The President shall have such other powers, authority and duties as the Board of Directors or the Chief Executive Officer may assign to such office. Section 5. The Vice President, or any one of them as may be designated by the Board of Directors, shall, in the absence of the President, have the power and perform the duties of the President, as long as such absence continues. The Vice President, or Vice Presidents, shall have such other powers and duties as the Board of Directors may assign to such office. Section 6. The General Counsel shall be the chief legal officer of the corporation. He shall have active overall management and oversight of and have responsibility for, and manage, all of the legal affairs of the corporation and, to the extent such General Counsel deems appropriate, its subsidiaries. It shall be the General Counsel's duty to employ all other counsel on behalf of the corporation and to provide the corporation with counsel and advice on all legal matters affecting the corporation. The General Counsel shall supervise the activities of the Secretary and shall have such other powers and duties as may be 12 13 assigned by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, the General Counsel shall affix the seal of the corporation to any instrument requiring same. Section 7. The Secretary shall attend all meetings of the Board of Directors and the stockholders, and of the committees upon request, and shall act as clerk of such meetings. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, as required by the Chairman of the Board, the President or these Bylaws. The Secretary shall have such other powers and duties as may be assigned by the Board of Directors or the General Counsel. The Secretary shall keep the seal of the corporation in safe custody and he shall affix said seal to any instrument requiring same. Section 8. The Treasurer shall be the custodian of all of the funds and securities of the corporation. The Treasurer shall have the power, in the regular performance of the duties of the Treasurer, to endorse for collection, on behalf of the corporation, checks, notes and other obligations, and shall deposit or shall cause to be deposited, all such checks, notes or other obligations in such bank or banks or depository or depositories as the Board of Directors may designate. The Treasurer shall have such other powers and duties as the Board of Directors may assign to such office. Section 9. The Controller shall be the principal accounting officer of the corporation. He shall enter regularly in the books of the corporation, to be kept by him for that purpose, a full and accurate account of all monies received and paid by or for the account of the corporation, and all other financial and related transactions of the corporation. The Controller shall at all reasonable times exhibit his books and accounts to any Director of the corporation upon application at the offices of the corporation during business hours. Whenever required by the Board of Directors, the Controller shall render a statement of his accounts, and he shall have such other powers and duties specified by the Board of Directors as it may from time to time deem necessary or appropriate. Section 10. The Board may appoint one or more Assistant Secretaries and prescribe such powers and duties as it may deem necessary and appropriate. In the absence of the Secretary, the 13 14 Board of Directors may designate an Assistant Secretary or a Secretary pro tempore to assume the powers and duties of the Secretary so long as such absence continues. Section 11. The Board may appoint one or more Assistant Treasurers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 12. The Board may appoint one or more Assistant Controllers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 13. The Board of Directors may appoint such other assistant officers, with such powers and duties then specified, as it may from time to time deem necessary or appropriate. Section 14. The Board of Directors may, by resolution, require any and all of the officers of the Corporation, and any and all employees of the Corporation, to give bond in such sum and with such sureties as shall be satisfactory to the Board of Directors for faithful performance of the duties of their respective offices of employment. Section 15. Officers of the Corporation are not required to be employees of the Corporation. ARTICLE V Stock Section 1. Certificates for shares or certificates representing rights with respect to the capital stock of the corporation shall be in such form as shall be approved by the Board of Directors. Each certificate shall be numbered in order of its issue, and shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, or by a printed or engraved facsimile of such signatures and may be sealed with the seal of the corporation or by a printed or engraved facsimile of such seal. The certificate shall be countersigned by a Transfer Agent and registered by a Registrar, both of which shall be 14 15 designated by the Board of Directors. The countersignature of the Transfer Agent may be a printed or engraved facsimile of such countersignature. The stock records shall be kept by a Transfer Agent or by Transfer Agents or by the Secretary or by such other agent as may be designated by the Board of Directors. Section 2. The shares of the capital stock of the corporation shall be transferable on the records of the corporation only by the person in whose name such shares appear or by such person's duly authorized attorney, upon surrender of the certificate representing such transferred shares, properly endorsed. The Board of Directors may make such additional rules and regulations with respect to the issue, transfer or registration of the shares of the capital stock of the corporation as it deems necessary or appropriate. Section 3. In case of loss or destruction of a certificate of the capital stock of the corporation, a new certificate replacing such lost or destroyed certificate shall be issued provided the Secretary, or the Secretary's agent, after receiving satisfactory proof of loss or destruction and of the posting of satisfactory indemnity bond or otherwise, has approved such replacement. Section 4. The corporation shall be entitled to treat the holder of record of any share of its capital stock as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof. 15 16 ARTICLE VI Execution of Instruments Section 1. All documents, instruments or other writings to be signed on behalf of the Corporation shall be signed, executed, verified or acknowledged by such officer, employee or agent of the corporation as may be authorized by the Board of Directors. Section 2. All certificates made on behalf of the corporation shall be made by the Secretary or an Assistant Secretary or such other officer or officers or person as the Board of Directors may from time to time designate. ARTICLE VII Indemnification Section 1. Each person who was or is made a party or is threatened to be made a party to or is involved in or called as a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is, was or had agreed to become a director of the corporation or was or had agreed to become an officer of the corporation (but with respect to such officers and persons agreeing to become officer only as to proceedings occurring after a Change of Control, as defined herein, arising out of acts, events or omissions occurring prior to such Change of Control) or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the corporation to the fullest extent permitted under DGCL, as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than the DGCL permitted the corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties 16 17 and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, that except as explicitly provided herein, the corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if authorization for such proceeding (or part thereof) was not denied by the Board of Directors of the corporation prior to the earlier of (i) 30 days after receipt of notice thereof from such person of (ii) a Change of Control, as defined herein. For purposes of this Article, a "Change in Control of the corporation" shall be deemed to have occurred if (i) any "Person" (as is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes (except in a transaction approved in advance by the Board of Directors of the Corporation) the beneficial owner (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the corporation representing 20% or more of the combined voting power of the corporation's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the corporation cease for any reason to constitute at least a majority thereof unless the election of each director who was not a director at the beginning of the period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. Unless a court interpreting Delaware law shall rule otherwise, this paragraph shall be deemed to entitle all persons described herein requesting indemnification covered hereby to such indemnification without the determination provided for below, provided that if such a determination is required, such a determination shall be deemed to have occurred unless within 60 days of a request for indemnification by the corporation a determination is made as provided below that such indemnification is not proper in the circumstances because such person has not met the necessary standard of conduct. If a determination is required and one of the three parties listed below shall make a determination that a person is entitled to indemnification under these by-laws, then a later decision by another party of the parties listed below that such person is not so entitled shall be of no effect and shall not work to deny such person indemnification. A determination shall be made, if required hereunder or by law, (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding, or (ii) if such quorum is not obtainable, or even 17 18 if obtainable a quorum of disinterested directors so directs, by independent legal counsel (who may be the regular counsel of the corporation) in a written opinion or (iii) by the stockholders. If there is a Change in Control of the corporation (as defined above), then with respect to all matters thereafter arising out of acts, omissions or events prior to the Change of Control of the corporation concerning the rights of any director or officer seeking indemnification under this Article whose request for indemnification has been denied by one of the parties listed above, such person shall be entitled to have such decision redetermined as provided below if such person so requests within 120 days of his or her being informed of the initial denial of indemnification by the corporation (unless the initial determination had been by the procedure outlined below), and the corporation shall have the issue redetermined by special, independent counsel selected by such person and approved by the corporation (which approval shall not be unreasonably withheld), which counsel has not otherwise performed services (other than in connection with similar matters) within the five years preceding its engagement to render such opinion for such person or for the corporation or any affiliates (as such term is defined in Rule 405 under the Securities Act of 1933, as amended) of the corporation (whether or not they were affiliates when services were so performed)("Independent Counsel"). Unless such person has theretofore selected Independent Counsel pursuant to this Section 1 and such Independent Counsel has been approved by the corporation, the firms approved by a resolution or resolutions of the Board of Directors prior to a Change in Control of the corporation shall be deemed to have been approved by the corporation as required. Such Independent Counsel shall determine within 60 days whether and to what extent such person would be permitted to be indemnified under applicable law and shall render its written opinion to the corporation and such person to such effect. If such Independent Counsel is engaged by the corporation, the corporation agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Article or its engagement pursuant hereto. Section 2. Expenses. Expenses, including attorneys' fees, incurred by a person referred to in Section 1 of this Article in defending or otherwise being involved in a proceeding shall be paid by the corporation in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of 18 19 an undertaking (the "Undertaking") by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such undertaking shall provide that if the person to whom the expenses were advanced has commenced proceedings in a court of competent jurisdiction to secure a determination that he or she should be indemnified by the corporation, such person shall not be obligated to repay the corporation during the pendency of such proceeding. Section 3. Right of Claimant to Bring Suit. If a claim under Section 1 hereof is not paid in full by the corporation within 60 days after a written claim has been received by the corporation or if expenses pursuant to Section 2 hereof have not been advanced within 10 days after a written request for such advancement accompanied by the Undertaking has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim or the advancement of expenses. (If the claimant is successful in such suit or any other suit to enforce a right for expenses or indemnification against the corporation or any other party under any other agreements, in whole or in part, such claimant shall also be entitled to be paid the reasonable expense of prosecuting such claim.) It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required Undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination, if required, prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct required under the DGCL, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct. Section 4. Non-Exclusivity of Rights. The rights conferred on any person by this Article shall not be exclusive of 19 20 any other right which such person may have or hereafter acquire under any statue, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Board of Directors shall have the authority, by resolution, to provide for such other indemnification of directors, officers, employees or agents as it shall deem appropriate. Section 5. Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expenses, liabilities or losses, whether or not the corporation would have the power to indemnify such person against such expenses, liabilities or losses under the DGCL. Section 6. Contractual Nature. The provisions of this Article shall be applicable to all proceedings commenced after its adoption, whether such arise out of events, acts or omissions which occurred prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. This Article shall be deemed to be a contract between the corporation and each person who, at any time that this Article is in effect, serves or agrees to serve in any capacity which entitles him to indemnification hereunder and any repeal or other modification of this Article or any repeal of modification of the DGCL or any other applicable law shall not limit any rights of indemnification then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article with regard to acts, omissions or events arising prior to such repeal or modification. Section 7. Severability. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer of the corporation as to costs, charges and expenses (including attorney's fees), judgements, fines and amounts paid in settlement with respect to any proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. 20 21 ARTICLE VIII Amendments Section 1. The power to adopt, make, amend, alter, change or repeal the Bylaws of the corporation, including the power to increase or decrease the number of directors, may, except as otherwise provided by these Bylaws, the Certificate of Incorporation or by statute, be exercised by a majority of stockholders or by a majority of the Board of Directors, and the stockholders shall have the right to amend, alter, change or repeal any Bylaw which may be adopted by the Board of Directors. Section 2. The power to amend, alter, change or repeal Article II, Sections 4 and 10, Article III, Sections 3, 7 and 9, Article VII and this Article VIII may be exercised only by two-thirds of the stockholders or by two-thirds of the then current Board of Directors. ARTICLE IX Miscellaneous Section 1. The corporate seal of this corporation shall be in such form as may be designated by the Board of Directors. Section 2. The fiscal year of the corporation shall begin on the first day of October of each year. Section 3. The Board of Directors shall have the power to, from time to time, amend, alter, repeal or otherwise change the pension or welfare benefit plans of the corporation, in part or in their entirety, including, but not limited to, increasing the benefits paid or payable to the participants therein upon a Change in control of the corporation. For purposes of this Article, a "Change in Control of the corporation" shall be as defined in Section 1 of Article VII. 21 EX-3.2.C 8 BY-LAWS OF OMC ALUMINUM BOAT GROUP, INC. 1 Exhibit 3.2(c) BYLAWS of OMC ALUMINUM BOAT GROUP, INC. ARTICLE I Location Section 1. The principal office of the corporation shall be located in the City of Wilmington, New Castle County, Delaware. Section 2. The corporation shall have such other offices, either in or outside of the State of Delaware, as the Board of Directors, the Chief Executive Officer or the Chief Operating Officer shall from time to time direct. ARTICLE II Stockholders Section 1. The Board of Directors shall determine the place, which may be in or outside of the State of Delaware, for holding any meeting of the stockholders of the corporation. Section 2. No change of the time or place for the annual meeting for the election of Directors shall be made within 60 days of the day on which such election is to be held unless required by law. If any change is required, notice of such change shall be given by the Secretary of the corporation to each stockholder entitled to notice thereof no less than 20 days before such election is to be held. Section 3. The annual meeting of stockholders shall be held on the third Thursday in January in each year, if not a holiday. If such day is a holiday, the meeting shall be held on the first day thereafter that is not a holiday, Saturday or Sunday or at such time, which shall not be more than 30 days from the date of the original meeting or the immediately preceding adjournment, as may be set by the Board of Directors. At the annual meeting, the stockholders shall elect Directors and transact such other and proper business as may come before the meeting. Section 4. Special meetings of stockholders, for any purpose other than the election of Directors, may be held at such time, on such date and at such place as shall be specified in the notice of such meeting. Special meetings of stockholders may be called by the Chairman of the Board, the President, or by three-quarters of the Board of Directors. 2 Section 5. The holders of a majority of the shares of common stock entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of stockholders. A majority of the quorum shall decide any matter properly brought before the meeting, except as may otherwise be required by these Bylaws, by the Certificate of Incorporation or by statute. If a quorum is not present at any such meeting, a majority of those stockholders present, in person or by proxy, shall have the power to adjourn the meeting from time to time without notice, other than announcement at the meeting, until a quorum shall be present. At any adjourned meeting, any business may be transacted which might have been transacted at the original or immediately preceding adjourned meeting. Section 6. At each meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy or other writing, duly executed by a stockholder, provided such proxy or other writing is not dated more than 3 years prior to said meeting, unless such proxy specifically provides for a longer period. Execution of such proxy or other writing may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such proxy or other writing or causing his or her signature to be affixed to such proxy or other writing by any reasonable means including, but not limited to, by facsimile signature. A stockholder may authorized another person(s) to act for him as proxy or other writing by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or other writing or to a proxy or other writing solicitation firm, proxy or other writing support service organization or like agent duly authorized by the person who will be the holder of the proxy or other writing to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the proxy or other writing or transmission created pursuant to the above may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original proxy or other writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original proxy or other writing or transmission. 2 3 Section 7. Written notice of each annual or special meeting of stockholders shall be prepared and mailed by or shall be caused to be prepared and mailed by the Secretary of the corporation. These notices shall be mailed to the address of each stockholder as it appears on the books and records of the corporation as of the record date for such meeting. The notice for any annual meeting shall be mailed no less than 10 days and no more than 60 days before the meeting. The notice for any special meeting shall be mailed no less than 10 days and no more than 60 days before such special meeting, and shall state the purpose or purposes of such meeting. In no event shall any irregularity in such notice affect the validity of any annual meeting of stockholders or any proceeding at any such meeting duly constituted. Section 8. The Chairman of the Board shall act as chairman at all meetings of stockholders. In the absence of the Chairman of the Board, the President shall preside. In the absence of the President, a Vice President, as designated by the Board of Directors, shall preside and, in the absence of any such designation, a Vice President, in the order of seniority as Vice President, shall preside. In the absence of any Vice President, the Board of Directors shall designate any other Director, officer or employee of the corporation to preside at such meetings. The Secretary shall act as secretary at all stockholders and Directors meetings, and, upon request, at the meetings of the committees of the Board of Directors. In the absence of the Secretary, the Board of Directors may designate an Assistant Secretary to act as secretary at such meetings and, in the absence of any such designation, an Assistant Secretary, in order of seniority as Assistant Secretary, shall act as secretary at such meetings. Section 9. The Board of Directors, in advance of any meeting of stockholders, may appoint one or more Inspectors of Election ("Inspectors") to act at the meeting and make a written report thereof. If Inspectors are not so appointed or if any person so appointed fails to appear, the Chairman of the meeting may appoint one or more Inspectors to act at the meeting. Each Inspector shall, before undertaking to perform the duties of an Inspector, take and sign an oath to execute the duties of Inspector faithfully, honestly and impartially, according to the best of such Inspector's skill and ability. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies, votes or other writings purporting to vote, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls. The Inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, shall receive vote, ballots or consents, shall hear and determine all challenges and questions arising in connection with the right to 3 4 vote, shall count and tabulate all votes, ballots or consents, certify their determination of the number of shares represented at the meeting and perform such acts as are proper to conduct the election or vote with fairness to all stockholders and. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, and information provided in accordance with Article II, Section 6 of these Bylaws, ballots and the regular books and records of the Company, except that the Inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the Inspectors consider other reliable information for the limited purpose permitted herein, the Inspectors at the time they make their certification pursuant to this Section 9 shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the Inspectors belief that such information is accurate and reliable. Section 10. At any annual meeting of stockholders, only that business which is properly brought before the meeting shall be conducted. To be properly brought before the meeting, such business must be specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors or otherwise properly brought before the meeting by the Board of Directors or by a stockholder. For a stockholder to properly bring business before the meeting, the stockholder must have given written notice thereof; such notice to be received by the Secretary, Outboard Marine Corporation, at the corporation's principal executive offices, no less than 60 days prior to the date one year from the date of the immediately preceding annual meeting of stockholders. The notice must contain a brief description of the business intended to be brought before the meeting, the stockholder's name and address, the class and number of shares the stockholder beneficially owns and a description of any material interest the stockholder has in the corporation. If the corporation provides less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, to be timely received the stockholders' notice must be received by the Secretary no later than the close of business on the tenth day after that notice was mailed to stockholders or public disclosure of the notice was made. Section 11. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of 4 5 Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholders of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days following the receipt of such a request, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of stockholders meetings are recorded, to the attention of the Secretary of the Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. ARTICLE III Directors Section 1. The general management and control of the business and property of the corporation shall be vested in the Board of Directors, subject to any restrictions imposed upon them by these Bylaws, by the Certificate of Incorporation or by statute. Section 2. The Board of Directors shall have the power to fix the compensation of its members and shall provide for the payment of the expenses of the Directors attending meetings of the Board of Directors and of any committee of the Board. Section 3. There shall be three (3) members on the Board of Directors. The election and term of office of each Director shall be in accordance with the provisions of Article FOURTEENTH of the Certificate of Incorporation. Section 4. A majority of the Board of Directors then in office shall constitute a quorum for the transaction of business at any meeting of Directors. If a quorum is not present, a majority 5 6 of those present may adjourn the meeting. The act of a majority of the Directors present at any meeting shall be the act of the Board of Directors, except as provided by these Bylaws, by the Certificate of Incorporation or by statute. Section 5. Any action required or permitted to be taken at any meeting of the Board of Directors or committee of the Board may be taken without a meeting, if all members of the Board of Directors or the committee, as the case may be, shall consent in writing, and such writing is filed with the minutes of the Board of Directors or the committee, as the case may be. Section 6. In the event of any vacancy in the Board of Directors for any reason other than an increase in the number of Directors, a majority of the Directors then in office, or if only one director remains, that director, may elect a successor to fill any such vacancy. In the case of any vacancy due to an increase in the number of Directors, a majority of the Directors then in office may elect to fill such vacancy. The successor Director shall serve for the unexpired term of the vacant directorship. Section 7. The Board of Directors shall meet to elect the officers of the corporation as promptly as practical after the adjournment of the annual meeting of stockholders. Other meetings of the Directors may be held at such time, on such date and in such place as the Board of Directors may from time to time direct. Special meetings of the Directors may be called at any time by the Chairman of the Board, the President or the written request of two-thirds of the Directors then in office. The Secretary shall give notice to the Directors of the time, date and place of each such meeting no less than 3 days prior to any such meeting. The notice shall be sent to the last known address of each such director as shown on the corporation's books and records. Any Director may waive, before or after any meeting, notice of such meeting. Section 8. The Board of Directors may, by a resolution passed by a majority of the entire Board of Directors, designate such committee or committees of the Board as it deems necessary or appropriate. Each committee shall consist of two or more Directors. In the absence or disqualification of a member of any committee, the member or members present at any meeting and not disqualified from voting may unanimously appoint another director to act at the meeting in place of such absent or disqualified member. Each committee shall have such power and authority as may be provided in a resolution of the Board of Directors, except that no committee shall have the power or authority to amend the Certificate of Incorporation or the Bylaws, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property or assets or recommend to the stockholders a dissolution of the corporation or revocation of a dissolution; and, unless the resolution, bylaws or certificate of incorporation expressly so 6 7 provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of shares of stock (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Corporation Law ("DGCL"), as amended, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of the stock of the corporation, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series) or to adopt a certificate of ownership and merger. Section 9. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors, or by any stockholder of the corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 9. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received by the Secretary of the corporation at the principal executive offices of the corporation not less than 60 days prior to the date one year from the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth: (a) as to each person who the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of stock of the corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Rule 14a under the Securities Exchange Act of 1934 or any successor rule thereto; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by the stockholder as of the record date for such meeting. The corporation may require any proposed nominee to furnish such other information as may 7 8 reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a Director of the corporation. Section 10. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the absence of the Chairman of the Board, the presiding officer at such meetings shall be chosen pursuant to Article II, Section 8 of these Bylaws. Section 11. Members of the Board of Directors or any Committee designated by the Board may participate in a meeting of the Board or such Committee by means of telephone or similar communications equipment provided that all Directors participating in such meeting can hear each other. Participation in such a telephone meeting shall constitute presence in person at such meeting. ARTICLE IV Officers Section 1. The Board of Directors shall elect a Chairman of the Board, one or more Vice Presidents, a General Counsel, a Secretary and a Treasurer or such other officers as may be designated by the Board of Directors, and may appoint certain other officers of the corporation. Each officer shall have such power and authority as may be prescribed by the Board of Directors or as may be specified by these Bylaws, by the Certificate of Incorporation or by statute. Any 2 offices, except that of President and Vice President, may be held by the same person at the same time. Section 2. Except where otherwise expressly provided in a contract duly authorized by a majority of the Board of Directors, all officers elected or appointed by the Board shall hold office until the annual meeting of stockholders held next after such election or appointment and until his successor shall have been duly chosen and qualified or until such officer shall have resigned or shall have been removed. All appointed officers and agents of the corporation shall be subject to removal at any time by a majority of the Board of Directors with or without cause. All officers elected by the Board of Directors shall be subject to removal with or without cause at any time by two-thirds of the Directors then in office. Any vacancy occurring in any office shall be filled by the vote of a majority of the Directors then in office. Notwithstanding the foregoing, any such removal shall be without prejudice to such officer's contractual rights. Section 3. The Chairman of the Board may be the Chief Executive Officer and shall be primarily responsible for formulating and carrying into effect the Corporation's missions, 8 9 goals, objectives and strategies, for managing the Corporation's financial condition and results of operations and shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have such other powers, authority and duties as the Board of Directors may assign to such office. Section 4. The President may be the Chief Executive Officer and the Chief Operating Officer. The President shall be primarily responsible for the day-to-day operation of the Corporation and shall ensure that all orders and resolutions of the Board of Directors are carried into effect, except with respect to any specific authority as the Board of Directors may grant to any other officer or agent of the Corporation. The President shall have such other powers, authority and duties as the Board of Directors or the Chief Executive Officer may assign to such office. Section 5. The Vice President, or any one of them as may be designated by the Board of Directors, shall, in the absence of the President, have the power and perform the duties of the President, as long as such absence continues. The Vice President, or Vice Presidents, shall have such other powers and duties as the Board of Directors may assign to such office. Section 6. The General Counsel shall be the chief legal officer of the corporation. He shall have active overall management and oversight of and have responsibility for, and manage, all of the legal affairs of the corporation and, to the extent such General Counsel deems appropriate, its subsidiaries. It shall be the General Counsel's duty to employ all other counsel on behalf of the corporation and to provide the corporation with counsel and advice on all legal matters affecting the corporation. The General Counsel shall supervise the activities of the Secretary and shall have such other powers and duties as may be assigned by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, the General Counsel shall affix the seal of the corporation to any instrument requiring same. Section 7. The Secretary shall attend all meetings of the Board of Directors and the stockholders, and of the committees upon request, and shall act as clerk of such meetings. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, as required by the Chairman of the Board, the President or these Bylaws. The Secretary shall have such other powers and duties as may be assigned by the Board of Directors or the General Counsel. The Secretary shall keep the seal of the corporation in safe custody and he shall affix said seal to any instrument requiring same. Section 8. The Treasurer shall be the custodian of all of the funds and securities of the corporation. The Treasurer shall have the power, in the regular performance of the duties of the Treasurer, to endorse for collection, on behalf of the 9 10 corporation, checks, notes and other obligations, and shall deposit or shall cause to be deposited, all such checks, notes or other obligations in such bank or banks or depository or depositories as the Board of Directors may designate. The Treasurer shall have such other powers and duties as the Board of Directors may assign to such office. Section 9. The Controller shall be the principal accounting officer of the corporation. He shall enter regularly in the books of the corporation, to be kept by him for that purpose, a full and accurate account of all monies received and paid by or for the account of the corporation, and all other financial and related transactions of the corporation. The Controller shall at all reasonable times exhibit his books and accounts to any Director of the corporation upon application at the offices of the corporation during business hours. Whenever required by the Board of Directors, the Controller shall render a statement of his accounts, and he shall have such other powers and duties specified by the Board of Directors as it may from time to time deem necessary or appropriate. Section 10. The Board may appoint one or more Assistant Secretaries and prescribe such powers and duties as it may deem necessary and appropriate. In the absence of the Secretary, the Board of Directors may designate an Assistant Secretary or a Secretary pro tempore to assume the powers and duties of the Secretary so long as such absence continues. Section 11. The Board may appoint one or more Assistant Treasurers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 12. The Board may appoint one or more Assistant Controllers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 13. The Board of Directors may appoint such other assistant officers, with such powers and duties then specified, as it may from time to time deem necessary or appropriate. Section 14. The Board of Directors may, by resolution, require any and all of the officers of the Corporation, and any and all employees of the Corporation, to give bond in such sum and with such sureties as shall be satisfactory to the Board of Directors for faithful performance of the duties of their respective offices of employment. Section 15. Officers of the Corporation are not required to be employees of the Corporation. 10 11 ARTICLE V Stock Section 1. Certificates for shares or certificates representing rights with respect to the capital stock of the corporation shall be in such form as shall be approved by the Board of Directors. Each certificate shall be numbered in order of its issue, and shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, or by a printed or engraved facsimile of such signatures and may be sealed with the seal of the corporation or by a printed or engraved facsimile of such seal. The certificate shall be countersigned by a Transfer Agent and registered by a Registrar, both of which shall be designated by the Board of Directors. The countersignature of the Transfer Agent may be a printed or engraved facsimile of such countersignature. The stock records shall be kept by a Transfer Agent or by Transfer Agents or by the Secretary or by such other agent as may be designated by the Board of Directors. Section 2. The shares of the capital stock of the corporation shall be transferable on the records of the corporation only by the person in whose name such shares appear or by such person's duly authorized attorney, upon surrender of the certificate representing such transferred shares, properly endorsed. The Board of Directors may make such additional rules and regulations with respect to the issue, transfer or registration of the shares of the capital stock of the corporation as it deems necessary or appropriate. Section 3. In case of loss or destruction of a certificate of the capital stock of the corporation, a new certificate replacing such lost or destroyed certificate shall be issued provided the Secretary, or the Secretary's agent, after receiving satisfactory proof of loss or destruction and of the posting of satisfactory indemnity bond or otherwise, has approved such replacement. Section 4. The corporation shall be entitled to treat the holder of record of any share of its capital stock as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof. 11 12 ARTICLE VI Execution of Instruments Section 1. All documents, instruments or other writings to be signed on behalf of the Corporation shall be signed, executed, verified or acknowledged by such officer, employee or agent of the corporation as may be authorized by the Board of Directors. Section 2. All certificates made on behalf of the corporation shall be made by the Secretary or an Assistant Secretary or such other officer or officers or person as the Board of Directors may from time to time designate. ARTICLE VII Indemnification Section 1. Each person who was or is made a party or is threatened to be made a party to or is involved in or called as a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is, was or had agreed to become a director of the corporation or was or had agreed to become an officer of the corporation (but with respect to such officers and persons agreeing to become officer only as to proceedings occurring after a Change of Control, as defined herein, arising out of acts, events or omissions occurring prior to such Change of Control) or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the corporation to the fullest extent permitted under DGCL, as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than the DGCL permitted the corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, that except as explicitly provided herein, the corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if authorization for such proceeding (or part thereof) was not denied by the Board of Directors of the corporation prior to the earlier of (i) 30 days after receipt of notice thereof from such person of 12 13 (ii) a Change of Control, as defined herein. For purposes of this Article, a "Change in Control of the corporation" shall be deemed to have occurred if (i) any "Person" (as is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes (except in a transaction approved in advance by the Board of Directors of the Corporation) the beneficial owner (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the corporation representing 20% or more of the combined voting power of the corporation's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the corporation cease for any reason to constitute at least a majority thereof unless the election of each director who was not a director at the beginning of the period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. Unless a court interpreting Delaware law shall rule otherwise, this paragraph shall be deemed to entitle all persons described herein requesting indemnification covered hereby to such indemnification without the determination provided for below, provided that if such a determination is required, such a determination shall be deemed to have occurred unless within 60 days of a request for indemnification by the corporation a determination is made as provided below that such indemnification is not proper in the circumstances because such person has not met the necessary standard of conduct. If a determination is required and one of the three parties listed below shall make a determination that a person is entitled to indemnification under these by-laws, then a later decision by another party of the parties listed below that such person is not so entitled shall be of no effect and shall not work to deny such person indemnification. A determination shall be made, if required hereunder or by law, (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding, or (ii) if such quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel (who may be the regular counsel of the corporation) in a written opinion or (iii) by the stockholders. If there is a Change in Control of the corporation (as defined above), then with respect to all matters thereafter arising out of acts, omissions or events prior to the Change of Control of the corporation concerning the rights of any director or officer seeking indemnification under this Article whose request for indemnification has been denied by one of the parties listed above, such person shall be entitled to have such decision redetermined as provided below if such person so requests within 120 days of his or her being informed of the initial denial of indemnification by the corporation (unless the initial determination had been by the procedure outlined below), and the corporation shall have the issue redetermined by special, independent counsel selected by such person and approved by the corporation (which approval shall not be 13 14 unreasonably withheld), which counsel has not otherwise performed services (other than in connection with similar matters) within the five years preceding its engagement to render such opinion for such person or for the corporation or any affiliates (as such term is defined in Rule 405 under the Securities Act of 1933, as amended) of the corporation (whether or not they were affiliates when services were so performed)("Independent Counsel"). Unless such person has theretofore selected Independent Counsel pursuant to this Section 1 and such Independent Counsel has been approved by the corporation, the firms approved by a resolution or resolutions of the Board of Directors prior to a Change in Control of the corporation shall be deemed to have been approved by the corporation as required. Such Independent Counsel shall determine within 60 days whether and to what extent such person would be permitted to be indemnified under applicable law and shall render its written opinion to the corporation and such person to such effect. If such Independent Counsel is engaged by the corporation, the corporation agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Article or its engagement pursuant hereto. Section 2. Expenses. Expenses, including attorneys' fees, incurred by a person referred to in Section 1 of this Article in defending or otherwise being involved in a proceeding shall be paid by the corporation in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking (the "Undertaking") by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such undertaking shall provide that if the person to whom the expenses were advanced has commenced proceedings in a court of competent jurisdiction to secure a determination that he or she should be indemnified by the corporation, such person shall not be obligated to repay the corporation during the pendency of such proceeding. Section 3. Right of Claimant to Bring Suit. If a claim under Section 1 hereof is not paid in full by the corporation within 60 days after a written claim has been received by the corporation or if expenses pursuant to Section 2 hereof have not been advanced within 10 days after a written request for such advancement accompanied by the Undertaking has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim or the advancement of expenses. (If the claimant is successful in such suit or any other suit to enforce a right for expenses or indemnification against the corporation or any other party under any other agreements, in whole or in part, such claimant shall also be entitled to be paid the reasonable expense of prosecuting such claim.) It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in 14 15 defending any proceeding in advance of its final disposition where the required Undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination, if required, prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct required under the DGCL, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct. Section 4. Non-Exclusivity of Rights. The rights conferred on any person by this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statue, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Board of Directors shall have the authority, by resolution, to provide for such other indemnification of directors, officers, employees or agents as it shall deem appropriate. Section 5. Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expenses, liabilities or losses, whether or not the corporation would have the power to indemnify such person against such expenses, liabilities or losses under the DGCL. Section 6. Contractual Nature. The provisions of this Article shall be applicable to all proceedings commenced after its adoption, whether such arise out of events, acts or omissions which occurred prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. This Article shall be deemed to be a contract between the corporation and each person who, at any time that this Article is in effect, serves or agrees to serve in any capacity which entitles him to indemnification hereunder and any repeal or other modification of this Article or any repeal of modification of the DGCL or any other applicable law shall not limit any rights of indemnification then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article with regard to acts, omissions or events arising prior to such repeal or modification. 15 16 Section 7. Severability. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer of the corporation as to costs, charges and expenses (including attorney's fees), judgements, fines and amounts paid in settlement with respect to any proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE VIII Amendments Section 1. The power to adopt, make, amend, alter, change or repeal the Bylaws of the corporation, including the power to increase or decrease the number of directors, may, except as otherwise provided by these Bylaws, the Certificate of Incorporation or by statute, be exercised by a majority of stockholders or by a majority of the Board of Directors, and the stockholders shall have the right to amend, alter, change or repeal any Bylaw which may be adopted by the Board of Directors. Section 2. The power to amend, alter, change or repeal Article II, Sections 4 and 10, Article III, Sections 3, 7 and 9, Article VII and this Article VIII may be exercised only by two-thirds of the stockholders or by two-thirds of the then current Board of Directors. ARTICLE IX Miscellaneous Section 1. The corporate seal of this corporation shall be in such form as may be designated by the Board of Directors. Section 2. The fiscal year of the corporation shall begin on the first day of October of each year. Section 3. The Board of Directors shall have the power to, from time to time, amend, alter, repeal or otherwise change the pension or welfare benefit plans of the corporation, in part or in their entirety, including, but not limited to, increasing the benefits paid or payable to the participants therein upon a Change in control of the corporation. For purposes of this Article, a "Change in Control of the corporation" shall be as defined in Section 1 of Article VII. 16 EX-3.2.D 9 BY-LAWS OMC RECREATIONAL BOAT GROUP, INC. 1 Exhibit 3.2(d) BYLAWS of OMC RECREATIONAL BOAT GROUP, INC. ARTICLE I Location Section 1. The principal office of the corporation shall be located in the City of Wilmington, New Castle County, Delaware. Section 2. The corporation shall have such other offices, either in or outside of the State of Delaware, as the Board of Directors, the Chief Executive Officer or the Chief Operating Officer shall from time to time direct. ARTICLE II Stockholders Section 1. The Board of Directors shall determine the place, which may be in or outside of the State of Delaware, for holding any meeting of the stockholders of the corporation. Section 2. No change of the time or place for the annual meeting for the election of Directors shall be made within 60 days of the day on which such election is to be held unless required by law. If any change is required, notice of such change shall be given by the Secretary of the corporation to each stockholder entitled to notice thereof no less than 20 days before such election is to be held. Section 3. The annual meeting of stockholders shall be held on the third Thursday in January in each year, if not a holiday. If such day is a holiday, the meeting shall be held on the first day thereafter that is not a holiday, Saturday or Sunday or at such time, which shall not be more than 30 days from the date of the original meeting or the immediately preceding adjournment, as may be set by the Board of Directors. At the annual meeting, the stockholders shall elect Directors and transact such other and proper business as may come before the meeting. Section 4. Special meetings of stockholders, for any purpose other than the election of Directors, may be held at such time, on such date and at such place as shall be specified in the notice of such meeting. Special meetings of stockholders may be called by the Chairman of the Board, the President, or by three-quarters of the Board of Directors. 2 Section 5. The holders of a majority of the shares of common stock entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of stockholders. A majority of the quorum shall decide any matter properly brought before the meeting, except as may otherwise be required by these Bylaws, by the Certificate of Incorporation or by statute. If a quorum is not present at any such meeting, a majority of those stockholders present, in person or by proxy, shall have the power to adjourn the meeting from time to time without notice, other than announcement at the meeting, until a quorum shall be present. At any adjourned meeting, any business may be transacted which might have been transacted at the original or immediately preceding adjourned meeting. Section 6. At each meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy or other writing, duly executed by a stockholder, provided such proxy or other writing is not dated more than 3 years prior to said meeting, unless such proxy specifically provides for a longer period. Execution of such proxy or other writing may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such proxy or other writing or causing his or her signature to be affixed to such proxy or other writing by any reasonable means including, but not limited to, by facsimile signature. A stockholder may authorized another person(s) to act for him as proxy or other writing by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or other writing or to a proxy or other writing solicitation firm, proxy or other writing support service organization or like agent duly authorized by the person who will be the holder of the proxy or other writing to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the proxy or other writing or transmission created pursuant to the above may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original proxy or other writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original proxy or other writing or transmission. 2 3 Section 7. Written notice of each annual or special meeting of stockholders shall be prepared and mailed by or shall be caused to be prepared and mailed by the Secretary of the corporation. These notices shall be mailed to the address of each stockholder as it appears on the books and records of the corporation as of the record date for such meeting. The notice for any annual meeting shall be mailed no less than 10 days and no more than 60 days before the meeting. The notice for any special meeting shall be mailed no less than 10 days and no more than 60 days before such special meeting, and shall state the purpose or purposes of such meeting. In no event shall any irregularity in such notice affect the validity of any annual meeting of stockholders or any proceeding at any such meeting duly constituted. Section 8. The Chairman of the Board shall act as chairman at all meetings of stockholders. In the absence of the Chairman of the Board, the President shall preside. In the absence of the President, a Vice President, as designated by the Board of Directors, shall preside and, in the absence of any such designation, a Vice President, in the order of seniority as Vice President, shall preside. In the absence of any Vice President, the Board of Directors shall designate any other Director, officer or employee of the corporation to preside at such meetings. The Secretary shall act as secretary at all stockholders and Directors meetings, and, upon request, at the meetings of the committees of the Board of Directors. In the absence of the Secretary, the Board of Directors may designate an Assistant Secretary to act as secretary at such meetings and, in the absence of any such designation, an Assistant Secretary, in order of seniority as Assistant Secretary, shall act as secretary at such meetings. Section 9. The Board of Directors, in advance of any meeting of stockholders, may appoint one or more Inspectors of Election ("Inspectors") to act at the meeting and make a written report thereof. If Inspectors are not so appointed or if any person so appointed fails to appear, the Chairman of the meeting may appoint one or more Inspectors to act at the meeting. Each Inspector shall, before undertaking to perform the duties of an Inspector, take and sign an oath to execute the duties of Inspector faithfully, honestly and impartially, according to the best of such Inspector's skill and ability. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies, votes or other writings purporting to vote, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls. The Inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, shall receive vote, ballots or consents, shall hear and determine all challenges and questions arising in connection with the right to 3 4 vote, shall count and tabulate all votes, ballots or consents, certify their determination of the number of shares represented at the meeting and perform such acts as are proper to conduct the election or vote with fairness to all stockholders and. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, and information provided in accordance with Article II, Section 6 of these Bylaws, ballots and the regular books and records of the Company, except that the Inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the Inspectors consider other reliable information for the limited purpose permitted herein, the Inspectors at the time they make their certification pursuant to this Section 9 shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the Inspectors belief that such information is accurate and reliable. Section 10. At any annual meeting of stockholders, only that business which is properly brought before the meeting shall be conducted. To be properly brought before the meeting, such business must be specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors or otherwise properly brought before the meeting by the Board of Directors or by a stockholder. For a stockholder to properly bring business before the meeting, the stockholder must have given written notice thereof; such notice to be received by the Secretary, Outboard Marine Corporation, at the corporation's principal executive offices, no less than 60 days prior to the date one year from the date of the immediately preceding annual meeting of stockholders. The notice must contain a brief description of the business intended to be brought before the meeting, the stockholder's name and address, the class and number of shares the stockholder beneficially owns and a description of any material interest the stockholder has in the corporation. If the corporation provides less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, to be timely received the stockholders' notice must be received by the Secretary no later than the close of business on the tenth day after that notice was mailed to stockholders or public disclosure of the notice was made. Section 11. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of 4 5 Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholders of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days following the receipt of such a request, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of stockholders meetings are recorded, to the attention of the Secretary of the Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. ARTICLE III Directors Section 1. The general management and control of the business and property of the corporation shall be vested in the Board of Directors, subject to any restrictions imposed upon them by these Bylaws, by the Certificate of Incorporation or by statute. Section 2. The Board of Directors shall have the power to fix the compensation of its members and shall provide for the payment of the expenses of the Directors attending meetings of the Board of Directors and of any committee of the Board. Section 3. There shall be three (3) members on the Board of Directors. The election and term of office of each Director shall be in accordance with the provisions of Article FOURTEENTH of the Certificate of Incorporation. Section 4. A majority of the Board of Directors then in office shall constitute a quorum for the transaction of business at any meeting of Directors. If a quorum is not present, a majority 5 6 of those present may adjourn the meeting. The act of a majority of the Directors present at any meeting shall be the act of the Board of Directors, except as provided by these Bylaws, by the Certificate of Incorporation or by statute. Section 5. Any action required or permitted to be taken at any meeting of the Board of Directors or committee of the Board may be taken without a meeting, if all members of the Board of Directors or the committee, as the case may be, shall consent in writing, and such writing is filed with the minutes of the Board of Directors or the committee, as the case may be. Section 6. In the event of any vacancy in the Board of Directors for any reason other than an increase in the number of Directors, a majority of the Directors then in office, or if only one director remains, that director, may elect a successor to fill any such vacancy. In the case of any vacancy due to an increase in the number of Directors, a majority of the Directors then in office may elect to fill such vacancy. The successor Director shall serve for the unexpired term of the vacant directorship. Section 7. The Board of Directors shall meet to elect the officers of the corporation as promptly as practical after the adjournment of the annual meeting of stockholders. Other meetings of the Directors may be held at such time, on such date and in such place as the Board of Directors may from time to time direct. Special meetings of the Directors may be called at any time by the Chairman of the Board, the President or the written request of two-thirds of the Directors then in office. The Secretary shall give notice to the Directors of the time, date and place of each such meeting no less than 3 days prior to any such meeting. The notice shall be sent to the last known address of each such director as shown on the corporation's books and records. Any Director may waive, before or after any meeting, notice of such meeting. Section 8. The Board of Directors may, by a resolution passed by a majority of the entire Board of Directors, designate such committee or committees of the Board as it deems necessary or appropriate. Each committee shall consist of two or more Directors. In the absence or disqualification of a member of any committee, the member or members present at any meeting and not disqualified from voting may unanimously appoint another director to act at the meeting in place of such absent or disqualified member. Each committee shall have such power and authority as may be provided in a resolution of the Board of Directors, except that no committee shall have the power or authority to amend the Certificate of Incorporation or the Bylaws, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property or assets or recommend to the stockholders a dissolution of the corporation or revocation of a dissolution; and, unless the resolution, bylaws or certificate of incorporation expressly so 6 7 provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of shares of stock (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of stock adopted by the Board of Directors as provided in Section 151(a) of the Delaware General Corporation Law ("DGCL"), as amended, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of the stock of the corporation, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series) or to adopt a certificate of ownership and merger. Section 9. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors, or by any stockholder of the corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 9. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received by the Secretary of the corporation at the principal executive offices of the corporation not less than 60 days prior to the date one year from the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth: (a) as to each person who the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of stock of the corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Rule 14a under the Securities Exchange Act of 1934 or any successor rule thereto; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by the stockholder as of the record date for such meeting. The corporation may require any proposed nominee to furnish such other information as may 7 8 reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a Director of the corporation. Section 10. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the absence of the Chairman of the Board, the presiding officer at such meetings shall be chosen pursuant to Article II, Section 8 of these Bylaws. Section 11. Members of the Board of Directors or any Committee designated by the Board may participate in a meeting of the Board or such Committee by means of telephone or similar communications equipment provided that all Directors participating in such meeting can hear each other. Participation in such a telephone meeting shall constitute presence in person at such meeting. ARTICLE IV Officers Section 1. The Board of Directors shall elect a Chairman of the Board, one or more Vice Presidents, a General Counsel, a Secretary and a Treasurer or such other officers as may be designated by the Board of Directors, and may appoint certain other officers of the corporation. Each officer shall have such power and authority as may be prescribed by the Board of Directors or as may be specified by these Bylaws, by the Certificate of Incorporation or by statute. Any 2 offices, except that of President and Vice President, may be held by the same person at the same time. Section 2. Except where otherwise expressly provided in a contract duly authorized by a majority of the Board of Directors, all officers elected or appointed by the Board shall hold office until the annual meeting of stockholders held next after such election or appointment and until his successor shall have been duly chosen and qualified or until such officer shall have resigned or shall have been removed. All appointed officers and agents of the corporation shall be subject to removal at any time by a majority of the Board of Directors with or without cause. All officers elected by the Board of Directors shall be subject to removal with or without cause at any time by two-thirds of the Directors then in office. Any vacancy occurring in any office shall be filled by the vote of a majority of the Directors then in office. Notwithstanding the foregoing, any such removal shall be without prejudice to such officer's contractual rights. Section 3. The Chairman of the Board may be the Chief Executive Officer and shall be primarily responsible for formulating and carrying into effect the Corporation's missions, 8 9 goals, objectives and strategies, for managing the Corporation's financial condition and results of operations and shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have such other powers, authority and duties as the Board of Directors may assign to such office. Section 4. The President may be the Chief Executive Officer and the Chief Operating Officer. The President shall be primarily responsible for the day-to-day operation of the Corporation and shall ensure that all orders and resolutions of the Board of Directors are carried into effect, except with respect to any specific authority as the Board of Directors may grant to any other officer or agent of the Corporation. The President shall have such other powers, authority and duties as the Board of Directors or the Chief Executive Officer may assign to such office. Section 5. The Vice President, or any one of them as may be designated by the Board of Directors, shall, in the absence of the President, have the power and perform the duties of the President, as long as such absence continues. The Vice President, or Vice Presidents, shall have such other powers and duties as the Board of Directors may assign to such office. Section 6. The General Counsel shall be the chief legal officer of the corporation. He shall have active overall management and oversight of and have responsibility for, and manage, all of the legal affairs of the corporation and, to the extent such General Counsel deems appropriate, its subsidiaries. It shall be the General Counsel's duty to employ all other counsel on behalf of the corporation and to provide the corporation with counsel and advice on all legal matters affecting the corporation. The General Counsel shall supervise the activities of the Secretary and shall have such other powers and duties as may be assigned by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, the General Counsel shall affix the seal of the corporation to any instrument requiring same. Section 7. The Secretary shall attend all meetings of the Board of Directors and the stockholders, and of the committees upon request, and shall act as clerk of such meetings. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, as required by the Chairman of the Board, the President or these Bylaws. The Secretary shall have such other powers and duties as may be assigned by the Board of Directors or the General Counsel. The Secretary shall keep the seal of the corporation in safe custody and he shall affix said seal to any instrument requiring same. Section 8. The Treasurer shall be the custodian of all of the funds and securities of the corporation. The Treasurer shall have the power, in the regular performance of the duties of the Treasurer, to endorse for collection, on behalf of the 9 10 corporation, checks, notes and other obligations, and shall deposit or shall cause to be deposited, all such checks, notes or other obligations in such bank or banks or depository or depositories as the Board of Directors may designate. The Treasurer shall have such other powers and duties as the Board of Directors may assign to such office. Section 9. The Controller shall be the principal accounting officer of the corporation. He shall enter regularly in the books of the corporation, to be kept by him for that purpose, a full and accurate account of all monies received and paid by or for the account of the corporation, and all other financial and related transactions of the corporation. The Controller shall at all reasonable times exhibit his books and accounts to any Director of the corporation upon application at the offices of the corporation during business hours. Whenever required by the Board of Directors, the Controller shall render a statement of his accounts, and he shall have such other powers and duties specified by the Board of Directors as it may from time to time deem necessary or appropriate. Section 10. The Board may appoint one or more Assistant Secretaries and prescribe such powers and duties as it may deem necessary and appropriate. In the absence of the Secretary, the Board of Directors may designate an Assistant Secretary or a Secretary pro tempore to assume the powers and duties of the Secretary so long as such absence continues. Section 11. The Board may appoint one or more Assistant Treasurers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 12. The Board may appoint one or more Assistant Controllers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 13. The Board of Directors may appoint such other assistant officers, with such powers and duties then specified, as it may from time to time deem necessary or appropriate. Section 14. The Board of Directors may, by resolution, require any and all of the officers of the Corporation, and any and all employees of the Corporation, to give bond in such sum and with such sureties as shall be satisfactory to the Board of Directors for faithful performance of the duties of their respective offices of employment. Section 15. Officers of the Corporation are not required to be employees of the Corporation. 10 11 ARTICLE V Stock Section 1. Certificates for shares or certificates representing rights with respect to the capital stock of the corporation shall be in such form as shall be approved by the Board of Directors. Each certificate shall be numbered in order of its issue, and shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, or by a printed or engraved facsimile of such signatures and may be sealed with the seal of the corporation or by a printed or engraved facsimile of such seal. The certificate shall be countersigned by a Transfer Agent and registered by a Registrar, both of which shall be designated by the Board of Directors. The countersignature of the Transfer Agent may be a printed or engraved facsimile of such countersignature. The stock records shall be kept by a Transfer Agent or by Transfer Agents or by the Secretary or by such other agent as may be designated by the Board of Directors. Section 2. The shares of the capital stock of the corporation shall be transferable on the records of the corporation only by the person in whose name such shares appear or by such person's duly authorized attorney, upon surrender of the certificate representing such transferred shares, properly endorsed. The Board of Directors may make such additional rules and regulations with respect to the issue, transfer or registration of the shares of the capital stock of the corporation as it deems necessary or appropriate. Section 3. In case of loss or destruction of a certificate of the capital stock of the corporation, a new certificate replacing such lost or destroyed certificate shall be issued provided the Secretary, or the Secretary's agent, after receiving satisfactory proof of loss or destruction and of the posting of satisfactory indemnity bond or otherwise, has approved such replacement. Section 4. The corporation shall be entitled to treat the holder of record of any share of its capital stock as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof. 11 12 ARTICLE VI Execution of Instruments Section 1. All documents, instruments or other writings to be signed on behalf of the Corporation shall be signed, executed, verified or acknowledged by such officer, employee or agent of the corporation as may be authorized by the Board of Directors. Section 2. All certificates made on behalf of the corporation shall be made by the Secretary or an Assistant Secretary or such other officer or officers or person as the Board of Directors may from time to time designate. ARTICLE VII Indemnification Section 1. Each person who was or is made a party or is threatened to be made a party to or is involved in or called as a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is, was or had agreed to become a director of the corporation or was or had agreed to become an officer of the corporation (but with respect to such officers and persons agreeing to become officer only as to proceedings occurring after a Change of Control, as defined herein, arising out of acts, events or omissions occurring prior to such Change of Control) or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the corporation to the fullest extent permitted under DGCL, as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than the DGCL permitted the corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, that except as explicitly provided herein, the corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if authorization for such proceeding (or part thereof) was not denied by the Board of Directors of the corporation prior to the earlier of (i) 30 days after receipt of notice thereof from such person of 12 13 (ii) a Change of Control, as defined herein. For purposes of this Article, a "Change in Control of the corporation" shall be deemed to have occurred if (i) any "Person" (as is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes (except in a transaction approved in advance by the Board of Directors of the Corporation) the beneficial owner (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the corporation representing 20% or more of the combined voting power of the corporation's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the corporation cease for any reason to constitute at least a majority thereof unless the election of each director who was not a director at the beginning of the period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. Unless a court interpreting Delaware law shall rule otherwise, this paragraph shall be deemed to entitle all persons described herein requesting indemnification covered hereby to such indemnification without the determination provided for below, provided that if such a determination is required, such a determination shall be deemed to have occurred unless within 60 days of a request for indemnification by the corporation a determination is made as provided below that such indemnification is not proper in the circumstances because such person has not met the necessary standard of conduct. If a determination is required and one of the three parties listed below shall make a determination that a person is entitled to indemnification under these by-laws, then a later decision by another party of the parties listed below that such person is not so entitled shall be of no effect and shall not work to deny such person indemnification. A determination shall be made, if required hereunder or by law, (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding, or (ii) if such quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel (who may be the regular counsel of the corporation) in a written opinion or (iii) by the stockholders. If there is a Change in Control of the corporation (as defined above), then with respect to all matters thereafter arising out of acts, omissions or events prior to the Change of Control of the corporation concerning the rights of any director or officer seeking indemnification under this Article whose request for indemnification has been denied by one of the parties listed above, such person shall be entitled to have such decision redetermined as provided below if such person so requests within 120 days of his or her being informed of the initial denial of indemnification by the corporation (unless the initial determination had been by the procedure outlined below), and the corporation shall have the issue redetermined by special, independent counsel selected by such person and approved by the corporation (which approval shall not be 13 14 unreasonably withheld), which counsel has not otherwise performed services (other than in connection with similar matters) within the five years preceding its engagement to render such opinion for such person or for the corporation or any affiliates (as such term is defined in Rule 405 under the Securities Act of 1933, as amended) of the corporation (whether or not they were affiliates when services were so performed)("Independent Counsel"). Unless such person has theretofore selected Independent Counsel pursuant to this Section 1 and such Independent Counsel has been approved by the corporation, the firms approved by a resolution or resolutions of the Board of Directors prior to a Change in Control of the corporation shall be deemed to have been approved by the corporation as required. Such Independent Counsel shall determine within 60 days whether and to what extent such person would be permitted to be indemnified under applicable law and shall render its written opinion to the corporation and such person to such effect. If such Independent Counsel is engaged by the corporation, the corporation agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Article or its engagement pursuant hereto. Section 2. Expenses. Expenses, including attorneys' fees, incurred by a person referred to in Section 1 of this Article in defending or otherwise being involved in a proceeding shall be paid by the corporation in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking (the "Undertaking") by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such undertaking shall provide that if the person to whom the expenses were advanced has commenced proceedings in a court of competent jurisdiction to secure a determination that he or she should be indemnified by the corporation, such person shall not be obligated to repay the corporation during the pendency of such proceeding. Section 3. Right of Claimant to Bring Suit. If a claim under Section 1 hereof is not paid in full by the corporation within 60 days after a written claim has been received by the corporation or if expenses pursuant to Section 2 hereof have not been advanced within 10 days after a written request for such advancement accompanied by the Undertaking has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim or the advancement of expenses. (If the claimant is successful in such suit or any other suit to enforce a right for expenses or indemnification against the corporation or any other party under any other agreements, in whole or in part, such claimant shall also be entitled to be paid the reasonable expense of prosecuting such claim.) It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in 14 15 defending any proceeding in advance of its final disposition where the required Undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination, if required, prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct required under the DGCL, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct. Section 4. Non-Exclusivity of Rights. The rights conferred on any person by this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statue, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Board of Directors shall have the authority, by resolution, to provide for such other indemnification of directors, officers, employees or agents as it shall deem appropriate. Section 5. Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expenses, liabilities or losses, whether or not the corporation would have the power to indemnify such person against such expenses, liabilities or losses under the DGCL. Section 6. Contractual Nature. The provisions of this Article shall be applicable to all proceedings commenced after its adoption, whether such arise out of events, acts or omissions which occurred prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. This Article shall be deemed to be a contract between the corporation and each person who, at any time that this Article is in effect, serves or agrees to serve in any capacity which entitles him to indemnification hereunder and any repeal or other modification of this Article or any repeal of modification of the DGCL or any other applicable law shall not limit any rights of indemnification then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article with regard to acts, omissions or events arising prior to such repeal or modification. 15 16 Section 7. Severability. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer of the corporation as to costs, charges and expenses (including attorney's fees), judgements, fines and amounts paid in settlement with respect to any proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE VIII Amendments Section 1. The power to adopt, make, amend, alter, change or repeal the Bylaws of the corporation, including the power to increase or decrease the number of directors, may, except as otherwise provided by these Bylaws, the Certificate of Incorporation or by statute, be exercised by a majority of stockholders or by a majority of the Board of Directors, and the stockholders shall have the right to amend, alter, change or repeal any Bylaw which may be adopted by the Board of Directors. Section 2. The power to amend, alter, change or repeal Article II, Sections 4 and 10, Article III, Sections 3, 7 and 9, Article VII and this Article VIII may be exercised only by two-thirds of the stockholders or by two-thirds of the then current Board of Directors. ARTICLE IX Miscellaneous Section 1. The corporate seal of this corporation shall be in such form as may be designated by the Board of Directors. Section 2. The fiscal year of the corporation shall begin on the first day of October of each year. Section 3. The Board of Directors shall have the power to, from time to time, amend, alter, repeal or otherwise change the pension or welfare benefit plans of the corporation, in part or in their entirety, including, but not limited to, increasing the benefits paid or payable to the participants therein upon a Change in control of the corporation. For purposes of this Article, a "Change in Control of the corporation" shall be as defined in Section 1 of Article VII. 16 EX-3.2.E 10 BY-LAWS OMC LATIN AMERICA/CARIBBEAN, INC. 1 Exhibit 3.2(e) BYLAWS of OMC Latin America/Caribbean, Inc. ARTICLE I Location Section 1. The principal office of the corporation shall be located in the City of Sunrise, Florida. Section 2. The corporation shall have such other offices, either in or outside of the State of Florida, as the Board of Directors, the Chief Executive Officer or the Chief Operating Officer shall from time to time direct. ARTICLE II Stockholders Section 1. The Board of Directors shall determine the place, which may be in or outside of the State of Florida, for holding any meeting of the stockholders of the corporation. Section 2. No change of the time or place for the annual meeting for the election of Directors shall be made within 60 days of the day on which such election is to be held unless required by law. If any change is required, notice of such change shall be given by the Secretary of the corporation to each stockholder entitled to notice thereof no less than 20 days before such election is to be held. Section 3. The annual meeting of stockholders shall be held on the third Thursday in January in each year, if not a holiday. If such day is a holiday, the meeting shall be held on the first day thereafter that is not a holiday, Saturday or Sunday or at such time, which shall not be more than 30 days from the date of the original meeting or the immediately preceding adjournment, as may be set by the Board of Directors. At the annual meeting, the stockholders shall elect Directors and transact such other and proper business as may come before the meeting. Section 4. Special meetings of stockholders, for any purpose other than the election of Directors, may be held at such time, on such date and at such place as shall be specified in the notice of such meeting. Special meetings of stockholders may be called by the Chairman of the Board, the President, or by three-quarters of the Board of Directors. 2 Section 5. The holders of a majority of the shares of common stock entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of stockholders. A majority of the quorum shall decide any matter properly brought before the meeting, except as may otherwise be required by these Bylaws, by the Certificate of Incorporation or by statute. If a quorum is not present at any such meeting, a majority of those stockholders present, in person or by proxy, shall have the power to adjourn the meeting from time to time without notice, other than announcement at the meeting, until a quorum shall be present. At any adjourned meeting, any business may be transacted which might have been transacted at the original or immediately preceding adjourned meeting. Section 6. At each meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy or other writing, duly executed by a stockholder, provided such proxy or other writing is not dated more than 3 years prior to said meeting, unless such proxy specifically provides for a longer period. Execution of such proxy or other writing may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such proxy or other writing or causing his or her signature to be affixed to such proxy or other writing by any reasonable means including, but not limited to, by facsimile signature. A stockholder may authorized another person(s) to act for him as proxy or other writing by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or other writing or to a proxy or other writing solicitation firm, proxy or other writing support service organization or like agent duly authorized by the person who will be the holder of the proxy or other writing to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the proxy or other writing or transmission created pursuant to the above may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original proxy or other writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original proxy or other writing or transmission. 2 3 Section 7. Written notice of each annual or special meeting of stockholders shall be prepared and mailed by or shall be caused to be prepared and mailed by the Secretary of the corporation. These notices shall be mailed to the address of each stockholder as it appears on the books and records of the corporation as of the record date for such meeting. The notice for any annual meeting shall be mailed no less than 10 days and no more than 60 days before the meeting. The notice for any special meeting shall be mailed no less than 10 days and no more than 60 days before such special meeting, and shall state the purpose or purposes of such meeting. In no event shall any irregularity in such notice affect the validity of any annual meeting of stockholders or any proceeding at any such meeting duly constituted. Section 8. The Chairman of the Board shall act as chairman at all meetings of stockholders. In the absence of the Chairman of the Board, the President shall preside. In the absence of the President, a Vice President, as designated by the Board of Directors, shall preside and, in the absence of any such designation, a Vice President, in the order of seniority as Vice President, shall preside. In the absence of any Vice President, the Board of Directors shall designate any other Director, officer or employee of the corporation to preside at such meetings. The Secretary shall act as secretary at all stockholders and Directors meetings, and, upon request, at the meetings of the committees of the Board of Directors. In the absence of the Secretary, the Board of Directors may designate an Assistant Secretary to act as secretary at such meetings and, in the absence of any such designation, an Assistant Secretary, in order of seniority as Assistant Secretary, shall act as secretary at such meetings. Section 9. The Board of Directors, in advance of any meeting of stockholders, may appoint one or more Inspectors of Election ("Inspectors") to act at the meeting and make a written report thereof. If Inspectors are not so appointed or if any person so appointed fails to appear, the Chairman of the meeting may appoint one or more Inspectors to act at the meeting. Each Inspector shall, before undertaking to perform the duties of an Inspector, take and sign an oath to execute the duties of Inspector faithfully, honestly and impartially, according to the best of such Inspector's skill and ability. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies, votes or other writings purporting to vote, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls. The Inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, shall receive vote, ballots or consents, shall hear and determine all challenges and questions arising in connection with the right to 3 4 vote, shall count and tabulate all votes, ballots or consents, certify their determination of the number of shares represented at the meeting and perform such acts as are proper to conduct the election or vote with fairness to all stockholders and. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, and information provided in accordance with Article II, Section 6 of these Bylaws, ballots and the regular books and records of the Company, except that the Inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the Inspectors consider other reliable information for the limited purpose permitted herein, the Inspectors at the time they make their certification pursuant to this Section 9 shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the Inspectors belief that such information is accurate and reliable. Section 10. At any annual meeting of stockholders, only that business which is properly brought before the meeting shall be conducted. To be properly brought before the meeting, such business must be specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors or otherwise properly brought before the meeting by the Board of Directors or by a stockholder. For a stockholder to properly bring business before the meeting, the stockholder must have given written notice thereof; such notice to be received by the Secretary, Outboard Marine Corporation, at the corporation's principal executive offices, no less than 60 days prior to the date one year from the date of the immediately preceding annual meeting of stockholders. The notice must contain a brief description of the business intended to be brought before the meeting, the stockholder's name and address, the class and number of shares the stockholder beneficially owns and a description of any material interest the stockholder has in the corporation. If the corporation provides less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, to be timely received the stockholders' notice must be received by the Secretary no later than the close of business on the tenth day after that notice was mailed to stockholders or public disclosure of the notice was made. Section 11. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of 4 5 Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholders of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days following the receipt of such a request, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Florida, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of stockholders meetings are recorded, to the attention of the Secretary of the Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. ARTICLE III Directors Section 1. The general management and control of the business and property of the corporation shall be vested in the Board of Directors, subject to any restrictions imposed upon them by these Bylaws, by the Certificate of Incorporation or by statute. Section 2. The Board of Directors shall have the power to fix the compensation of its members and shall provide for the payment of the expenses of the Directors attending meetings of the Board of Directors and of any committee of the Board. Section 3. There shall be three (3) members on the Board of Directors. The election and term of office of each Director shall be in accordance with the provisions of Article FOURTEENTH of the Certificate of Incorporation. Section 4. A majority of the Board of Directors then in office shall constitute a quorum for the transaction of business at any meeting of Directors. If a quorum is not present, a majority 5 6 of those present may adjourn the meeting. The act of a majority of the Directors present at any meeting shall be the act of the Board of Directors, except as provided by these Bylaws, by the Certificate of Incorporation or by statute. Section 5. Any action required or permitted to be taken at any meeting of the Board of Directors or committee of the Board may be taken without a meeting, if all members of the Board of Directors or the committee, as the case may be, shall consent in writing, and such writing is filed with the minutes of the Board of Directors or the committee, as the case may be. Section 6. In the event of any vacancy in the Board of Directors for any reason other than an increase in the number of Directors, a majority of the Directors then in office, or if only one director remains, that director, may elect a successor to fill any such vacancy. In the case of any vacancy due to an increase in the number of Directors, a majority of the Directors then in office may elect to fill such vacancy. The successor Director shall serve for the unexpired term of the vacant directorship. Section 7. The Board of Directors shall meet to elect the officers of the corporation as promptly as practical after the adjournment of the annual meeting of stockholders. Other meetings of the Directors may be held at such time, on such date and in such place as the Board of Directors may from time to time direct. Special meetings of the Directors may be called at any time by the Chairman of the Board, the President or the written request of two-thirds of the Directors then in office. The Secretary shall give notice to the Directors of the time, date and place of each such meeting no less than 3 days prior to any such meeting. The notice shall be sent to the last known address of each such director as shown on the corporation's books and records. Any Director may waive, before or after any meeting, notice of such meeting. Section 8. The Board of Directors may, by a resolution passed by a majority of the entire Board of Directors, designate such committee or committees of the Board as it deems necessary or appropriate. Each committee shall consist of two or more Directors. In the absence or disqualification of a member of any committee, the member or members present at any meeting and not disqualified from voting may unanimously appoint another director to act at the meeting in place of such absent or disqualified member. Each committee shall have such power and authority as may be provided in a resolution of the Board of Directors, except that no committee shall have the power or authority to amend the Certificate of Incorporation or the Bylaws, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property or assets or recommend to the stockholders a dissolution of the corporation or revocation of a dissolution; and, unless the resolution, bylaws or certificate of incorporation expressly so 6 7 provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of shares of stock (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of stock adopted by the Board of Directors as provided in Section 151(a) of the Florida General Corporation Law ("FGCL"), as amended, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of the stock of the corporation, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series) or to adopt a certificate of ownership and merger. Section 9. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors, or by any stockholder of the corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 9. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received by the Secretary of the corporation at the principal executive offices of the corporation not less than 60 days prior to the date one year from the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that less than 30 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth: (a) as to each person who the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of stock of the corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Rule 14a under the Securities Exchange Act of 1934 or any successor rule thereto; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by the stockholder as of the record date for such meeting. The corporation may require any proposed nominee to furnish such other information as may 7 8 reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a Director of the corporation. Section 10. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the absence of the Chairman of the Board, the presiding officer at such meetings shall be chosen pursuant to Article II, Section 8 of these Bylaws. Section 11. Members of the Board of Directors or any Committee designated by the Board may participate in a meeting of the Board or such Committee by means of telephone or similar communications equipment provided that all Directors participating in such meeting can hear each other. Participation in such a telephone meeting shall constitute presence in person at such meeting. ARTICLE IV Officers Section 1. The Board of Directors shall elect a Chairman of the Board, one or more Vice Presidents, a General Counsel, a Secretary and a Treasurer or such other officers as may be designated by the Board of Directors, and may appoint certain other officers of the corporation. Each officer shall have such power and authority as may be prescribed by the Board of Directors or as may be specified by these Bylaws, by the Certificate of Incorporation or by statute. Any 2 offices, except that of President and Vice President, may be held by the same person at the same time. Section 2. Except where otherwise expressly provided in a contract duly authorized by a majority of the Board of Directors, all officers elected or appointed by the Board shall hold office until the annual meeting of stockholders held next after such election or appointment and until his successor shall have been duly chosen and qualified or until such officer shall have resigned or shall have been removed. All appointed officers and agents of the corporation shall be subject to removal at any time by a majority of the Board of Directors with or without cause. All officers elected by the Board of Directors shall be subject to removal with or without cause at any time by two-thirds of the Directors then in office. Any vacancy occurring in any office shall be filled by the vote of a majority of the Directors then in office. Notwithstanding the foregoing, any such removal shall be without prejudice to such officer's contractual rights. Section 3. The Chairman of the Board may be the Chief Executive Officer and shall be primarily responsible for formulating and carrying into effect the Corporation's missions, 8 9 goals, objectives and strategies, for managing the Corporation's financial condition and results of operations and shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have such other powers, authority and duties as the Board of Directors may assign to such office. Section 4. The President may be the Chief Executive Officer and the Chief Operating Officer. The President shall be primarily responsible for the day-to-day operation of the Corporation and shall ensure that all orders and resolutions of the Board of Directors are carried into effect, except with respect to any specific authority as the Board of Directors may grant to any other officer or agent of the Corporation. The President shall have such other powers, authority and duties as the Board of Directors or the Chief Executive Officer may assign to such office. Section 5. The Vice President, or any one of them as may be designated by the Board of Directors, shall, in the absence of the President, have the power and perform the duties of the President, as long as such absence continues. The Vice President, or Vice Presidents, shall have such other powers and duties as the Board of Directors may assign to such office. Section 6. The General Counsel shall be the chief legal officer of the corporation. He shall have active overall management and oversight of and have responsibility for, and manage, all of the legal affairs of the corporation and, to the extent such General Counsel deems appropriate, its subsidiaries. It shall be the General Counsel's duty to employ all other counsel on behalf of the corporation and to provide the corporation with counsel and advice on all legal matters affecting the corporation. The General Counsel shall supervise the activities of the Secretary and shall have such other powers and duties as may be assigned by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, the General Counsel shall affix the seal of the corporation to any instrument requiring same. Section 7. The Secretary shall attend all meetings of the Board of Directors and the stockholders, and of the committees upon request, and shall act as clerk of such meetings. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, as required by the Chairman of the Board, the President or these Bylaws. The Secretary shall have such other powers and duties as may be assigned by the Board of Directors or the General Counsel. The Secretary shall keep the seal of the corporation in safe custody and he shall affix said seal to any instrument requiring same. Section 8. The Treasurer shall be the custodian of all of the funds and securities of the corporation. The Treasurer shall have the power, in the regular performance of the duties of the Treasurer, to endorse for collection, on behalf of the 9 10 corporation, checks, notes and other obligations, and shall deposit or shall cause to be deposited, all such checks, notes or other obligations in such bank or banks or depository or depositories as the Board of Directors may designate. The Treasurer shall have such other powers and duties as the Board of Directors may assign to such office. Section 9. The Controller shall be the principal accounting officer of the corporation. He shall enter regularly in the books of the corporation, to be kept by him for that purpose, a full and accurate account of all monies received and paid by or for the account of the corporation, and all other financial and related transactions of the corporation. The Controller shall at all reasonable times exhibit his books and accounts to any Director of the corporation upon application at the offices of the corporation during business hours. Whenever required by the Board of Directors, the Controller shall render a statement of his accounts, and he shall have such other powers and duties specified by the Board of Directors as it may from time to time deem necessary or appropriate. Section 10. The Board may appoint one or more Assistant Secretaries and prescribe such powers and duties as it may deem necessary and appropriate. In the absence of the Secretary, the Board of Directors may designate an Assistant Secretary or a Secretary pro tempore to assume the powers and duties of the Secretary so long as such absence continues. Section 11. The Board may appoint one or more Assistant Treasurers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 12. The Board may appoint one or more Assistant Controllers, with such powers and duties then specified, and as it may from time to time deem necessary or appropriate. Section 13. The Board of Directors may appoint such other assistant officers, with such powers and duties then specified, as it may from time to time deem necessary or appropriate. Section 14. The Board of Directors may, by resolution, require any and all of the officers of the Corporation, and any and all employees of the Corporation, to give bond in such sum and with such sureties as shall be satisfactory to the Board of Directors for faithful performance of the duties of their respective offices of employment. Section 15. Officers of the Corporation are not required to be employees of the Corporation. 10 11 ARTICLE V Stock Section 1. Certificates for shares or certificates representing rights with respect to the capital stock of the corporation shall be in such form as shall be approved by the Board of Directors. Each certificate shall be numbered in order of its issue, and shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, or by a printed or engraved facsimile of such signatures and may be sealed with the seal of the corporation or by a printed or engraved facsimile of such seal. The certificate shall be countersigned by a Transfer Agent and registered by a Registrar, both of which shall be designated by the Board of Directors. The countersignature of the Transfer Agent may be a printed or engraved facsimile of such countersignature. The stock records shall be kept by a Transfer Agent or by Transfer Agents or by the Secretary or by such other agent as may be designated by the Board of Directors. Section 2. The shares of the capital stock of the corporation shall be transferable on the records of the corporation only by the person in whose name such shares appear or by such person's duly authorized attorney, upon surrender of the certificate representing such transferred shares, properly endorsed. The Board of Directors may make such additional rules and regulations with respect to the issue, transfer or registration of the shares of the capital stock of the corporation as it deems necessary or appropriate. Section 3. In case of loss or destruction of a certificate of the capital stock of the corporation, a new certificate replacing such lost or destroyed certificate shall be issued provided the Secretary, or the Secretary's agent, after receiving satisfactory proof of loss or destruction and of the posting of satisfactory indemnity bond or otherwise, has approved such replacement. Section 4. The corporation shall be entitled to treat the holder of record of any share of its capital stock as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof. 11 12 ARTICLE VI Execution of Instruments Section 1. All documents, instruments or other writings to be signed on behalf of the Corporation shall be signed, executed, verified or acknowledged by such officer, employee or agent of the corporation as may be authorized by the Board of Directors. Section 2. All certificates made on behalf of the corporation shall be made by the Secretary or an Assistant Secretary or such other officer or officers or person as the Board of Directors may from time to time designate. ARTICLE VII Indemnification Section 1. Each person who was or is made a party or is threatened to be made a party to or is involved in or called as a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is, was or had agreed to become a director of the corporation or was or had agreed to become an officer of the corporation (but with respect to such officers and persons agreeing to become officer only as to proceedings occurring after a Change of Control, as defined herein, arising out of acts, events or omissions occurring prior to such Change of Control) or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the corporation to the fullest extent permitted under FGCL, as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than the FGCL permitted the corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, that except as explicitly provided herein, the corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if authorization for such proceeding (or part thereof) was not denied by the Board of Directors of the corporation prior to the earlier of (i) 30 days after receipt of notice thereof from such person of 12 13 (ii) a Change of Control, as defined herein. For purposes of this Article, a "Change in Control of the corporation" shall be deemed to have occurred if (i) any "Person" (as is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes (except in a transaction approved in advance by the Board of Directors of the Corporation) the beneficial owner (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the corporation representing 20% or more of the combined voting power of the corporation's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the corporation cease for any reason to constitute at least a majority thereof unless the election of each director who was not a director at the beginning of the period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. Unless a court interpreting Florida law shall rule otherwise, this paragraph shall be deemed to entitle all persons described herein requesting indemnification covered hereby to such indemnification without the determination provided for below, provided that if such a determination is required, such a determination shall be deemed to have occurred unless within 60 days of a request for indemnification by the corporation a determination is made as provided below that such indemnification is not proper in the circumstances because such person has not met the necessary standard of conduct. If a determination is required and one of the three parties listed below shall make a determination that a person is entitled to indemnification under these by-laws, then a later decision by another party of the parties listed below that such person is not so entitled shall be of no effect and shall not work to deny such person indemnification. A determination shall be made, if required hereunder or by law, (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding, or (ii) if such quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel (who may be the regular counsel of the corporation) in a written opinion or (iii) by the stockholders. If there is a Change in Control of the corporation (as defined above), then with respect to all matters thereafter arising out of acts, omissions or events prior to the Change of Control of the corporation concerning the rights of any director or officer seeking indemnification under this Article whose request for indemnification has been denied by one of the parties listed above, such person shall be entitled to have such decision redetermined as provided below if such person so requests within 120 days of his or her being informed of the initial denial of indemnification by the corporation (unless the initial determination had been by the procedure outlined below), and the corporation shall have the issue redetermined by special, independent counsel selected by such person and approved by the corporation (which approval shall not be 13 14 unreasonably withheld), which counsel has not otherwise performed services (other than in connection with similar matters) within the five years preceding its engagement to render such opinion for such person or for the corporation or any affiliates (as such term is defined in Rule 405 under the Securities Act of 1933, as amended) of the corporation (whether or not they were affiliates when services were so performed)("Independent Counsel"). Unless such person has theretofore selected Independent Counsel pursuant to this Section 1 and such Independent Counsel has been approved by the corporation, the firms approved by a resolution or resolutions of the Board of Directors prior to a Change in Control of the corporation shall be deemed to have been approved by the corporation as required. Such Independent Counsel shall determine within 60 days whether and to what extent such person would be permitted to be indemnified under applicable law and shall render its written opinion to the corporation and such person to such effect. If such Independent Counsel is engaged by the corporation, the corporation agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Article or its engagement pursuant hereto. Section 2. Expenses. Expenses, including attorneys' fees, incurred by a person referred to in Section 1 of this Article in defending or otherwise being involved in a proceeding shall be paid by the corporation in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking (the "Undertaking") by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such undertaking shall provide that if the person to whom the expenses were advanced has commenced proceedings in a court of competent jurisdiction to secure a determination that he or she should be indemnified by the corporation, such person shall not be obligated to repay the corporation during the pendency of such proceeding. Section 3. Right of Claimant to Bring Suit. If a claim under Section 1 hereof is not paid in full by the corporation within 60 days after a written claim has been received by the corporation or if expenses pursuant to Section 2 hereof have not been advanced within 10 days after a written request for such advancement accompanied by the Undertaking has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim or the advancement of expenses. (If the claimant is successful in such suit or any other suit to enforce a right for expenses or indemnification against the corporation or any other party under any other agreements, in whole or in part, such claimant shall also be entitled to be paid the reasonable expense of prosecuting such claim.) It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in 14 15 defending any proceeding in advance of its final disposition where the required Undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the FGCL for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination, if required, prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct required under the FGCL, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct. Section 4. Non-Exclusivity of Rights. The rights conferred on any person by this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statue, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Board of Directors shall have the authority, by resolution, to provide for such other indemnification of directors, officers, employees or agents as it shall deem appropriate. Section 5. Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expenses, liabilities or losses, whether or not the corporation would have the power to indemnify such person against such expenses, liabilities or losses under the FGCL. Section 6. Contractual Nature. The provisions of this Article shall be applicable to all proceedings commenced after its adoption, whether such arise out of events, acts or omissions which occurred prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. This Article shall be deemed to be a contract between the corporation and each person who, at any time that this Article is in effect, serves or agrees to serve in any capacity which entitles him to indemnification hereunder and any repeal or other modification of this Article or any repeal of modification of the FGCL or any other applicable law shall not limit any rights of indemnification then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article with regard to acts, omissions or events arising prior to such repeal or modification. 15 16 Section 7. Severability. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer of the corporation as to costs, charges and expenses (including attorney's fees), judgements, fines and amounts paid in settlement with respect to any proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE VIII Amendments Section 1. The power to adopt, make, amend, alter, change or repeal the Bylaws of the corporation, including the power to increase or decrease the number of directors, may, except as otherwise provided by these Bylaws, the Certificate of Incorporation or by statute, be exercised by a majority of stockholders or by a majority of the Board of Directors, and the stockholders shall have the right to amend, alter, change or repeal any Bylaw which may be adopted by the Board of Directors. Section 2. The power to amend, alter, change or repeal Article II, Sections 4 and 10, Article III, Sections 3, 7 and 9, Article VII and this Article VIII may be exercised only by two-thirds of the stockholders or by two-thirds of the then current Board of Directors. ARTICLE IX Miscellaneous Section 1. The corporate seal of this corporation shall be in such form as may be designated by the Board of Directors. Section 2. The fiscal year of the corporation shall begin on the first day of October of each year. Section 3. The Board of Directors shall have the power to, from time to time, amend, alter, repeal or otherwise change the pension or welfare benefit plans of the corporation, in part or in their entirety, including, but not limited to, increasing the benefits paid or payable to the participants therein upon a Change in control of the corporation. For purposes of this Article, a "Change in Control of the corporation" shall be as defined in Section 1 of Article VII. 16 EX-3.2.F 11 AGREEMENT OF LIMITED PARTNERSHIP 1 Exhibit 3.2 (f) FIRST AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP This First Amendment to that Agreement of Limited Partnership of Recreational Boat Group Limited Partnership entered into on September 24 1993 by and between Outboard Marine Corporation (Limited Partner) and OMC Recreational Boat Group Inc (General Partner) is effective the 24th day of September 1993. WHEREAS the parties desire to correct certain technical errors discovered in the Agreement of Limited Partnership so that the Agreement of Limited Partnership more closely reflects their intent. NOW THEREFORE the parties hereby amend the Agreement of Limited Partnership as follows: 1. Paragraph 4.3 Sharing Percentages is hereby amended to read as follows: "Each partner shall have a sharing percentage determined in accordance with this Section 4.3 (collectively the "Sharing Percentages"). The Sharing Percentage of the Limited Partner shall initially be 37.8%. The Sharing Percentage of the General Partner shall initially be 62.2%. The Sharing Percentage of the partners may be modified from time to time by mutual agreement of the partners." 2. Paragraph 6.1 Maintenance of Books and Records Etc. is hereby amended to read as follows: "The partnership shall maintain books and records on the basis utilized in preparing the partnerships federal income tax return incorporating the accrual method of accounting and such other records as may be required in 2 connection with the preparation and filing of the partnership's federal and state income tax returns or other tax returns or reports." 3. Schedule A to the Agreement of Limited Partnership is hereby replaced with the Schedule A attached hereto and incorporated herein. 4. All other terms and conditions of the Agreement of Limited Partnership shall remain in full force and effect as written. In witness whereof the parties hereto have executed this agreement as of this 29th day of September, 1993. OUTBOARD MARINE CORPORATION RECREATIONAL BOAT GROUP, INC. By:/s/ Christopher R. Sachs By:/s/ Gordon G. Repp ------------------------------ ------------------------- Name: Christopher R. Sachs Name: Gordon G. Repp Title: Treasurer Title: Assistant Secretary 2 3 Schedule A ASSETS AND NET AGREED VALUE OF CONTRIBUTED ASSETS
Partner Assets Net Agreed Value - ------- ------ ---------------- General Partner $977,500 $ 977,500 Assets and Liabilities $11,175,000 received in liquidation of Sunbird Boat Co., Inc. and Seaswirl, Inc. Limited Partner 750 shares of $ 82,000 common stock of Four Winns, Inc. 10 shares of common stock of OMCCC, Inc Various assets $ 7,300,000 received in liquidation of Four Winns, Inc. and OMCCC, Inc.
4 AGREEMENT OF LIMITED PARTNERSHIP THIS AGREEMENT OF LIMITED PARTNERSHIP OF RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP (the "Partnership") is executed and delivered and made as of the 24th day of September, 1993, by and between Outboard Marine Corporation, a Delaware corporation (the "Limited Partner"), and OMC Recreational Boat Group, Inc., a Delaware corporation, (the "General Partner"). Certain capitalized terms used in this Agreement have the respective meanings specified for such terms in Article IX hereof. WHEREAS, the General Partner and the Limited Partner desire to form a limited partnership under the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto hereby agree as follows: I. ORGANIZATION 1.1 Formation of Partnership. The General Partner shall execute and cause to be filed a Certificate of Limited Partnership in accordance with the provisions of the Delaware Act. Upon the filing of the Certificate of Limited Partnership in the Office of the Secretary of State of the State of Delaware, the Partnership shall be formed. 1.2 Name. The Partnership shall conduct its activities under the name of "RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP" or under such other name or names deemed advisable by the General Partner. The words "Limited Partnership" or the abbreviation "L.P." shall be included in the Partnership name where necessary for the purposes of complying with the laws of any jurisdiction that so requires or protecting the limited liability of the Limited Partner. The General Partner in its sole discretion may change the name of the Partnership at any time and from time to time. 1.3 Partners. The Partnership shall consist of the undersigned General Partner and Limited Partner, and such substitute or additional Partners as shall be admitted to the Partnership pursuant to the terms of this Agreement (collectively, the "Partners"). No real or other property of the Partnership shall be deemed to be 5 owned by any Partner individually, but shall be owned by and title shall be vested solely in the Partnership. The interests of the Partners in the Partnership shall constitute personal Property. 1.4 Principal Place of Business. The principal place of business of the Partnership shall be at 100 Sea Horse Drive, Waukegan, IL 60085, or such other place or places as the General Partner may, from time to time, determine. 1.5 Term. The Partnership shall commence upon the fillng of the Certificate of Limited Partnership of the Partnership in accordance with the Delaware Act and shall continue in existence until the termination of the Partnership in accordance with the provisions of Article VIII. 1.6 Purpose and Powers. The Partnership is organized for the object and purpose of managing the assets contributed to the Partnership by the Partners. The Partnership shall have all powers necessary, suitable or convenient to carry out the purpose of the Partnership. II. MANAGEMENT 2.1 Consent of Partners. The General Partner is hereby authorized to take all actions and decisions relating to the management of the Partnership, including but not limited to: (i) opening, maintaining and closing accounts with brokers and giving instructions or directions in connection therewith; (ii) opening, maintaining and closing bank accounts and drawing checks or other orders for the payment of money; (iii) receiving, disposing of and dealing in all securities, checks, money, machinery and equipment and other assets or liabilities of the Partnership; (iv) hiring and firing employees, investment bankers, attorneys, accountants, consultants, custodians, contractors and other agents, and paying them compensation; (v) entering into, making and performing such contracts, agreements and other undertakings, and doing any and all such other acts required of the Partnership with respect to its interest in any corporation, partnership, limited partnership, trust, association or other entity or activity, including but not limited to, entering into agreements with respect to such interests, 2 6 which agreements may contain such terms, conditions and provisions as the managing general partner in its sole discretion shall approve; and (vi) making all elections for the Partnership that are permitted under tax or other applicable laws, including an election under Section 754 of the Code; provided, however, that the following actions shall require the consent of both Partners: (a) the admittance of any new partner to the Partnership; (b) the making of any contributions to the Partnership; and (c) the modification of the Partner's Sharing Percentages. 2.2 Certificate of Limited Partnership. To the extent that the General Partner in its sole discretion determines such action to be reasonable and necessary or appropriate, the General Partner shall file amendments to the Certificate of Limited Partnership and do all the things to maintain the Partnership as a limited partner- ship (or a partnership in which the Limited Partner has limited liability) under the laws of the State of Delaware or any other state in which the Partnership may elect to do business. Subject to applicable law, the General Partner may omit from any and all filings in and reports to any state, and from all amendments thereto, the names and addresses of the Limited Partner and information relating to the Capital Contributions and shares of profits and compensation of the Partners, or state such information in the aggregate rather than with respect to each individual Partner. 2.3 Third-Party Reliance. Third parties dealing with the Partnership are entitled to rely exclusively upon the authority of the General Partner as set forth in this Agreement. 2.4 Other Activities of Partners. Any Partner may engage independently or with others in other business ventures of every nature and description. Neither the Partnership nor any other Partner shall have any rights or obligations in and to such independent ventures or the income or profits derived therefrom. 3 7 2.5 Compensation. No Partner shall be compensated for its services performed in its capacity as a Partner to the Partnership. 2.6 Affiliates. The Partnership may enter into an agreement with either Partner or an Affiliate of either Partner to render services to the Partnership. Any services rendered to the Partnership by a Partner or its Affiliate shall be on terms that are fair and reasonable to the Partnership. III. RIGHTS AND OBLIGATIONS OF LIMITED PARTNER 3.1 Limitation of Liability. The Limited Partner shall have no liability under this Agreement, except as provided in this Agreement or in the Delaware Act. 3.2 Management of Business. Except as provided herein, the Limited Partner shall not take part in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. 3.3 Return of Capital. The Limited Partner shall not be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. IV. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS 4.1 Capital Contribution. On the date of this Agreement or on such other dates as agreed to by the Partners, each Partner shall contribute its undivided interest in the Assets to the Partnership. The Partners agree that the Assets have a Net Agreed Value as set forth on Schedule A hereto. Subject to Section 2.1(b), from time to time each Partner shall contribute cash to the capital of the Partnership in an amount equal to such Partner's Sharing Percentage of the capital requirements of the Partnership. 4.2 Capital Accounts. (a) The Partnership shall maintain for each Partner a separate Capital Account 4 8 in accordance with the rules of Regulation Section1.704-1(b)(2)(iv). Such Capital Account shall be credited with (i) the amount of cash and Net Agreed Value of property contributed by the Partner to the Partnership pursuant to this Agreement and (ii) the Partner's allocable share of Net Income and items of income and gain allocated to the Partner pursuant to Sections 4.4 and 4.5 and such Capital Account shall be debited by (iii) the cash distributions and the Net Agreed Value of all distributions of property made to the Partner pursuant to this Agreement and (iv) the Partner's allocable share of Net Loss and items of deduction and loss allocated to the Partner pursuant to Sections 4.4 and 4.5. (b) Upon the occurrence of an event described in the definition of Adjusted Value, the Capital Accounts of the Partners shall be increased or decreased by the amount of any gain or loss that would have been allocated to the Partners pursuant to Sections 4.4 and 4.5 upon an actual sale of the Partnership's assets immediately prior to such event as if such gain or loss was the only item for the period. (c) The foregoing provisions are intended to comply with Regulation Section 1.704-1, and shall be interpreted and applied consistently with such Regulation. In the event that the Partners determine that it is prudent to modify the manner in which Capital Accounts, or any credits or debits thereto are computed in order to comply with such Regulation, the Partners shall make such modification, but only if such modification is not likely to have a material effect on the amounts distributable to the Partners under this Agreement. 4.3 Sharing Percentages. Each Partner shall have a sharing percentage determined in accordance with this Section 4.3 (collectively, the "Sharing Percentages"). The Sharing Percentage of the Limited Partner shall initially be 95%. The Sharing Percentage of the General Partner shall initially be 5%. The Sharing Percentages of the Partners may be modified from time to time by mutual agreement of the Partners. 4.4 Allocations to Capital Accounts. After giving effect to the special allocations set forth in Section 4.5, Net Income or Net Loss, as the case may be, of the Partnership for any fiscal period shall be alloc- 5 9 ated to the Capital Accounts of the Partners in proportion to their respective Sharing Percentages. 4.5 Special Allocations. The following special allocations shall be made to the Capital Accounts of the Partners in the following order: (a) In accordance with and pursuant to Regulation Section1.704-2(f), if there is a net decrease in Partnership Minimum Gain during any taxable year, all Partners shall be allocated, before any other allocation is made of Partnership items for such taxable year, items of income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain, as determined pursuant to Regulation Section1.704-2(f). For purposes of this Section 4.5(a), Partnership Minimum Gain shall be determined in accordance with Regulation Section1.704-2(d). This Section 4.5(a) is intended to comply with the "minimum gain chargeback" requirement in such Regulations and shall be interpreted consistently therewith. (b) In the event that any Partner unexpectedly receives an adjustment, allocation or distribution described in clauses (4), (5) or (6) of Regulation Section1.704-1(b)(2)(ii)(d) that results in such Partner having an Adjusted Capital Account Deficit, such Partner shall be allocated Partnership items of income and gain in an amount and manner sufficient to eliminate, to the extent required by such regulations, the Adjusted Capital Account Deficit of such Partner as quickly as possible; provided, that an allocation pursuant to this Section 4.5(b) shall be made only if and to the extent that such Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in Sections 4.4 and 4.5 have been tentatively made as if this Section 4.5(b) were not in this Agreement. This Section 4.5(b) is intended to constitute a "qualified income offset" within the meaning of Regulation Section1.704-1(b)(2)(ii)(d)(3) and shall be interpreted consistently with such provisions. (c) Minimum Allocation. Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, for each fiscal year, each Partner shall be allocated at least 1% of each material item of Partnership income, gain, loss, deduction or credit for such year, subject to the temporary allocations required 6 10 under Section 704(b) and (c) of the Code provided for in this Agreement. 4.6 Tax Allocations. (a) Except as otherwise provided in this Section 4.6, items of income, gain, loss and deduction recognized by the Partnership shall, for each fiscal period, be allocated, for Federal, state and local income tax purposes, between the Partners in the same manner as such items or the Net Income or Net Loss of which such items are components were allocated pursuant to Sections 4.4 or 4.5. (b) In accordance with Section 704(c) of the Code and the Regulations thereunder (and any corresponding provisions of applicable state law), income, gain, loss, and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for Federal income tax purposes and its Fair Market Value upon such contribution. In the event the Capital Accounts are restated pursuant to Section 4.2(b) hereof, to reflect an adjustment in the value of the Partnership assets, subsequent allocations of income, gain, loss, and deduction with respect to such assets shall take into account any variation between adjusted basis of any such asset for Federal income tax purposes and its Fair Market Value at the time of such restatement in the same manner as under Section 704(c) of the Code and the Regulations thereunder. (c) Any credits of the Partnership shall be allocated to the Partners in accordance with their respective Sharing Percentages or as otherwise required by the Code and Regulations. (d) Allocations pursuant to this Section 4.6 are solely for Federal, state and local income tax purposes and shall not affect, or in any way be taken into account in computing, any Partner's Capital Account or share of income, gain, loss and deduction described in Sections 4.4 and 4.5 or distributions pursuant to any provision of this Agreement. 7 11 (e) The Partners are aware of the income and other tax consequences of the allocations made by this Section 4.6 and hereby agree to be bound by the provisions of this Section 4.6 in reporting their shares of items of Partnership income, gain, loss, deduction and credit. V. DISTRIBUTIONS AND GUARANTEED PAYMENTS 5.1 No Right to Withdraw. No Partner shall have the right to withdraw or demand distribution of any amount of its Capital Account, except as expressly provided in this Section 5. 5.2 Distributions. Subject to Section 8.2 Distributable Cash (as hereinafter defined), if any, of the Partnership for each fiscal year shall be distributed in the discretion of the General Partner to the Partners in proportion to their respective Sharing Percentages. In the event of a distribution of property other than in cash, such property shall be deemed to be sold for its Fair Market Value on the date of such distribution and any gain or loss associated with such deemed sale shall be included in determining Net Income or Net Loss for the applicable fiscal period. VI. BOOKS OF ACCOUNT, RECORDS AND REPORTS 6.1 Maintenance of Books and Records, Etc. The Partnership shall maintain books and records on the basis utilized in preparing the Partnership's Federal income tax return, incorporating the cash method of accounting, and such other records as may be required in connection with the preparation and filing of the Partnership's Federal and state income tax returns or other tax returns or reports. 6.2 Tax and Other Filings. The General Partner, at the expense of the Partnership, shall prepare and file, or cause to be prepared and filed, (i) Federal, state and local tax returns, as required, for each tax year of the Partnership and (ii) any other filings and reports with respect to the Partnership required to be made under the laws of the United States and applicable state and local laws, in connection with the conduct of its business. Prior to making any such filing or report, all tax returns shall be furnished to the Partners for their review and comment. 8 12 6.3 Designation of Tax Matters Partner. The General Partner shall be designated the "Tax Matters Partner" pursuant to Section 623l(a)(7) of the Code and the applicable Regulations promulgated thereunder. This provision shall survive any termination of this Agreement. 6.4 Fiscal and Tax Year. The fiscal and taxable year of the Partnership shall be the taxable year of the Partners having an aggregate interest in the Partnership's profits and Capital Accounts of more than fifty percent (50%) on the first day of the Partnership's first taxable year, or as otherwise determined in accordance with Section 706 of the Code. VII. TRANSFER OF PARTNERSHIP INTERESTS, WITHDRAWAL, ADDITIONAL PARTNERS 7.1 Restriction on Transfer. No Partner may sell, transfer, assign, hypothecate, pledge or otherwise dispose of or encumber ("Transfer") all or any part of such Partner's interest in the Partnership (whether voluntarily, involuntarily or by operation of law) without the prior written consent of the other Partners, which consent shall be within such other Partner's absolute discretion. 7.2 Admission of Substitute Partners. A permitted transferee of an interest in the Partnership shall have the right to seek admission as a substitute Partner subject to the conditions of and in the manner permitted under this Agreement. By permitted transfer of an interest in the Partnership, the transferor is deemed to have given the transferee the right to seek admission as a substitute Partner subject to the conditions of and in the manner permitted under this Agreement. Each permitted transferee of an interest in the Partnership may apply to become a substitute Partner with respect to the interest transferred to such Person by executing and delivering a transfer application at the time of such transfer. Such transferee shall become a substitute Partner if all of the Partners consent thereto, which consent may be withheld by any of them in each of their sole discretion, and when any such admission is shown on the books and records of the Partnership. If such consent is withheld, such transferee shall be an assignee ("Assignee"). An Assignee shall have an interest in the Partnership equivalent to that of a Partner with respect to allocations and distributions, including liquidating distributions of the 9 13 Partnership. An Assignee shall have no other rights of a Partner. 7.3 Withdrawal. No Partner shall withdraw from the Partnership without the prior written consent of the other Partners. 7.4 Additional Partners. Any person may be admitted to the Partnership as an additional partner if (a) each Partner consents in writing to such admission and (b) the person has executed a counterpart of this Agreement (as modified or amended from time to time) and such other instruments as the Partners deem necessary to confirm the undertaking of the person to be bound by all the terms and provisions of this Agreement. VIII. TERMINATION, DISSOLUTION AND WINDING-UP OF PARTNERSHIP 8.1 Termination. The existence of the Partnership shall continue until the first to occur of the following events (an "Event of Termination"). (a) a mutual determination by the Partners to terminate the Partnership; (b) December 31, 2003, unless the Partners mutually agree to extend the term of the Partnership; or (c) the happening of any event causing the dissolution of the Partnership under applicable law, unless the Partners (or their legal representatives) agree to continue the existence of the Partnership. 8.2 Dissolution and Winding-Up. Upon the occurrence of an Event of Termination, the Partnership shall be dissolved and wound-up. In connection with the dissolution and winding-up of the Partnership, the General Partner or, if there Is no General Partner, a liquidator appointed by a court of competent jurisdiction shall proceed with the sale or liquidation of all of the assets of the Partnership (including the conversion to cash or cash equivalents of its notes or accounts receivable) and shall apply and distribute the proceeds of such sale or liquidation in the following order of priority, unless otherwise required by mandatory provisions of applicable law. 10 14 (a) First, to pay (or to make provision for the payment of) all creditors of the Partnership (including Partners who are creditors of the Partnership) in the order of priority provided by law or otherwise, in satisfaction of all debts, liabilities or obligations of the Partnership due such creditors; (b) Second, to the Partners to the extent necessary to bring their respective Capital Accounts into balance in the same proportion as their respective Sharing Percentages; and (c) Third, to the Partners in proportion to their respective Sharing Percentages. IX. DEFINITIONS As used herein the following terms shall have the following respective meanings: Adjusted Capital Account Deficit. With respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of the relevant fiscal year or other period, after giving effect to the following adjustments: (a) Credit to such Capital Account any amounts that such Partner is obligated to restore or is deemed to be obligated to restore pursuant to the penultimate sentence of Regulation Section1.704-2(g)(1); (b) Debit to such Capital Account the items described in Regulation Sectionsl.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6); and (c) Credit and debit to such Capital Account, in the sole discretion of the Partners, any other items required or permitted under Section 704(b) of the Code and Regulations thereunder. Adjusted Value--with respect to any Partnership asset, the adjusted basis thereof for Federal income tax purposes, except that the Adjusted Value of each Partnership asset shall be adjusted to equal its Fair Market Value (i) upon the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution, 11 15 or (ii) immediately prior to the distribution of more than a de minimis amount of cash or any Partnership property as consideration for an interest in the Partnership (whether in liquidation of the Partnership or otherwise). Notwithstanding the foregoing, any adjustment to basis shall be made only if the Partners reasonably determine that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership. Affiliate--with reference to any Person, any Person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with such person. Assets--the assets to be contributed to the Partnership by the Partners as set forth on Schedule A hereto, which have a Net Agreed Value as set forth on Schedule A hereto. Capital Account--as defined in Section 4.2. Capital Contribution--as to any Partner, an amount contributed by such Partner to the capital of the Partnership as provided in Section 4.1 or otherwise. Code--the Internal Revenue Code of 1986, as amended (and any successor thereto). Any reference herein to specific sections of the Code shall be deemed to include a reference to any corresponding provisions of future law. Delaware Act--the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. Section 17-101, et seq., as it may be amended from time to time, and any successor to such Act. Distributable Cash--with respect to any period shall mean all cash revenues and funds received by the Partnership in such period, less the sum of the following: (i) all cash expenditures (including capital expenditures) made in such period incident to the normal operation of the Partnership's business and (ii) such additions therefrom to working capital and cash reserves as the General Partner reasonably determines to be necessary or appropriate for the proper operation of the Partnership's business. 12 16 Fair Market Value--as to any asset on any date, the gross fair market value of such asset on such date (i.e., without regard to any liabilities to which such asset is subject) as determined in good faith by the Partners. Net Agreed Value--(a) in the case of any asset contributed to the Partnership, the Fair Market Value of such asset at the time of such contribution reduced by any indebtedness or liabilities either assumed by the Partnership upon such contribution or to which such asset is subject when contributed and (b) in the case of any asset distributed to a Partner pursuant to Section 5 or distributed to a Partner in liquidation of the Partnership pursuant to Section 8, the Fair Market Value of such asset at the time such asset is distributed reduced by any indebtedness either assumed by such Partner upon such distribution or to which such asset is subject when distributed. Net Capital Contribution--the Net Capital Contribution of any Partner on any day shall be equal to the excess, if any, of (a) the aggregate Capital Contributions of such Partner on or before such day over (b) the aggregate distributions to such Partner before such day pursuant to Section 5.2(a) or (b) hereof, as the case may be. Net Income and Net Loss--For each fiscal period the Partnership's Net Income or Net Loss is an amount equal to the Partnership's taxable income or loss for such period determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments: (i) income of the Partnership that is exempt from Federal income tax and not otherwise taken into account in computing Net Income or Net Loss shall be added to such taxable income or loss; (ii) nondeductible and nonamortizable (or nondepreciable) expenditures described or treated under Regulations, as described in Section 705(a)(2)(B) of the Code, that are not otherwise taken into account in computing Net Income and Net Loss shall be subtracted from such taxable income or loss; 13 17 (iii) in lieu of the taxable gain or loss resulting from any disposition of any Partnership asset, there shall be taken into account the gain or loss that would be recognized for Federal income tax purposes upon such disposition if such gain or loss were computed by reference to the Adjusted Value of such asset; (iv) depreciation, amortization or other cost recovery deductions shall be computed based on the Adjusted Values of the Partnership's assets; and (v) any items that are specially allocated pursuant to Section 4.5 shall not be taken into account in computing Net Income or Net Loss. Partners--as defined in Section 1.3. Partnership--as defined in the introduction to this Agreement. Partnership Minimum Gain--Partnership Minimum Gain shall have the meaning set forth in Section 4.5(a) hereof. Person--an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Regulations--the regulations promulgated by the Treasury Department under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). Sharing Percentages--as defined in Section 4.3. Tax Matters Partner--as defined in Section 6.3. X. MISCELLANEOUS 10.1 Waiver of Partition. Each of the Partners hereby irrevocably waives any and all rights that it may have to maintain any action for partition of any of the Partnership's property. 14 18 10.2 Entire Agreement. This Agreement constitutes the entire agreement among the parties. It supersedes any prior agreement or understanding among them, and it may not be modified or amended in any manner other than as set forth herein. 10.3 Amendments and Waivers. This Agreement shall not be amended except by an instrument in writing executed by all the Partners; provided, however, that any provision of this Agreement may be waived, modified or amended, in any manner whatsoever, by mutual written consent of the Partners. 10.4 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES GOVERNING CONFLICTS OF LAW. 10.5 Successors and Assigns. Except as herein otherwise specifically provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, heirs, administrators, executors, successors and permitted assigns. 10.6 Interpretation. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in the masculine, the feminine or neuter gender shall include the masculine, the feminine and the neuter. 10.7 Captions. Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof. 10.8 Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 10.9 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed original but all of which shall constitute one and 15 19 the same instrument. It shall not be necessary for the Partners to execute the same counterpart hereof. 10.10 Additional Documents. Each party hereto agrees to execute, with acknowledgment or affidavit, if required, any and all documents and writings which may be necessary or expedient in connection with the creation of the Partnership and the achievement of its purposes, specifically including (a) any amendments to this Agreement and such certificates and other documents necessary or appropriate to form, qualify or continue the Partnership in all jurisdictions in which the Partnership conducts or plans to conduct business and (b) all such agreements, certificates, tax statements, tax returns and other documents as may be required of the Partnership or its Partners by the laws of the United States of America, the State of Delaware or any other state in which the Partnership conducts or plans to conduct business, or any political subdivision or agency thereof. 10.11 Notices. To be effective, all notices and demands under this Agreement must be in writing and must be given (a) by depositing the same in the United States mail, postage prepaid, certified or registered, return receipt requested, (b) by telephone, telegraph, telex or other electronic communication which in the case of an oral telephonic communication shall be promptly confirmed in writing, or (c) by delivering same in person and receiving a signed receipt therefor. Notices mailed in accordance with the foregoing shall be deemed to have been given and made three business days following the date so mailed. 16 20 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and in the year first above written. OUTBOARD MARINE CORPORATION By: /s/ Robert D. Randolph -------------------------------------- Name: Robert D. Randolph Title: Executive Vice President and Chief Operating Officer OMC RECREATIONAL BOAT GROUP, INC. By: /s/ Robert D. Randolph -------------------------------------- Name: Robert D. Randolph Title: Chairman 17 21 Schedule A ASSETS AND NET AGREED VALUE OF CONTRIBUTED ASSETS
Partner Assets Net Agreed Value - ------- ------ ---------------- General Partner $592,500 $592,500 Limited Partner - 750 shares of $82,000 for common stock of all listed assets Four Winns, Inc. - 10 shares of common stock of OMCCC Inc.
18 EX-4.1 12 INDENTURE 1 Exhibit 4.1 EXECUTION COPY ================================================================================ ------------------------ OUTBOARD MARINE CORPORATION AND SUBSIDIARY GUARANTORS SERIES A AND SERIES B 10 3/4% SENIOR NOTES DUE 2008 INDENTURE ------------------------ Dated as of May 27, 1998 ------------------------ STATE STREET BANK AND TRUST COMPANY Trustee ------------------------ ================================================================================ 2 CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310(a)(1).............................................................7.10 (a)(2).............................................................7.10 (a)(3).............................................................N.A. (a)(4).............................................................N.A. (a)(5).............................................................7.10 (i)(b).............................................................7.10 (ii)(c)............................................................N.A. 311(a)................................................................7.11 (b)................................................................7.11 (iii)(c)...........................................................N.A. 312(a)................................................................2.05 (b)................................................................12.03 (iv)(c)............................................................12.03 313(a)................................................................7.06 (b)(1).............................................................10.03 (b)(2).............................................................7.07 (v)(c).............................................................7.06; 12.02 (vi)(d)............................................................7.06 314(a)................................................................4.03; 12.02 (A)(b).............................................................10.02. (c)(1).............................................................12.04 (c)(2).............................................................12.04 (c)(3).............................................................N.A. (d)................................................................10.03; 10.04; 10.05 (vii)(e)...........................................................12.05 (f)................................................................N.A. 315(a)................................................................7.01 (b)................................................................7.05; 12.02 (A)(c).............................................................7.01 (d)................................................................7.01 (e)................................................................6.11 316(a)(last sentence).................................................2.09 (a)(1)(A)..........................................................6.05 (a)(1)(B)..........................................................6.04 (a)(2).............................................................N.A. (b)................................................................6.07 (B)(c).............................................................2.12 317(a)(1).............................................................6.08 (a)(2).............................................................6.09 i 3 (b)................................................................2.04 318(a)................................................................12.01 (b)................................................................N.A. (c)................................................................12.01 N.A. means not applicable *This Cross-Reference Table is not part of the Indenture. ii 4 TABLE OF CONTENTS Page ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.......................1 Section 1.01. Definitions..................................................1 Section 1.02. Other Definitions............................................17 Section 1.03. Incorporation by Reference of Trust Indenture Act............17 Section 1.04. Rules of Construction........................................18 ARTICLE 2. THE NOTES........................................................18 Section 2.01. Form and Dating..............................................18 Section 2.02. Execution and Authentication.................................19 Section 2.03. Registrar and Paying Agent...................................19 Section 2.04. Paying Agent to Hold Money in Trust..........................20 Section 2.05. Holder Lists.................................................20 Section 2.06. Transfer and Exchange........................................20 Section 2.07. Replacement Notes............................................32 Section 2.08. Outstanding Notes............................................32 Section 2.09. Treasury Notes...............................................33 Section 2.10. Temporary Notes..............................................33 Section 2.11. Cancellation.................................................33 Section 2.12. Defaulted Interest...........................................33 ARTICLE 3. REDEMPTION AND PREPAYMENT........................................34 Section 3.01. Notices to Trustee...........................................34 Section 3.02. Selection of Notes to Be Redeemed............................34 Section 3.03. Notice of Redemption.........................................34 Section 3.04. Effect of Notice of Redemption...............................35 Section 3.05. Deposit of Redemption Price..................................35 Section 3.06. Notes Redeemed in Part.......................................36 Section 3.07. Optional Redemption..........................................36 Section 3.08. Mandatory Redemption.........................................37 Section 3.09. Offer to Purchase by Application of Excess Proceeds..........37 ARTICLE 4. COVENANTS........................................................38 Section 4.01. Payment of Notes.............................................38 Section 4.02. Maintenance of Office or Agency..............................39 Section 4.03. Reports......................................................39 Section 4.04. Compliance Certificate.......................................40 Section 4.05. Taxes........................................................41 Section 4.06. Stay, Extension and Usury Laws...............................41 Section 4.07. Restricted Payments..........................................41 Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.................................................43 iii 5 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock........................................................44 Section 4.10. Asset Sales..................................................47 Section 4.11. Transactions with Affiliates.................................48 Section 4.12. Liens........................................................49 Section 4.13. Business Activities..........................................49 Section 4.14. Corporate Existence..........................................49 Section 4.15. Offer to Repurchase Upon Change of Control...................49 Section 4.16. Limitation on Sale and Leaseback Transactions................50 Section 4.17. Additional Subsidiary Guarantees.............................50 Section 4.18. Use of Proceeds..............................................51 ARTICLE 5. SUCCESSORS.......................................................51 Section 5.01. Merger, Consolidation, or Sale of Assets.....................51 Section 5.02. Successor Corporation Substituted............................52 ARTICLE 6. DEFAULTS AND REMEDIES............................................52 Section 6.01. Events of Default............................................52 Section 6.02. Acceleration.................................................54 Section 6.03. Other Remedies...............................................55 Section 6.04. Waiver of Past Defaults......................................55 Section 6.05. Control by Majority..........................................55 Section 6.06. Limitation on Suits..........................................55 Section 6.07. Rights of Holders of Notes to Receive Payment................56 Section 6.08. Collection Suit by Trustee...................................56 Section 6.09. Trustee May File Proofs of Claim.............................56 Section 6.10. Priorities...................................................57 Section 6.11. Undertaking for Costs........................................57 ARTICLE 7. TRUSTEE..........................................................57 Section 7.01. Duties of Trustee............................................57 Section 7.02. Rights of Trustee............................................58 Section 7.03. Individual Rights of Trustee.................................59 Section 7.04. Trustee's Disclaimer.........................................59 Section 7.05. Notice of Defaults...........................................60 Section 7.06. Reports by Trustee to Holders of the Notes...................60 Section 7.07. Compensation and Indemnity...................................60 Section 7.08. Replacement of Trustee.......................................61 Section 7.09. Successor Trustee by Merger, etc.............................62 Section 7.10. Eligibility; Disqualification................................62 Section 7.11. Preferential Collection of Claims Against Company............62 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................62 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.....62 Section 8.02. Legal Defeasance and Discharge...............................62 Section 8.03. Covenant Defeasance..........................................63 iv 6 Section 8.04. Conditions to Legal or Covenant Defeasance...................63 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions........................65 Section 8.06. Repayment to Company.........................................65 Section 8.07. Reinstatement................................................66 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................66 Section 9.01. Without Consent of Holders of Notes..........................66 Section 9.02. With Consent of Holders of Notes.............................67 Section 9.03. Compliance with Trust Indenture Act..........................68 Section 9.04. Revocation and Effect of Consents............................68 Section 9.05. Notation on or Exchange of Notes.............................69 Section 9.06. Trustee to Sign Amendments, etc..............................69 ARTICLE 10. COLLATERAL AND SECURITY.........................................69 Section 10.01. Depositary Agreement........................................69 Section 10.02. Recording and Opinions......................................70 Section 10.03. Release of Collateral.......................................70 Section 10.04. Certificates of the Company.................................71 Section 10.05. Certificates of the Trustee.................................71 Section 10.06 Authorization of Actions to be Taken by the Trustee under the Depositary Agreement....................................71 Section 10.07. Authorization of receipt of funds by the trustee under the Depositary Agreement........................................72 Section 10.08. Termination of security interest............................72 ARTICLE 11 SUBSIDIARY GUARANTEES.............................................72 Section 11.01. Subsidiary Guarantees.......................................72 Section 11.02. Limitation on subsidiary Guarantor Liability................73 Section 11.03. Execution and Delivery of Subsidiary Guarantees.............73 Section 11.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.......................................................74 Section 11.05. Releases Following Designation As an Unrestricted Subsidiary or Sale of Assets................................75 ARTICLE 12. MISCELLANEOUS....................................................75 Section 12.01. Trust Indenture Act Controls................................75 Section 12.02. Notices.....................................................75 Section 12.03. Communication by Holders of Notes with Other Holders of Notes.......................................................77 Section 12.04. Certificate and Opinion as to Conditions Precedent..........77 Section 12.05. Statements Required in Certificate or Opinion...............77 Section 12.06. Rules by Trustee and Agents.................................77 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders............................................78 Section 12.08. Governing Law...............................................78 Section 12.09. No Adverse Interpretation of Other Agreements...............78 v 7 Section 12.10. Successors..................................................78 Section 12.11. Severability................................................78 Section 12.12. Counterpart Originals.......................................78 Section 12.13. Table of Contents, Headings, etc............................78 vi 8 EXHIBITS Exhibit A FORM OF GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEES Exhibit F FORM OF NOTICE OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS vii 9 INDENTURE dated as of May 27, 1998 among Outboard Marine Corporation, a Delaware corporation (the "Company"), each of OMC Aluminum Boat Group, Inc., a Delaware corporation, OMC Fishing Boat Group, Inc., a Delaware corporation, OMC Recreational Boat Group, Inc., a Delaware corporation, OMC Latin America/Caribbean, Inc. and Recreational Boat Group Limited Partnership, a Delaware limited partnership, as guarantors (each a "Subsidiary Guarantor") and State Street Bank and Trust Company, as trustee (the "Trustee"). The Company, the Subsidiary Guarantors and the Trustee agree as follows for the benefit of one other and for the equal and ratable benefit of the Holders of the Company's 10 3/4% Series A Senior Notes due 2008 (the "Series A Notes") and the 10 3/4% Series B Senior Notes due 2008 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "144A Global Note" means a global note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "Asset Sale" means (i) the sale, lease, conveyance, transfer or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) of the Company or any of 1 10 its Restricted Subsidiaries other than sales (or resales) of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by Sections 4.15 and/or 5.1 hereof and not by Section 4.10 hereof), and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2.0 million or (b) for Net Proceeds in excess of $2.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary; (iii) a Restricted Payment that is permitted by Section 4.07 hereof; (iv) any sale of Equity Interests of the Company; (v) any surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind, in each case in the ordinary course of business; (vi) any grant of any license of patents, trademarks, trade names, registrations therefor or similar intellectual property, in the ordinary course of business; (vii) any sale of the Company's facility in Juarez, Mexico in a transaction which (a) satisfies the requirements of clauses (i) or (ii) of Section 4.10 hereof (but substituting "50%" in lieu of "75%" in said clause (ii)) and (b) is consummated no later than 18 months following the Issue Date pursuant to a definitive agreement signed no later than one year subsequent to the Issue Date; provided, that any cash Net Proceeds received therefrom shall be deemed to be Net Proceeds from an Asset Sale for all purposes under this Indenture; (viii) the sale and leaseback of any assets within 90 days of the acquisition of such assets; (ix) any disposition of Cash Equivalents in the ordinary course of business; (x) sales of accounts receivable, or participation therein, in connection with any Receivables Facility and (xi) sales of damaged, fully-depreciated or obsolete equipment or assets that, in the Company's reasonable judgment, are no longer used or useful in the business of the Company or its Restricted Subsidiaries. "Attributable Debt" in respect of a sale and leaseback transaction, means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Borrowing Base" means, as of any date, an amount equal to the sum of (a) 75% of the face amount of all accounts receivable owned by the Company and its Restricted Subsidiaries as of such date that are not more than 60 days past due, and (b) 50% of the book value of all inventory owned by the Company and its Subsidiaries as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. 2 11 "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than 12 months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding 12 months and overnight bank deposits, in each case with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (v) of this definition. "Cedel" means Cedel Bank, SA. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder or a Related Party of a Permitted Holder; (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Permitted Holders and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person," such "person" shall be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company or Holdings (measured by voting power rather than number of shares); (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors or (v) the Company or Holdings consolidates with, or merges into, any Person, or sells, assigns, conveys, transfers, leases or otherwise disposes of 3 12 substantially all of its assets to any Person, or any Person consolidates with, or merges into, the Company or Holdings, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or Holdings is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company or Holdings outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance). "Company" has the meaning assigned to it in the preamble to this Indenture. "Consolidated Capital Expenditures" means, for any period, an amount equal to (i) the sum of (a) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of the Company and its Restricted Subsidiaries) by the Company and its Restricted Subsidiaries during that period that, in conformity with GAAP, are included in "property, plant or equipment" or comparable items reflected in the consolidated balance sheets of the Company and its Subsidiaries plus (b) to the extent not covered by clause (i)(a) of this definition, the aggregate of all expenditures by the Company and its Restricted Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets (other than current assets consisting of inventory or accounts receivable) of any Person, or the stock or other evidence of beneficial ownership of any Person that, as a result of such acquisition, becomes a Restricted Subsidiary of the Company minus (ii) the sum of (a) the proceeds of Indebtedness permitted under clause (iv) of the definition of Permitted Debt, (b) an amount equal to the proceeds received by the Company or any of its Subsidiaries from a sale and leaseback transaction permitted under Section 4.16 hereof so long as such transaction occurs within 180 days of the acquisition of the related property or equipment and to the extent prior expenditures, up to an equivalent amount for the asset so sold and leased back, constituted Consolidated Capital Expenditures in such period or in any prior period and (c) expenditures in an amount not to exceed the proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments received from third parties, so long as such expenditures were made for purposes of replacing or repairing the assets in respect of which such proceeds, awards or payments were received and so long as such expenditures are made not later than 12 months after the occurrence of the damage to or loss of the assets being replaced or repaired. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, in each case to the extent deducted in computing Consolidated Net Income (i) an amount equal to any extraordinary loss recorded in such period, plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), plus (v) any other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a 4 13 prepaid expense that was paid in a prior period) of such Person and its Subsidiaries for such period, minus, to the extent included in the computation of Consolidated Net Income, any non-cash items increasing such Consolidated Net Income for such period in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, the interest expense of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of a Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly-Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means that certain Amended and Restated Loan and Security Agreement, dated as of January 6, 1998, by and among the Company and NationsBank, N.A., as amended, modified, increased, renewed, refunded, replaced or refinanced from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A hereto except that such Note 5 14 shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Depositary Agent" means State Street Bank and Trust Company, in its capacity as depositary agent. "Depositary Agreement" means that certain Depositary Agreement, dated as of the Issue Date, among the Company, the Trustee, the Depositary Agent and NationsBank of Texas, N.A., as administrative agent. "Designated Obligations" means the obligations of the Company with respect to certain "Rabbi Trust" arrangements in existence on the Issue Date in an aggregate amount not to exceed $14 million. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to that date that is 91 days after the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means an offering of common stock (other than Disqualified Stock) of the Company pursuant to an effective registration statement filed with the SEC pursuant to the Securities Act, other than an offering pursuant to Form S-8 (or any successor thereto). "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. 6 15 "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means up to $104.1 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than letters of credit and Indebtedness under the Credit Agreement) in existence on the Issue Date, until such amounts are repaid. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) consolidated interest expense of such Person and its Restricted Subsidiaries for such period whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, multiplied by (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means, with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the referent Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred and the proceeds thereof applied at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions, that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, 7 16 and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "Foreign Credit Facilities" means, with respect to the Company's Foreign Subsidiaries, one or more debt facilities or other debt securities or commercial paper facilities with banks or other institutional lenders providing for overdraft, revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit to which one or more Foreign Subsidiaries is a party, in each case, as amended, restated, modified, increased, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Foreign Subsidiary" means any Subsidiary of the Company, more than 80% of the sales, earnings or assets (determined on a consolidated basis) of which are located or derived from operations outside the United States. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate or currency swap agreements, cap agreements and collar agreements and (ii) other agreements or arrangements (including foreign exchange or commodity hedge, exchange, purchase or similar agreements) designed to protect such Person against fluctuations in interest rates, value of assets owned, financed or sold, value of raw materials purchased, or of liabilities incurred or assumed or of pre-funding arrangements, or against fluctuations in foreign currency exchange rates or commodity prices, in any case, in the ordinary course of business of such Person and not for speculative purposes. "Holder" means a Person in whose name a Note is registered. 8 17 "Holdings" means Greenmarine Holdings, L.L.C., a Delaware limited liability company. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or bankers' acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person; provided, however, that Indebtedness shall not include the obligations of the Company in respect of "floor plan financing" or similar arrangements entered into in the ordinary course of business for the benefit of dealers in connection with the sale of the Company's products. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances (excluding commission, travel, relocation and similar advances to officers and employees made in the ordinary course of business) or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. "Issue Date" means the first date on which any Notes are issued under this Indenture. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York, or the city in which the principal corporate trust office of the Trustee is located or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment 9 18 date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gains or losses, together with any related provision for taxes on such gains or losses, realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the Credit Agreement), and any reserve for adjustment in respect of the sale price of, or warranties and indemnities made with respect to, such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (iii) as to which the lenders have been notified in writing (including in any written agreement) that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. 10 19 "Non-U.S. Person" means a Person who is not a U.S. Person. "Notes" has the meaning assigned to it in the preamble to this Indenture. "Notes Collateral" has the meaning assigned to it in the Depositary Agreement. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the offering of the Notes by the Company. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, the Assistant Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Sections 12.04 and 12.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Sections 12.04 and 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Cedel). "Participating Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Permitted Business" means any of the businesses engaged in by the Company and its Restricted Subsidiaries on the date of this Indenture, and any similar, complementary or related business with respect to any such businesses, including, without limitation, any business related to the development or application of the Company's FICHT technology as described in the Offering Memorandum dated May 21, 1998 relating to the Notes. "Permitted Holders" means, collectively, (i) Holdings and its Affiliates, and their respective managers, members, employees and directors, (ii) Greenlake Holdings LLC and its Affiliates, and their respective managers, members and directors, (iii) Quasar Strategic Partners LDC and its Affiliates, and their respective managers, members, partners, employees and directors, (iv) Quantum Industrial Partners LDC and its Affiliates, and their respective managers, members, partners, employees and directors, (v) Quasar Industrial Fund N.V. and its Affiliates, and their respective managers, members, partners, employees and directors, (vi) Quantum Industrial Holdings Ltd. and its Affiliates, and their respective managers, members, partners, employees and directors, and (vii) with respect to any 11 20 natural persons described in the foregoing clauses (i) through (vi), (A) any spouse, lineal descendent (including by adoption and stepchildren), or sibling of such natural persons and (B) any trust, corporation, limited liability company or partnership, the beneficiaries, stockholders or partners of which consist entirely of natural persons or the individuals described in subclause (A) above. "Permitted Investments" means (i) any Investment in the Company or in a Wholly-Owned Restricted Subsidiary of the Company that is engaged in a Permitted Business; (ii) any Investment in Cash Equivalents; (iii) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (a) such Person becomes a Wholly-Owned Restricted Subsidiary of the Company that is engaged in a Permitted Business or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly-Owned Restricted Subsidiary of the Company that is engaged in a Permitted Business; (iv) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (v) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (vi) any Investment in residential real estate obtained in connection with employment or relocation agreements entered into in the ordinary course of business; provided that the aggregate amount of such Investments does not exceed $1.5 million at any time outstanding; (vii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of the Company's or any of its Subsidiaries' trade creditors or customers. "Permitted Liens" means (i) Liens on assets securing Indebtedness and other Obligations under the Credit Agreement, to the extent that the assets securing such Indebtedness are of the same general type of assets as those securing the Indebtedness and other Obligations under the Credit Agreement on the Issue Date (including any such assets of Foreign Subsidiaries); (ii) Liens in favor of the Company; (iii) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any other assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company; provided that such Liens were not incurred in contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens existing on the date of this Indenture; (vii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings and which are not being foreclosed, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of the second paragraph of Section 4.09 hereof, which Liens attach only to the assets acquired with such Indebtedness; (ix) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (x) Purchase Money Liens (including extensions and renewals thereof); (xi) Liens securing Indebtedness under Hedging Obligations; (xii) Liens securing obligations of the Company or any of its Restricted Subsidiaries under any "floor-plan" financing arrangement; (xiii) statutory Liens of landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business and with 12 21 respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made therefor; and (xiv) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Subsidiary. "Permitted Refinancing Indebtedness" means any Indebtedness (including prepayment fees and premiums) of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, or other business entity or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Purchase Money Obligations" of any Person means any obligations of such Person to any seller or any other Person incurred or assumed to finance the purchase, or the cost of construction or improvement, or real or personal property to be used in the business of such person or any of its Restricted Subsidiaries in an amount that is not more than 100% of the cost, or fair market value, as appropriate, of such property, and incurred within 180 days after the date of such acquisition (excluding amounts payable to trade creditors incurred in the ordinary course of business). "QIB" means a "qualified institutional buyer" as defined in Rule 144A. 13 22 "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a global Note bearing the Private Placement Legend and deposited with or on behalf of the Depositary and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 or Rule 904 of Regulation S. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend and the Global Note Legend. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Receivables Facility" means one or more receivables financing facilities, as amended from time to time, pursuant to which the Company and/or any of its Restricted Subsidiaries sells its accounts receivable to a Person that is not a Restricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. 14 23 "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly, owned by such Person (a "subsidiary"), by one or more subsidiaries of such Person or by such Person and one or more subsidiaries of such Person or (ii) a partnership in which such Person or a subsidiary of such Person is, at the date of determination, a general partner of such partnership, or (iii) any partnership, limited liability company or other Person in which such Person, a subsidiary of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or appoint or direct the election or appointment of the managing partner or member of such Person or, if applicable, a majority of the directors or other governing body of such Person. "Subsidiary Guarantee" means the Subsidiary Guarantee by each Subsidiary Guarantor of the Company's payment obligations under this Indenture and the Notes, executed pursuant to the provisions of this Indenture. "Subsidiary Guarantor" means each of (i) the Company's direct or indirect Restricted Subsidiaries that are Significant Subsidiaries (other than Foreign Subsidiaries) on the date of this Indenture and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. 15 24 "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned 16 25 Restricted Subsidiaries of such Person and one or more Wholly-Owned Restricted Subsidiaries of such Person. SECTION 1.02. OTHER DEFINITIONS.
Defined in Term Section "Affiliate Transaction"..................................4.11 "Asset Sale Offer".......................................3.09 "Authentication Order"...................................2.02 "Change of Control Offer"................................4.15 "Change of Control Payment"..............................4.15 "Change of Control Payment Date" ........................4.15 "Covenant Defeasance"....................................8.03 "DTC"....................................................2.03 "Event of Default".......................................6.01 "Excess Proceeds"........................................4.10 "incur"..................................................4.09 "Legal Defeasance" ......................................8.02 "Offer Amount"...........................................3.09 "Offer Period"...........................................3.09 "Paying Agent"...........................................2.03 "Payment Default"........................................6.01 "Permitted Debt".........................................4.09 "Purchase Date"..........................................3.09 "Registrar"..............................................2.03 "Restricted Payments"....................................4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Subsidiary Guarantees means the Company and the Subsidiary Guarantors, respectively, and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively. 17 26 All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES SECTION 2.01. FORM AND DATING. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the 18 27 aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Cedel Bank. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two duly authorized Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. 19 28 The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA ss. 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global 20 29 Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. 21 30 (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who 22 31 shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests in Global Notes for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; 23 32 (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or 24 33 (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, 25 34 a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note and in the case of clause (C) above, the Regulation S Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, 26 35 certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. 27 36 (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or 28 37 (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: 29 38 "THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND , IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: 30 39 "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the 31 40 Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (c) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. 32 41 If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of 33 42 defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3. REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. 34 43 The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest and Liquidated Damages, if any, on Notes called for redemption cease to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE On or before 10:30am (New York City time) on each redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. 35 44 If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest and Liquidated Damages, if any, shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal and Liquidated Damages, if any, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to June 1, 2003. Thereafter, the Company shall have the option at any time to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:
Year Percentage ---- ---------- 2003.............................................105.375% 2004.............................................103.583% 2005.............................................101.792% 2006 and thereafter..............................100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to June 1, 2001, the Company may redeem up to an aggregate of 35% of the original aggregate principal amount of the Notes at a redemption price of 110.750% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes originally issued remain outstanding immediately after the occurrence of such redemption; and provided, further that any such redemption shall occur within 60 days of the date of the closing of any such offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. 36 45 SECTION 3.08. MANDATORY REDEMPTION. Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall not be required to make mandatory redemption payments with respect to the Notes. SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest and Liquidated Damages, if any, after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; 37 46 (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the 38 47 Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03. REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports, in 39 48 each case within 15 days after the time periods specified for such filings in the SEC's rules and regulations. In addition, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, at all times that the SEC does not accept the filings provided for in the preceding sentence, the Company and the Subsidiary Guarantors shall, for so long as any Notes remain outstanding, furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Company and each Subsidiary Guarantor (to the extent that such Subsidiary Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture and the Depositary Agreement, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and the Depositary Agreement and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture or the Depositary Agreement (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. In the event that such written statement of the Company's independent public accountants cannot be obtained, the Company shall deliver an Officer's Certificate certifying that it has used its best efforts to obtain such statements and was unable to do so. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 40 49 SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings and with respect to which appropriate reserves have been taken in accordance with GAAP. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. The Company and each of the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Subsidiary Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less 41 50 than the sum, without duplication, of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment (including any Investment in an Unrestricted Subsidiary) that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (iv) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the lesser of (A) the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation or (B) such fair market value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary. The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (v) Investments in any Person (other than the Company or a Wholly-Owned Restricted Subsidiary or any Unrestricted Subsidiary) engaged in a Permitted Business having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (v) that are at that time outstanding not to exceed $25 million; (vi) the repurchase of Convertible Debentures in an amount not to exceed $7.1 million, plus any accrued and unpaid interest thereon, in connection with any offer required to be made to the holders thereof following a Change of Control or similar event; provided, that the Company has previously paid all amounts required to be paid in connection with any Change of Control Offer for the Notes; (vii) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company held by any management employee of the Company (or any Restricted Subsidiary) pursuant to any management equity subscription agreement or stock option, phantom stock or other equity incentive plan; provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed the sum of (a) $2 million in each fiscal year (provided that any unused amounts may be carried over to any subsequent fiscal year, subject to a maximum amount of $4 million in any fiscal year) plus (b) the amount of net cash proceeds received by the Company from the Sale of Equity Interests (other than Disqualified Stock) to management employees of the Company or any Restricted Subsidiary; provided that any such net cash proceeds shall be excluded from any computation under clause (c)(ii) above; (viii) loans to employees of 42 51 the Company or any Restricted Subsidiary to purchase Equity Interests issued by the Company in an amount not to exceed $2 million at any time outstanding; (ix) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (ix) that are at that time outstanding, not to exceed $5 million; (x) the payment of consulting or similar fees to Holdings in an aggregate amount not to exceed $250,000 in any fiscal year; provided, that the requirement set forth in clause (b) of the preceding paragraph is satisfied with respect to any such payment; or (xi) other Restricted Payments in an aggregate amount not to exceed $5 million; provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (iii) through (xi) above, no Default or Event of Default shall have occurred and be continuing or would occur as consequence thereof. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default; provided that in no event shall the business currently operated by any Subsidiary Guarantor be transferred to or held by an Unrestricted Subsidiary. In the event of any such designation, all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Restricted Investments in an amount equal to the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such redesignation would not cause a Default. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $20 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of 43 52 (a) Existing Indebtedness or other agreements as in effect on the date of this Indenture, (b) the Credit Agreement as in effect as of the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the date of this Indenture, (c) this Indenture and the Notes, (d) applicable law, rule, regulation or order, (e) any agreement or other instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (f) customary non-assignment provisions in licenses, leases or other contracts or agreements entered into in the ordinary course of business and consistent with past practices, (g) Purchase Money Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, (i) contracts for the sale of assets, including without limitation, customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary that is otherwise permitted by this Indenture; (j) Indebtedness secured by Liens otherwise permitted to be incurred pursuant to the provisions of Section 4.12 hereof that limits the right of the debtor to dispose of the assets securing such Indebtedness; (k) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (l) agreements relating to the financing of the acquisition of real or tangible personal property acquired after the date of this Indenture; provided, that such encumbrance or restriction relates only to the property which is acquired and in the case of any encumbrance or restriction that constitutes a Lien, such Lien constitutes a Purchase Money Lien. SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company or any Subsidiary Guarantor (or, to the extent specified in clause (viii) of the definition of Permitted Debt, any Foreign Subsidiary) may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least (a) 2.0 to 1.0, if such date is prior to December 31, 1999, (b) 2.25 to 1.0, if such date is on or after December 31, 1999 and prior to June 30, 2001 and (c) 2.5 to 1.0 thereafter, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional 44 53 Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be and the proceeds thereof applied, at the beginning of such four-quarter period. The provisions of the first paragraph of this Section 4.09 shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of revolving credit Indebtedness and letters of credit pursuant to the Credit Agreement (including Indebtedness under any Receivables Facility); provided that the aggregate principal amount of all such Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder) outstanding under the Credit Agreement after giving effect to such incurrence does not exceed the greater of (a) $150.0 million or (b) the Borrowing Base less, in either case, the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Subsidiaries to permanently reduce the commitments for revolving credit Indebtedness under the Credit Agreement pursuant to Section 4.10 hereof; (ii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company and the Subsidiary Guarantors of the Indebtedness represented by the Notes and the Subsidiary Guarantees; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or Purchase Money Obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment (including tooling) used in the business of the Company or such Restricted Subsidiary or other expenditures which would be included within clause (a) of the definition of "Consolidated Capital Expenditures" (whether through the direct purchase of assets or the Capital Stock of any Person owning such Assets), in an aggregate principal (or accreted value, as applicable) amount at any time outstanding, not to exceed $25 million; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace any Indebtedness (other than Indebtedness incurred pursuant to clauses (i), (vi), (vii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv) or (xvi) hereof) that was permitted by this Indenture to be incurred; (vi) Indebtedness of the Company and its Restricted Subsidiaries in connection with performance, surety, statutory, appeal or similar bonds in the ordinary course of business; (vii) the incurrence of intercompany Indebtedness between or among the Company and any Wholly-Owned Restricted Subsidiary; provided, however, that (a) if the Company or a Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and the Subsidiary Guarantees, and (b) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly-Owned Restricted Subsidiary and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly-Owned Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be that was not permitted by this clause; 45 54 (viii) the incurrence by any Foreign Subsidiary of Indebtedness under Foreign Credit Facilities; provided that the aggregate principal amount of all Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of Foreign Subsidiaries thereunder) outstanding under all Foreign Credit Facilities after giving effect to such incurrence does not exceed $5 million or such greater amount, not to exceed $30 million outstanding at any time, as may be incurred by any Foreign Subsidiary pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph above; (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations; (x) the guarantee by the Company or any of the Subsidiary Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (xi) Indebtedness of the Company and its Restricted Subsidiaries from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts, which will not be, and will not be deemed to be, inadvertent) drawn against any insufficient funds in the ordinary course of business; (xii) the incurrence by the Company or any Restricted Subsidiary of Indebtedness pursuant to the issuance of promissory notes in an amount not to exceed $2 million at any time outstanding in order to repurchase or otherwise acquire or retire for value Equity Interests of the Company held by any employee of the Company as permitted by clause (vii) of the second paragraph of Section 4.07 hereof; provided, however, that any such Indebtedness incurred pursuant to this clause (xii) shall be expressly subordinated in right of payment to the Notes; (xiii) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including without limitation to letters of credit in respect to workers' compensation claims or self-insurance (and including letters of credit issued with respect to the Designated Obligation), or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (xiv) Indebtedness arising from the agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment or purchase price of similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, that the maximum aggregate liability of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company or a Restricted Subsidiary in connection with such disposition; (xv) guarantees by the Company or any of its Restricted Subsidiaries of Indebtedness of Persons who are not Affiliates of the Company incurred in the ordinary course of business in an aggregate principal amount not to exceed $15 million at any time outstanding; and 46 55 (xvi) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness, in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $15 million. The Company shall not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xvi) above as of the date of incurrence thereof, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09 as of the date of incurrence thereof, the Company shall, in its sole discretion, classify such item of Indebtedness on the date of its incurrence in any manner that complies with this Section 4.09. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued. SECTION 4.10. ASSET SALES The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed or satisfied by the transferee of any such assets pursuant to a customary novation or other agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any marketable securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option, (a) to purchase, redeem, repay or prepay Indebtedness under the Credit Agreement or other secured Indebtedness of the Company or a Restricted Subsidiary (and, in the case of any such Indebtedness that was borrowed under a revolving credit line, to correspondingly reduce commitments with respect thereto), (b) to cash collateralize letters of credit to the extent such 47 56 letters of credit have not been drawn upon or returned undrawn; provided, however, that any such cash collateral released to the Company upon the expiration of such letters of credit shall again be deemed to be Net Proceeds (and, in the case of any such letters of credit established under a revolving credit line to correspondingly reduce commitments with respect thereto), or (c) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other long-term assets that are used or useful, in each case, in a Permitted Business; provided, however, that if the Company or any Restricted Subsidiary has entered into a definitive agreement with respect to any such acquisition or capital expenditure within such 365 day period, it may defer the application of such Net Proceeds to effect such acquisition or capital expenditure for up to an additional 90 days or the fifth Business Day following the termination of any such definitive agreement, whichever occurs first. Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be required to make an Asset Sale Offer to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth herein. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any general corporate purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction") unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that the following shall not be deemed to be Affiliate Transactions: (A) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, including reasonable loans to officers contemplated by such employment agreements, (B) transactions between or among the Company 48 57 and/or its Restricted Subsidiaries, (C) Permitted Investments or Restricted Payments that are permitted under Section 4.07 hereof, (D) customary compensation paid to, and indemnity or insurance provided on behalf of, directors and officers of the Company or any of its Restricted Subsidiaries as determined in good faith by the Company's Board of Directors, including customary programs related to the testing and evaluation of the Company's products; (E) transactions with customers, suppliers, joint venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) which are at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and (F) payments under any agreement in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) and any replacement agreement thereto so long as any such amendment or replacement agreement is no less favorable to the Company and its Restricted Subsidiaries in any material respect than the original agreement as in effect on the Issue Date. SECTION 4.12. LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien of any kind upon any of their property or assets, now owned or hereafter acquired, except Permitted Liens. SECTION 4.13. BUSINESS ACTIVITIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.14. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Significant Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Significant Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase 49 58 Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by this Indenture and described in such notice. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.09 hereof and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. SECTION 4.16. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company may enter into a sale and leaseback transaction if (i) the Company could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to the provisions of Section 4.12 hereof, (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (in the case of transactions having a fair market value in excess of $5.0 million, as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.10 hereof. SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES If the Company or any of its Restricted Subsidiaries shall after the date of this Indenture (i) transfer or cause to be transferred in one or a series of transactions (whether or not related), any assets, business, divisions, real property or equipment having an aggregate fair market value (as determined in good faith by the Board of Directors) in excess of $1.0 million to any Restricted 50 59 Subsidiary that is a Significant Subsidiary (other than a Foreign Subsidiary) that is not a Subsidiary Guarantor; (ii) acquire or create another Restricted Subsidiary that is a Significant Subsidiary (other than a Foreign Subsidiary); or (iii) cause any Restricted Subsidiary of the Company, that is not a Subsidiary Guarantor, to guarantee any Indebtedness of the Company other than the Notes, or pledge any of its assets to secure any Indebtedness of the Company other than the Notes, then, in each case, the Company will cause such Restricted Subsidiary to (A) execute and deliver to the Trustee a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally Guarantee all of the Company's obligations under the Notes on the terms set forth in such supplemental indenture and (B) deliver to the Trustee an opinion of counsel reasonably satisfactory to the Trustee that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary. Notwithstanding the foregoing, if such transferee or acquired Subsidiary has been properly designated as an Unrestricted Subsidiary in accordance with this Indenture, then for so long as it continues to constitute an Unrestricted Subsidiary, that transferee or acquired Subsidiary shall not be required to execute a Subsidiary Guarantee or deliver to the Trustee an opinion of counsel in accordance with the terms of this Indenture. SECTION 4.18. USE OF PROCEEDS The Company shall use the proceeds from the sale of the Notes in the manner described in the Offering Memorandum dated May 21, 1998 relating to the Notes under the caption "Use of Proceeds." ARTICLE 5. SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Company shall not, directly or indirectly, consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; (iv) except in the case of a merger of the Company with or into a Wholly-Owned Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, immediately after such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph Section 4.09 hereof; and (v) each Subsidiary Guarantor, unless it is the other party to the transaction described above, shall have by supplemental 51 60 indenture confirmed that its Subsidiary Guarantee shall apply to the Company's or the surviving Person's obligations under this Indenture and the Notes. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company or any of its Subsidiaries fails to comply with any of the provisions of Section 4.15 or 5.01 hereof; (d) the Company or any of its Subsidiaries fails to comply with any of the provisions of Section 4.07, 4.09 or 4.10 hereof and such failure continues for a period of 30 days; (e) the Company or any Subsidiary fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture, the Notes or the Depositary Agreement for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (f) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on 52 61 such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (g) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $5.0 million; (h) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case to which it or they are the debtor; (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or 53 62 (j) except as permitted herein, any Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under such Subsidiary Guarantor's Subsidiary Guarantee. SECTION 6.02. ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (h) or (i) of Section 6.01 hereof with respect to the Company, any Significant Subsidiary or any group of Significant Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to June 1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on June 1 of the years set forth below, as set forth below (expressed as a percentage of the principal amount to the date of payment that would otherwise be due but for the provisions of this sentence):
Year Percentage ---- ---------- 1998...............................................114.333% 1999...............................................112.542% 2000...............................................110.750% 2001...............................................108.958% 2002...............................................107.167%
54 63 SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; 55 64 (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or 56 65 composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically 57 66 set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c), (e) and (f) of this Section 7.01 and Section 7.02. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. 58 67 (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) Except with respect to Section 4.01 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.01(a), 6.01(b) and 4.01 or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee may, in its discretion, make sure further inquiry or investigation into such facts or matters as it may see fit and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. 59 68 SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company and the Subsidiary Guarantors shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. 60 69 To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 61 70 A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each Subsidiary Guarantor shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and the Subsidiary Guarantees on the date the conditions set forth below 62 71 are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and Subsidiary Guarantees, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and the Company and each Subsidiary Guarantor shall be deemed to have satisfied all their respective other obligations under such Notes, Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest and Liquidated Damages thereon, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and each Subsidiary Guarantor shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the outstanding Notes and Subsidiary Guarantees on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and Subsidiary Guarantees shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes and Subsidiary Guarantees shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Subsidiary Guarantees, the Company or any of its Subsidiaries may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guarantees shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(d) through 6.01(g) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: 63 72 (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages, if any, on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel (which may be subject to customary exceptions) to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and 64 73 (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured creditor except to the extent provided in the Depositary Agreement, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. 65 74 SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Company and the Subsidiary Guarantors under this Indenture, the Notes and the Subsidiary Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or a Subsidiary Guarantor's obligations to the Holders of the Notes by a successor to the Company or a Subsidiary Guarantor pursuant to Article 5 or Article 10 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or (f) to allow any Subsidiary Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Subsidiary Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations 66 75 that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15 hereof), the Subsidiary Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents, without limitation, obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Subsidiary Guarantors in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; 67 76 (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes (other than provisions relating to Sections 3.09, 4.10 and 4.15 hereof); (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by Section 4.10 or 4.15 hereof); (h) release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture; or (i) make any change in the foregoing amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture, the Subsidiary Guarantees or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. The Company may, but shall not be obligated to, fix a record date for determining which Holders must consent to such amendment, supplement or waiver. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation pursuant to Section 2.05 hereof or (ii) such other date as the Company shall designate. 68 77 SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10. COLLATERAL AND SECURITY SECTION 10.01. DEPOSITARY AGREEMENT. The due and punctual payment of the principal of and interest and Liquidated Damages, if any, on the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of and interest and Liquidated Damages (to the extent permitted by law), if any, on the Notes and performance of all other obligations of the Company to the Holders of Notes or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, shall be secured to the extent provided in the Depositary Agreement which the Company has entered into simultaneously with the execution of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Depositary Agreement (including, without limitation, the provisions providing for foreclosure and release of Notes Collateral) as the same may be in effect or may be amended from time to time in accordance with its terms and authorizes and directs the Depositary Agent to enter into the Depositary Agreement and to perform its obligations and exercise its rights thereunder in accordance therewith. The Company shall deliver or cause to be delivered to the Trustee copies of all documents delivered to the Depositary Agent pursuant to the Depositary Agreement, and shall do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the provisions of the Depositary Agreement, to assure and confirm to the Trustee and the Depositary Agent the security interest in the Notes Collateral contemplated hereby, by the Depositary Agreement or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purposes herein expressed. The Company shall take, or shall cause its Subsidiaries to take, upon request of the Trustee, any and all actions reasonably required to cause the Depositary Agreement to create and maintain, as security for the 69 78 Obligations of the Company hereunder, a valid and enforceable perfected first priority Lien in and on all the Notes Collateral, in favor of the Trustee for the benefit of the Holders of Notes, superior to and prior to the rights of all third Persons and subject to no Liens other than Permitted Liens. SECTION 10.02. RECORDING AND OPINIONS (a) The Company shall furnish to the Trustee simultaneously with the execution and delivery of this Indenture an Opinion of Counsel either (i) stating that in the opinion of such counsel all action has been taken with respect to the recording, registering and filing of this Indenture, financing statements or other instruments necessary to make effective the Lien intended to be created by the Depositary Agreement, and reciting with respect to the security interests in the Notes Collateral, the details of such action, or (ii) stating that, in the opinion of such counsel, no such action is necessary to make such Lien effective. (b) The Company shall furnish to the Depositary Agent and the Trustee on May 27, in each year beginning with May 27, 1999, an Opinion of Counsel, dated as of such date, either (i)(A) stating that, in the opinion of such counsel, action has been taken with respect to the recording, registering, filing, re-recording, re-registering and re-filing of all supplemental indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Lien of the Depositary Agreement and reciting with respect to the security interests in the Notes Collateral the details of such action or referring to prior Opinions of Counsel in which such details are given, (B) stating that, based on relevant laws as in effect on the date of such Opinion of Counsel, all financing statements and continuation statements have been executed and filed that are necessary as of such date and during the succeeding 12 months fully to preserve and protect, to the extent such protection and preservation are possible by filing, the rights of the Holders of Notes and the Depositary Agent and the Trustee hereunder and under the Depositary Agreement with respect to the security interests in the Notes Collateral, or (ii) stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien and assignment. (c) The Company shall otherwise comply with the provisions of TIA ss.314(b). SECTION 10.03. RELEASE OF COLLATERAL (a) Subject to subsections (b) and (c) of this Section 10.03, Notes Collateral may be released from the Lien and security interest created by the Depositary Agreement at any time or from time to time in accordance with the provisions of the Depositary Agreement or as provided hereby. (b) At any time when a Default or Event of Default shall have occurred and be continuing, no release of Notes Collateral pursuant to the provisions of the Depositary Agreement shall be effective as against the Holders of Notes. (c) The release of any Notes Collateral from the terms of this Indenture and the Depositary Agreement shall not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Notes Collateral is released pursuant to the terms of the Depositary Agreement. To the extent applicable, the Company shall cause TIA ss.313(b), relating to reports, and TIA ss.314(d), relating to the release of property or securities from the Lien and security interest of the Depositary Agreement and relating to the substitution therefor of any property or securities 70 79 to be subjected to the Lien and security interest of the Depositary Agreement, to be complied with. Any certificate or opinion required by TIA ss.314(d) may be made by an Officer of the Company except in cases where TIA ss.314(d) requires that such certificate or opinion be made by an independent Person, which Person shall be an independent engineer, appraiser or other expert selected or approved by the Trustee and the Depositary Agent in the exercise of reasonable care. SECTION 10.04. CERTIFICATES OF THE COMPANY. (a) The Company shall furnish to the Trustee and the Depositary Agent, prior to each proposed release of Notes Collateral pursuant to the Depositary Agreement, (i) all documents required by TIA ss.314(d) and (ii) an Opinion of Counsel, which may be rendered by internal counsel to the Company, to the effect that such accompanying documents constitute all documents required by TIA ss.314(d). The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such documents and such Opinion of Counsel. SECTION 10.05. CERTIFICATES OF THE TRUSTEE. In the event that the Company wishes to release Notes Collateral in accordance with the Depositary Agreement and has delivered the certificates and documents required by the Depositary Agreement and Section 10.04 hereof, the Trustee shall determine whether it has received all documentation required by TIA ss.314(d) in connection with such release and, based on such determination and the Opinion of Counsel delivered pursuant to Section 10.04(b), shall deliver a certificate to the Depositary Agent setting forth such determination. SECTION 10.06. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE DEPOSITARY AGREEMENT. Subject to the provisions of Section 7.01 and 7.02 hereof, the Trustee may, in its sole discretion and without the consent of the Holders of Notes, direct, on behalf of the Holders of Notes, the Depositary Agent to, take all actions it deems necessary or appropriate in order to (a) enforce any of the terms of the Depositary Agreement and (b) collect and receive any and all amounts payable in respect of the Obligations of the Company hereunder. The Trustee shall have power to institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Notes Collateral by any acts that may be unlawful or in violation of the Depositary Agreement or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders of Notes in the Notes Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders of Notes or of the Trustee. 71 80 SECTION 10.07. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE DEPOSITARY AGREEMENT. The Trustee is authorized to receive any funds for the benefit of the Holders of Notes distributed under the Depositary Agreement, and to make further distributions of such funds to the Holders of Notes according to the provisions of this Indenture. SECTION 10.08. TERMINATION OF SECURITY INTEREST Upon the payment in full of all Obligations of the Company under this Indenture and the Notes, or under Legal Defeasance, the Trustee shall, at the request of the Company, deliver a certificate to the Depositary Agent stating that such Obligations have been paid in full, and instruct the Depositary Agent to release the Liens pursuant to this Indenture and the Depositary Agreement. ARTICLE 11 SUBSIDIARY GUARANTEES SECTION 11.01. SUBSIDIARY GUARANTEES. Subject to this Article 11, each of the Subsidiary Guarantors, and each Subsidiary of the Company that in accordance with Section 4.17 hereof is required to guarantee the obligations of the Company under the Notes and this Indenture, hereby, jointly and severally, unconditionally guarantees on a senior basis to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of, premium, if any, and interest on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly and severally obligated to pay the same immediately. Each Subsidiary Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Subsidiary Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. 72 81 If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Subsidiary Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by such persons to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of this Subsidiary Guarantee. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. SECTION 11.02. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY. Each Subsidiary Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Subsidiary Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee and this Article 11 shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Subsidiary Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under this Article 11, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance or being improper or prohibited under applicable state law. SECTION 11.03. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. To evidence its Subsidiary Guarantee set forth in Section 11.01 hereof, each Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Subsidiary Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Subsidiary Guarantor by its President or one of its Vice Presidents. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 73 82 If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Subsidiary Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the date of this Indenture, if required by Section 4.17 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Subsidiary Guarantees in accordance with Section 4.17 hereof and this Article 11, to the extent applicable. SECTION 11.04. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. No Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person whether or not affiliated with such Subsidiary Guarantor unless: (a) subject to Section 11.05 hereof, the Person formed by or surviving any such consolidation or merger (if other than a Subsidiary Guarantor or the Company) unconditionally assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture, the Registration Rights Agreement and the Subsidiary Guarantees on the terms set forth herein or therein; and (b) immediately after giving effect to such transaction, no Default or Event of Default exists. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Subsidiary Guarantor, such successor Person shall succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor, or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Guarantor. 74 83 SECTION 11.05. RELEASES FOLLOWING DESIGNATION AS AN UNRESTRICTED SUBSIDIARY OR SALE OF ASSETS. In the event of (i) the designation of any Subsidiary Guarantor as an Unrestricted Subsidiary or (ii) a sale or other disposition of all or substantially all of the properties or assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Subsidiary Guarantor to a third party or an Unrestricted Subsidiary, then such Subsidiary Guarantor (in the event of such designation or a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Subsidiary Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof; and provided, further, however, that any such termination shall occur only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests that secure, any other Indebtedness of the Company or its Restricted Subsidiaries, shall also terminate upon such release, sale or disposition. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its obligations under its Subsidiary Guarantee. Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Subsidiary Guarantor under this Indenture as provided in this Article 11. ARTICLE 12. MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall control. SECTION 12.02. NOTICES. Any notice or communication by the Company, any Subsidiary Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address 75 84 If to the Company and/or any Subsidiary Guarantor: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, IL 60085 Telecopier No.: (847) 689-5371 Attention: General Counsel With a copy to: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, IL 60085 Telecopier No.: (847) 689-5371 Attention: Treasurer If to the Trustee: State Street Bank and Trust Company Goodwin Square, 225 Asylum Street, 23rd Floor Hartford, CT 06103 Telecopier No.: (860) 244-1897 Attention: Steven Cimalore The Company, any Subsidiary Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. 76 85 SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. 77 86 SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or such Subsidiary Guarantor under the Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 12.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING EFFECT TO THE APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. All agreements of the Company and the Subsidiary Guarantors in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. 78 87 (Signatures on following page) 79 88 IN WITNESS WHEREOF, the parties hereto have executed this Indenture as of the date first written above. OUTBOARD MARINE CORPORATION By: /s/ Robert S. Romano ---------------------------------- Name: Robert S. Romano Title: Vice President and Secretary OMC FISHING BOAT GROUP, INC. By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer OMC ALUMINUM BOAT GROUP, INC. By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer OMC RECREATIONAL BOAT GROUP, INC. By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer 89 RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP By: OMC Recreational Boat Group, Inc. Its: General Partner By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer OMC LATIN AMERICA/CARIBBEAN, INC. By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp Title: Assistant Secretary STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/ Steven Cimalore ------------------------------------ Authorized Signatory 90 (Face of Note) 10 3/4% Series A Senior Notes due 2008 CUSIP: 690020-AF-9 $160,000,000 No. 1 OUTBOARD MARINE CORPORATION promises to pay to Cede & Co. or registered assigns, the principal sum of One Hundred Sixty Million Dollars on June 1, 2008. Interest Payment Dates: June 1 and December 1 Record Dates: May 15 and November 15 OUTBOARD MARINE CORPORATION By: ------------------------------- Name: Title: By: ------------------------------- Name: Title: Dated: May 27, 1998 This is one of the Global Notes referred to in the within-mentioned Indenture: STATE STREET BANK AND TRUST COMPANY, as Trustee By: ---------------------------------- A-1 91 Authorized Signatory A-2 92 (Back of Note) 10 3/4% Series A Senior Notes due 2008 THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER A-3 93 APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Outboard Marine Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 10 3/4% per annum from May 27, 1998 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages semi-annually on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be December 1, 1998. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. A-4 94 4. INDENTURE. The Company issued the Notes under an Indenture dated as of May 27, 1998 ("Indenture") among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general obligations of the Company limited to $160.0 million in aggregate principal amount, plus amounts, if any, issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company shall not have the option to redeem the Notes prior to June 1, 2003. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:
Year Percentage ---- ---------- 2003.......................................... 105.375% 2004.......................................... 103.583% 2005.......................................... 101.792% 2006 and thereafter........................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to June 1, 2001, the Company may on one or more occasions redeem up to an aggregate of 35% of the original aggregate principal amount of Notes at a redemption price of 110.750% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of the Notes originally issued remains outstanding immediately after the occurrence of such redemption and provided, further, that any such redemption shall occur within 60 days of the date of the closing of any such offering. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDERS. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple A-5 95 thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary A-6 96 Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Subsidiary Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, or to allow any Subsidiary Guarantor to execute a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with respect to the Notes. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on the Notes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise, (iii) failure by the Company or any of its Subsidiaries to comply with Section 4.15 or 5.01 of the Indenture; (iv) failure by the Company or any of its Subsidiaries to comply with Section 4.07, 4.09 or 4.10 of the Indenture and such failure continues for a period of 30 days; (v) failure by the Company or any Subsidiary for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding voting as a single class to comply with certain other agreements in the Indenture, the Notes or the Depositary Agreement; (vi) default under certain other agreements relating to Indebtedness of the Company which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vii) certain final judgments for the payment of money that remain undischarged for a period of 60 days; (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries; and (ix) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor or any Person acting on its behalf shall deny or disaffirm its obligations under such Subsidiary Guarantor's Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing A-7 97 Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Subsidiary Guarantors, as such, shall not have any liability for any obligations of the Company or any of the Subsidiary Guarantors under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. SECURITY. The due and punctual payment of the principal of, premium and interest and Liquidated Damages, if any, on the Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on any overdue principal of, premium and interest and Liquidated Damages, if any (to the extent permitted by law), on the Notes and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, shall be secured to the extent provided in the Depositary Agreement which the Company has entered into simultaneously with the execution of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Depositary Agreement (including, without limitation, the provisions providing for foreclosure) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs the Trustee or the Depositary Agent, as the case may be, to enter into the Depositary Agreement and to perform their respective obligations and exercise their respective rights thereunder in accordance therewith. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the A/B Exchange Registration Rights Agreement dated as of the Issue Date, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). A-8 98 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture, the Registration Rights Agreement and the Depositary Agreement. Requests may be made to: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 Attention: General Counsel A-9 99 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ________________ Your Signature:_______________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Register, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-10 100 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________ Date:________________ Your Signature:_______________________ (Sign exactly as your name appears on the Note) Tax Identification No:________________ Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Register, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-11 101 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Amount of Amount of increase this Global Note Signature of decrease in in Principal of following authorized officer Principal Amount Amount such decrease of Trustee or Date of Exchange of this Global Note of this Global Note (or increase) Note Custodian - ---------------- ------------------- ------------------- ---------------- ------------------
A-12 102 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 State Street Bank and Trust Company Goodwin Square, 225 Asylum Street Hartford, CT 06103 Re: 10 3/4% Senior Notes due 2008 Reference is hereby made to the Indenture, dated as of May 27, 1998 (the "Indenture"), between Outboard Marine Corporation, as issuer (the "Company"), the Subsidiary Guarantors (as defined therein) and State Street Bank and Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. |_| Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. |_| Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any B-1 103 Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. |_| Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) |_| Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. B-2 104 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ______________________________________ [Insert Name of Transferor] By:___________________________________ Name: Title: Dated:_________, ______ B-3 105 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) |_| a beneficial interest in the: (i) |_| 144A Global Note (CUSIP _____), or (ii) |_| Regulation S Global Note (CUSIP _____), or (b) |_| a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) |_| a beneficial interest in the: (i) |_| 144A Global Note (CUSIP _____), or (ii) |_| Regulation S Global Note (CUSIP _____), or (iii) |_| Unrestricted Global Note (CUSIP _____); or (b) |_| a Restricted Definitive Note; or (c) |_| an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 106 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 State Street Bank and Trust Company Goodwin Square, 225 Asylum Street Hartford, CT 06103 Re: 10 3/4% Senior Notes due 2008 (CUSIP______________) Reference is hereby made to the Indenture, dated as of May 27, 1998 (the "Indenture"), between Outboard Marine Corporation, as issuer (the "Company"), the Subsidiary Guarantors (as defined therein) and State Street Bank and Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a) |_| Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) |_| Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes C-1 107 and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) |_| Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) |_| Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a) |_| Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) |_| Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer C-2 108 enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-3 109 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ______________________________________ [Insert Name of Owner] By:___________________________________ Name: Title: Dated: ________________, ____ C-4 110 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 State Street Bank and Trust Company Goodwin Square, 225 Asylum Street Hartford, CT 06103 Re: 10 3/4% Senior Notes due 2008 Reference is hereby made to the Indenture, dated as of May 27, 1998 (the "Indenture"), between Outboard Marine Corporation, as issuer (the "Company"), the Subsidiary Guarantors (as defined therein) and State Street Bank and Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) |_| a beneficial interest in a Global Note, or (b) |_| a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and , if such transfer is in respect of a principal amount of Notes, at the time of D-1 111 transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. __________________________________________ [Insert Name of Accredited Investor] By:_______________________________________ Name: Title: Dated: __________________, ____ D-2 112 EXHIBIT E FORM OF NOTATION OF SUBSIDIARY GUARANTEE For value received, each Subsidiary Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of May 27, 1998 (the "Indenture") among Outboard Marine Corporation, the Subsidiary Guarantors listed on Schedule I thereto and State Street Bank and Trust Company, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Subsidiary Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. (Signature Page Follows) 113 OMC FISHING BOAT GROUP, INC. By:__________________________________ Name: Title: OMC ALUMINUM BOAT GROUP, INC. By:__________________________________ Name: Title: OMC RECREATIONAL BOAT GROUP, INC. By:__________________________________ Name: Title: RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP By: OMC Recreational Boat Group, Inc. Its: General Partner By:__________________________________ Name: Title: OMC LATIN AMERICA/CARIBBEAN, INC. By:__________________________________ 114 Name: Title: 115 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Outboard Marine Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Subsidiary Guarantors (as defined in the Indenture referred to herein), and State Street Bank and Trust Company as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of May 27, 1998 providing for the issuance of an aggregate principal amount of up to $160.0 million of 10 3/4 Senior Notes due 2008 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Subsidiary Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in F-1 116 full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Subsidiary Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether F-2 117 or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of this Subsidiary Guarantee. (h) The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. (i) Pursuant to Section 11.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under Article 11 of the Indenture shall result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3 EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Subsidiary Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Subsidiary Guarantor or the Company) unconditionally assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Subsidiary Guarantor, such successor corporation shall succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the F-3 118 Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor, or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Subsidiary Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Subsidiary Guarantor under the Indenture as provided in Article 11 of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. F-4 119 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. F-5 120 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. OUTBOARD MARINE CORPORATION By: ---------------------------- Name: Title: OMC ALUMINUM BOAT GROUP, INC. By: ---------------------------- Name: Title OMC FISHING BOAT GROUP, INC. By: ---------------------------- Name: Title OMC RECREATIONAL BOAT GROUP, INC. By: ---------------------------- Name: Title OMC LATIN AMERICA/CARIBBEAN, INC. By: ---------------------------- Name: Title F-6 121 RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP By: OMC RECREATIONAL BOAT GROUP, INC., ITS GENERAL PARTNER By: -------------------------------- Name: Title: [INSERT NAME OF GUARANTEEING SUBSIDIARY] By: -------------------------------- Name: Title: STATE STREET BANK AND TRUST COMPANY, as Trustee By: -------------------------------- Name: Title: F-7 122 SCHEDULE I SCHEDULE OF SUBSIDIARY GUARANTORS The following schedule lists each Subsidiary Guarantor under the Indenture as of the Issue Date: OMC Aluminum Boat Group, Inc. OMC Fishing Boat Group, Inc. OMC Recreational Boat Group, Inc. OMC Latin America/Caribbean, Inc. Recreational Boat Group Limited Partnership EX-4.3 13 EXCHANGE NOTE 1 EXHIBIT 4.3 (Face of Note) 10 3/4% Series B Senior Notes due 2008 CUSIP: $160,000,000 No. 1 OUTBOARD MARINE CORPORATION promises to pay to Cede & Co. or registered assigns, the principal sum of One Hundred Sixty Million Dollars on June 1, 2008. Interest Payment Dates: June 1 and December 1 Record Dates: May 15 and November 15 OUTBOARD MARINE CORPORATION By: ------------------------------- Name: Title: By: ------------------------------- Name: Title: Dated: June , 1998 This is one of the Global Notes referred to in the within-mentioned Indenture: STATE STREET BANK AND TRUST COMPANY, as Trustee By: ---------------------------------- Authorized Signatory 2 (Back of Note) 10 3/4% Series B Senior Notes due 2008 THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. 2 3 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Outboard Marine Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 10 3/4% per annum from May 27, 1998 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages semi-annually on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be December 1, 1998. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 3 4 4. INDENTURE. The Company issued the Notes under an Indenture dated as of May 27, 1998 ("Indenture") among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general obligations of the Company limited to $160.0 million in aggregate principal amount, plus amounts, if any, issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company shall not have the option to redeem the Notes prior to June 1, 2003. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:
Year Percentage ---- ---------- 2003.......................................... 105.375% 2004.......................................... 103.583% 2005.......................................... 101.792% 2006 and thereafter........................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to June 1, 2001, the Company may on one or more occasions redeem up to an aggregate of 35% of the original aggregate principal amount of Notes at a redemption price of 110.750% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of the Notes originally issued remains outstanding immediately after the occurrence of such redemption and provided, further, that any such redemption shall occur within 60 days of the date of the closing of any such offering. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDERS. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple 4 5 thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary 5 6 Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Subsidiary Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, or to allow any Subsidiary Guarantor to execute a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with respect to the Notes. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on the Notes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise, (iii) failure by the Company or any of its Subsidiaries to comply with Section 4.15 or 5.01 of the Indenture; (iv) failure by the Company or any of its Subsidiaries to comply with Section 4.07, 4.09 or 4.10 of the Indenture and such failure continues for a period of 30 days; (v) failure by the Company or any Subsidiary for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding voting as a single class to comply with certain other agreements in the Indenture, the Notes or the Depositary Agreement; (vi) default under certain other agreements relating to Indebtedness of the Company which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vii) certain final judgments for the payment of money that remain undischarged for a period of 60 days; (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries; and (ix) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor or any Person acting on its behalf shall deny or disaffirm its obligations under such Subsidiary Guarantor's Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing 6 7 Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Subsidiary Guarantors, as such, shall not have any liability for any obligations of the Company or any of the Subsidiary Guarantors under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. SECURITY. The due and punctual payment of the principal of, premium and interest and Liquidated Damages, if any, on the Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on any overdue principal of, premium and interest and Liquidated Damages, if any (to the extent permitted by law), on the Notes and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, shall be secured to the extent provided in the Depositary Agreement which the Company has entered into simultaneously with the execution of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Depositary Agreement (including, without limitation, the provisions providing for foreclosure) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs the Trustee or the Depositary Agent, as the case may be, to enter into the Depositary Agreement and to perform their respective obligations and exercise their respective rights thereunder in accordance therewith. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the A/B Exchange Registration Rights Agreement dated as of the Issue Date, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 7 8 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture, the Registration Rights Agreement and the Depositary Agreement. Requests may be made to: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 Attention: General Counsel 8 9 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ________________ Your Signature:_______________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Register, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 9 10 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________ Date:________________ Your Signature:_______________________ (Sign exactly as your name appears on the Note) Tax Identification No:________________ Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Register, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 10 EX-4.5 14 REGISTRATION RIGHTS AGREEMENT 1 Exhibit 4.5 EXECUTION COPY A/B EXCHANGE REGISTRATION RIGHTS AGREEMENT Dated as of May 27, 1998 by and among Outboard Marine Corporation, OMC Aluminum Boat Group, Inc., OMC Fishing Boat Group, Inc., OMC Recreational Boat Group, Inc., OMC Latin America/Caribbean, Inc. and Recreational Boat Group Limited Partnership and Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co. Inc. - -------------------------------------------------------------------------------- 2 This Registration Rights Agreement (this "Agreement") is made and entered into as of May 27, 1998, by and among Outboard Marine Corporation, a Delaware corporation (the "Company"), OMC Aluminum Boat Group, Inc., a Delaware corporation, OMC Fishing Boat Group, Inc., a Delaware corporation, OMC Recreational Boat Group, Inc., a Delaware corporation, OMC Latin America/Caribbean, Inc. and Recreational Boat Group Limited Partnership, a Delaware limited partnership (the "Subsidiary Guarantors"), and Donaldson Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co. Inc. (each an "Initial Purchaser" and, together, the "Initial Purchasers"), each of whom has agreed to purchase the Company's 10 3/4% Series A Senior Notes due 2008 (the "Series A Notes") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated May 21, 1998, (the "Purchase Agreement"), by and among the Company, the Subsidiary Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Series A Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 3 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Indenture, dated May 27, 1998, among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as Trustee, relating to the Series A Notes and the Series B Notes (the "Indenture"). The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Act: The Securities Act of 1933, as amended. Affiliate: As defined in Rule 144 of the Act. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Certificated Securities: Definitive Notes, as defined in the Indenture. Closing Date: The date hereof. Commission: The Securities and Exchange Commission. Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series B Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of 1 3 Series B Notes in the same aggregate principal amount as the aggregate principal amount of Series A Notes tendered by Holders thereof pursuant to the Exchange Offer. Consummation Deadline: As defined in Section 3(b) hereof. Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof. Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Offer: The exchange and issuance by the Company of a principal amount of Series B Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Series A Notes that are tendered by such Holders in connection with such exchange and issuance. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Series A Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act and pursuant to Regulation S under the Act. Filing Deadline: As defined in Sections 3(a) and 4(a) hereof. Holders: As defined in Section 2 hereof. Prospectus: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Recommencement Date: As defined in Section 6(d) hereof. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company and the Subsidiary Guarantors relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Regulation S: Regulation S promulgated under the Act. Rule 144: Rule 144 promulgated under the Act. Series B Notes: The Company's 10 3/4% Series B Senior Notes due 2008 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. 2 4 Shelf Registration Statement: As defined in Section 4 hereof. Suspension Notice: As defined in Section 6(d) hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Series A Note, until the earliest to occur of (a) the date on which such Series A Note is exchanged in the Exchange Offer for a Series B Note which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Series A Note has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued Series B Notes), or (c) the date on which such Series A Note is distributed to the public pursuant to Rule 144 under the Act (and purchasers thereof have been issued Series B Notes) and each Series B Note until the date on which such Series B Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Subsidiary Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 60 days after the Closing Date (such 60th day being the "Filing Deadline"), (ii) use their respective best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 150 days after the Closing Date (such 150th day being the "Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Series B Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Series B Notes to be offered in exchange for the Series A Notes that are Transfer Restricted Securities and (ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange Offer Series A Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Series A Notes acquired directly from the Company or any of its Affiliates) as contemplated by Section 3(c) below. 3 5 (b) The Company and the Subsidiary Guarantors shall use their respective best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. The Company and the Subsidiary Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Series B Notes shall be included in the Exchange Offer Registration Statement. The Company and the Subsidiary Guarantors shall use their respective best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter (such 30th day being the "Consummation Deadline"). (c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Series A Notes acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993). Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Series B Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Subsidiary Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Series B Notes by Broker-Dealers, the Company and the Subsidiary Guarantors agree to use their respective best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 270 days from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Company and the Subsidiary Guarantors shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than two days after such request, at any time during such period. 4 6 SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Exchange Offer is not permitted by applicable law or Commission policy (after the Company and the Subsidiary Guarantors have complied with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within 20 Business Days following the Consummation Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A Notes acquired directly from the Company or any of its Affiliates, then the Company and the Subsidiary Guarantors shall: (x) cause to be filed, on or prior to 60 days after the earlier of (i) the date on which the Company determines that the Exchange Offer Registration Statement cannot be filed as a result of clause (a)(i) above and (ii) the date on which the Company receives the notice specified in clause (a)(ii) above, (such earlier date, the "Filing Deadline"), a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (the "Shelf Registration Statement")), relating to all Transfer Restricted Securities, and (y) shall use their respective best efforts to cause such Shelf Registration Statement to become effective on or prior to 90 days after the Filing Deadline for the Shelf Registration Statement (such 90th day the "Effectiveness Deadline"). If, after the Company has filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company is required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Company shall remain obligated to meet the Effectiveness Deadline set forth in clause (y). To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Subsidiary Guarantors shall use their respective best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a 5 7 request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within five Business Days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately (each such event referred to in clauses (i) through (iv), a "Registration Default"), then the Company and the Subsidiary Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.35 per week per $1,000 in principal amount of Transfer Restricted Securities; provided that the Company and the Subsidiary Guarantors shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Company and the Subsidiary Guarantors to pay liquidated damages with respect to securities shall 6 8 survive until such time as such obligations with respect to such securities shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Subsidiary Guarantors shall (x) comply with all applicable provisions of Section 6(c) below, (y) use their respective best efforts to effect such exchange and to permit the resale of Series B Notes by Broker-Dealers that tendered in the Exchange Offer Series A Notes that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Series A Notes acquired directly from the Company or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following provisions: (i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law or Commission policy, the Company and the Subsidiary Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Subsidiary Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. The Company and the Subsidiary Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level, but shall not be required to take commercially unreasonable action to effect any change in Commission policy. In connection with the foregoing, the Company and the Subsidiary Guarantors hereby agree to take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Subsidiary Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Series B Notes to be issued in the Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary course of business. As a condition to its participation in the Exchange Offer, each Holder using the Exchange Offer to participate in a distribution of the Series B Notes shall acknowledge and agree that, if the resales are of Series B Notes obtained by such Holder 7 9 in exchange for Series A Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Subsidiary Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Subsidiary Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Subsidiary Guarantor has entered into any arrangement or understanding with any Person to distribute the Series B Notes to be received in the Exchange Offer and that, to the best of the Company's and each Subsidiary Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Series B Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series B Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Subsidiary Guarantors shall: (i) comply with all the provisions of Section 6(c) below and use their respective best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Subsidiary Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof, and (ii) issue, upon the request of any Holder or purchaser of Series A Notes covered by any Shelf Registration Statement contemplated by this Agreement, Series B Notes having an aggregate principal amount equal to the aggregate principal amount of Series A Notes 8 10 sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation; the Company shall register Series B Notes on the Shelf Registration Statement for this purpose and issue the Series B Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Company and the Subsidiary Guarantors shall: (i) use their respective best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Subsidiary Guarantors shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their respective best efforts to cause such amendment to be declared effective as soon as practicable. (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise each selling Holder promptly and, if requested by such selling Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any 9 11 additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Subsidiary Guarantors shall use their respective best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) furnish to each selling Holder in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within five Business Days after the receipt thereof to the effect that such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Act; (vi) at reasonable times requested by the selling Holders upon reasonable notice, prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to each Holder in connection with such exchange or sale, if any, make the Company's and the Subsidiary Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such Holders may reasonably request; (vii) make available, at reasonable times, for inspection by each selling Holder and any attorney or accountant retained by such Holders, all financial and other records, 10 12 pertinent corporate documents of the Company and the Subsidiary Guarantors and cause the Company's and the Subsidiary Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; provided, however, that such Persons shall first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such Persons, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquires of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of such Registration Statement or the use of any Prospectus), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard such information by such Person or (iv) such information becomes available to such Person from a source other than the Company and its subsidiaries and such source is not known, after due inquiry, by such Person to be bound by a confidentiality agreement or other similar agreement; provided further, that the foregoing investigation shall be coordinated on behalf of such Persons by one representative designated by and on behalf of such Persons and any such confidential information shall be available from such representative to such Persons so long as any Person agrees to be bound by such confidentiality agreement; (viii) if requested by any selling Holder in connection with such sale, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (ix) furnish to each selling Holder in connection with such sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and, if such selling Holder so requests in writing, all exhibits thereto (other than those exhibits incorporated therein by reference); (x) deliver to each selling Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Subsidiary Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; 11 13 (xi) upon the request of any Holder, enter into such agreements (including, in the case of any Shelf Registration Statement, underwriting agreements) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Company and the Subsidiary Guarantors shall: (A) upon request of any Holder, furnish (or in the case of paragraphs (2) and (3), use its best efforts to cause to be furnished) to each Holder, upon Consummation of the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: (1) a certificate, dated such date, signed on behalf of the Company and each Subsidiary Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and such Subsidiary Guarantor, confirming, as of the date thereof, the matters set forth in Sections 6(y), 9(a) and 9(b) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) in the case of any Shelf Registration Statement, if requested by the Holders of a majority in principal amount of Transfer Restricted Securities included therein, an opinion, dated the date of effectiveness of the Shelf Registration Statement, of counsel for the Company and the Subsidiary Guarantors covering matters similar to those set forth in paragraph (e) of Section 9 of the Purchase Agreement and such other matters as such Holders may reasonably request; and (3) in the case of any Shelf Registration Statement, if requested by the Holders of a majority in principal amount of Transfer Restricted Securities included therein, a customary comfort letter, dated the date of effectiveness of the Shelf Registration Statement, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9(g) of the Purchase Agreement; and (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in the any agreement entered into by the Company and the Subsidiary Guarantors pursuant to this clause (xi); (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification 12 14 of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Subsidiary Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to such sale of Transfer Restricted Securities; (xiv) use their respective best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xv) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xvi) otherwise use their respective best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (xvii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents 13 15 required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xviii) provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. (d) Restrictions on Holders. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated Prospectuses and provide written confirmation of such destruction to the Company or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Subsidiary Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series B Notes to be issued in the Exchange Offer and printing of Prospectuses, messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Subsidiary Guarantors and (in accordance with Section 7(b) hereof) the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Series B Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Subsidiary Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). 14 16 The Company will, in any event, bear its and the Subsidiary Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Subsidiary Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Subsidiary Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Series A Notes in the Exchange Offer and/or selling or reselling Series A Notes or Series B Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins (Los Angeles office), unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared; provided, however, the fees and expenses of such counsel shall not exceed $50,000. SECTION 8. INDEMNIFICATION (a) The Company and the Subsidiary Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company to any Holder or any prospective purchaser of Series B Notes or registered Series A Notes, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders; provided, however, that the indemnification contained in this paragraph (a) with respect to any preliminary prospectus shall not inure to the benefit of any Holder (or to the benefit of any person controlling any Holder) on account of any such loss, claim, damage, liability, judgment, action or expense arising from the sale of Series B Notes or registered Series A Notes by such Holder to any person if a copy of the Prospectus, as it may be amended or supplemented, shall not have been delivered or sent to such person, at or prior to the written certification of such sale, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in any preliminary prospectus was corrected in the Prospectus, as it may have been amended or supplemented. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Subsidiary Guarantors, and their respective 15 17 directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, or the Subsidiary Guarantors to the same extent as the foregoing indemnity from the Company and the Subsidiary Guarantors set forth in section (a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "indemnified party"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "indemnifying person") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company and the Subsidiary Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if the settlement is entered into more than twenty Business Days after the indemnifying party shall have received a request from the indemnified 16 18 party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Subsidiary Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Subsidiary Guarantor, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Subsidiary Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its 17 19 directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint. SECTION 9. RULE 144A AND RULE 144 The Company and each Subsidiary Guarantor agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company or such Subsidiary Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 10. MISCELLANEOUS (a) Remedies. The Company and the Subsidiary Guarantors acknowledge and agree that any failure by the Company and/or the Subsidiary Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Subsidiary Guarantors' obligations under Sections 3 and 4 hereof. (b) No Inconsistent Agreements. Neither the Company nor any Subsidiary Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any Subsidiary Guarantor has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's and the Subsidiary Guarantors' securities under any agreement in effect on the date hereof. 18 20 (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or the Subsidiary Guarantors: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 Telecopier No.: (847) 689-5371 Attention: General Counsel With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Telecopier No.: (212) 310-8007 Attention: David E. Zeltner, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, 19 21 postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (signature page follows) 20 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. OUTBOARD MARINE CORPORATION By: /S/ Robert S. Romano ---------------------------------------- Name: Title: OMC ALUMINUM BOAT GROUP, INC. By: /S/ Gordon G. Repp ---------------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer OMC FISHING BOAT GROUP, INC. By: /S/ Gordon G. Repp ---------------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer OMC RECREATIONAL BOAT GROUP, INC. By: /S/ Gordon G. Repp ---------------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer OMC LATIN AMERICA/CARIBBEAN, INC. By: /S/ Gordon G. Repp ---------------------------------------- Name: Gordon G. Repp Title: Assistant Secretary 23 RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP By: OMC Recreational Boat Group, Inc. Its: General Partner By: /S/ Gordon G. Repp ---------------------------------------- Name: Gordon G. Repp Title: Assistant Secretary and Treasurer 24 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /S/ James A. D'Aquila ---------------------------------------- Name: James A. D'Aquila Title: Managing Director BEAR, STEARNS & CO. INC. By: /S/ James Diao ---------------------------------------- Name: James Diao Title: Senior Managing Director 25 EXHIBIT A NOTICE OF FILING OF A/B EXCHANGE OFFER REGISTRATION STATEMENT To: Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 Attention: Louise Guarneri (Compliance Department) Fax: (212) 892-7272 From: Outboard Marine Corporation __% Senior Notes due 2008 Date: ________, 1998 For your information only (NO ACTION REQUIRED): Today, ________, 1998, we filed [an A/B Exchange Registration Statement/a Shelf Registration Statement] with the Securities and Exchange Commission. We currently expect this registration statement to be declared effective within __ business days of the date hereof. EX-4.6 15 DEPOSITARY AGREEMENT 1 Exhibit 4.6 EXECUTION COPY DEPOSITARY AGREEMENT among OUTBOARD MARINE CORPORATION STATE STREET BANK AND TRUST COMPANY, as Trustee NATIONSBANK, N.A., as Administrative Agent and STATE STREET BANK AND TRUST COMPANY, as Depositary Agent Dated as of May 27, 1998 2 TABLE OF CONTENTS ARTICLE I. Definitions.........................................................2 SECTION 1.1. Capitalized Terms........................................2 SECTION 1.2. Definitions; Construction................................2 ARTICLE II. Appointment of Depositary Agent; Establishment of Interest Reserve Accounts..................................................14 SECTION 2.1. Acceptance of Appointment of Depositary Agent...........14 SECTION 2.2. Establishment of Interest Reserve Accounts..............14 SECTION 2.3. Security Interest.......................................15 SECTION 2.4. Termination.............................................16 ARTICLE III. The Interest Reserve Funds.......................................16 SECTION 3.1. Additions to Interest Reserve Accounts..................16 SECTION 3.2. Requested Disbursements From Interest Reserve Accounts..17 SECTION 3.3. Mandatory Disbursements From Interest Reserve Accounts..19 SECTION 3.4. Quarterly Report........................................19 SECTION 3.5. Distribution Account....................................19 SECTION 3.6. Investment of Interest Reserve Accounts.................20 SECTION 3.7. Disposition of Notes Interest Account Upon Retirement of Notes.....................................21 SECTION 3.8. Disposition of Other Senior Debt Interest Account Upon Retirement of Senior Debt Obligations other than the Notes..........................................21 SECTION 3.9. Account Balance Statements..............................21 SECTION 3.10. Events of Default.......................................21 SECTION 3.11. Securities Intermediary.................................22 ARTICLE IV. Depositary Agent..................................................23 SECTION 4.1. Appointment of Depositary Agent, Powers and Immunities..23 SECTION 4.2. Reliance by Depositary Agent............................24 SECTION 4.3. Court Orders............................................24 SECTION 4.4. Resignation or Removal..................................25 ARTICLE V. Expenses; Indemnification; Fees....................................25 SECTION 5.1. Expenses................................................25 SECTION 5.2. Indemnification.........................................26 SECTION 5.3. Fees....................................................26 ARTICLE VI. Miscellaneous.....................................................26 SECTION 6.1. Amendments; Etc.........................................26 SECTION 6.2. Addresses for Notices...................................26 SECTION 6.3. Governing Law; Terms....................................28 SECTION 6.4. Headings................................................28 SECTION 6.5. No Third Party Beneficiaries............................29 SECTION 6.6. No Waiver...............................................29 i 3 SECTION 6.7. Severability............................................29 SECTION 6.8. Successors and Assigns..................................29 SECTION 6.9. Execution in Counterparts...............................29 SECTION 6.10. Consequential Damages...................................29 ii 4 DEPOSITARY AGREEMENT This DEPOSITARY AGREEMENT (this "Depositary Agreement") dated as of May 27, 1998 among Outboard Marine Corporation, a Delaware corporation (the "Company"), State Street Bank and Trust Company, in its capacity as trustee (together with its successors and permitted assigns in such capacity, the "Trustee") under the Indenture (as defined below), NationsBank, N.A., in its capacity as administrative agent (together with its successors and permitted assigns in such capacity, the "Administrative Agent") under the Credit Agreement (as defined below), and State Street Bank and Trust Company, in its capacity as depositary agent (together with its successors and permitted assigns in such capacity, the "Depositary Agent") and, for purposes of Section 3.11, as securities intermediary (the "Securities Intermediary") for the benefit of (i) the holders of the Notes (as defined below) and (ii) the Lenders (as defined below) under the Credit Agreement. RECITALS A. Pursuant to that certain Indenture, dated as of the date hereof (as it may be amended, modified and supplemented from time to time, the "Indenture"), among the Company, the Subsidiary Guarantors (as defined below) and the Trustee, the Company has issued an aggregate of $160,000,000 of its 10 3/4% Senior Notes due 2008 (such Notes and any other Notes issued under the Indenture, the "Notes"). B. The Company has entered into that certain Amended and Restated Loan and Security Agreement, dated as of January 6, 1998 (as amended, modified and supplemented from time to time, the "Credit Agreement"), among the Company, the Lenders party thereto (the "Lenders") and the Administrative Agent. C. The Trustee, the Administrative Agent and the Company desire to appoint the Depositary Agent as depositary agent to hold and administer money deposited in the various Interest Reserve Accounts (as defined below) established pursuant to this Depositary Agreement and funded in an amount equal to the Required Amount (as defined below). D. As security for its obligations under the Notes, the Company desires to execute and deliver to the Trustee this Depositary Agreement, in order to grant to the Trustee a perfected first priority security interest in the Notes Collateral (as defined below). E. As security for its obligations under the Credit Agreement, the Company desires to execute and deliver to the Administrative Agent this Depositary Agreement, in order to grant to the Administrative Agent a perfected first priority security interest in the Other Senior Debt Collateral (as defined below). 5 AGREEMENT NOW, THEREFORE, in consideration of the premises and in order to induce the Holders of the Notes to purchase the Notes, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I. Definitions SECTION 1.1. Capitalized Terms. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Indenture. SECTION 1.2. Definitions; Construction. For all purposes of this Depositary Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) all terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) all references in this Depositary Agreement to designated "Articles," "Sections," "Exhibits" and other subdivisions are to the designated Articles, Sections, Exhibits and other subdivisions of this Depositary Agreement; (c) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Depositary Agreement as a whole and not to any particular Article, Section or other subdivision; (d) unless otherwise expressly specified, any agreement, contract or document defined or referred to herein shall mean such agreement, contract or document as in effect as of the date hereof, as the same may thereafter be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof including any agreement, contract or document in substitution or replacement of any of the foregoing; (e) unless the context clearly intends to the contrary, pronouns having a masculine or feminine gender shall be deemed to include the other; and (f) any reference to any Person shall include its successors and assigns. "Account Collateral" has the meaning specified in Section 2.3(b). "Adjusted Senior Debt Amount" shall mean, on any date, the aggregate principal amount (or accreted value) of all outstanding Senior Debt of the Company and its Restricted Subsidiaries; provided, however, that the amount of outstanding Indebtedness under the Credit 2 6 Agreement and any other revolving credit facilities shall be deemed to be the amount specified by the chief financial officer of the Company as the Company's good faith estimate of its average outstanding daily balances under all such revolving credit facilities during the specified period (which average daily balances shall in no event exceed 150% of its average daily balances under all revolving credit facilities during the corresponding fiscal quarter in the prior fiscal year). "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Applicable Senior Debt" has the meaning specified in Section 3.2(a). "Asset Sale" means (i) the sale, lease, conveyance, transfer or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) of the Company or any of its Restricted Subsidiaries other than sales (or resales) of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by Sections 4.15 and/or 5.1 of the Indenture and not by Section 4.10 of the Indenture), and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2.0 million or (b) for Net Proceeds in excess of $2.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary; (iii) a Restricted Payment that is permitted by Section 4.7 of the Indenture; (iv) any sale of Equity Interests of the Company; (v) any surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind, in each case in the ordinary course of business; (vi) any grant of any license of patents, trademarks, trade names, registrations therefor or similar intellectual property, in the ordinary course of business; (vii) any sale of the Company's facility in Juarez, Mexico in a transaction which (a) satisfies the requirements of clauses (i) or (ii) of Section 4.10 of the Indenture (but substituting "50%" in lieu of "75%" in said clause (ii)) and (b) is consummated no later than 18 months following the Issue Date pursuant to a definitive agreement signed no later than one year subsequent to the Issue Date; provided, that any cash Net Proceeds received therefrom shall be deemed to be Net Proceeds from an Asset Sale for all purposes under this Depositary Agreement; (viii) the sale and leaseback of any assets within 90 days of the acquisition of such assets; (ix) any disposition of Cash Equivalents in the ordinary course of business; (x) sales of accounts 3 7 receivable, or participations therein, in connection with any Receivables Facility and (xi) sales of damaged, fully-depreciated or obsolete equipment or assets that, in the Company's reasonable judgment, are no longer used or useful in the business of the Company or its Restricted Subsidiaries. "Attributable Debt" in respect of a sale and leaseback transaction, means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Authorized Representative" means, (i) for the Notes, the Trustee; (ii) for the Lenders, the Administrative Agent; and (iii) for any other issuance of Senior Debt, the Person or Persons to whom the Company is obligated to make payments of interest on such Senior Debt. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than 12 months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding 12 months and overnight bank deposits, in each case with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (v) of this definition. "Certificate of Authorization" has the meaning specified in Section 3.2(a). 4 8 "Consolidated Capital Expenditures" means, for any period, an amount equal to (i) the sum of (a) the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of the Company and its Restricted Subsidiaries) by the Company and its Restricted Subsidiaries during that period that, in conformity with GAAP, are included in "property, plant or equipment" or comparable items reflected in the consolidated balance sheets of the Company and its Subsidiaries plus (b) to the extent not covered by clause (i)(a) of this definition, the aggregate of all expenditures by the Company and its Restricted Subsidiaries during that period to acquire (by purchase or otherwise) the business, property or fixed assets (other than current assets consisting of inventory or accounts receivable) of any Person, or the stock or other evidence of beneficial ownership of any Person that, as a result of such acquisition, becomes a Restricted Subsidiary of the Company minus (ii) the sum of (a) the proceeds of Indebtedness permitted under clause (iv) of the definition of Permitted Debt, (b) an amount equal to the proceeds received by the Company or any of its Subsidiaries from a sale-leaseback transaction permitted under Section 4.18 of the Indenture so long as such transaction occurs within 180 days of the acquisition of the related property or equipment and to the extent prior expenditures, up to an equivalent amount for the asset so sold and leased back, constituted Consolidated Capital Expenditures in such period or in any prior period and (c) expenditures in an amount not to exceed the proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments received from third parties, so long as such expenditures were made for purposes of replacing or repairing the assets in respect of which such proceeds, awards or payments were received and so long as such expenditures are made not later than 12 months after the occurrence of the damage to or loss of the assets being replaced or repaired. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, in each case to the extent deducted in computing Consolidated Net Income (i) an amount equal to any extraordinary loss recorded in such period, plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letters of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), plus (v) any other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid expense that was paid in a prior period) of such Person and its Subsidiaries for such period, minus, to the extent included in the computation of Consolidated Net Income, any non-cash items increasing such Consolidated Net Income for such period in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, the interest expense of, 5 9 and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of a Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly-Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Credit Agreement Default" has the meaning specified in Section 3.10(b). "Credit Agreement Event of Default" has the meaning specified in Section 3.10(b). "Credit Agreement Obligations" has the meaning specified in Section 2.3(b). "Credit Agreement Trigger Event Date" has the meaning specified in Section 3.10(b). "Deemed Payments" has the meaning specified in Section 3.2(c). "Disbursement Amount" has the meaning specified in Section 3.2(a). "Disbursement Date" has the meaning specified in Section 3.2(a). "Distribution Account" means the Interest Reserve Account of such name established pursuant to Section 2.2. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Excess Available Cash" means for any fiscal quarter ending after the Issue Date (each a "Reference Period") an amount (not less than zero), determined as of the last day of such 6 10 Reference Period, equal to (i) the sum (without duplication) of the amounts for such Reference Period of (a) the Consolidated Net Income of the Company and its Restricted Subsidiaries; plus (b) the amount of Net Proceeds of Asset Sales received by the Company or any Restricted Subsidiary during such Reference Period, to the extent not otherwise included in Consolidated Net Income; plus (c) the amount of cash proceeds (net of underwriting discounts, placement fees and similar commissions and reasonable costs and expenses related thereto) received by the Company or any Restricted Subsidiary during such Reference Period from the issuance of Equity Interests or the incurrence of Indebtedness (other than any proceeds from the issuance of the Notes or borrowings under revolving credit facilities, including the Credit Agreement); plus, (d) consolidated depreciation and amortization expense for the Company and its Restricted Subsidiaries for such Reference Period; plus (e) the net decrease, if any, in working capital for the Company and its Restricted Subsidiaries during such Reference Period; plus (f) to the extent not included in Consolidated Net Income, the amount of any cash extraordinary gains recognized by the Company or any Restricted Subsidiary; plus (g) any other non-cash expenses reducing the Consolidated Net Income of the Company and its Restricted Subsidiaries for such Reference Period (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid expense that was paid in a prior period); minus (ii) the sum (without duplication) of the amounts for such Reference Period of (a) the aggregate amount of Consolidated Capital Expenditures paid for in cash by the Company or any Restricted Subsidiary during such Reference Period; plus (b) cash payments made to permanently repay or retire the principal amount of any Indebtedness of the Company or any Restricted Subsidiary (excluding the repayment of any revolving credit facility unless a corresponding amount of the related commitments are permanently reduced); plus (c) the net increase (if any) in deferred tax assets and the net decrease (if any) in deferred tax liabilities of the Company and its Restricted Subsidiaries during the Reference Period; plus (d) the net increase, if any, in working capital for the Company and its Restricted Subsidiaries during such Reference Period; plus (e) cash payments in respect of restructuring reserves and other long-term accrued liabilities; plus (f) other non-cash items increasing Consolidated Net Income for the Company and its Restricted Subsidiaries during such Reference Period; all of the foregoing as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP. "Excess Cash" has the meaning specified in Section 3.1(b). "Existing Indebtedness" means up to $104.1 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than letters of credit and Indebtedness under the Credit Agreement) in existence on the Issue Date, until such amounts are repaid. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments 7 11 associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the referent Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred and the proceeds thereof applied at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and the Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "Foreign Subsidiary" means any Subsidiary of the Company, more than 80% of the sales, earnings or assets (determined on a consolidated basis) of which are located or derived from operations outside the United States. 8 12 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate or currency swap agreements, cap agreements and collar agreements and (ii) other agreements or arrangements (including foreign exchange or commodity hedge, exchange, purchase or similar agreements) designed to protect such Person against fluctuations in interest rates, value of assets owned, financed or sold, value of raw materials purchased, or of liabilities incurred or assumed or of pre-funding arrangements, or against fluctuations in foreign currency exchange rates or commodity prices, in any case, in the ordinary course of business of such Person and not for speculative purposes. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or bankers' acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person; provided, however, that Indebtedness shall not include the obligations of the Company in respect of "floor plan financing" or similar arrangements entered into in the ordinary course of business for the benefit of dealers in connection with the sale of the Company's products. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indemnified Depositary Agent Party" has the meaning specified in Section 5.2. "Indenture Default" has the meaning specified in Section 3.10(a). "Indenture Event of Default" has the meaning specified in Section 3.10(a). 9 13 "Interest Reserve Accounts" has the meaning specified in Section 2.2. "Interest Reserve Funds" means such funds on deposit from time to time in the Interest Reserve Accounts. "Issue Date" means the first date on which any Notes are issued under the Indenture. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gains or losses, together with any related provision for taxes on such gains or losses, realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the Credit Agreement), and any reserve for adjustment in respect of the sale price of, or warranties and indemnities made with respect to, such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (iii) as to which the lenders have been notified in writing 10 14 (including in any written agreement) that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes Collateral" has the meaning specified in Section 2.3(a). "Notes Deemed Payments" has the meaning specified in Section 3.2(c). "Notes Interest Account" means the Interest Reserve Account of such name established pursuant to Section 2.2. "Notes Interest Excess" has the meaning specified in Section 3.5(a). "Notes Obligations" has the meaning specified in Section 2.3(a). "Notes Required Amount" means $17.2 million. "Notes Trigger Event Date" has the meaning specified in Section 3.10(a). "Officers' Certificate" means a certificate signed on behalf of the Company by two officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 of the Indenture. "Other Senior Debt Collateral" has the meaning specified in Section 2.3(b). "Other Senior Debt Deemed Payments" has the meaning specified in Section 3.2(c). "Other Senior Debt Default" has the meaning specified in Section 3.5(b). "Other Senior Debt Event of Default" has the meaning specified in Section 3.5(b). "Other Senior Debt Interest Account" means the Interest Reserve Account of such name established pursuant to Section 2.2. "Other Senior Debt Interest Excess" has the meaning specified in Section 3.5(b). "Other Senior Debt Required Amount" means $11.4 million. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, or other business entity or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business.) "Projected Senior Debt Interest Expense" means with respect to any fiscal quarter of the Company commencing after the Issue Date (each a "Forecast Period"), (a) the pro forma 11 15 Fixed Charges which will accrue during such Forecast Period on the Adjusted Senior Debt Amount outstanding on the last day of the immediately preceding fiscal quarter, whether or not any such Fixed Charges will be payable during such Forecast Period plus (b) all accrued and unpaid Fixed Charges with respect to Senior Debt, calculated as of the day immidiately prior to the first day of such Forecast Period minus (c) the amount of all Deemed Payments with respect to Senior Debt which have not been distributed. "Receivables Facility" means one or more receivables financing facilities, as amended from time to time, pursuant to which the Company and/or any of its Restricted Subsidiaries sells its accounts receivable to a Person that is not a Restricted Subsidiary. "Required Amount" means the Notes Required Amount and the Other Senior Debt Required Amount. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Senior Debt" means, as of any date, the outstanding Indebtedness of the Company or any Restricted Subsidiaries attributable to the Notes, borrowings (including letters of credit outstanding) under the Credit Agreement and any other Existing Indebtedness then outstanding which is not subordinated in right of payment to other Indebtedness of the Company or any Restricted Subsidiaries. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of the Indenture. "Subsidiary" means, with respect to any Person, (i) any corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly, owned by such Person (a "subsidiary"), by one or more subsidiaries of such Person or by such Person and one or more subsidiaries of such Person or (ii) a partnership in which such Person or a subsidiary of such Person is, at the date of determination, a general partner of such partnership, or (iii) any partnership, limited liability company or other Person in which such Person, a subsidiary of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or appoint or direct the election or appointment of the managing partner or member of such Person or, if applicable, a majority of the directors or other governing body of such Person. "Subsidiary Guarantee" means the Subsidiary Guarantee by each Subsidiary Guarantor of the Company's payment obligations under the Indenture and the Notes, executed pursuant to the provisions of the Indenture. "Subsidiary Guarantor" means each of (i) the Company's direct or indirect Restricted Subsidiaries that are Significant Subsidiaries (other than Foreign Subsidiaries) on the 12 16 date of the Indenture and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "Termination Date" has the meaning specified in Section 2.4. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly to indirectly provided credit support for any indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.07 of the Indenture. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 of the Indenture, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09 of the Indenture calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Indenture Default or Indenture Event of Default would be in existence following such designation. "U.S. Government Securities" means securities (i) issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, or (ii) interests in money market mutual funds which invest solely in assets or securities of the type described in clause (i) above. 13 17 "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Wholly-Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries of such Person and one or more Wholly-Owned Restricted Subsidiaries of such Person. ARTICLE II. Appointment of Depositary Agent; Establishment of Interest Reserve Accounts SECTION 2.1. Acceptance of Appointment of Depositary Agent. (a) The Depositary Agent hereby agrees to act as such and to accept all cash, payments, other amounts and U.S. Government Securities to be delivered to or held by the Depositary Agent pursuant to the terms of this Depositary Agreement. The Depositary Agent shall hold and safeguard the Interest Reserve Accounts during the term of this Depositary Agreement and shall treat the cash, instruments and securities deposited in (i) the Notes Interest Account as monies, instruments and securities pledged by the Company to the Trustee for the benefit of the holders of the Notes to be held in the custody of the Depositary Agent, as agent for the Trustee, and (ii) the Other Senior Debt Interest Account as monies, instruments and securities pledged by the Company to the Administrative Agent for the benefit of the Lenders to be held in the custody of the Depositary Agent, as agent for the Administrative Agent, in each case, in accordance with the provisions of this Depositary Agreement. In performing its functions and duties under this Depositary Agreement, the Depositary Agent shall act as agent for each of the Trustee and the Administrative Agent and, except in such capacity, does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for the Company. (b) The Company shall not have any rights against or to monies held in any of the Interest Reserve Accounts, as third party beneficiary or otherwise, except (i) the right to receive or make requisitions of monies held in the Interest Reserve Accounts, as permitted by this Depositary Agreement, and (ii) the right to request the manner of the investment of monies held in the Interest Reserve Accounts as provided for in Section 3.6 hereof. SECTION 2.2. Establishment of Interest Reserve Accounts. The Company hereby establishes the following securities accounts with the Depositary Agent, as Securities Intermediary, at its offices at 61 Broadway, Corporate Trust Department, Concourse Level, New York, New York 10016 (each an "Interest Reserve Account" and collectively, the "Interest Reserve Accounts") in the form of interest bearing accounts, which shall be subject to the terms hereof and maintained at all times until the termination of this Depositary Agreement: 14 18 (a) Notes Interest Account, Account No. FD4425 (designated "Pledged Account" pledged by Outboard Marine Corporation to State Street Bank and Trust Company, as Trustee; (b) Other Senior Debt Interest Account, Account No. FD4426 (designated "Pledged Account" pledged by Outboard Marine Corporation to NationsBank, N.A., as Agent; and (c) Distribution Account, Account No. FD4427. All amounts from time to time held in the Notes Interest Account (which for purposes of this Agreement shall include all sub-accounts thereof) shall be held in the name of the Depositary Agent, as agent for the Trustee for the benefit of the Trustee and the holders of the Notes. All amounts from time to time held in the Other Senior Debt Interest Account (which for purposes of this Agreement shall include all sub-accounts thereof) shall be held in the name of the Depositary Agent, as agent for the Administrative Agent for the benefit of the Administrative Agent and the Lenders. It is hereby agreed and understood that the Administrative Agent shall have no interest in the Notes Interest Account and the Trustee shall have no interest in the Other Senior Debt Interest Account. All such amounts shall be held by the Depositary Agent for the purposes and on the terms set forth in this Depositary Agreement, shall constitute a part of the Account Collateral and shall not constitute payment of any Senior Debt or any other obligation of the Company until applied as hereinafter provided. SECTION 2.3. Security Interest. (a) Notes Interest Account. As collateral security for the prompt payment and performance when due of its obligations under the Notes and the Indenture and its obligations to the Trustee and the holders of the Notes under this Depositary Agreement (collectively, the "Notes Obligations"), the Company hereby pledges, assigns, hypothecates, transfers and grants to the Trustee for the benefit of the Trustee and the holders of the Notes a Lien on and security interest in and to (i) the Notes Interest Account, and all sub-accounts thereof, and (ii) all cash, investments and securities at any time on deposit in the Notes Interest Account, and all sub-accounts thereof, including all income or gain earned thereon and any proceeds thereof (collectively, the "Notes Collateral"). (b) Other Senior Debt Interest Account. As collateral security for the prompt payment and performance when due of all "Secured Obligations" as defined under the Credit Agreement and its obligations to the Administrative Agent and the Lenders under this Depositary Agreement (collectively, the "Credit Agreement Obligations"), the Company hereby pledges, assigns, hypothecates, transfers and grants to the Administrative Agent for the benefit of the Administrative Agent and the Lenders, a Lien on and security interest in and to (i) the Other Senior Debt Interest Account, and all sub-accounts thereof, and the Distribution Account and (ii) all cash, investments and securities at any time on deposit in the Other Senior Debt Interest Account, and all sub-accounts thereof, and the Distribution Account, including all income or gain 15 19 earned thereon and any proceeds thereof (collectively, the "Other Senior Debt Collateral," and together with the Notes Collateral, the "Account Collateral"). (c) Depositary Agent. The Depositary Agent is the agent of (i) the Trustee for the purpose of receiving payments contemplated hereunder and for the purpose of perfecting the Lien of the Trustee for the benefit of the Trustee and the holders of the Notes in and to the Notes Interest Account and all cash, investments and securities and any proceeds thereof at any time on deposit in the Notes Interest Account, and (ii) the Administrative Agent for the purpose of receiving payments contemplated hereunder and for the purpose of perfecting the Lien of the Administrative Agent for the benefit of the Administrative Agent and the Lenders in and to the Other Senior Debt Interest Account and the Distribution Account and all cash, investments and securities and any proceeds thereof at any time on deposit in the Other Senior Debt Interest Account; provided that the Depositary Agent shall not be responsible to take any action to perfect any Lien except through the performance of its express obligations hereunder or upon the written direction of the Trustee or the Administrative Agent, as applicable, complying with this Depositary Agreement. For purpuses of perfecting the security interests granted hereunder, except as otherwise expressly provided in this Agreement, the Interest Reserve Accounts, and all sub-accounts thereof, shall at all times be in the exclusive possession of the Depositary Agent and the Notes Interest Account, and all sub-accounts thereof, shall be under the exclusive dominion and control of the Trustee and the Other Senior Debt Interest Account, and all sub-accounts thereof, shall be under the exclusive dominion and control of the Administrative Agent. SECTION 2.4. Termination. This Depositary Agreement and the security interest hereunder shall remain in full force and effect until the earlier of (i) the later of (x) three years from the Issue Date and (y) such time as the Company's Fixed Charge Coverage Ratio for the four consecutive fiscal quarter period ending as of the last day of the most recent fiscal quarter is greater than 2.5 to 1.0, and (ii) the date upon which all Notes Obligations have been indefeasibly paid in full (the "Termination Date"). At such time, after notice to the Depositary Agent, the Trustee and the Administrative Agent, the Interest Reserve Funds shall be placed in the Distribution Account and made available to the Company for general corporate purposes. Upon delivery of such notice to the Depositary Agent, the Trustee and the Administrative Agent, this Depositary Agreement shall automatically terminate and, except as expressly provided herein, be of no further force and effect. ARTICLE III. The Interest Reserve Funds SECTION 3.1. Additions to Interest Reserve Accounts (a) On the Issue Date, the Company shall deposit into (i) the Notes Interest Account an amount equal to the Notes Required Amount; and (ii) the Other Senior Debt Interest Account an amount equal to the Other Senior Debt Required Amount, which amounts shall be invested as provided for in Section 3.6 hereof. 16 20 (b) In the event that the Company's Excess Available Cash for any given fiscal quarter ending after the Issue Date is greater than the Projected Senior Debt Interest Expense for the next fiscal quarter (the amount of such excess, the "Excess Cash") then: (i) if the Notes Required Amount exceeds the difference between (x) the amount of funds on deposit in the Notes Interest Account and (y) the amount of all Notes Deemed Payments which have not yet been distributed, then the Company shall deposit into the Notes Interest Account an amount equal to such excess; and (ii) if the Other Senior Debt Required Amount exceeds the difference between (x) the amount of funds on deposit in the Other Senior Debt Interest Account the (y) the amount of all Other Senior Debt Deemed Payments which have not yet been distributed, then the Company shall deposit into the Other Senior Debt Interest Account an amount equal to such excess; provided that if the Excess Cash is less than the amount of all required deposits under this clause (b), then the amount of Excess Cash shall be deposited ratably into the Notes Interest Account and the Other Senior Debt Interest Account (based on the amount of their respective required deposits). SECTION 3.2. Requested Disbursements From Interest Reserve Accounts. (a) Disbursement Request. If the Excess Available Cash for any fiscal quarter ending subsequent to the Issue Date is less than the Projected Senior Debt Interest Expense for the next fiscal quarter, during such next fiscal quarter the Company may request a disbursement from the Interest Reserve Accounts solely for the payment of interest on Senior Debt; provided that no disbursement can be requested or made until the certificate required by Section 3.4 hereof for such fiscal quarter has been delivered. If the Company desires to request a disbursement from the Interest Reserve Accounts, then on the date three Business Days prior to the date of the requested disbursement, the Company shall deliver to the Depositary Agent, the Administrative Agent and the Trustee a duly completed certificate, in substantially the form of the attached Exhibit A (each such certificate, a "Certificate of Authorization"). Each Certificate of Authorization shall contain the following information: (i) the date of the requested disbursement (such date, a "Disbursement Date"); (ii) the aggregate amount of the requested disbursement (the "Disbursement Amount"); (iii) the issuance or issuances of Senior Debt to which the requested disbursement is to be applied (such issuance of Senior Debt, the "Applicable Senior Debt"); 17 21 (iv) the Company's Excess Available Cash for the fiscal quarter ended immediately prior to the Disbursement Date; (v) the Company's Projected Senior Debt Interest Expense for the fiscal quarter in which the Disbursement Date occurs; (vi) the amount, calculated as of the Disbursement Date, of all accrued and unpaid interest for each issuance of Senior Debt; (vii) for each issuance of Senior Debt, the amount of all Deemed Payments which, as of the Disbursement Date, have not yet been disbursed; (viii) the dates subsequent to the Disbursement Date upon which accrued and unpaid interest is due and payable for each issuance of Senior Debt other than the Applicable Senior Debt; and (ix) a request by the Company that the requested disbursement and each Deemed Payment required under Section 3.2(c) with respect to such requested disbursement be made. (b) Disbursement. On the Disbursement Date for each requested disbursement, the Depositary Agent shall, in accordance with the Certificate of Authorization, disburse the Disbursement Amount to the Authorized Representative for the Applicable Senior Debt. If the Applicable Senior Debt for such disbursement is the Notes, such disbursement shall be made from the Notes Interest Account, and if the Applicable Senior Debt for such disbursement is not the Notes, such disbursement shall be made from the Other Senior Debt Interest Account. (c) Deemed Payments. On the Disbursement Date for each requested disbursement, the Depositary Agent shall also transfer to a sub-account, for each outstanding issuance of Senior Debt other than the Applicable Senior Debt (each such transfer, a "Deemed Payment"), an amount equal to (x) the amount of all accrued and unpaid interest on such issuance of Senior Debt minus (y) the amount of all prior Deemed Payments on such issuance of Senior Debt which, as of such Disbursement Date, has not yet been disbursed, each as set forth in the applicable Certificate of Authorization. If the Applicable Senior Debt is the Notes, such Deemed Payment (each such payment, a "Notes Deemed Payment") shall be made from the Notes Interest Account into a sub-account thereof, and if the Applicable Senior Debt is not the Notes, such Deemed Payment (each such payment, an "Other Senior Debt Deemed Payment") shall be made from the Other Senior Debt Interest Account. (d) Maximum Amount of Disbursement and Deemed Payments. Notwith-standing anything to the contrary contained in this Section 3.2: (i) in any fiscal quarter of the Company, the aggregate amount of all disbursements under Section 3.2(b) plus the aggregate amount of all Deemed Payments 18 22 under Section 3.2(c) shall not exceed the actual amount of Fixed Charges paid in such fiscal quarter minus the Excess Cash Available with respect to the prior fiscal quarter; (ii) if as of any Disbursement Date, the aggregate amount of the disbursement under Section 3.2(b) with respect to the Notes to be made on such Disbursement Date or the aggregate amount of the Notes Deemed Payment under Section 3.2(c) to be made on such Disbursement Date is greater than the amount of funds in the Notes Interest Account (not including the sub-account thereof for Notes Deemed Payments), then the amount of such disbursement or Notes Deemed Payment, as the case may be, shall be reduced to the amount of funds in the Notes Interest Account (not including the sub-account thereof for Notes Deemed Payments); and (iii) if as of any Disbursement Date, the aggregate amount of all disbursements under Section 3.2(b) with respect to Senior Debt other than the Notes to be made on such Disbursement Date plus the aggregate amount of all Other Senior Debt Deemed Payments under Section 3.2(c) to be made on such Disbursement Date is greater than the amount of funds in the Other Senior Debt Interest Account (not including the sub-account thereof for Other Senior Debt Deemed Payments), then the aggregate amount of all such disbursements and Other Senior Debt Deemed Payments shall be reduced to the amount of funds in the Other Senior Debt Interest Account (not including the sub-account thereof for Other Senior Debt Deemed Payments) and each such disbursement and/or Other Senior Debt Deemed Payment shall be reduced pro rata based on the Projected Senior Debt Interest Expense for each such issuance of Senior Debt other than the Notes for the fiscal quarter in which such Disbursement Date occurs. SECTION 3.3. Mandatory Disbursements From Interest Reserve Accounts. If a Deemed Payment has been made for any issuance of Senior Debt, then on each subsequent interest payment date for such issuance of Senior Debt until payments in an amount equal to such Deemed Payments have been made, the Depositary Agent shall, in accordance with the applicable Certificate of Authorization, disburse the amount of interest due and payable on such interest payment date (up to the undisbursed amount of such Deemed Payment) to the Authorized Representative for such issuance of Senior Debt. If such issuance of Senior Debt is the Notes, such disbursement shall be made from the applicable sub-account of the Notes Interest Account, and if such issuance of Senior Debt is not the Notes, such disbursement shall be made from the applicable sub-account of the Other Senior Debt Interest Account. SECTION 3.4. Quarterly Report. On or prior to the 45th day after the end of each fiscal quarter of the Company, the Company shall deliver to the Depositary Agent, the Administrative Agent and the Trustee a certificate setting forth the Excess Cash Available for such fiscal quarter. SECTION 3.5. Distribution Account. (a) If, for any fiscal quarter, the Excess Available Cash for the prior fiscal quarter exceeds the Projected Senior Debt Interest Expense for such fiscal quarter, the amount on 19 23 deposit in the Notes Interest Account is greater than the Notes Required Amount plus the amount of all undisbursed Notes Deemed Payments (the "Notes Interest Excess") and no Indenture Default or Indenture Event of Default shall have occurred and be continuing, then within three Business Days after receipt of written request from the Company to the Depositary Agent and the Trustee (which request shall certify that the conditions to such a disbursement have been satisfied), the Depositary Agent shall transfer to the Distribution Account from the Notes Interest Account an amount equal to the Notes Interest Excess. (b) If, for any fiscal quarter, the Excess Available Cash for the prior fiscal quarter exceeds the Projected Senior Debt Interest Expense for such fiscal quarter, the amount on deposit in the Other Senior Debt Interest Account is greater than the Other Senior Debt Required Amount plus the amount of all undisbursed Other Senior Note Deemed Payments (the "Other Senior Debt Interest Excess") and no default ("Other Senior Debt Default") or event of default ("Other Senior Debt Event of Default") under any Senior Debt other than the Notes shall have occurred and be continuing, then within three Business Days after receipt of written request from the Company to the Depositary Agent and the Administrative Agent (which request shall certify that the conditions to such a disbursement have been satisfied), the Depositary Agent shall transfer to the Distribution Account from the Other Senior Debt Interest Account an amount equal to the Other Senior Debt Interest Excess. (c) If there are any funds on deposit in the Distribution Account and no Other Senior Debt Default or Other Senior Debt Event of Default shall have occurred and be continuing, then within three Business Days after receipt of written request from the Company to the Depositary Agent and the Administrative Agent (which request shall certify that the conditions to such a disbursement have been satisfied), the Depositary Agent shall disburse from the Distribution Account an amount equal to the amount requested by the Company (which amount shall not exceed the amount of the funds on deposit in the Distribution Account). (d) Upon any transfer of funds from the Notes Interest Account to the Distribution Account, the security interest of the Trustee in the funds transferred to the Distribution Account shall terminate. SECTION 3.6. Investment of Interest Reserve Accounts. Monies held in the Interest Reserve Accounts created by and held under this Depositary Agreement shall be invested and reinvested in U.S. Government Securities at the written request (which may be in the form of a standing instruction) of the Company, which request has been consented to in writing by the Trustee and the Administrative Agent. If at any time cash in an aggregate amount greater than $100,000 is held in either Interest Reserve Account, the Depositary Agent shall invest, without further instruction, such cash in 30-day United States Treasury securities. The Depositary Agent shall at any time and from time to time liquidate any or all of such investments prior to the maturity as needed in order to effect the transfers and withdrawals contemplated by this Depositary Agreement; provided that, in the absence of timely receipt of such an Officer's Certificate, the Depositary Agent shall liquidate any or all such investments as so needed. In the event any such investments are redeemed prior to the maturity thereof, the Depositary Agent shall not be liable for any loss or penalties relating thereto in the absence of gross negligence or 20 24 willful misconduct. Any income or gain realized from such investments with respect to the Notes Collateral shall be deposited into the Notes Interest Account and any income or gain realized from such investments with respect to the Other Senior Debt Collateral shall be deposited into the Other Senior Debt Interest Account. Any loss with respect to the Notes Collateral shall be charged to the Notes Interest Account and any loss with respect to the Other Senior Debt Collateral shall be charged to the Other Senior Debt Interest Account. The Depositary Agent shall not be liable for any such loss other than by reason of its willful misconduct or gross negligence. For purposes of any income tax payable on account of any income or gain on an investment, such income or gain shall be for the account of the Company. SECTION 3.7. Disposition of Notes Interest Account Upon Retirement of Notes. Upon the payment in full of the Notes Obligations such that the Notes are no longer outstanding, all amounts held in the Notes Interest Account shall upon the written direction of the Company be transferred to the Distribution Account. SECTION 3.8. Disposition of Other Senior Debt Interest Account Upon Retirement of Senior Debt Obligations other than the Notes. Upon payment in full of the Company's obligations under all its Senior Debt other than the Notes, all amounts held in the Other Senior Debt Interest Account shall upon the written direction of the Company be transferred to the Distribution Account. SECTION 3.9. Account Balance Statements. The Depositary Agent shall, on a monthly basis and at such other times as the Trustee, the Administrative Agent or the Company may from time to time reasonably request, provide fund balance statements to (i) the Trustee (in respect to the Notes Interest Account), (ii) the Administrative Agent (in respect to the Other Senior Debt Interest Account) and (iii) the Company (in respect to each of the Interest Reserve Accounts). Such balance statements shall also include deposits, withdrawals and transfers to and from the applicable Interest Reserve Account and segregated amounts. SECTION 3.10. Events of Default. (a) On and after any date on which the Depositary Agent receives written notice from the Trustee that any default, after the expiration of any applicable cure period ("Indenture Default"), or event of default, after the expiration of any applicable cure period ("Indenture Event of Default"), has occurred under the Indenture (such date of receipt of such notice, the "Notes Trigger Event Date"), the Depositary Agent shall thereafter accept all notices and instructions required to be given to the Depositary Agreement with respect to the Notes Interest Account only from the Trustee and not from any other Person and the Depositary Agent shall not withdraw, transfer, pay or otherwise distribute any monies in the Notes Interest Account except pursuant to such notices and instructions from the Trustee. (b) On and after any date on which the Depositary Agent receives written notice from the Administrative Agent that any "Default," after the expiration of any applicable cure period ("Credit Agreement Default"), or "Event of Default," after the expiration of any applicable cure period ("Credit Agreement Event of Default"), has occurred under the Credit 21 25 Agreement (the date of receipt of such notice, the "Credit Agreement Trigger Event Date"), the Depositary Agent shall thereafter accept all notices and instructions required to be given to the Depositary Agent pursuant to the terms of this Depositary Agreement with respect to the Other Senior Debt Interest Account only from the Administrative Agent and not from any other Person and the Depositary Agent shall not withdraw, transfer, pay or otherwise distribute any monies in the Other Senior Debt Interest Account except pursuant to such notices and instructions from the Administrative Agent. (c) On the Notes Trigger Event Date, the Depositary Agent shall render an accounting of all monies in the Notes Interest Account as of the Notes Trigger Event Date to the Trustee and the Company and shall thereafter, upon instruction by the Trustee, distribute all money then held in the Notes Interest Account to the Trustee. (d) On the Credit Agreement Trigger Event Date, the Depositary Agent shall render an accounting of all monies in the Other Senior Debt Interest Account and the Distribution Account as of the Credit Agreement Trigger Event Date to the Administrative Agent and the Company and shall thereafter, upon instruction by the Administrative Agent distribute all money then held in the Other Senior Debt Interest Account and the Distribution Account to the Administrative Agent for application to the "Secured Obligations" under the Credit Agreement in the manner provided therein. SECTION 3.11. Securities Intermediary. Securities Intermediary hereby agrees and confirms that it has established the Interest Reserve Accounts as set forth and defined in this Depositary Agreement. Securities Intermediary agrees that (i) each such Interest Reserve Account established by Securities Intermediary is and will be maintained as a "securities account" (within the meaning of Section 8-501 of the Uniform Commercial Code as adopted in the State of New York (the "UCC")); (ii) the Company is an "entitlement holder" (within the meaning of Section 8-102(a)(7) of the UCC) in respect of the "financial assets" (within the meaning of Section 8-102(a)(9) of the UCC, the "Financial Assets") credited to such Interest Reserve Accounts; (iii) all Financial Assets in registered form or payable to or to the order of and credited to any such Interest Reserve Account shall be registered in the name of, payable to or to the order of, or specially endorsed to, Securities Intermediary or in blank, or credited to another securities account maintained in the name of Securities Intermediary, and in no case will any Financial Asset credited to any such Interest Reserve Account be registered in the name of, payable to or to the order of, or endorsed to the Company, except to the extent the foregoing have been subsequently endorsed by the Company to Securities Intermediary or in blank. Each item of property (including a security, security entitlement, investment property, instrument or obligation, share, participation, interest or other property whatsoever) credited to any Interest Reserve Account shall be treated as a Financial Asset. Until this Depositary Agreement shall terminate in accordance with the terms hereof, (i) the Trustee shall have "control" (within the meaning of Section 8-106(d)(2) of the UCC) of each of the Company's "security 22 26 entitlements" (within the meaning of Section 8-102(a)(17) of the UCC) with respect to the Financial Assets credited to the Notes Interest Account, and (ii) the Administrative Agent shall have "control" (within the meaning of Section 8-106(d)(2) of the UCC) of each of the Company's "security entitlements" (within the meaning of Section 8-102(a)(17) of the UCC) with respect to the Financial Assets credited to the Other Senior Debt Interest Account. All property delivered to the Securities Intermediary pursuant to this Depositary Agreement will be promptly credited to the Notes Interest Account if allocated for payment on the Notes Obligations and promptly credited to the Other Senior Debt Interest Account if allocated for payment on the Credit Agreement Obligations. If at any time the Securities Intermediary shall receive (i) any order from the Trustee on behalf of the holders of the Notes directing transfer or redemption of any Financial Asset relating to the Notes Interest Account or (ii) any order from the Administrative Agent on behalf of the Lenders directing the transfer or redemption of any Financial Asset relating to the Other Senior Debt Interest Account, the Securities Intermediary shall comply with such entitlement order without further consent by the Company or any other person. ARTICLE IV. Depositary Agent SECTION 4.1. Appointment of Depositary Agent, Powers and Immunities. The Trustee on behalf of the holders of the Notes and the Administrative Agent on behalf of the Lenders hereby appoint the Depositary Agent to act as its respective agent hereunder, with such powers as are expressly delegated to the Depositary Agent by the terms of this Depositary Agreement, together with such other powers as are reasonably incidental thereto. The Depositary Agent shall not have any duties or responsibilities except those expressly set forth in this Depositary Agreement and those reasonably incidental thereto. Without limiting the generality of the foregoing, the Depositary Agent shall take all actions as the Trustee or the Administrative Agent, as applicable, shall direct it to perform in accordance with the provisions of this Depositary Agreement. Notwithstanding anything to the contrary contained herein, the Depositary Agent shall not be required to take any action which is contrary to this Depositary Agreement or applicable law. Neither the Depositary Agent nor any of its Affiliates shall be responsible to the Trustee or the Administrative Agent, the holders of the Notes or the Lenders for any recitals, statements, representations or warranties made by the Company contained in this Depositary Agreement or any certificate or other document referred to or provided for in, or received by the Depositary Agent, the Trustee or the Administrative Agent, as applicable, under this Depositary Agreement, the Indenture or the Credit Agreement for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Depositary Agreement or any other document referred to or provided for herein or therein or for any failure by the Company to perform its obligations hereunder or thereunder. The Depositary Agent shall not be required to ascertain or inquire as to the performance by the Company of any of its obligations under the Indenture, the Credit Agreement, this Depositary Agreement or any other document or agreement contemplated hereby or thereby. Except as otherwise provided under this Depositary Agreement, the Depositary Agent shall take action under this Depositary Agreement only as it shall be directed in writing by the Trustee or the Administrative Agent, as applicable. Whenever in the administration of this Depositary Agreement the Depositary Agent shall deem it necessary or desirable that a factual matter be proved or established in connection with the Depositary Agent 23 27 taking, suffering or omitting to take any action hereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may be deemed to be conclusively proved or established by an Officer's Certificate of the Company, an Administrative Agent's certificate or a Trustee's certificate, if appropriate. The Depositary Agent shall have the right at any time to seek instructions concerning the administration of this Depositary Agreement from the Trustee or the Administrative Agent or any court of competent jurisdiction. The Depositary Agent shall have no obligation to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. SECTION 4.2. Reliance by Depositary Agent. The Depositary Agent shall be entitled to rely upon and shall not be bound to make any investigation into the facts or matters stated in any Officer's Certificate of the Company, Trustee's certificate, Administrative Agent's certificate or any other certificate, notice or other document (including any cable, telegram, telecopy or telex) reasonably believed by it to be genuine and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statement of legal counsel, independent accountants and other experts selected by the Depositary Agent and shall have no liability for its actions taken thereupon, unless due to the Depositary Agent's willful misconduct or gross negligence. Without limiting the foregoing, the Depositary Agent shall be required to make disbursements and Deemed Payments only as set forth herein. The Depositary Agent shall be fully justified in failing or refusing to take any action under this Depositary Agreement (i) if such action would, in the reasonable opinion of the Depositary Agent, be contrary to applicable law or the terms of this Depositary Agreement, (ii) if such action is not specifically provided for in this Depositary Agreement, and it shall not have received any such advice or concurrence of the Trustee, the Administrative Agent or, unless there are defaults under any Senior Debt, the Company, as applicable, as it deems appropriate or (iii) if, in connection with the taking of any such action that would constitute an exercise of remedies under this Depositary Agreement (whether such action is or is intended to be an action of the Depositary Agent, the Trustee or the Administrative Agent, as applicable), it shall not first be indemnified to its satisfaction by the holders of the Notes or the Lenders (other than the Trustee (in its individual capacity) or the Administrative Agent (in its individual capacity)), as applicable, against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Depositary Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Depositary Agreement in accordance with a request of the Trustee or the Administrative Agent (to the extent that the Trustee or the Administrative Agent, as applicable, is expressly authorized to direct the Depositary Agent to take or refrain from taking such action), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the holders of the Notes and the Lenders, as applicable. SECTION 4.3. Court Orders. The Depositary Agent is hereby authorized, in its exclusive discretion, to obey and comply with all writs, orders, judgments or decrees issued by any court or administrative agency affecting any money, documents or things held by the Depositary Agent. The Depositary Agent shall not be liable to any of the parties hereto, the holders of the Notes or the Lenders, their successors, heirs or personal representatives by reason of the Depositary Agent's compliance with such writs, orders, judgments or decrees, 24 28 notwithstanding such writ, order, judgment or decree is later reversed, modified, set aside or vacated. SECTION 4.4. Resignation or Removal. Subject to the appointment and acceptance of a successor Depositary Agent as provided below, the Depositary Agent may resign at any time by giving thirty (30) days' written notice thereof to each of the Trustee, the Administrative Agent and the Company; provided that in the event the Depositary Agent is also the Administrative Agent or the Trustee, it must at the same time resign as Administrative Agent or Trustee, as applicable. The Depositary Agent may be removed at any time with cause by either the Trustee or the Administrative Agent. The Company shall have the right to remove the Depositary Agent upon thirty (30) days' notice to the Trustee and the Administrative Agent with or without cause, effective upon the appointment of a successor Depositary Agent under this Section 4.4, which is reasonably acceptable to the Trustee and the Administrative Agent. In the event that the Depositary Agent shall decline to take any action without first receiving adequate indemnity from any of the Company, Trustee or Administrative Agent, as the case may be and, having received an indemnity, shall continue to decline to take such action, the Trustee and the Administrative Agent shall be deemed to have sufficient cause to remove the Depositary Agent. Upon any such resignation or removal, the Trustee and the Administrative Agent shall have the right to appoint a successor Depositary Agent, which Depositary Agent shall be reasonably acceptable to the Company. If no successor Depositary Agent shall have been appointed by the Trustee and the Administrative Agent and shall have accepted such appointment within thirty (30) days after the retiring Depositary Agent's giving of notice of resignation or the removal of the retiring Depositary Agent, then the retiring Depositary Agent may appoint a successor Depositary Agent, which shall be a bank or trust company reasonably acceptable to each of the Trustee, the Administrative Agent and the Company. Upon the acceptance of any appointment as Depositary Agent hereunder by the successor Depositary Agent, (a) such successor Depositary Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Depositary Agent, and the retiring Depositary Agent shall be discharged from its duties and obligations hereunder and (b) the retiring Depositary Agent shall promptly transfer all Interest Reserve Accounts and Account Collateral within its possession or control to the possession or control of the successor Depositary Agent and shall execute and deliver such notices, instructions and assignments as may be necessary or desirable to transfer the rights of the Depositary Agent with respect to the Interest Reserve Accounts and Account Collateral to the successor Depositary Agent. After the retiring Depositary Agent's resignation or removal hereunder as Depositary Agent, the provisions of this Article IV and of Article V shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Depositary Agent. ARTICLE V. Expenses; Indemnification; Fees SECTION 5.1. Expenses. The Company agrees to pay or reimburse all out-of-pocket expenses of the Depositary Agent (including, without limitation, reasonable fees and 25 29 expenses for legal services) in respect of, or incident to, the administration or enforcement of any of the provisions of this Depositary Agreement or in connection with any amendment, waiver or consent relating to this Depositary Agreement. SECTION 5.2. Indemnification. The Company agrees to indemnify the Depositary Agent in its capacity as such, and, in their capacity as such, its officers, directors, shareholders, controlling persons, employees, agents and servants (each an "Indemnified Depositary Agent Party") from and against any and all claims, losses, liabilities and expenses (including the reasonable fees and expenses of counsel) growing out of or resulting from this Depositary Agreement (including, without limitation, performance under or enforcement of this Depositary Agreement, but excluding any such claims, losses or liabilities resulting from the Indemnified Depositary Agent Party's gross negligence or willful misconduct). This indemnity shall survive the termination of this Depositary Agreement, and the resignation or removal of the Depositary Agent. SECTION 5.3. Fees. On the Issue Date, and on each anniversary of the Issue Date to and including the Termination Date, the Company shall pay the Depositary Agent an annual fee in an amount mutually agreed on by the Company and the Depositary Agent. SECTION 5.4. Survival. The provisions of this Article V shall survive the termination of this Agreement. ARTICLE VI. Miscellaneous SECTION 6.1. Amendments; Etc. No amendment or waiver of any provision of this Depositary Agreement nor consent to any departure by the Company herefrom shall in any event be effective unless the same shall be in writing and signed by each of the Trustee, the Administrative Agent, the Depositary Agent and the Company. Any such amendment, waiver or consent shall be effective only in the specific instance and for the specified purpose for which given. SECTION 6.2. Addresses for Notices. All notices, requests and other communications provided for hereunder shall be in writing and, except as otherwise required by the provisions of this Depositary Agreement, shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid, or sent by overnight delivery, telecopy, telegram or telex, addressed to the parties as follows: 26 30 Company: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, Illinois 60085 Telephone: (847) 689-6200 Fax: (847) 689-53-71 Attention: General Counsel Treasurer Administrative Agent: NationsBank, N.A. 901 Main Street, Sixth Floor Dallas, Texas 75202 Fax: (214) 508-0480 Attention: Business Credit Regional Manager: Urgent State Street Bank & Trust Company Trustee: Goodwin Square, 225 Asylum Street Hartford, CT 06103 Telephone: (860) 244-1844 Fax: (860) 244-1897 Attention: Steve Cimalore Depositary Agent: State Street Bank and Trust Company 61 Broadway Corporate Trust Department New York, NY 10006 Telephone: (212) 612-3000 Fax: (212) 612-3202 27 31 SECTION 6.3. Governing Law; Terms. (a) THIS DEPOSITARY AGREEMENT AND THE INTEREST RESERVE ACCOUNTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY, THE DEPOSITARY AGENT, THE ADMINISTRATIVE AGENT, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN CONNECTION WITH THIS DEPOSITARY AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS IDENTIFIED IN 31 C.F.R. ss. 357.10 AND 357.11 (AS IN EFFECT ON THE DATE OF THIS DEPOSITARY AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN. REGARDLESS OF ANY PROVISION IN ANY OTHER AGREEMENT, FOR PURPOSES OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK (THE "UCC"), NEW YORK SHALL BE DEEMED TO BE THE SECURITIES INTERMEDIARY'S JURISDICTION AS DEFINED IN SECTIONS 9-103 (6) (d) AND 8-110 (e) OF THE UCC AND THE INTEREST RESERVE ACCOUNTS (AS WELL AS ANY SECURITIES ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. (b) THE COMPANY HEREBY APPOINTS GREENWAY PARTNERS, L.P., 277 PARK AVENUE, 27TH FLOOR, NEW YORK, NEW YORK 10017 AS ITS AGENT FOR SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS DEPOSITARY AGREEMENT AND FOR ACTIONS BROUGHT UNDER THE U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK (EACH A "NEW YORK COURT"). EACH OF THE PARTIES HERETO SUBMITS TO THE JURISDICTION OF ANY NEW YORK COURT AND TO THE COURTS OF ITS CORPORATE DOMICILE WITH RESPECT TO ANY ACTIONS BROUGHT AGAINST IT AS DEFENDANT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY, THE DEPOSITARY AGENT, THE ADMINISTRATIVE AGENT, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN CONNECTION WITH THIS DEPOSITARY AGREEMENT, AND EACH OF THE PARTIES HERETO WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LAYING OF VENUE, INCLUDING ANY PLEADING OF FORUM NON CONVENIENS, WITH RESPECT TO ANY SUCH ACTION AND WAIVES ANY RIGHT TO WHICH IT MAY BE ENTITLED ON ACCOUNT OF PLACE OF RESIDENCE OR DOMICILE. SECTION 6.4. Headings. Headings used in this Depositary Agreement are for convenience of reference only and do not constitute part of this Depositary Agreement for any purpose. 28 32 SECTION 6.5. No Third Party Beneficiaries. The agreements of the parties hereto are solely for the benefit of the Company, the Trustee, the Administrative Agent, the Depositary Agent, the holders of the Notes and the Lenders and their respective successors and assigns and no other Person shall have any rights hereunder. SECTION 6.6. No Waiver. No failure on the part of the Depositary Agent, the Trustee, the Administrative Agent, the holders of the Notes or the Lenders or any of their nominees or representatives to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Depositary Agent, the Administrative Agent, the Trustee, the holders of the Notes or the Lenders or any of their nominees or representatives of any right, power or remedy. SECTION 6.7. Severability. If any provision of this Depositary Agreement or the application thereof shall be invalid or unenforceable to any extent, (a) the remainder of this Depositary Agreement and the application of such remaining provisions shall not be affected thereby and (b) each such remaining provision shall be enforced to the greatest extent permitted by law. SECTION 6.8. Successors and Assigns. All covenants, agreements, representations and warranties in this Depositary Agreement by the Depositary Agent, the Trustee, the Administrative Agent and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. SECTION 6.9. Execution in Counterparts. This Depositary Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 6.10. Consequential Damages. In no event (other than with respect to its own gross negligence or willful misconduct) shall the Depositary Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Depositary Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. SECTION 6.11. Instructions. Any instructions given by the Trustee or the Administrative Agent to the Securities Intermediary hereunder shall be in compliance with and for the purposes expressly provided for in this Agreement. SECTION 6.12. Further Assurances. The Company shall execute and file any financing or continuation statements, or amendments thereto, and such other instruments or notices as may be necessary or desirable, which the Trustee or the Administrative Agent, as the case may be, may reasonably request in order to perfect and preserve the perfection and the priority of the security interests granted or purported to be granted under this Agreement. The Company agrees that, at the option of the Trustee or the Administrative Agent, as the case may be, this Agreement, 29 33 or a photocopy hereof, may be filed by the Trustee or the Administrative Agent, as the case may be, as a financing statement, and that the Company's execution hereof shall constitute the execution by the Company of a financing statement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 30 34 IN WITNESS WHEREOF, the parties hereto have caused this Depositary Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. OUTBOARD MARINE CORPORATION, a Delaware corporation By: /s/ Robert S. Romano ----------------------------------- Name: Robert S. Romano Title: Vice President, General Counsel and Secretary NATIONSBANK, N.A., as Administrative Agent By: /s/ Stacy Wills ----------------------------------- Name: Stacy Wills Title: Assistant Vice President STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/ Steven Cimalore ----------------------------------- Name: Steven Cimalore Title: Vice President STATE STREET BANK AND TRUST COMPANY, as Depositary Agent and Securities Intermediary By: /s/ Steven Cimalore ----------------------------------- Name: Steven Cimalore Title: Vice President S-1 35 EXHIBIT A FORM OF CERTIFICATE OF AUTHORIZATION State Street Bank and Trust Company, as Depositary Agent ____________________________ ____________________________ ____________________________ NationsBank, N.A., as Administrative Agent 901 Main Street, Sixth Floor Dallas, Texas 75202 State Street Bank and Trust Company, as Trustee Goodwin Square, 225 Asylum Street Hartford, CT 06103 Ladies and Gentlemen: The undersigned, Outboard Marine Corporation (the "Company"), refers to the Depositary Agreement, dated as of May __, 1998, among the Company, State Street Bank and Trust Company, as Trustee for the holders of the Notes, State Street Bank and Trust Company, as Depositary Agent and NationsBank, N.A., as Administrative Agent for the Lenders, (the "Depositary Agreement," the terms defined therein being used herein as therein defined), hereby gives you irrevocable notice that the undersigned hereby requests that a disbursement under Section 3.2(b) of the Depositary Agreement and Deemed Payments pursuant to Section 3.2(c) of the Depositary Agreement be made, and in that connection sets forth below the information relating to such disbursement or Deemed Payment, as the case may be, as required by Section 3.2 of the Depositary Agreement. (i) The Disbursement Date is _____, 19__; (ii) The Disbursement Amount is $_____; (iii) The issuance of Senior Debt to which the requested disbursement is to be applied is _____________; (iv) The Company's Excess Available Cash for the fiscal quarter ended immediately prior to the Disbursement Date is $_____; A-1 36 (v) the Company's Projected Senior Debt Interest Expense for the fiscal quarter in which the Disbursement Date occurs is $_____; (vi) The amount, calculated as of the Disbursement Date, of all accrued and unpaid interest for each issuance of Senior Debt is $_____; (vii) For each issuance of Senior Debt, the amount of all Deemed Payments which, as of the Disbursement Date, have not yet been disbursed is $_____; (viii) The dates subsequent to the Disbursement Date upon which accrued and unpaid interest is due and payable for each issuance of Senior Debt other than the Applicable Senior Debt are _____; and [(ix) a request by the Company that the requested disbursement and each Deemed Payment required under Section 3.2(c) with respect to such requested disbursement be made.] The undersigned hereby certifies that the following statements are true on the date hereof and will be true on the Disbursement Date: (A) the representations and warranties contained in the Depositary Agreement, on and as of the Disbursement Date; and (B) no event has occurred and is continuing, or would result from any disbursement pursuant to Section 3.2(b) of the Depositary Agreement or any Deemed Payment pursuant to Section 3.2(c) of the Depositary Agreement, which constitutes an Indenture Event of Default, a Credit Agreement Event of Default or an Other Senior Debt Event of Default; Very truly yours, Outboard Marine Corporation, a Delaware corporation By: __________________________________ Name: Title: A-2 EX-5 16 OPINION RE VALIDITY 1 Exhibit 5 Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153-0119 Telephone: (212) 310-8000 Fax: (212) 310-8007 June 29, 1998 Outboard Marine Corporation 100 Sea Horse Drive Waukegan, IL 60085 Ladies and Gentlemen: We have acted as counsel to Outboard Marine Corporation, a Delaware corporation (the "Company"), and certain of its subsidiaries (the "Subsidiary Guarantors"), in connection with the preparation and filing of a Registration Statement on Form S-4 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), relating to $160,000,000 aggregate principal amount of 10-3/4% Senior Notes due 2008, Series B (the "New Notes") of the Company and the Subsidiary Guarantors' guarantees thereof (the "Subsidiary Guarantees"). In so acting, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement, the Prospectus that is a part of the Registration Statement (the "Prospectus"), the Indenture, dated as of May 27, 1998, by and among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee"), pursuant to which the New Notes and the Subsidiary Guarantees will be issued (the "Indenture"), the form of New Note and the Subsidiary Guarantees included as Exhibits 4.3 and 4.4 to the Registration Statement, and such corporate records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of the Company, and have made such inquiries of such officers and representatives of the Company as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us 2 as certified, conformed or photostatic copies and the authenticity of the originals of such later documents. As to all questions of fact material to this opinion that have not been independently established, we have relied upon certificates or comparable documents of officers and representatives of the Company. The opinions set forth below are also based on the assumption that the Registration Statement, as finally amended (including any necessary post-effective amendments), has become effective under the Securities Act. Based on the foregoing, and subject to the qualifications stated herein, we are of the opinion that: The New Notes are duly authorized, and, when duly executed on behalf of the Company, authenticated by the Trustee under the Indenture and issued and delivered in accordance with the terms of the Indenture and as contemplated by the Registration Statement, will constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms and the terms of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that the waiver of rights under any usury laws contained in the Indenture may be unenforceable. The Subsidiary Guarantees have been duly authorized, validly issued and constitute the legal, valid and binding obligations of each Subsidiary Guarantor, enforceable against it in accordance with their terms and the terms of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that the waiver of rights under any usury laws contained in the Indenture may be unenforceable. The opinions herein are limited to the laws of the State of New York, the corporate laws of the State of Delaware and the federal laws of the United States, and we express no opinion as to the effect on the matters covered by this opinion of the laws of any other jurisdiction. We hereby consent to the use of this opinion as an exhibit to the Registration Statement. We also consent to any and all references to our firm under the caption "Legal Matters" in the Prospectus. Very truly yours, WEIL, GOTSHAL & MANGES LLP EX-10.5 17 AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT 1 EXHIBIT 10.5 NATIONSBANK NATIONSBANK, N.A. FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT among OUTBOARD MARINE CORPORATION, OMC ALUMINUM BOAT GROUP, INC., OMC FISHING BOAT GROUP, INC., OMC LATIN AMERICA/CARIBBEAN, INC., and RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP as Borrowers and Guarantors, and OMC RECREATIONAL BOAT GROUP, INC., and (AND THE OTHER BORROWERS AND/OR GUARANTORS, IF ANY, FROM TIME TO TIME PARTY HERETO), NATIONSBANK, N.A., as Agent and a Lender, (AND THE OTHER LENDERS, IF ANY, FROM TIME TO TIME PARTY HERETO), as Lenders Dated effective as of May 21, 1998 2 FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Amendment"), dated effective as of May 21, 1998, is executed and entered into by and among OUTBOARD MARINE CORPORATION, a Delaware corporation ("OMC"), OMC ALUMINUM BOAT GROUP, INC., a Delaware corporation OMC FISHING BOAT GROUP, INC., a Delaware corporation, OMC LATIN AMERICA/CARIBBEAN, INC., a Delaware corporation, RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP, a Delaware limited partnership, OMC RECREATIONAL BOAT GROUP, INC., a Delaware corporation (collectively all of the "Loan Parties," as of the effective date hereof, under the Amended and Restated Loan and Security Agreement referenced under the Recitals hereinbelow; herein called the "Loan Parties"), each of the lending institutions signatory hereto (collectively all of the "Lenders," as of the effective date hereof, under the Amended and Restated Loan and Security Agreement referenced under the Recitals hereinbelow; herein called the "Lenders") and NATIONSBANK, N.A., a national banking association and successor in interest by merger to NationsBank of Texas, N.A., in its capacity as agent for itself and the other Lenders (in such capacity, together with its successors and assigns in such capacity, herein called "Agent"). RECITALS: A. The Loan Parties, the Lenders and Agent are parties to the certain Amended and Restated Loan and Security Agreement dated effective as of January 6, 1998 (hereinafter called the "Agreement"). B. The Loan Parties, the Lenders and Agent have agreed to amend the Agreement as provided hereinbelow. NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: ARTICLE 1 Definitions Section 1.1 Definitions. Unless otherwise defined in this Amendment, each capitalized term used in this Amendment, shall have the same meaning given to such term in the Agreement, as amended by this Amendment. 3 ARTICLE 2 Amendments Section 2.1 Addition of Definitions to Article 1 of the Agreement. Effective as of the date hereof, Article 1 of the Agreement is hereby amended by adding thereto in alphabetical order the following definitions to read in their entirety as follows: "Depositary Agreement" means the certain Depositary Agreement dated as of the Notes Closing Date, among OMC, State Street Bank and Trust Company, (acting in its separate capacities as Trustee and as depositary agent), and Agent, as the same may be amended, extended or otherwise modified from time to time with the prior written consent of Agent. "Indenture" means that certain Indenture among OMC, ABG, FBG, GP, LAC, RBG and State Street Bank and Trust Company pursuant to which OMC shall issue the Senior Notes on the Notes Closing Note. "Notes Closing Date" means the date, which date shall not be later than June 15, 1998, on which the Indenture is executed and delivered by the parties thereto and the Senior Notes are issued in accordance with the terms thereof. "Senior Notes" means the Senior Notes due 2008 issued by OMC in an aggregate amount not exceeding $160,000,000, issued pursuant to the terms of the Indenture. Section 2.2 Amendment to Definitions in Article 1 of the Agreement. Effective as of the date hereof, the following definitions in Article 1 of the Agreement are hereby amended and restated in their entirety to read as follows: "Applicable Margin" means, for the period from the Agreement Date through the end of the fiscal quarter of OMC in which Agent receives OMC's financial statements dated September 30, 1998, pursuant to Section 11.1(a), two percent (2.0%) with respect to Eurodollar Loans and one-half percent (0.5%) with respect to Base Rate Loans, subject to adjustment from time to time thereafter to the percentage specified for each Type of Loan, corresponding to the Leverage Ratio, as set forth below, respectively:
Leverage Ratio Eurodollar Loans Base Rate Loans -------------- ---------------- --------------- Greater than or equal to 4.0 to 1.0 2.00% 0.50% Less than 4.0 to 1.0 but greater than or 1.75% 0.00% equal to 3.0 to 1.0 Less than 3.0 to 1.0 1.25% 0.00%
2 4 provided, that notwithstanding the forgoing, with respect to the amount, if any, of Loans at any time funded and outstanding in excess of the aggregate amount determined under paragraph (b) of the definition of "Borrowing Base" without giving effect to subparagraph (vii) thereof, "Applicable Margin" means two and one half percent (2.50%) with respect to Eurodollar Loans and one percent (1.00%) with respect to Base Rate Loans. For the purpose of determining the Applicable Margin, OMC's Leverage Ratio shall be determined based upon OMC's Consolidated financial statements for the months of March, June, September and December delivered to Agent as required by Section 11.1, and any resulting change, if any, in the Applicable Margin, shall become effective (i) as to Base Rate Loans, as of the first day of the calendar month following the month in which such financial statements are delivered to Agent and (ii) as to Eurodollar Loans, as of the date (on or after the effective date as referenced in clause (i) preceding) when any such Eurodollar Loan is made, Continued or Converted, as the case may be. "Borrowing Base" means, at any time, an amount equal to the lesser of: (a) the maximum principal amount of the Revolving Credit Facility, minus the sum of (i) the Letter of Credit Reserve, plus (ii) the Reserve, or (b) an amount equal to the sum of (i) 85% (or such lesser percentage as Agent may determine pursuant to Section 2.5) of the face value of Eligible Receivables that are determined by Agent in its discretion to be Qualified L/C Supported Receivables at such time, plus (ii) 85% (or such lesser percentage as Agent may determine pursuant to Section 2.5) of the face value of Eligible Receivables that are determined by Agent in its discretion to be Qualified Guaranteed Receivables at such time, plus (iii) 85% (or such lesser percentage as Agent may determine pursuant to Section 2.5) of the face value of Eligible Domestic Receivables (other than Qualified L/C Supported Receivables or Qualified Guaranteed Receivables) at such time, plus (iv) 75% (or such lesser percentage as Agent may determine pursuant to Section 2.5) of the Dollar Equivalent face value of Eligible Foreign Receivables (other than Qualified L/C Supported Receivables or Qualified Guaranteed Receivables) at such time, 3 5 plus (v) the lesser of (A) 60% with respect to Eligible Domestic Inventory and 50% with respect to Eligible Foreign Inventory (or such lesser percentage as Agent may determine pursuant to Section 2.5) of the lesser of cost determined on a FIFO (or first-in-first-out) accounting basis or fair market value of such Eligible Inventory, as applicable, net of the Loan Parties' reserve for obsolescence (if any), at such time, plus, during the period of January 1, through April 30, 35% (or such lesser percentage as Agent may in its discretion determine from time to time) of the lesser of cost determined on a FIFO (or first-in-first-out) accounting basis or fair market value of Eligible Work-In-Process Inventory, net of the Loan Parties' reserve for obsolescence (if any), at such time or (B) $75,000,000, minus (vi) the Letter of Credit Reserve; plus (vii) provided that the representations of Borrowers under Section 7.1(z) are and remain true and correct, during any single period commencing during any calendar year, determined as provided hereinbelow (herein called a "Designated Period"), $30,000,000 at any time during the period from the Agreement Date through December 30, 1998, $20,000,000 at any time during the period from December 31, 1998 through December 30, 1999, $10,000,000 at any time during the period from December 31, 1999 through December 30, 2000 and $0.00 on or at any time after December 31, 2000; provided, that any such Designated Period for any calendar year shall begin on the Business Day, if any, during such year on which the aggregate outstanding balance of Loans first exceeds an amount equal to the aggregate amount determined under paragraph (b) of this definition without regard to this subparagraph (vii), and shall terminate on the earlier of (a) the expiration of one hundred eighty (180) days thereafter or (b) December 31 of such year; 4 6 provided that with respect to clause (b) preceding, Agent may deduct any Reserve prior to application of the relevant percentages used to calculate the Borrowing Base as set forth herein. "EBITDA" means Net Income, plus, (a) for each of the fiscal quarters in the period beginning October 1, 1997, through and including September 30, 1998, to the extent deducted in the determination of Net Income, (i) any expense resulting from amortization of goodwill and intellectual property recorded on OMC's financial statements pursuant to purchase accounting adjustments under GAAP, and (ii) up to $3,000,000 of "other income" (as determined in accordance with GAAP) cumulatively for each fiscal quarter, plus, (b) for each fiscal quarter to the extent deducted in the determination of Net Income, each of the following: (i) net interest expense; (ii) income taxes; and (iii) depreciation and amortization expense. "Interest Coverage Ratio" means, for any period, the ratio of (a) Net Income, plus, (i) for each of the fiscal quarters in the period beginning October 1, 1997, through and including September 30, 1998, to the extent deducted in the determination of Net Income, (A) any expense resulting from amortization of goodwill and intellectual property recorded on OMC's balance sheet pursuant to purchase accounting adjustments under GAAP, and (B) up to $3,000,000 of "other income" (as determined in accordance with GAAP) cumulatively for each fiscal quarter, plus, (ii) to the extent deducted in the determination of Net Income, net interest expense and income taxes, to (b) the aggregate amount of net interest expense paid during such period. "Letter of Credit Facility" means the facility provided under Article 3 of this Agreement for issuance of one or more Letters of Credit for the account of a Borrower in an aggregate amount not to exceed $30,000,000 at any time. Section 2.3 Amendment to Article 3 of the Agreement. Effective as of the date hereof, Article 3 of the Agreement is hereby amended by adding thereto, immediately following Section 3.9, a new Section 3.10 which shall read in its entirety as follows: Section 3.10 Increased Costs. If any Applicable Law or the interpretation thereof by any Governmental Authority shall impose, modify or deem applicable any capital, reserve, insurance premium or similar requirement against letters of credit issued by L/C Issuer or any Lender and the result thereof shall be to increase the cost to L/C Issuer or such Lender of making any payment under or issuing or maintaining any Letter of Credit or to reduce the yield to L/C Issuer or such Lender in connection with any Letter of Credit or this Agreement, then, on demand of L/C Issuer or such Lender, Borrowers shall pay to L/C Issuer or such Lender, as applicable, from time to time, such additional amounts as L/C Issuer or such Lender may reasonably determine to be necessary to compensate L/C Issuer or such Lender for such increased cost or reduced yield. 5 7 Section 2.4 Amendment to Section 11.1(b) of the Agreement. Effective as of the date hereof, Section 11.1(b) of the Agreement is hereby amended and restated to read in its entirety as follows: (b) Monthly Financial Statements. As soon as available after the end of each month, but in any event within forty-five (45) days of the last day of each March, June, September and December and thirty (30) days after the end of each other month, each Loan Party will provide Agent with copies of the unaudited consolidated and consolidating balance sheet of such Loan Party and its Consolidated Subsidiaries as at the end of such month and the related unaudited consolidated and consolidating statements of earnings and cash flows for such Loan Party and its Consolidated Subsidiaries for such month and for the portion of the fiscal year of such Loan Party and its Consolidated Subsidiaries through such month, certified by a Financial Officer as presenting fairly the financial condition and results of operations of such Loan Party (subject to normal year-end audit adjustments). Section 2.5 Amendment to Section 12.1(a)(i) of the Agreement. Effective as of September 30, 1998, Section 12.1(a)(i) of the Agreement is hereby amended as follows: the phrase "deficit $51,700,000 (<$51,700,000>)" is hereby amended to read "deficit $57,000,000 (<$57,000,000>)." Section 2.6 Amendment to Section 7.1(z) of the Agreement. Effective as of the date hereof, Section 7.1(z) of the Agreement is hereby amended and restated to read in its entirety as follows: (z) Proprietary Rights. Schedule 7.1(z) sets forth a correct and complete list of all of the Loan Parties' respective Proprietary Rights. None of such Proprietary Rights is subject to any licensing agreement or similar arrangement except as set forth on Schedule 7.1(z) or as entered into in the sale or distribution of the Loan Parties' Inventory in the ordinary course of business. To the best of each Loan Party's knowledge, none of such Proprietary Rights infringe on or conflict with any other Person's property, and no other Person's property infringes on or conflicts with any such Proprietary Rights. The Proprietary Rights described on Schedule 7.1(z) constitute all of the property of such type necessary to the current and anticipated future conduct of the Loan Parties' business. The aggregate fair market value of all Proprietary Rights listed in Schedule 7.1(z-1) equals or exceeds $68,500,000. Section 2.7 Amendment to Section 12.2 of the Agreement. Effective as of the date hereof, Section 12.2 of the Agreement is hereby amended by deleting the word "and" at the end of subsection (d), substituting "; and" for the period at the end of subsection (e) and adding a new subsection (f), immediately following subsection (e) which shall read in its entirety as follows: (f) Indebtedness evidenced by the Senior Notes; provided, that the proceeds thereof are used to pay in full the Indebtedness outstanding pursuant to that 6 8 certain Credit Agreement entered into between OMC and American Annuity Group, Inc. and Great American Insurance Company dated August 13, 1997, in the amount of $150,000,000, and to partially fund the "Interest Reserve Accounts" (as defined in the Depositary Agreement). Section 2.8 Amendment to Section 12.3 of the Agreement. Effective as of the date hereof, Section 12.3 of the Agreement is hereby amended and restated to read in its entirety as follows: Section 12.3 Guaranties. No Loan Party will, nor will it permit any other Loan Party to, directly or indirectly, become or remain liable with respect to any Guaranty of any obligation of any other Person other than pursuant to the Guaranty Agreement to be executed by such Loan Party pursuant to the terms of this Agreement, Indebtedness permitted pursuant to Section 12.2(a), Section 12.2(b) or Section 12.2(c), a Guaranty of the Senior Notes by ABG, FBG, LAC, RBG and GP, or other Indebtedness in an aggregate amount not at any time exceeding $10,000,000. Section 2.9 Amendment to Schedule 1.1(b) of the Agreement. Effective as of the date hereof, Schedule 1.1(b) ("Permitted Liens") of the Agreement is hereby amended to add the following as a new paragraph 6, immediately following paragraph 5 thereof: 6. The Lien in OMC's interest in the "Notes Interest Account" pursuant to the Depositary Agreement. Section 2.10 Amendment to Schedule 7.1(j) of the Agreement. Effective as of the date hereof, Schedule 7.1(j) ("Indebtedness and Guaranties") of the Agreement is hereby amended by amending paragraph I.k. thereof to read in its entirety as follows: k. Senior Notes due 2008 issued by OMC pursuant to the Indenture. Initial amount - $160,000,000; current outstanding amount - $160,000,000. Section 2.11 Addition of Schedule 7.1(z-1) of the Agreement. Effective as of the date hereof, Exhibit A of this Amendment is added to the Agreement as Schedule 7.1(z-1) ("Designated Proprietary Rights") immediately following existing Schedule 7.1(z) ("Proprietary Rights"), and which shall read in its entirety as set forth on Exhibit A hereto. ARTICLE 3 Miscellaneous Section 3.1 Consent to Depositary Agreement. Each of Agent and the Lenders hereby consents to execution by OMC of the Depositary Agreement. Section 3.2 Limited Waiver. Agent and the Lenders hereby waive any Event of Default resulting solely from noncompliance with Section 12.1(a) of the Agreement for the period ending 7 9 June 30, 1998, provided, that such waiver is expressly limited as provided herein and shall not impair the requirements of Section 12.1(a) with respect to any other time or period. Section 3.3 Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of each of the following conditions precedent: (a) Agent shall have received all of the following, each dated the date of this Amendment (unless otherwise indicated), in form and substance satisfactory to Agent: (i) Amendment Documents. This Amendment and any other instrument, document or certificate required by Agent to be executed or delivered by any of the Loan Parties, each of the Lenders and or any other Person in connection with this Amendment, duly executed by such Persons (the "Amendment Documents"). (ii) Resolutions. Resolutions of the board of directors of each Loan Party (as applicable) certified by its Secretary or an Assistant Secretary which authorize the execution, delivery and performance by such Loan Party of this Amendment and the other Amendment Documents to which such Loan Party is or is to be a party hereunder; (iii) Fees and Expenses. Evidence that the costs and expenses (including, without limitation, attorneys' fees and expenses) incurred by Agent incident to this Amendment or otherwise required to be paid in accordance with Section 16.2 of the Agreement, to the extent incurred and submitted to the Loan Parties, shall have been paid in full; and (iv) Additional Information. Agent shall have received such additional documents, instruments and information as Agent may reasonably request to effect the transactions contemplated hereby. (b) The representations and warranties contained herein, in the Agreement and in all other Loan Documents, as amended hereby, shall be true and correct as of the date hereof as if made on the date hereof (except those, if any, which by their terms specifically relate only to a different date). (c) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all other agreements, documents and instruments executed and/or delivered pursuant hereto, and all legal matters incident thereto, shall be satisfactory to Agent. (d) No Default or Event of Default shall have occurred and be continuing. Section 3.4 Representations and Warranties. The Loan Parties hereby represent and warrant to, and agree with, Agent, for the benefit of the Lenders, that, as of the date of and after giving effect to this Amendment, (a) the execution, delivery and performance of this Amendment 8 10 and any and all other Amendment Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of each of the Loan Parties (as applicable) and will not violate any of such Loan Party's certificate of incorporation or bylaws (or, in the case of Recreational Boat Group Limited Partnership, its certificate of limited partnership or its limited partnership agreement), (b) all representations and warranties set forth in the Agreement and in any other Loan Document are true and correct as if made again on and as of such date (except those, if any, which by their terms specifically relate only to a different date) in the Agreement), (d) no Default or Event of Default has occurred and is continuing, (e) the Agreement (as amended by this Amendment), and all other Loan Documents are and remain legal, valid, binding and enforceable obligations in accordance with the terms thereof, and (f) the certifications delivered to Agent under clause (i), clause (ii) and clause (iii) of Section 6.1(c) of the Agreement remain true, correct and complete as of the effective date of this Amendment. Section 3.5 Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Document shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender, or any closing, shall affect the representations and warranties or the right of Agent and the Lenders to rely upon them. Section 3.6 Reference to Agreement. Each of the Loan Documents, including the Agreement, the Amendment Documents and any and all other agreements, documents or instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant to the terms of the Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement, whether direct or indirect, shall mean a reference to the Agreement as amended hereby. Section 3.7 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Section 3.8 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of the Credit Parties and the Loan Parties and their respective successors and assigns, except each of the Loan Parties may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent and the Lenders. Section 3.9 General. This Amendment, when signed by each signatory as provided hereinbelow (i) shall be deemed effective prospectively as of the effective date specified in the preamble of this Amendment, (ii) contains the entire agreement among the parties and may not be amended or modified except in writing signed by all parties, (iii) shall be governed and construed according to the laws of the State of Texas, and (iv) may be executed in any number of counterparts, each of which shall be valid as an original and all of which shall be one and the same agreement. A telecopy or other electronic transmission of any executed counterpart shall be deemed valid as an original. 9 11 THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers in several counterparts. BORROWERS: OUTBOARD MARINE CORPORATION By: /s/ Leslie M. Savickas ---------------------------------- Name: Leslie M. Savickas ------------------------------- Title: Vice President and Treasurer ------------------------------- By: /s/ Gordon G. Repp -------------------------------- Name: Gordon G. Repp ------------------------------- Title: Assistant Secretary ------------------------------- OMC ALUMINUM BOAT GROUP, INC. By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp ------------------------------- Title: Assistant Secretary and Treasurer ------------------------------- By: /s/ Steve Hansley ---------------------------------- Name: Steve Hansley ------------------------------- Title: Vice President, Finance ------------------------------- OMC FISHING BOAT GROUP, INC. By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp ------------------------------- Title: Assistant Secretary and Treasurer ------------------------------- 10 12 By: /s/ Chris Wainscott ------------------------------------ Name: Chris Wainscott --------------------------------- Title: Vice President, Sales and Marketing -------------------------------- OMC LATIN AMERICA/CARIBBEAN, INC. By: /s/ Gordon G. Repp ----------------------------------- Name: Gordon G. Repp -------------------------------- Title: Assistant Secretary ------------------------------- By: /s/ Raymond M. Cartade ----------------------------------- Name: Raymond M. Cartade -------------------------------- Title: President ------------------------------- RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP By: OMC Recreational Boat Group, Inc., General Partner By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp ------------------------------- Title: Assistant Secretary and Treasurer ------------------------------ By: /s/ John A. Anderson ---------------------------------- Name: John A. Anderson ------------------------------- Title: Vice President ------------------------------ 11 13 GUARANTOR: OMC RECREATIONAL BOAT GROUP, INC. By: /s/ Gordon G. Repp ---------------------------------- Name: Gordon G. Repp ------------------------------- Title: Assistant Secretary and Treasurer ------------------------------ By: /s/ John A. Anderson ---------------------------------- Name: John A. Anderson ------------------------------- Title: Vice President ------------------------------ 12 14 AGENT: NATIONSBANK, N.A., successor in interest by merger to NationsBank of Texas, N.A. By: /s/ Stacy Lemerich -------------------------------- Name: Stacey Lemerich ----------------------------- Title: Assistant Vice President ---------------------------- 13 15 LENDERS: NATIONSBANK, N.A. successor in interest by merger to NationsBank of Texas, N.A. By: /s/ Stewart Whars ------------------------------- Name: Stewart Whars ---------------------------- Title: Senior Vice President --------------------------- 14 16 AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO By: /s/ David C. Weislogel -------------------------------- Name: David C. Weislogel ----------------------------- Title: Vice President ---------------------------- 15 17 FLEET CAPITAL CORPORATION By: /s/ Thomas Foyer -------------------------------- Name: Thomas Foyer ------------------------------ Title: Senior Vice President and Portfolio Manager ---------------------------- 16 18 THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Pamela A. Wozniak ------------------------------ Name: Pamela A. Wozniak ---------------------------- Title: Assistant Vice President ---------------------------- 17 19 TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ R. L. Heinz ---------------------------- Name: R. L. Heinz ------------------------- Title: Senior Vice President ------------------------ 18 20 SANWA BUSINESS CREDIT CORPORATION By: /s/ Lawrence J. Placek -------------------------- Name: Lawrence J. Placek ----------------------- Title: Vice President ---------------------- 19 21 EXHIBIT A FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT SCHEDULE 7.1(z-1) TO LOAN AND SECURITY AGREEMENT AMONG OUTBOARD MARINE CORPORATION, OMC ALUMINUM BOAT GROUP, INC., OMC FISHING BOAT GROUP, INC., OMC LATIN AMERICA/CARIBBEAN, INC. AND RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP, AS BORROWERS AND GUARANTORS, AND OMC RECREATIONAL BOAT GROUP, INC., AS A GUARANTOR, NATIONSBANK, N.A., AS AGENT AND A LENDER, AND THE OTHER LENDERS PARTY THERETO Designated Proprietary Rights Item Registration No. Trademarks - Johnson 1,277,753 Trademarks - Johnson 519,909 Trademarks - Johnson 1,438,492 Trademarks - Johnson (Suppl. Reg.) 233,698 Trademarks - Evinrude 516,807 Trademarks - Evinrude 1,293,585 Trademarks - Evinrude 1,426,296 Gross appraised value as of March 1, 1998 according to appraisal by Arthur Andersen, LLP dated as of March 20, 1998 - $68,500,00. 20 EX-12 18 STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS 1 EXHIBIT 12 OUTBOARD MARINE CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Post-Merger Pre-Merger Company Company Pre-Merger Company -------------------------- -------------------------------------------------------- Six Month's ended March 31 Years ended September 30 1998 1997 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- ---- ---- (In millions except ratios) Earnings (loss): Earnings (loss) before provision for income taxes $ (14.4) $ (19.8) $ (76.3) $ (10.4) $ 60.8 $ 53.4 $(159.9) Interest expense 14.4 8.4 16.2 12.3 23.1 15.1 19.8 Interest portion of rent expense 0.6 0.6 1.1 1.2 1.3 1.3 1.0 ------- ------- ------- ------- ------ ------ ------- Earnings (loss) $ 0.6 $ (10.8) $ (59.0) $ 3.1 $ 85.2 $ 69.8 $(139.1) ======= ======= ======= ======= ====== ====== ======= Fixed Charges: Interest expense 14.4 8.4 16.2 12.3 23.1 15.1 19.8 Interest portion of rent expense 0.6 0.6 1.1 1.2 1.3 1.3 1.0 ------- ------- ------- ------- ------ ------ ------- Fixed Charges $ 15.0 $ 9.0 $ 17.3 $ 13.5 $ 24.4 $ 16.4 $ 20.8 ======= ======= ======= ======= ====== ====== ======= Ratio of earnings to fixed charges 0.04 0.2 3.5 4.3 ======= ======= ====== ====== Excess of fixed charges over earnings $ 19.8 $ 76.3 $ 159.9 ======= ======= =======
EX-23.1 19 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this registration statement. ARTHUR ANDERSEN LLP Chicago, Illinois June 25, 1998 EX-25 20 FORM T-1 1 EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 --------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) (OUTBOARD MARINE CORPORATION) (Exact name of obligor as specified in its charter) DELAWARE (36-1589715) (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) (100 SEA HORSE DRIVE WAUKEGAN, IL 60085) (Address of principal executive offices) (Zip Code) (10-3/4% SENIOR NOTES DUE 2008) (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 1 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the {JUNE 16, 1998}. STATE STREET BANK AND TRUST COMPANY By: /s/ Steven Cimalore NAME: STEVEN CIMALORE TITLE: VICE PRESIDENT 2 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by {OUTBOARD MARINE CORPORATION}. of its {10-3/4% SENIOR NOTES DUE 2008}, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Steven Cimalore NAME: STEVEN CIMALORE TITLE: VICE PRESIDENT DATED: JUNE 16, 1998 3 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 1998, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ............ 1,144,309 Interest-bearing balances ..................................... 9,914,704 Securities ............................................................. 10,062,052 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ........................... 8,073,970 Loans and lease financing receivables: Loans and leases, net of unearned income ...................... 6,433,627 Allowance for loan and lease losses ........................... 88,820 Allocated transfer risk reserve ............................... 0 Loans and leases, net of unearned income and allowances ....... 6,344,807 Assets held in trading accounts ........................................ 1, 117,547 Premises and fixed assets .............................................. 453,576 Other real estate owned ................................................ 100 Investments in unconsolidated subsidiaries ............................. 44,985 Customers' liability to this bank on acceptances outstanding ........... 66,149 Intangible assets ...................................................... 263,249 Other assets ........................................................... 1,066,572 ---------- Total assets ........................................................... 38,552,020 ========== LIABILITIES Deposits: In domestic offices ........................................... 9,266,492 Noninterest-bearing .................................. 6,824,432 Interest-bearing ..................................... 2,442,060 In foreign offices and Edge subsidiary ........................ 14,385,048 Noninterest-bearing .................................. 75,909 Interest-bearing ..................................... 14,309,139 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ....................... 9,949,994 Demand notes issued to the U.S. Treasury and Trading Liabilities ....... 171,783 Trading liabilities .................................................... 1,078,189 Other borrowed money ................................................... 406,583 Subordinated notes and debentures ...................................... 0 Bank's liability on acceptances executed and outstanding ............... 66,149 Other liabilities ...................................................... 878,947 Total liabilities ...................................................... 36,203,185 ---------- EQUITY CAPITAL Perpetual preferred stock and related surplus .......................... 0 Common stock ........................................................... 29,931 Surplus ................................................................ 450,003 Undivided profits and capital reserves/Net unrealized holding gains (losses) ............................ 1,857,021 Net unrealized holding gains (losses) on available-for-sale securities . 18,136 Cumulative foreign currency translation adjustments .................... (6,256) Total equity capital ................................................... 2,348,835 ---------- Total liabilities and equity capital ................................... 38,552,020 ----------
4 6 I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Rex S. Schuette We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. David A. Spina Marshall N. Carter Truman S. Casner EX-27 21 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FORM S-4 REGISTRATION STATEMENT OF OUTBOARD MARINE CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000075149 OUTBOARD MARINE CORP 1,000 6-MOS SEP-30-1998 MAR-31-1998 49,100 0 186,300 7,000 193,800 462,900 210,200 11,200 1,152,200 504,600 92,900 200 0 0 256,900 1,152,200 475,500 475,500 377,900 377,900 97,600 0 14,400 (14,400) 1,800 (16,200) 0 0 0 (16,200) (0.79) (0.79)
EX-99.1 22 LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL OUTBOARD MARINE CORPORATION TO TENDER FOR EXCHANGE 10 3/4% SENIOR NOTES DUE 2008 PURSUANT TO THE PROSPECTUS DATED , 1998 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998 UNLESS EXTENDED (THE "EXPIRATION DATE"). PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS IF YOU DESIRE TO ACCEPT THE EXCHANGE OFFER, THIS LETTER OF TRANSMITTAL SHOULD BE COMPLETED, SIGNED, AND SUBMITTED TO THE EXCHANGE AGENT: THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: STATE STREET BANK AND TRUST COMPANY By Mail: Overnight Courier: State Street Bank and Trust Company State Street Bank and Trust P.O. Box 778 Company Boston, Massachusetts 02102 Two International Place Attention: Corporate Trust Department Boston, Massachusetts 02110 Kellie Mullen Attention: Corporate Trust To Confirm by Telephone Department or for Information Call: Kellie Mullen (617) 664-5587 By Hand: in New York State Street Bank and Trust Company, N.A. 61 Broadway, 15th Floor By Hand: in Boston Corporate Trust Window State Street Bank and Trust New York, New York 10006 Company Two International Plaza Fourth Floor, Corporate Trust Boston, Massachusetts 02110
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT. The undersigned hereby acknowledges receipt of the Prospectus dated , 1998 (as it may be supplemented and amended from time to time, the "Prospectus") of Outboard Marine Corporation, a Delaware corporation ("Company"), and this Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of its 10 3/4% Senior Notes due 2008, Series B (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement, for each $1,000 in principal amount of its outstanding 10 3/4% Senior Notes due 2008, Series A (the "Notes"), of which $160,000,000 aggregate principal amount is outstanding. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. The undersigned hereby tenders the Notes described in Box 1 below (the "Tendered Notes") pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered owner of all the Tendered Notes and the undersigned represents that it has received from each beneficial owner of the Tendered Notes ("Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" 2 accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. Subject to, and effective upon, the acceptance for exchange of the Tendered Notes, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title, and interest in, to and under the Tendered Notes. Please issue the Exchange Notes exchanged for Tendered Notes in the name(s) of the undersigned. Similarly, unless otherwise indicated under "SPECIAL DELIVERY INSTRUCTIONS" below (see Box 3), please send or cause to be sent the certificates for the Exchange Notes (and accompanying documents, as appropriate) to the undersigned at the address shown below in Box 1. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney in fact of the undersigned with respect to the Tendered Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver the Tendered Notes to the Company or cause ownership of the Tendered Notes to be transferred to, or upon the order of, the Company, on the books of the registrar for the Notes and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Company upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon acceptance by the Company of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise exercise all rights of beneficial ownership of the Tendered Notes, all in accordance with the terms of the Exchange Offer. The undersigned understands that tenders of Notes pursuant to the procedures described under the caption "The Exchange Offer" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of Tenders." All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any Beneficial Owner(s), and every obligation of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon the heirs, representatives, successors, and assigns of the undersigned and such Beneficial Owner(s). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign, and transfer the Tendered Notes and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, and adverse claims when the Tendered Notes are acquired by the Company as contemplated herein. The undersigned and each Beneficial Owner will, upon request, execute and deliver any additional documents reasonably requested by the Company or the Exchange Agent as necessary or desirable to complete and give effect to the transactions contemplated hereby. The undersigned hereby represents and warrants that the information set forth in Box 2 is true and correct. By accepting the Exchange Offer, the undersigned hereby represents and warrants that (i) the Exchange Notes to be acquired by the undersigned and any Beneficial Owner(s) in connection with the Exchange Offer are being acquired by the undersigned and any Beneficial Owner(s) in the ordinary course of business of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, (iii) except as otherwise disclosed in writing herewith, neither the undersigned nor any Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, and (iv) the undersigned and each Beneficial Owner acknowledge and agree that any person participating in the Exchange Offer with the intention or for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder, the "Securities Act") in connection with a secondary resale of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission (the "Commission") set forth in the no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer." In addition, 2 3 by accepting the Exchange Offer, the undersigned hereby (i) represents and warrants that, if the undersigned or any Beneficial Owner of the Notes is a Participating Broker-Dealer, such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities and has not entered into any arrangement or understanding with the Company or any "affiliate" of the Company (within the meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes to be received in the Exchange Offer, and (ii) acknowledges that, by receiving Exchange Notes for its own account in exchange for Notes, where such Notes were acquired as a result of market-making activities or other trading activities, such Participating Broker-Dealer will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Holders of Notes that are tendering by book-entry transfer to the Exchange Agent's account at DTC can execute the tender through the DTC Automated Tender Offer Program ("ATOP"), for which the transaction will be eligible. DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC, which will verify the acceptance and execute a book-entry delivery to the Exchange Agent's DTC account. DTC will then send an Agent's Message to the Exchange Agent for its acceptance. DTC participants may also accept the Exchange Offer prior to the Expiration Date by submitting a Notice of Guaranteed Delivery through ATOP. [ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH. [ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE "USE OF GUARANTEED DELIVERY" BELOW (Box 4). [ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (Box 5). [ ] CHECK HERE IF YOU ARE A PARTICIPATING BROKER-DEALER WHO ACQUIRED THE NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO (Box 7). 3 4 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES BOX 1 DESCRIPTION OF NOTES TENDERED (Attach additional signed pages, if necessary)
- ---------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), CERTIFICATE AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF AMOUNT REPRESENTED AMOUNT (PLEASE FILL IN, IF BLANK) NOTES* BY CERTIFICATE(S) TENDERED** - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Total
- ----------------------------------------------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer. ** The minimum permitted tender is $1,000 in principal amount of Notes. All other tenders must be in integral multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the principal amount of all Note Certificates identified in this Box 1 or delivered to the Exchange Agent herewith shall be deemed tendered. See Instruction 4. BOX 2 BENEFICIAL OWNER(S)
- ----------------------------------------------------------------------------------------------------------------- STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- =================================================================================================================
4 5 BOX 3 BOX 4 - ------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE Mail Exchange Note(s) and any untendered Notes to: Name(s): -------------------------------------------- (PLEASE PRINT) Address: --------------------------------------------- ------------------------------------------------------ ------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------ TAX IDENTIFICATION OR SOCIAL SECURITY NO. - ------------------------------------------------------ - ------------------------------------------------------ USE OF GUARANTEED DELIVERY (SEE INSTRUCTION 2) TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): ------------------------------------------------------ Window Ticket No. (if any): ------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------------------------------------ Name of Institution that Guaranteed Delivery: ------------------------------------------------------ If Delivered by Book-Entry Transfer: Account Number with DTC: ------------------ Transaction Code Number: -------------------- - ------------------------------------------------------ BOX 5 USE OF BOOK-ENTRY TRANSFER (SEE INSTRUCTION 2) TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY TRANSFER. Name of Tendering Institution: - ----------------------------------------------------------------- Account Number: - ------------------------------------------------------------------------------ Transaction Code Number: - --------------------------------------------------------------------- 5 6 BOX 6 TENDERING HOLDER SIGNATURE (SEE INSTRUCTIONS 1 AND 5) IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 X - -------------------------------------------------------------------------------- X - -------------------------------------------------------------------------------- (SIGNATURE OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY) Note: The above lines must be signed by the registered holder(s) of Notes as their name(s) appear(s) on the Notes or by person(s) authorized to become registered holder(s) (evidence of such authorization must be transmitted with this Letter of Transmittal). If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer, or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. See Instruction 5. Name(s): - -------------------------------------------------------------------------------- Capacity: - -------------------------------------------------------------------------------- Street Address: - -------------------------------------------------------------------------------- ------------------------------------------------------------------- (ZIP CODE) Area Code and Telephone Number: - --------------------------------------------------------------------- Tax Identification or Social Security Number: - ---------------------------------------------------------- SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 5) Authorized Signature - -------------------------------------------------------------------------------- X - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- (PLEASE PRINT) Title: - -------------------------------------------------------------------------------- Name of Firm: - -------------------------------------------------------------------------------- (MUST BE AN ELIGIBLE INSTITUTION AS DEFINED IN INSTRUCTION 2) Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (ZIP CODE) Area Code and Telephone Number: - --------------------------------------------------------------------- Dated: - --------------------------- 6 7 BOX 7 BROKER-DEALER STATUS [ ] Check this box if the Beneficial Owner of the Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. If this box is checked, regardless of whether you are tendering by book-entry transfer through ATOP, an executed copy of this Letter of Transmittal must be received within three NYSE trading days after the Expiration Date by Outboard Marine Corporation, attention Robert S. Romano, facsimile (847) 689-5371. - ---------------------------------------------------------------------------------------------------------------------- EXCHANGE AGENT'S NAME: STATE STREET BANK AND TRUST COMPANY - ---------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING --------------------------------- DEPARTMENT OF THE TREASURY BELOW Social Security Number INTERNAL REVENUE SERVICE or --------------------------------- Employer Identification Number --------------------------------------------------------------------------------- PAYER'S REQUEST FOR PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that: TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or NUMBER ("TIN") I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. --------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross PART 3 -- out item (2) above if you have been notified Awaiting TIN [ ] by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). - ---------------------------------------------------------------------------------------------------------------------- Signature Date - ----------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administrative Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within 60 days. - ------------------------------------------------------------------------------ - --------------------- , 1998 Signature Date 7 8 OUTBOARD MARINE CORPORATION INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. Delivery of this Letter of Transmittal and Notes. This Letter of Transmittal is to be completed by registered holders of Notes if certificates representing such Notes are to be forwarded herewith pursuant to the procedures set forth in the Prospectus under "The Exchange Offer--Procedures for Tendering," unless delivery of such certificates is to be made by book-entry transfer to the Exchange Agent's account maintained by DTC through ATOP. For a holder to properly tender Notes pursuant to the Exchange Offer, a properly completed and duly executed copy of this Letter of Transmittal, including Substitute Form W-9, and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein, and either (i) certificates for Tendered Notes must be received by the Exchange Agent at its address set forth herein, or (ii) such Tendered Notes must be transferred pursuant to the procedures for book-entry transfer described in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering" (and a confirmation of such transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of certificates for Tendered Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the tendering holder and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. Instead of delivery by mail, it is recommended that the holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Tendered Notes should be sent to the Company. Neither the Company nor the Exchange Agent is under any obligation to notify any tendering holder of the Company's acceptance of Tendered Notes prior to the closing of the Exchange Offer. 2. Guaranteed Delivery Procedures. If a registered holder desires to tender Notes pursuant to the Exchange Offer and (a) certificates representing such tendered Notes are not immediately available, (b) time will not permit such holder's Letter of Transmittal, certificates representing such Tendered Notes and all other required documents to reach the Exchange Agent on or prior to the Expiration Date, or (c) the procedures for book-entry transfer cannot be completed on or prior to the Expiration Date, such holder may nevertheless tender such Tendered Notes with the effect that such tender will be deemed to have been received on or prior to the Expiration Date if the procedures set forth below and in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures" (including the completion of Box 4 above) are followed. Pursuant to such procedures, (i) the tender must be made by or through an Eligible Institution (as defined), (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company herewith, or an Agent's Message with respect to a guaranteed delivery that is accepted by the Company, must be received by the Exchange Agent on or prior to the Expiration Date, and (iii) the certificates for the Tendered Notes, in proper form for transfer (or a Book-Entry Confirmation of the transfer of such Tendered Notes to the Exchange Agent's account at DTC as described in the Prospectus), together with a Letter of Transmittal (or manually signed facsimile thereof) properly completed and duly executed, with any required signature guarantees and any other documents required by the Letter of Transmittal or a properly transmitted Agent's Message, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. Any holder who wishes to tender Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such tendered Notes prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by an Eligible Holder who attempted to use the guaranteed delivery process. 3. Beneficial Owner Instructions to Registered Holders. Only a holder in whose name Tendered Notes are registered on the books of the registrar (or the legal representative or attorney-in-fact of such registered 8 9 holder) may execute and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes who is not the registered holder must arrange promptly with the registered holder to execute and deliver this Letter of Transmittal on his or her behalf through the execution and delivery to the registered holder of the "Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" form accompanying this Letter of Transmittal. 4. Partial Tenders. Tenders of Notes will be accepted only in integral multiples of $1,000 in principal amount. If less than the entire principal amount of Notes held by the holder is tendered, the tendering holder should fill in the principal amount tendered in the column labeled "Aggregate Principal Amount Tendered" of the box entitled "Description of Notes Tendered" (see Box 1) above. The entire principal amount of Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Notes held by the holder is not tendered, then Notes for the principal amount of Notes not tendered and Exchange Notes issued in exchange for any Notes tendered and accepted will be sent to the holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal, as soon as practicable following the Expiration Date, 5. Signatures on the Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the registered holder(s) of the Tendered Notes, the signature must correspond with the name(s) as written on the face of the Tendered Notes without alteration, enlargement or any change whatsoever. If any of the Tendered Notes are owned of record by two joint owners, all such owners must sign this Letter of Transmittal. If any Tendered Notes are held in different names, it will be necessary to complete, sign and submit as many separate copies of the Letter of Transmittal as there are different names in which Tendered Notes are held. If this Letter of Transmittal is signed by the registered holder(s) of Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued (and any untendered principal amount of Notes is to be reissued) in the name of the registered holder(s), then such registered holder(s) need not and should not endorse any Tendered Notes, nor provide a separate bond power. In any other case, such registered holder(s) must either properly endorse the Tendered Notes or a properly completed separate bond power with this Letter of Transmittal, with the signature(s) on the endorsement or bond power guaranteed by a Medallion Signature Guarantor (as defined below). If this Letter of Transmittal is signed by a person other than the registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed or accompanied by appropriate bond powers, in each case, signed as the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with the signature(s) on the endorsement or bond power guaranteed by a Medallion Signature Guarantor. If this Letter of Transmittal or any Tendered Notes or bond powers are signed by trustees, executors, administrators, guardians, attorney-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal. Signatures on this Letter of Transmittal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each a "Medallion Signature Guarantor"), unless the Tendered Notes are tendered (i) by a registered holder of Tendered Notes (or by a participant in DTC whose name appears on a security position listing as the owner of such Tendered Notes) who has not completed Box 3 ("Special Delivery Instructions") on this Letter of Transmittal, or (ii) for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. ("NASD") or a commercial bank or trust company having an office or correspondent in the United States (each of the foregoing being referred to as an "Eligible Institution"). If the Tendered Notes are registered in the name of a person other than the signor of the Letter of Transmittal or if Notes not tendered are to be returned to a person other than the registered holder, then the Signature on this Letter of Transmittal accompanying the Tendered 9 10 Notes must be guaranteed by a Medallion Signature Guarantor as described above. Beneficial owners whose Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee if they desire to tender such Notes. 6. Special Delivery Instructions. Tendering holders should indicate in Box 3 the name and address to which the Exchange Notes and/or substitute Notes for principal amounts not tendered or not accepted for exchange are to be sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person must also be indicated. 7. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the transfer and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of Transmittal. 8. Tax Identification Number. Federal income tax law requires that the holder(s) of any Tendered Notes which are accepted for exchange must provide the Exchange Agent (as payor) with its correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is his or her social security number. If the Exchange Agent is not provided with the correct TIN, the holder may be subject to backup withholding and a $50 penalty imposed by the Internal Revenue Service. (If withholding results in an over-payment of taxes, a refund may be obtained.) Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. To prevent backup withholding, each holder of Tendered Notes must provide such holder's correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) if previously so notified, the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the Tendered Notes are registered in more than one name or are not in the name of the actual owner, consult the "Guidelines for Certification of Taxpayer IdentificatIon Number on Substitute Form W-9" for information on which TIN to report. The Company reserves the right in its sole discretion to take whatever steps are necessary to comply with the Company's obligation regarding backup withholding. 9. Validity of Tenders. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of Tendered Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the right to reject any and all Notes not validly tendered or any Notes the Company's acceptance of which would, in the opinion of the Company or its counsel, be unlawful. The Company also reserves the right to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Notes as to any ineligibility of any holder who seeks to tender Notes in the Exchange Offer. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Notes received by the Exchange 10 11 Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 10. Waiver of Conditions. The Company reserves the absolute right to amend, waive or modify any of the conditions in the Exchange Offer in the case of any Tendered Notes. 11. No Conditional Tender. No alternative, conditional, irregular, or contingent tender of Notes or transmittal of this Letter of Transmittal will be accepted. 12. Mutilated, Lost, Stolen or Destroyed Notes. Any tendering holder whose Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. 13. Requests for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address indicated herein. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 14. Acceptance of Tendered Notes and Issuance of Exchange Notes; Return of Notes. Subject to the terms and conditions of the Exchange Offer, the Company will accept for exchange all validly tendered Notes as soon as practicable after the Expiration Date and will issue Exchange Notes therefor as soon as practicable thereafter. For purposes of the Exchange Offer, the Company shall be deemed to have accepted Tendered Notes when, as and if the Company has given written or oral notice (immediately followed in writing) thereof to the Exchange Agent. If any Tendered Notes are not exchanged pursuant to the Exchange Offer for any reason, such unexchanged Notes will be returned, without expense, to the undersigned at the address shown in Box 1 or at a different address as may be indicated herein under "Special Delivery Instructions" (Box 3). 15. Withdrawal. Tenders may be withdrawn only pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of Tenders." 11 EX-99.2 23 NOTIE OF GUARANTEED DELIVERY 1 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY IN RESPECT OF 10 3/4% SENIOR NOTES DUE 2008 OF OUTBOARD MARINE CORPORATION PURSUANT TO THE PROSPECTUS DATED , 1998 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED ("THE EXPIRATION DATE"). As set forth in the Prospectus dated , 1998 (as it may be supplemented and amended from time to time, the "Prospectus") of Outboard Marine Corporation (the "Company") under "The Exchange Offer -- Guaranteed Delivery Procedures," and in the Instructions to the related Letter of Transmittal (the "Letter of Transmittal"), this form, or one substantially equivalent hereto, or an Agent's Message relating to the guaranteed delivery procedures, must be used to accept the Company's offer (the "Exchange Offer") to exchange any and all of its outstanding 10 3/4% Senior Notes due 2008, Series A (the "Notes"), for new 10 3/4% Senior Notes due 2008, Series B (the "Exchange Notes"), if time will not permit the Letter of Transmittal, certificates representing such Notes and other required documents to reach the Exchange Agent, or the procedures for book-entry transfer cannot be completed, on or prior to the Expiration Date (as defined). This form must be delivered by an Eligible Institution (as defined herein) by mail or hand delivery or transmitted via facsimile to the Exchange Agent as set forth above. If a signature on the Letter of Transmittal is required to be guaranteed by a Medallion Signature Guarantor under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. This form is not to be used to guarantee signatures. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address above. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: STATE STREET BANK AND TRUST COMPANY By Mail: Overnight Courier: State Street Bank and Trust Company State Street Bank and Trust P.O. Box 778 Company Boston, Massachusetts 02102 Two International Place Attention: Corporate Trust Department Boston, Massachusetts 02110 Kellie Mullen Attention: Corporate Trust To Confirm by Telephone Department or for Information Call: Kellie Mullen (617) 664-5587 By Hand: in New York State Street Bank and Trust Company, N.A. 61 Broadway, 15th Floor By Hand: in Boston Corporate Trust Window State Street Bank and Trust New York, New York 10006 Company Two International Plaza Fourth Floor, Corporate Trust Boston, Massachusetts 02110
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY. 2 Ladies and Gentlemen: The undersigned hereby tender(s) to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal (receipt of which is hereby acknowledged), the principal amount of the Notes specified below pursuant to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures" and in Instruction 2 to the Letter of Transmittal. The undersigned hereby authorizes the Exchange Agent to deliver this Notice of Guaranteed Delivery to the Company with respect to the Notes tendered pursuant to the Exchange Offer. The undersigned understands that Notes will be exchanged only after timely receipt by the Exchange Agent of (i) such Notes, or a Book-Entry Confirmation, and (ii) a Letter of Transmittal (or a manually signed facsimile thereof), including by means of an Agent's Message, of the transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, with respect to such Notes, properly completed and duly executed, with any signature guarantees and any other documents required by the Letter of Transmittal within three New York Stock Exchange, Inc. trading days after the execution hereof. The undersigned also understands that the method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. The undersigned understands that tenders of Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned also understands that tenders of Notes may be withdrawn at any time prior to the Expiration Date. All authority conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall not be affected by, and shall survive, the death or incapacity of the undersigned, and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, executors, administrators, trustees in bankruptcy, personal and legal representatives, successors and assigns of the undersigned. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Prospectus. 2 3 PLEASE SIGN AND COMPLETE Principal Amount of Notes Tendered: ------------------------------------------------------------------- Name(s) of Registered Holder(s): ---------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Certificate No.(s) of Notes (if available): -------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Area Code and Telephone No.: -------------------------------------------------------------------------- If Notes will be delivered by book-entry transfer, provide the following information: Signature(s) of Registered Holder(s) or Authorized Signatory: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DTC Account No.: - -------------------------------------------------------------------------------- Date: - -------------------------------------------------------------------------------- THIS NOTICE OF GUARANTEED DELIVERY MUST BE SIGNED BY THE HOLDER(S) EXACTLY AS THEIR NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR NOTES OR ON A SECURITY POSITION LISTING AS THE OWNER OF NOTES, OR BY PERSON(S) AUTHORIZED TO BECOME HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED WITH THIS NOTICE OF GUARANTEED DELIVERY WITHOUT ALTERATION, ENLARGEMENT OR ANY CHANGE WHATSOEVER. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST PROVIDE THE FOLLOWING INFORMATION. Please print name(s) and address(es) Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capacity: - -------------------------------------------------------------------------------- Address(es): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3 4 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program (each, an "Eligible Institution"), hereby (i) represents that the above-named persons are deemed to own the Notes tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (ii) represents that such tender of Notes complies with Rule 14e-4 and (iii) guarantees that the Notes tendered hereby are in proper form for transfer (pursuant to the procedures set forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures"), and that the Exchange Agent will receive (a) such Notes, or a Book-Entry Confirmation of the transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility and (b) a properly completed and duly executed Letter of Transmittal or facsimile thereof (or Agent's message) with any required signature guarantees and any other documents required by the Letter of Transmittal within three New York Stock Exchange, Inc. trading days after the date of execution hereof. The Eligible Institution that completes this form must communicate the guarantee to the Exchange Agent and must deliver the Letter of Transmittal and Notes to the Exchange Agent within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: - -------------------------------------------------------------------------------- Authorized Signature: - -------------------------------------------------------------------------------- Title: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Zip Code) Area Code and Telephone Number: --------------------------------------------------------------------- Dated: - ------------------------------------ , 1998 DO NOT SEND NOTES WITH THIS FORM. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. 4 EX-99.3 24 INSTRUCTIONS TO REGISTERED HOLDERS 1 EXHIBIT 99.3 INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF OUTBOARD MARINE CORPORATION 10 3/4% SENIOR NOTES DUE 2008 To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus, dated , 1998 (as the same may be amended or supplemented from time to time, the "Prospectus") of Outboard Marine Corporation, a Delaware corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer"), Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to action to be taken by you relating to the Exchange Offer with respect to the 10 3/4% Senior Notes due 2008 (the "Notes") held by you for the account of the undersigned. The aggregate face amount of the Notes held by you for the account of the undersigned is (fill in amount): $ of the 10 3/4% Senior Notes due 2008. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] TO TENDER the following Notes held by you for the account of the undersigned (insert principal amount of Notes to be tendered, if any): $ [ ] NOT TO TENDER any Notes held by you for the account of the undersigned. If the undersigned instruct you to tender the Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representation and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including, but not limited to, the representations that (i) the undersigned's principal residence is in the State of (fill in State) (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not participate, and has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iv) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Act"), in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer -- Resale of the Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the Company or any Guarantor; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Notes. - -------------------------------------------------------------------------------- 2 [ ] Check this box if the Beneficial Owner of the Note is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. If this box is checked, a copy of these Instructions must be received within three New York Stock Exchange trading days after the Expiration Date by Outboard Marine Corporation, attention Robert S. Ramano, facsimile (847) 689-5371. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGN HERE Name of beneficial owner(s): --------------------------------------------------------------------------- Signature(s): - -------------------------------------------------------------------------------- Name (please print): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Telephone number: - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number: --------------------------------------------------- Date: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EX-99.4 25 EXCHANGE AGENT AGREEMENT 1 EXHIBIT 99.4 EXCHANGE AGENT AGREEMENT State Street Bank and Trust Company Corporate Trust Administration 225 Asylum Street, 23rd Floor Hartford, Connecticut 06103 Ladies and Gentlemen: Outboard Marine Corporation (the "Company") proposes to make an offer (the "Exchange Offer") to exchange its 10-3/4% Senior Notes due 2008, Series A (the "Old Notes") for its 10-3/4% Senior Notes due 2008, Series B, which have been registered under the Securities Act of 1933, as amended (the "New Notes"). The terms and conditions of the Exchange Offer as currently contemplated are set forth in a prospectus, dated , 1998 (the "Prospectus"), proposed to be distributed to all record holders of the Old Notes. The Old Notes and the New Notes are collectively referred to herein as the "Notes". Any capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Prospectus. The Company hereby appoints State Street Bank and Trust Company to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to State Street Bank and Trust Company. The Exchange Offer is expected to be commenced by the Company on or about , 1998. The Letter of Transmittal accompanying the Prospectus is to be used by the holders of the Old Notes to accept the Exchange Offer, and contains instructions with respect to the delivery of certificates for Old Notes tendered. The Exchange Offer shall expire at 5:00 P.M., New York City time, on ___________, or on such later date or time to which the Company may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (confirmed in writing) or written notice to you before 9:00 A.M., New York City time, on the business day following the previously scheduled Expiration Date. 2 The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Old Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified in the Prospectus under the caption "The Exchange Offer -- Conditions." The Company will give oral (confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth in the section of the Prospectus captioned "The Exchange Offer" or as specifically set forth herein; provided, however, that in no way will your general duty to act in good faith be discharged by the foregoing. 2. You will establish an account with respect to the Old Notes at The Depository Trust Company (the "Book- Entry Transfer Facility") for purposes of the Exchange Offer within two business days after the date of the Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of the Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into your account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. 3. You are to examine each of the Letters of Transmittal and certificates for Old Notes (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility) and any other documents delivered or mailed to you by or for holders of the Old Notes to ascertain whether: (i) the Letters of Transmittal and any such other documents are duly executed and properly completed in accordance with instructions set forth therein and (ii) the Old Notes have otherwise been properly tendered. In each case where the Letter of Transmittal or any other document has been improperly completed or executed or any of the certificates for Old Notes are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will endeavor to inform the presenters of the need for fulfillment of all requirements and to take any other action 2 3 as may be necessary or advisable to cause such irregularity to be corrected. 4. With the approval of the President, Chief Financial Officer or any Vice President of the Company (such approval, if given orally, to be confirmed in writing) or any other party designated by such an officer in writing, you are authorized to waive any irregularities in connection with any tender of Old Notes pursuant to the Exchange Offer. 5. Tenders of Old Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer - Procedures for Tending," and Old Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 5, Old Notes which the President, Chief Financial Officer or any Vice President of the Company shall approve as having been properly tendered pursuant to paragraph 4 above shall be considered to be properly tendered (such approval, if given orally, shall be confirmed in writing). 6. You shall advise the Company with respect to any Old Notes received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Old Notes (such advice, if given orally, shall be confirmed in writing). 7. You shall accept tenders: (a) in cases where the Old Notes are registered in two or more names, only if signed by all named holders; (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity, only when proper evidence of his or her authority so to act is submitted; and (c) from persons other than the registered holder of Old Notes provided that customary transfer requirements, including the payment by such persons of any applicable transfer taxes, are fulfilled. 8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify 3 4 you (such notice if given orally, to be confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Old Notes properly tendered and you, on behalf of the Company, will exchange such Old Notes for New Notes and cause such Old Notes to be cancelled. Delivery of New Notes will be made on behalf of the Company by you at the rate of $1,000 principal amount of New Notes for each $1,000 principal amount of the corresponding series of Old Notes tendered promptly after notice (such notice if given orally, to be confirmed in writing) of acceptance of said Old Notes by the Company; provided, however, that in all cases, Old Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Old Notes (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other required documents. You shall issue New Notes only in denominations of $1,000 or any integral multiple thereof. 9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. 10. The Company shall not be required to exchange any Old Notes tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to exchange any Old Notes tendered shall be given (and confirmed in writing) by the Company to you. 11. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Old Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "The Exchange Offer -- Conditions" or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return those certificates for unaccepted Old Notes (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them. 12. All certificates for reissued Old Notes, unaccepted Old Notes or for New Notes shall be forwarded by 4 5 (a) first-class certified mail, return receipt requested under a blanket surety bond protecting you and the Company from loss or liability arising out of the non-receipt or non-delivery of such certificates or (b) registered mail insured separately for the replacement value of each of such certificates. 13. You are not authorized to pay or offer to pay any concessions, commissions or solicitation fees to any broker, dealer, bank or other persons or to engage or utilize any person to solicit tenders. 14. As Exchange Agent hereunder you: (a) shall have no duties or obligations other than those specifically set forth in the Prospectus or set forth herein or as may be subsequently agreed to in writing by you and the Company; (b) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates or the Old Notes represented thereby deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; provided, however, that in no way will your general duty to act in good faith be discharged by the foregoing; (c) shall not be obligated to take any legal action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with reasonable indemnity; (d) may reasonably rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed by the proper party or parties; (e) may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or represented by a proper person or persons; 5 6 (f) may rely on and shall be protected in acting upon written or oral instructions from any officer of the Company; (g) may consult with your counsel with respect to any questions relating to your duties and responsibilities and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the advice or opinion of such counsel; and (h) shall not advise any person tendering Old Notes pursuant to the Exchange Offer as to the wisdom of making such tender or as to the market value or decline or appreciation in market value of any Old Notes. 15. You shall take such action as may from time to time be requested by the Company or its counsel (and such other action as you may reasonable deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms as may be approved from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. All other requests for information relating to the Exchange Offer shall be directed to the Company, Attention: Treasurer. 16. You shall advise by facsimile transmission or telephone, and promptly thereafter confirm in writing to Gordon G. Repp, Esq. of the Company and such other person or persons as it may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested) up to and including the Expiration Date, as to the number of Old Notes which have been tendered pursuant to the Exchange Offer and the items received by you pursuant to this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Company or any such other authorized person or persons upon oral request made from time to time prior to the Expiration Date of such other information as it or he or she reasonably requests. Such 6 7 cooperation shall include, without limitation, the granting by you to the Company and such person as the Company may request of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date, the Company shall have received information in sufficient detail to enable it to decide whether to extend the Exchange Offer. You shall prepare a final list of all persons whose tenders were accepted, the aggregate principal amount of Old Notes tendered, the aggregate principal amount of Old Notes accepted and deliver said list to the Company. 17. Letters of Transmittal and Notices of Guaranteed Delivery shall be stamped by you as to the date and the time of receipt thereof and shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities. You shall dispose of unused Letters of Transmittal and other surplus materials by returning them to the Company. 18. You hereby expressly waive any lien, encumbrance or right of set-off whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Company, or any of its subsidiaries or affiliates pursuant to any loan or credit agreement with you or for compensation owed to you hereunder. 19. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation as set forth on Schedule I attached hereto. 20. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, shall be resolved in favor of the latter two documents, except with respect to the duties, liabilities and indemnification of you as Exchange Agent, which shall be controlled by this Agreement. 21. The Company covenants and agrees to indemnify and hold you harmless in your capacity as Exchange Agent hereunder against any loss, liability, cost or expense, including reasonable attorneys' fees and expenses, arising 7 8 out of or in connection with any act, omission, delay or refusal made by you in reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Old Notes reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Old Notes; provided, however, that the Company shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of your gross negligence or willful misconduct. In no case shall the Company be liable under this indemnity with respect to any claim against you unless the Company shall be notified by you, by letter or cable or by facsimile confirmed by letter, of the written assertion of a claim against you or of any other action commenced against you, promptly, but in any event within enough time to file an answer to such claim, after you shall have received any such written assertion or notice of commencement of action. Failure to so notify the Company shall not relieve the Company of any liability which it may have otherwise than on account of this Agreement except such liability which is a result of your failure to notify promptly. The Company shall be entitled to participate at its own expense in the defense of any such claim or other action, and, if the Company so elects, the Company shall assume the defense of any suit brought to enforce any such claim. In the event that the Company shall assume the defense of any such suit, the Company shall not be liable for the fees and expenses of any additional counsel retained by you, which fees and expenses are incurred thereafter, so long as the Company shall retain counsel reasonably satisfactory to you to defend such suit except for any reasonable fees and expenses of your counsel incurred in representing you that are necessary and appropriate as a result of the need to have separate representation because the Company's counsel has reasonably determined a conflict of interest exists between the Company and you. 22. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. The Company understands that you are required to deduct 31% on payments to holders who have not supplied their correct Taxpayer Identification Number of 8 9 required certification. Such funds will be turned over to the Internal Revenue Service in accordance with applicable regulations. 23. You shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Old Notes, your check in the amount of all transfer taxes so payable, and the Company shall reimburse you for the amount of any and all transfer taxes payable in respect of the exchange of Old Notes; provided, however, that you shall reimburse the Company for amounts refunded to you in respect of your payment of any such transfer taxes, at such time as such refund is received by you. 24. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, and without regard to conflicts of law principles, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto. 25. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 26. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 27. This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waiver, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally. 28. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: 9 10 If to the Company: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, IL 60085 Facsimile: 847-689-6246 Attention: Treasurer With a copy to: Outboard Marine Corporation 100 Sea Horse Drive Waukegan, IL 60085 Facsimile: 847-689-6246 Attention: General Counsel If to the Exchange Agent: State Street Bank and Trust Company 225 Asylum Street, 23rd Floor Hartford, Connecticut 06103 Facsimile: (860) 244-1897 Attention: Corporate Trust Administration 29. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, Paragraphs 19, 21, and 23 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company any certificates for Notes, funds or property then held by you as Exchange Agent under this Agreement. [Remainder of page intentionally left blank.] 10 11 30. This Agreement shall be binding and effective as of the date hereof. Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and return the enclosed copy. OUTBOARD MARINE CORPORATION By: Name: Title: Accepted as of the date first above written: STATE STREET BANK AND TRUST COMPANY, as Exchange Agent By: Name: Title: 11 12 SCHEDULE 1 FEES 12 -----END PRIVACY-ENHANCED MESSAGE-----