-----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, VU4lxIcPnComAGw7ZDXl/6ZmAJ8CBer8YB0L2VM98sZarU99Sw8XoCXu50ho9u8P 8uejDRBV7kz2nSuMw21cyw== 0000950131-00-003450.txt : 20000516 0000950131-00-003450.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950131-00-003450 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02883 FILM NUMBER: 635294 BUSINESS ADDRESS: STREET 1: 100 SEA HORSE DR CITY: WAUKEGAN STATE: IL ZIP: 60085 BUSINESS PHONE: 7086896200 MAIL ADDRESS: STREET 1: 100 SEA HORSE DRIVE CITY: WAUKEGAN STATE: IL ZIP: 60085 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000. or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number 1-2883 ---------------- OUTBOARD MARINE CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-1589715 (State or other jurisdiction (IRS EmployerIdentification No.) ofincorporation or organization) 100 Sea Horse Drive 60085 Waukegan, Illinois (Zip Code) (Address of principal executive offices) 847-689-6200 Registrant's telephone number, including area code: ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Number of shares of Common Stock of $0.01 par value outstanding at March 31, 2000 was 20,439,531 shares. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OUTBOARD MARINE CORPORATION FORM 10-Q PART I, ITEM 1 FINANCIAL INFORMATION FINANCIAL STATEMENTS March 31, 2000
Page ---- Financial statements required by this form: Condensed Statements of Consolidated Operations and Comprehensive Income................................................................. 3 Condensed Statements of Consolidated Financial Position................. 4 Condensed Statements of Consolidated Cash Flows......................... 5 Notes to Condensed Consolidated Financial Statements.................... 6
2 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended March 31, -------------------- 2000 1999 --------- --------- (Dollars in millions except amounts per share) Net sales................................................ $ 269.1 $ 255.2 Costs of goods sold...................................... 225.7 201.9 --------- --------- Gross earnings......................................... 43.4 53.3 Selling, general, and administrative expense............. 64.4 57.1 --------- --------- Loss from operations................................... (21.0) (3.8) Interest expense......................................... 8.3 8.2 Other income, net........................................ (0.7) (1.2) --------- --------- Loss before provision for income taxes................. (28.6) (10.8) Provision for income taxes............................... 1.1 1.1 --------- --------- Net loss before preferred dividends.................... (29.7) (11.9) Preferred dividends...................................... 1.8 -- --------- --------- Net loss of common shareholders........................ $ (31.5) $ (11.9) ========= ========= Net loss of common shareholders.......................... $ (31.5) $ (11.9) Other comprehensive expense Foreign currency translation adjustments............... (1.5) (1.6) --------- --------- Other comprehensive expense.......................... (1.5) (1.6) --------- --------- Comprehensive loss................................... $ (33.0) $ (13.5) ========= ========= Net loss of common shareholder per share of common stock Basic.................................................. $ (1.54) $ (0.58) ========= ========= Diluted................................................ $ (1.54) $ (0.58) ========= ========= Average shares of common stock outstanding Basic ................................................. 20.4 20.4 Diluted................................................ 20.4 20.4
The accompanying notes are an integral part of these statements. 3 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
March 31, December 31, 2000 1999 ----------- ------------ (Unaudited) (Dollars in millions) ASSETS Current Assets: Cash and cash equivalents............................ $ 39.0 $ 25.0 Receivables, net..................................... 142.7 104.9 Inventories, net: Finished products.................................. 77.4 66.6 Raw material, work in process and service parts.... 117.0 122.0 ------- ------- Total inventories................................ 194.4 188.6 Other current assets................................. 20.1 17.2 ------- ------- Total current assets............................. 396.2 335.7 Restricted cash........................................ 31.0 30.6 Property, plant and equipment, net..................... 194.2 200.5 Product tooling, net................................... 27.1 29.5 Goodwill, net.......................................... 106.4 107.2 Trademarks, patent and other intangibles, net.......... 79.2 79.3 Other assets........................................... 67.1 65.6 ------- ------- Total assets..................................... $ 901.2 $ 848.4 ======= ======= LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Loan payable......................................... $ 68.0 $ 58.0 Accounts payable..................................... 105.2 99.2 Accrued and other.................................... 190.5 183.2 Current maturities of long-term debt................. 7.3 8.4 ------- ------- Total current liabilities........................ 371.0 348.8 Long-term debt......................................... 236.4 241.4 Postretirement benefits other than pensions............ 99.1 99.1 Other non-current liabilities.......................... 80.6 78.8 Preferred stock........................................ 30.9 -- Shareholders' investment: Common stock and capital surplus..................... 313.4 277.5 Accumulated deficit.................................. (220.7) (189.2) Accumulated other comprehensive income............... (9.5) (8.0) ------- ------- Total shareholders' investment................... 83.2 80.3 ------- ------- Total liabilities and shareholders' investment... $ 901.2 $ 848.4 ======= =======
The accompanying notes are an integral part of these statements. 4 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Three Months Ended March 31, -------------------- --- 2000 1999 --------- --------- (Dollars in millions) Cash Flows from Operating Activities: Net loss of common shareholders.................... $ (31.5) $ (11.9) Adjustments to reconcile net loss of common shareholders to net cash used for operations: Depreciation and amortization.................... 13.8 12.3 Changes in current accounts excluding the effects of noncash transactions: Increase in receivables........................ (39.0) (20.7) Increase in inventories........................ (7.1) (1.3) Increase in other current assets............... (3.0) (0.2) Increase in accounts payable, accrued liabilities and income taxes.................. 14.1 1.9 Other, net..................................... 0.8 5.2 --------- --------- Net cash used for operating activities....... (51.9) (14.7) Cash Flows from Investing Activities: Expenditures for plant and equipment, and tooling.. (6.6) (11.1) Proceeds from sale of plant and equipment.......... 4.6 0.2 --------- --------- Net cash used for investing activities....... (2.0) (10.9) Cash Flows from Financing Activities: Net increase in short-term debt.................... 10.0 47.6 Payments of long-term debt, including current maturities........................................ (6.1) (10.1) Proceeds from issuance of preferred stock and warrants.......................................... 65.0 -- Restricted cash.................................... (0.4) (0.3) Other, net......................................... -- (0.1) --------- --------- Net cash provided by financing activities.... 68.5 37.1 Exchange rate effect on cash......................... (0.6) 0.5 --------- --------- Net increase in cash and cash equivalents............ 14.0 12.0 Cash and cash equivalents at beginning of period..... 25.0 13.6 --------- --------- Cash and cash equivalents at end of period........... $ 39.0 $ 25.6 ========= ========= Supplemental Cash Flows Disclosures: Interest paid...................................... $ 2.0 $ 2.3 ========= ========= Income taxes paid.................................. $ 1.5 $ 0.8 ========= =========
The accompanying notes are an integral part of these statements. 5 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Unless the context otherwise requires, all references herein to the "Company" or "OMC" shall mean Outboard Marine Corporation, a Delaware corporation, and its consolidated subsidiaries. The accompanying unaudited condensed consolidated financial statements present information in accordance with generally accepted accounting principles for interim financial information and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information or footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the information furnished reflects all adjustments necessary for a fair statement of the results of the interim periods and all such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The 2000 interim results are not necessarily indicative of the results which may be expected for the remainder of the year. Certain amounts in 1999 have been reclassified to conform with the 2000 presentation. 2. Short-Term Borrowings The Company entered into an Amended and Restated Loan and Security Agreement, effective as of January 6, 1998 (as amended, the "Credit Agreement"), with a syndicate of lenders for which Bank of America, N.A. is administrative and collateral agent (the "Agent"). The Credit Agreement, which is in effect to December 31, 2001, provides a revolving credit facility (the "Revolving Credit Facility") of up to $150.0 million, subject to borrowing base limitations, to finance working capital with a $50.0 million sublimit for letters of credit. 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 February 1, 2000 the Company entered into an Eighth Amendment to the Amended and Restated Loan and Security Agreement which among other things (i) increased the borrowing capacity by increasing intellectual property availability to $20.0 million and increasing the advance rate for finished goods inventory to 65%, (ii) eliminated tangible net worth, interest coverage, and leverage ratio covenants, and (iii) established minimum availability requirements, maximum capital and tooling expenditures, and a minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") covenant test to reflect expected operating results. The Company's ability to remain in compliance with its covenants will depend upon several factors, including its ability to generate sales and maintain costs at acceptable levels. Factors outside the Company's control, including but not limited to third party supplier issues, may also affect the Company's compliance. At March 31, 2000, the Company was in compliance with the covenants. 3. Contingent Liabilities The Company is engaged in a 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 6 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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. 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 closedown costs associated with discontinued operations or facilities, including the environmental costs of operation and maintenance until disposition. At March 31, 2000 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. 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 approximately $33 million for a period not to exceed 18 months from the date of invoice. The Company resells any repurchased products at a discount. Losses incurred under this program have not been material. For the three month periods ended March 31, 2000 and 1999, the Company repurchased approximately $0.3 million and $1.1 million of products, respectively. The Company accrues for losses which are anticipated in connection with expected repurchases. The Company does not expect these repurchases to materially affect its results of operations, financial position, or cash flows. 4. Restructuring Charges During the fiscal year ended September 30, 1998, the Company finalized a restructuring plan for the closure of its Milwaukee, WI and Waukegan, IL engine facilities. The Company recorded a $98.5 million restructuring charge related to these closures. The Company has outsourced substantially all of the sub- assembly production previously performed in its Milwaukee facility and transferred the balance of production to other facilities within the Company. The Company is still in the process of doing the same for the Waukegan facility and anticipates substantial completion of such plan by the end of fiscal year 2000. As of March 31, 2000, the Company has made payments approximating $3.7 million against the restructuring reserve established in fiscal year 1998. The remaining $20.1 million cash component of the restructuring reserve will be substantially spent in the remainder of fiscal year 2000 as the plants are closed and prepared for sale. As part of its outsourcing efforts, the Company is negotiating with a potential vendor for the lease of space in the Waukegan facility for the continued supply of die cast parts. Although there can be no assurance, if the Company is successful in its negotiations, there may be a reduction of the employee severance and other costs previously recorded for this facility. The Company anticipates having more information regarding the negotiations in the second quarter of 2000. 5. Preferred Stock and Warrants Issuance On January 28, 2000, the Company sold an aggregate of 650,000 shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), and warrants (the "Warrants") to purchase an aggregate of 5,750,000 shares of its Common Stock, par value $.01 per share (the "Common Stock"), for an aggregate consideration of $65.0 million in a private placement transaction with Greenlake Holdings II, LLC and Quantum Industrial Partners, LDC. Approximately $15.0 million of the Series A Preferred Stock was 7 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) issued in exchange for certain subordinated notes previously issued by the Company to the purchasers. The Series A Preferred Stock has an initial liquidation preference of $100 per share and an initial conversion price of $14 per share (in each case, subject to adjustment upon occurrence of certain events). The Series A Preferred Stock is convertible into Common Stock at any time. The Series A Preferred Stock has an annual dividend rate of 15% of the then current liquidation preference, and is entitled to share ratably in any dividends paid on the Common Stock. Dividends will accrue if not paid in cash, and the liquidation preference will be increased by the amount of any accrued but unpaid dividends. The Series A Preferred Stock may be redeemed at any time after October 1, 2008, upon written request of the holders of at least 75% of the then outstanding shares. The Company may redeem all outstanding shares of the Series A Preferred Stock if, at any time, less than 10% of the total Series A Preferred Stock originally sold on January 28, 2000 remains outstanding. The Warrants are exercisable at any time until January 28, 2010, at an exercise price of $.01 per share of Common Stock, payable in cash or in shares of Common Stock. The Company intends to use the proceeds from the sale of the Series A Preferred Stock and Warrants for general corporate purposes, including funding its working capital and making capital expenditures. Upon issuance of the Series A Preferred Stock and Warrants, the Company recorded the value of each instrument in the Statement of Consolidated Financial Position based upon the fair market value of each instrument at the time of issuance. The fair value per Warrant on the date of issuance using the Black-Scholes option-pricing model was $6.25 for an aggregate fair value of $35.9 million. The fair value of the Warrants were estimated on the date of issuance using the following assumptions: risk-free interest rate of 6.3% and an expected life of 8.6 years. The fair value of the Series A Preferred Stock was determined as the difference between the aggregate amount of $65 million and the value of the Warrants, or $29.1 million. In the three months ended March 31, 2000, the Company has accrued $1.6 million in preferred dividend expense and $0.2 million in amortization expense related to the discount on the preferred stock. These amounts have been recorded in the Company's Statement of Consolidated Operations and Comprehensive Income as Preferred dividends. 6. Segment Data Summarized financial information concerning the Company's reportable segments is shown in the following table. The "Other" column includes primarily corporate staffing expense and amortization expense on the Company's intangible assets.
Marine Engines Boats Other Total ------- ------ ----- ------ (Dollars in millions) Three Months Ended March 31, 2000 Revenues.................................... $138.5 $130.6 $ -- $269.1 Intersegment revenues....................... 15.1 -- -- 15.1 Earnings (loss) from operations............. (14.6) 1.1 (7.5) (21.0) Three Months Ended March 31, 1999 Revenues.................................... $140.2 $115.0 $ -- $255.2 Intersegment revenues....................... 19.9 -- -- 19.9 Earnings (loss) from operations............. 0.9 1.2 (5.9) (3.8)
8 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A reconciliation of loss from operations for combined reportable segments to consolidated loss before provision for income taxes is as follows:
Three Months Ended March 31, -------------------- 2000 1999 --------- --------- (Dollars in millions) Loss from operations for reportable segments.......... $ (21.0) $ (3.8) Interest expense...................................... 8.3 8.2 Other income, net..................................... (0.7) (1.2) --------- --------- Loss before provision for income taxes................ $ (28.6) $ (10.8) ========= =========
7. Subsequent Events On May 2, 2000 the Company sold a $15.0 million Subordinated Note (the "15% Note") and Warrants (the "New Warrants") to purchase 330,000 shares of the Company's Common Stock, par value $0.01, to Quantum Industrial Partners LDC. The 15% Note bears an interest rate of 15% and has a maturity date of May 31, 2000, which may be extended for four additional 30 day periods upon 5 days written notice by the Company. The 15% Note is convertible into shares of the Company's Series B Convertible Preferred Stock. The New Warrants are exercisable at any time until May 2, 2010, at an exercise price of $0.01 per share of Common Stock, payable in cash or in shares of Common Stock. 8. Subsidiary Guarantor Information On May 21, 1998, the Company issued $160.0 million of 10 3/4% Senior Notes due 2008 ("Notes"). The Company's payment obligations under the Notes are 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 March 31, 2000, the Guarantor Subsidiaries were wholly-owned, but not the only wholly-owned, subsidiaries of the Company. The Credit Agreement and the Indenture governing the Notes contain certain covenants which, among other things, restrict the ability of the Company and certain of its subsidiaries to incur additional indebtedness; pay dividends or make distributions in respect to their capital stock; enter into certain transactions with shareholders and affiliates; make certain investments and other restricted payments; create liens; enter into certain sale and leaseback transactions and sell assets. These covenants are, however, subject to a number of exceptions and qualifications. 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. 9 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION MARCH 31, 2000 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) ASSETS - ------ Current Assets: Cash and cash equivalents.......... $ 16.0 $ 0.1 $ 22.9 $ -- $ 39.0 Receivables, net...... 77.5 25.2 40.0 -- 142.7 Intercompany receivables (payables)........... (11.2) (2.4) 13.6 -- -- Inventories, net...... 107.1 49.5 40.8 (3.0) 194.4 Other current assets.. 11.8 1.4 6.9 -- 20.1 ------ ------ ------ ------- ------ Total current assets............. 201.2 73.8 124.2 (3.0) 396.2 Restricted cash......... 31.0 -- -- -- 31.0 Property, plant and equipment, net......... 144.5 32.1 17.6 -- 194.2 Product tooling, net.... 21.9 5.0 0.2 -- 27.1 Goodwill and other intangibles, net....... 180.8 -- 4.8 -- 185.6 Other assets............ 59.4 0.4 7.3 -- 67.1 Intercompany notes, net.................... (88.8) -- 88.8 -- -- Investment in subsidiaries........... 259.2 -- -- (259.2) -- ------ ------ ------ ------- ------ Total assets........ $809.2 $111.3 $242.9 $(262.2) $901.2 ====== ====== ====== ======= ====== LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- Current Liabilities: Loan payable.......... $ 68.0 $ -- $ -- $ -- $ 68.0 Accounts payable...... 82.9 15.1 7.2 -- 105.2 Accrued and other..... 136.0 32.6 22.7 (0.8) 190.5 Current maturities of long-term debt....... 7.0 0.3 -- -- 7.3 ------ ------ ------ ------- ------ Total current liabilities........ 293.9 48.0 29.9 (0.8) 371.0 Long-term debt.......... 234.5 1.9 -- -- 236.4 Other non-current liabilities............ 164.4 7.7 7.6 -- 179.7 Preferred stock......... 30.9 -- -- -- 30.9 Shareholders' investment............. 85.5 53.7 205.4 (261.4) 83.2 ------ ------ ------ ------- ------ Total liabilities and shareholders' investment......... $809.2 $111.3 $242.9 $(262.2) $901.2 ====== ====== ====== ======= ======
10 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION DECEMBER 31, 1999
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) ASSETS - ------ Current Assets: Cash and cash equivalents......................... $ 9.3 $ 0.5 $ 15.2 $ -- $ 25.0 Receivables, net.................................. 58.1 16.8 30.0 -- 104.9 Intercompany receivables (payables)............... (34.3) 1.2 33.1 -- -- Inventories, net.................................. 102.6 46.7 41.1 (1.8) 188.6 Other current assets.............................. 9.6 2.0 5.6 -- 17.2 ------ ------ ------ ------- ------ Total current assets............................ 145.3 67.2 125.0 (1.8) 335.7 Restricted cash..................................... 30.6 -- -- -- 30.6 Property, plant and equipment, net.................. 150.1 32.4 18.1 (0.1) 200.5 Product tooling..................................... 24.3 5.0 0.2 -- 29.5 Goodwill and other intangibles, net................. 181.3 -- 5.2 -- 186.5 Other assets........................................ 56.0 2.5 7.1 -- 65.6 Intercompany notes, net............................. (88.3) -- 88.3 -- -- Investment in subsidiaries.......................... 256.5 -- -- (256.5) -- ------ ------ ------ ------- ------ Total assets.................................... $755.8 $107.1 $243.9 $(258.4) $848.4 ====== ====== ====== ======= ====== LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- Current Liabilities: Loan payable...................................... $ 58.0 $ -- $ -- $ -- $ 58.0 Accounts payable.................................. 73.6 16.4 9.2 -- 99.2 Accrued and other................................. 133.5 29.6 21.7 (1.6) 183.2 Current maturities of long-term debt.............. 8.2 0.2 -- -- 8.4 ------ ------ ------ ------- ------ Total current liabilities....................... 273.3 46.2 30.9 (1.6) 348.8 Long-term debt...................................... 239.3 2.1 -- -- 241.4 Other non-current liabilities....................... 162.6 7.7 7.6 -- 177.9 Shareholders' investment............................ 80.6 51.1 205.4 (256.8) 80.3 ------ ------ ------ ------- ------ Total liabilities and shareholders' investment.. $755.8 $107.1 $243.9 $(258.4) $848.4 ====== ====== ====== ======= ======
11 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) Net sales............... $144.5 $132.0 $62.2 $(69.6) $269.1 Cost of goods sold...... 125.4 115.4 53.3 (68.4) 225.7 ------ ------ ----- ------ ------ Gross earnings........ 19.1 16.6 8.9 (1.2) 43.4 Selling, general and administrative expense................ 42.3 14.8 7.3 -- 64.4 ------ ------ ----- ------ ------ Earnings (loss) from operations........... (23.2) 1.8 1.6 (1.2) (21.0) Non-operating expense (income)............... 8.7 (0.1) (1.0) -- 7.6 Equity earnings (loss) in subsidiaries........ 3.3 -- -- (3.3) -- ------ ------ ----- ------ ------ Earnings (loss) before provision for income taxes................ (28.6) 1.9 2.6 (4.5) (28.6) Provision for income taxes.................. -- -- 1.1 -- 1.1 ------ ------ ----- ------ ------ Net earnings (loss) before preferred dividends............ (28.6) 1.9 1.5 (4.5) (29.7) Preferred dividends..... 1.8 -- -- -- 1.8 ------ ------ ----- ------ ------ Net earnings (loss) of common shareholders.. $(30.4) $ 1.9 $ 1.5 $ (4.5) $(31.5) ====== ====== ===== ====== ====== Net earnings (loss) of common shareholders.... $(30.4) $ 1.9 $ 1.5 $ (4.5) $(31.5) Other comprehensive expense Foreign currency translation adjustment........... (0.1) -- (1.4) -- (1.5) ------ ------ ----- ------ ------ Other comprehensive expense............ (0.1) -- (1.4) -- (1.5) ------ ------ ----- ------ ------ Comprehensive income (loss)............. $(30.5) $ 1.9 $ 0.1 $ (4.5) $(33.0) ====== ====== ===== ====== ======
12 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) Net sales............... $141.7 $116.2 $68.6 $(71.3) $255.2 Cost of goods sold...... 113.9 101.2 57.5 (70.7) 201.9 ------ ------ ----- ------ ------ Gross earnings........ 27.8 15.0 11.1 (0.6) 53.3 Selling, general and administrative expense................ 36.3 13.1 7.7 -- 57.1 ------ ------ ----- ------ ------ Earnings (loss) from operations........... (8.5) 1.9 3.4 (0.6) (3.8) Non-operating expense (income)............... 9.8 0.2 (3.0) -- 7.0 Equity earnings (loss) in subsidiaries........ 7.0 -- -- (7.0) -- ------ ------ ----- ------ ------ Earnings (loss) before provision for income taxes................ (11.3) 1.7 6.4 (7.6) (10.8) Provision for income taxes.................. -- -- 1.1 -- 1.1 ------ ------ ----- ------ ------ Net earnings (loss)... $(11.3) $ 1.7 $ 5.3 $ (7.6) $(11.9) ====== ====== ===== ====== ====== Net earnings (loss)..... $(11.3) $ 1.7 $ 5.3 $ (7.6) $(11.9) Other comprehensive expense Foreign currency translation adjustment........... (0.2) -- (1.4) -- (1.6) ------ ------ ----- ------ ------ Other comprehensive expense............ (0.2) -- (1.4) -- (1.6) ------ ------ ----- ------ ------ Comprehensive income (loss)............. $(11.5) $ 1.7 $ 3.9 $ (7.6) $(13.5) ====== ====== ===== ====== ======
13 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in millions) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) of common shareholders.... $(30.4) $ 1.9 $ 1.5 $(4.5) $(31.5) Adjustments to reconcile net earnings (loss) of common shareholders to net cash provided by (used for) operations: Depreciation and amortization......... 11.7 1.4 0.7 -- 13.8 Changes in current accounts excluding the effects of noncash transactions: Decrease (increase) in receivables.......... (19.4) (8.4) (11.2) -- (39.0) Decrease (increase) in intercompany receivables and payables, and intercompany note receivables and note payables............. (23.6) 3.6 20.0 -- -- Decrease (increase) in inventories.......... (4.4) (2.7) (1.2) 1.2 (7.1) Decrease (increase) in other current assets............... (2.1) 0.5 (1.4) -- (3.0) Increase (decrease) in accounts payable, accrued liabilities and income taxes..... 11.9 2.5 (0.3) -- 14.1 Other, net............ 0.5 -- 0.3 -- 0.8 ------ ----- ------ ----- ------ Net cash provided by (used for) operating activities......... (55.8) (1.2) 8.4 (3.3) (51.9) CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling................ (5.2) (1.1) (0.3) -- (6.6) Proceeds from sale of plant and equipment.... 2.6 2.0 -- -- 4.6 Equity earnings (loss)................. (3.3) -- -- 3.3 -- Change in subsidiary investment............. -- -- -- -- -- Other, net.............. -- -- -- -- -- ------ ----- ------ ----- ------ Net cash provided by (used for) investing activities......... (5.9) 0.9 (0.3) 3.3 (2.0) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short- term debt.............. 10.0 -- -- -- 10.0 Payments of long-term debt, including current maturities..... (6.0) (0.1) -- -- (6.1) Issuance of preferred stock and warrants..... 65.0 -- -- -- 65.0 Change in subsidiary capital................ -- -- -- -- -- Change in restricted cash................... (0.4) -- -- -- (0.4) Other, net.............. -- -- -- -- -- ------ ----- ------ ----- ------ Net cash provided by (used for) financing activities......... 68.6 (0.1) -- -- 68.5 Exchange Rate Effect on Cash.................... (0.2) -- (0.4) -- (0.6) ------ ----- ------ ----- ------ Net increase (decrease) in Cash and Cash Equivalents............. 6.7 (0.4) 7.7 -- 14.0 Cash and Cash Equivalents at Beginning of Period.. 9.3 0.5 15.2 -- 25.0 ------ ----- ------ ----- ------ Cash and Cash Equivalents at End of Period........ $ 16.0 $ 0.1 $ 22.9 $ -- $ 39.0 ====== ===== ====== ===== ======
14 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in millions) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) of common shareholders... $(11.3) $ 1.7 $ 5.3 $(7.6) $(11.9) Adjustments to reconcile net earnings (loss) of common shareholders to net cash provided by (used for) operations: Depreciation and amortization ....... 5.0 6.8 0.5 -- 12.3 Changes in current accounts excluding the effects of noncash transactions: Decrease (increase) in receivables.... 5.7 (12.4) (14.0) -- (20.7) Decrease (increase) in intercompany receivables and payables, and intercompany note receivables and note payables..... (16.5) 6.5 10.0 -- -- Decrease (increase) in inventories.... (4.2) 3.5 (1.2) 0.6 (1.3) Decrease (increase) in other current assets............ (0.9) 0.6 0.1 -- (0.2) Increase (decrease) in accounts payable, accrued liabilities and income taxes...... (2.2) 2.9 1.3 (0.1) 1.9 Other, net........... 3.0 0.1 2.0 0.1 5.2 ------ ------ ------ ----- ------ Net cash provided by (used for) operating activities....... (21.4) 9.7 4.0 (7.0) (14.7) CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling............... 6.8 (16.1) (1.8) -- (11.1) Proceeds from sale of plant and equipment... 0.1 0.1 -- -- 0.2 Equity earnings (loss)................ (7.0) -- -- 7.0 -- Change in subsidiary investment............ (4.5) -- -- 4.5 -- Other, net............. -- -- -- -- -- ------ ------ ------ ----- ------ Net cash provided by (used for) investing activities....... (4.6) (16.0) (1.8) 11.5 (10.9) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short- term debt............. 47.6 -- -- -- 47.6 Payments of long-term debt, including current maturities.... (12.5) 2.4 -- -- (10.1) Change in subsidiary capital............... 0.9 4.2 (0.6) (4.5) -- Change in restricted cash.................. (0.3) -- -- -- (0.3) Other, net............. (0.1) -- -- -- (0.1) ------ ------ ------ ----- ------ Net cash provided by (used for) financing activities....... 35.6 6.6 (0.6) (4.5) 37.1 Exchange Rate Effect on Cash................... (0.3) -- 0.8 -- 0.5 ------ ------ ------ ----- ------ Net increase (decrease) in Cash and Cash Equivalents............ 9.3 0.3 2.4 -- 12.0 Cash and Cash Equivalents at Beginning of Period.... 2.2 0.1 11.3 -- 13.6 ------ ------ ------ ----- ------ Cash and Cash Equivalents at End of Period................. $ 11.5 $ 0.4 $ 13.7 $ -- $ 25.6 ====== ====== ====== ===== ======
15 OUTBOARD MARINE CORPORATION FORM 10-Q PART 1, ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARCH 31, 2000 The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements of the Company, together with the notes thereto, included elsewhere herein. General Market Share. As of March 31, 2000, the Company's twelve month rolling domestic outboard engine and boat market share have remained at their December 31, 1999 levels of 32% and 9%, respectively. Results of Operations Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Net Sales. Net sales increased to $269.1 million in the three months ended March 31, 2000 from $255.2 million in the three months ended March 31, 1999, an increase of $13.9 million or 5.4%. The increased sales were driven by boat segment sales, which increased $15.6 million as a result of higher unit sales of recreational and fishing boats (primarily saltwater). Total marine engine segment sales decreased slightly as increased parts and accessories sales were offset by lower engine sales. Worldwide engine unit sales were negatively affected as a result of third-party supplier quantity and quality problems. Cost of Goods Sold. Cost of goods sold increased to $225.7 million in the three months ended March 31, 2000 from $201.9 million in the three months ended March 31, 1999, an increase of $23.8 million or 11.8%. Gross earnings in the three months ended March 31, 2000 was 16.1% of net sales as compared with 20.9% of net sales for the comparable period in 1999. The reduction in gross earnings percent for the quarter was attributable mainly to the marine engine segment which had higher manufacturing costs in the three months ended March 31, 2000 than in the comparable period for the prior year. The increased manufacturing costs were primarily driven by spending related to productivity and quality improvement initiatives at each engine facility and costs incurred as a result of third-party vendor issues. Additionally, cost of sales were negatively impacted by increased warranty/rework accruals related to certain boat and engine products. Selling, General and Administrative ("SG&A") Expense. SG&A expense increased to $64.4 million in the three months ended March 31, 2000 from $57.1 million in the three months ended March 31, 1999, an increase of $7.3 million or 12.8%. SG&A expense as a percentage of net sales increased to 23.9% in the three months ended March 31, 2000 from 22.4% in the three months ended March 31, 1999. The SG&A expense increase was primarily due to (i) increased marketing expenses for promotional programs and (ii) the prior-year period including an $0.8 million accrual reversal related to a lawsuit settlement. Loss from Operations. Loss from operations was $21.0 million in the three months ended March 31, 2000 compared with a $3.8 million loss in the three months ended March 31, 1999, an increase of $17.2 million. The increased loss was attributable to higher cost of goods sold and SG&A expense, as discussed above. Non-Operating Expense (Income). Interest expense totaled $8.3 million in the three months ended March 31, 2000 as compared to $8.2 million in the three months ended March 31, 1999. Other non-operating income was $0.7 million in the three months ended March 31, 2000 compared to $1.2 million in the 16 comparable period in the prior year. The decrease in other non-operating income was attributable to higher foreign exchange losses related to the Company's European and Australian operations. Provision for Income Taxes. The provision for income taxes was $1.1 million in both the three months ended March 31, 2000 and March 31, 1999. The income tax provisions 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 considered realizable, at this time, under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Preferred Dividends. Preferred dividend expense, related to the 650,000 shares of Series A Convertible Preferred Stock (see Note 5 of the Notes to the Condensed Consolidated Financial Statements), was $1.8 million in the three months ended March 31, 2000. This amount reflects an accrual of $1.6 million in preferred dividend expense and $0.2 million in amortization expense related to the discount on the preferred stock. Financial Condition; Liquidity and Capital Resources The Company's business is seasonal in nature with receivables, inventory, and short-term borrowings usually at their peak levels in the Company's fiscal quarter ending March 31 and declining thereafter as the Company's products enter the consumer buying season. Current assets at March 31, 2000 increased $60.5 million from December 31, 1999 due primarily to increases in accounts receivable and cash and cash equivalents balances. Receivables at March 31, 2000 increased $37.8 million due primarily to increases in net sales in March 2000 as compared to sales during December 1999. Cash and cash equivalents increased by $14.0 million due primarily to the Company's issuance of preferred stock and warrants in January 2000 (see Note 5 of the Notes to Condensed Consolidated Financial Statements). Additionally, inventories at March 31, 2000 increased $5.8 million in anticipation of the consumer buying season. The Company had $31.0 million in restricted cash at March 31, 2000, which cash is held in interest reserve accounts, as required, for the benefit of the Company's senior lenders, as discussed in more detail below. Cash used for operations was $51.9 million for the three months ended March 31, 2000 compared with $14.7 million for the three months ended March 31, 1999. This increase in cash used was driven primarily by the increased net loss as well as the increase in accounts receivable. Expenditures for plant and equipment and tooling were $6.6 million for the three months ended March 31, 2000 compared to $11.1 million for the three months ended March 31, 1999. The lower level of expenditures is primarily due to the timing of implementing certain capital projects in 2000. The $6.6 million was used primarily for production enhancements, information technology projects, and new model development. Short-term debt was $68.0 million at March 31, 2000 comprising borrowings under the Company's Revolving Credit Facility. These borrowings were used to fund operations, pay $5.8 million of the Company's Medium-Term Notes Series A which came due in March 2000, as well as fund capital expenditures. On January 28, 2000, the Company sold an aggregate of 650,000 shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), and warrants (the "Warrants") to purchase an aggregate of 5,750,000 shares of its Common Stock, par value $.01 per share (the "Common Stock"), for an aggregate consideration of $65.0 million, in a private placement transaction to Greenlake Holdings II, LLC and Quantum Industrial Partners, LDC. Approximately $15.0 million of the Series A Preferred Stock was issued in exchange for certain subordinated notes previously issued by the Company to the purchasers. The Series A Preferred Stock has an initial liquidation preference of $100 per share and an initial conversion price of $14 per share (in each case, subject to adjustment upon occurrence of certain events). The Series A Preferred Stock is convertible into Common Stock at any time. The Series A Preferred Stock has an annual dividend rate of 15% of the then current liquidation preference, and is entitled to share ratably in any dividends paid on the Common Stock. Dividends will accrue if not paid in cash, and the liquidation preference will be increased by the amount of any accrued but unpaid dividends. The Series A Preferred Stock may be redeemed at any time 17 after October 1, 2008, upon written request of the holders of at least 75% of the then outstanding shares. The Company may redeem all outstanding shares of the Series A Preferred Stock if, at any time, less than 10% of the total Series A Preferred Stock originally sold on January 28, 2000 remains outstanding. The Warrants are exercisable at any time until January 28, 2010, at an exercise price of $.01 per share of Common Stock, payable in cash or in shares of Common Stock. The Company intends to use the proceeds from the sale of the Series A Preferred Stock and Warrants for general corporate purposes, including funding its working capital and making capital expenditures (see Note 5 of the Notes to Condensed Consolidated Financial Statements). The Company entered into an Amended and Restated Loan and Security Agreement, effective as of January 6, 1998 (as amended, the "Credit Agreement"), with a syndicate of lenders for which Bank of America, N.A. is administrative and collateral agent (the "Agent"). The Credit Agreement, which is in effect to December 31, 2001, provides a revolving credit facility (the "Revolving Credit Facility") of up to $150.0 million, subject to borrowing base limitations, to finance working capital with a $50.0 million sublimit for letters of credit. As of March 31, 2000, the Company had $68.0 million of borrowings outstanding and $37.0 million of letters of credit outstanding under the Revolving Credit Agreement. This resulted in the Company having $26.4 million of unused borrowing capacity under the Revolving Credit Agreement after considering borrowing base limitations and minimum availability requirements. 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 February 1, 2000 the Company entered into an Eighth Amendment to the Amended and Restated Loan and Security Agreement which among other things (i) increased the borrowing capacity by increasing intellectual property availability to $20.0 million and increasing the advance rate for finished goods inventory to 65%, (ii) eliminated tangible net worth, interest coverage, and leverage ratio covenants, and (iii) established minimum availability requirements, maximum capital and tooling expenditures, and a minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") covenant test to reflect expected operating results. The Company's ability to remain in compliance with its covenants will depend upon several factors, including its ability to generate sales and maintain costs at acceptable levels. Factors outside the Company's control, including but not limited to third party supplier issues, may also affect the Company's compliance. At March 31, 2000, the Company was in compliance with the covenants. On May 27, 1998, the Company issued $160.0 million of 10 3/4% Senior Notes Series A ("Series A Notes") due 2008, with interest payable semiannually on June 1 and December 1 of each year. The net proceeds from the issuance of the Series A Notes totaled $155.2 million, of which $150.0 million was used to repay debt assumed by the Company following the merger. Concurrently with the issuance of the Series A Notes, the Company entered into a depositary agreement which provided for the establishment and maintenance of an interest reserve account for the benefit of the holders of the Series A Notes and an interest reserve account for the benefit of the other senior creditors of the Company. An aggregate amount of cash equal to one year's interest due to these lenders was deposited into these interest reserve accounts. At March 31, 2000, the "Restricted Cash" held in these interest reserve accounts totaled $31.0 million. The "Restricted Cash" must remain in such accounts until at least May 27, 2001. These accounts may be accessed by the Company for the payment of the respective interest only, provided certain criteria are met by the Company. On April 14, 1999, the Company completed an exchange offer of all the Series A Notes for Senior Notes Series B ("Series B Notes") which are registered under the Securities Act of 1933, pursuant to a Registration Statement on Form S-4 and an accompanying Prospectus. The form and terms of the Series B Notes are the same form and terms of the Series A Notes except (i) the Series B designation, (ii) the Series B notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (iii) holders of the Series B notes are not entitled to registration rights as the exchange offer was intended to satisfy such exchange and registration rights. 18 At March 31, 2000, $62.9 million principal amount of the Company's 9 1/8% Debentures due 2017 (the "9 1/8% Debentures") was outstanding. 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 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. As of March 31, 2000, the Company had repurchased and deposited with the trustee for the 9 1/8% Debentures $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. At March 31, 2000, an aggregate of $5.0 million principal amount of the Company's Medium-Term Notes Series A (the "Medium-Term Notes") was outstanding. The Medium-Term Notes bear interest at a rate of 8.625%. The maturity dates of the Medium-Term Notes are March 15, 2001. Interest on the outstanding Medium- Term Notes is payable semi-annually each March 30 and September 30 and at maturity. At March 31, 2000, $6.8 million principal amount of the Company's 7% Convertible Subordinated Debentures due 2002 (the "Convertible Debentures") was outstanding. Following the Merger, the Company 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 $6.8 million principal amount of outstanding Convertible Debentures are no longer convertible into shares of common stock of the Company. Each holder of the remaining outstanding Convertible Debentures now has the right to convert (at $22.25 per share) such holder's Convertible Debentures and receive cash in an amount equal to what each holder would have received had they converted the Convertible Debentures into common stock immediately prior to the merger ($18.00 per share). Accordingly, 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 (i.e., ($18.00/$22.25) x $1,000). The outstanding Convertible Debentures are convertible at any time prior to their maturity on July 1, 2002. The Company has various Industrial Revenue Bonds outstanding in an aggregate principal amount of approximately $10.6 million as of March 31, 2000. The Industrial Revenue Bonds have various maturity dates between 2002 and 2007. Interest rates on the Industrial Revenue Bonds range from 6% to 12.037%. On May 2, 2000 the Company sold a $15.0 million Subordinated Note (the "15% Note") and Warrants (the "New Warrants") to purchase 330,000 shares of the Company's Common Stock, par value $0.01, to Quantum Industrial Partners LDC. The 15% Note bears an interest rate of 15% and has a maturity date of May 31, 2000, which may be extended for four additional 30 day periods upon 5 days written notice by the Company. The 15% Note is convertible into shares of the Company's Series B Convertible Preferred Stock. The New Warrants are exercisable at any time until May 2, 2010, at an exercise price of $0.01 per share of Common Stock, payable in cash or in shares of Common Stock. 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 approximately $33 million for a period not to exceed 18 months from the date of invoice. The Company resells any repurchased products at a discount. Losses incurred under this program have not been material. For the three month periods ending March 31, 2000 and 1999, the Company repurchased approximately $0.3 million and $1.1 million of products, respectively. 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, financial position, or cash flows. Based upon the current level of operations, the Company believes that its cash flow from operations together with the sale of the Series A Preferred Stock and Warrants, the 15% Note and Warrants on May 2, 2000, the available borrowing capacity under the Credit Agreement, and the interest reserve accounts and its 19 other sources of liquidity (including issuances of additional subordinated notes, preferred stock, and warrants), will be adequate to meet its presently anticipated requirements for working capital and accrued liabilities, capital expenditures, interest payments, and scheduled principal payments for the next two years. There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels. 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 meet 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. The Company's ability to remain in compliance with its covenants will depend upon several factors, including its ability to generate sales and maintain costs at acceptable levels. Factors outside the Company's control, including but not limited to third party supplier issues, may also affect the Company's compliance. At March 31, 2000, the Company was in compliance with the covenants. Third Party Suppliers As part of the closure of the Company's Milwaukee, Wisconsin and Waukegan, Illinois engine component facilities, the Company outsourced a majority of the products manufactured at those facilities to third party suppliers. In anticipation of the outsourcing of these components, the Company manufactured an incremental amount of inventory that it, and the chosen supplier, believed would be adequate to provide the Company with enough inventory to continue manufacturing through the period necessary to relocate, validate and begin production of the components. For the most part, the incremental inventory was adequate to allow the Company to manufacture finished outboards until the chosen supplier was able to supply the quantity and quality of these components required by the Company. However, as a result of various issues, validation and full production capabilities for some of the components has taken longer than anticipated and production of finished outboard engines has been constrained. These supply issues will continue to affect production into the Company's second quarter. Euro Currency Conversion On January 1, 1999, eleven of the fifteen member countries of the European Union adopted the euro as their common legal currency. The euro trades on currency exchanges and is available for non-cash transactions. From January 1, 1999 through January 1, 2002, each of the participating countries are scheduled to maintain their national ("legacy") currencies as legal tender for goods and services. Beginning January 1, 2002, new euro-denominated bills and coins will be issued, and legacy currencies will be withdrawn from circulation no later than July 1, 2002. The Company's foreign operating subsidiaries that will be affected by the euro conversion have established plans to address any business issues raised, including the competitive impact of cross-border price transparency. It is not anticipated that there will be any near term business ramifications; however, the long-term implications, including any changes or modifications that will need to be made to business and financial strategies are still being reviewed. From an accounting, treasury and computer system standpoint, the impact from the euro currency conversion is not expected to have a material impact on the financial position or results of operations of the Company. Accounting Standard In June 1998, the Financial Accounting Standards Board issued Statement 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains 20 and losses to offset related results on the hedged item in the income statement, and requires that a Company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 is effective for fiscal years beginning after December 31, 2000. The Company has not yet quantified the impacts of adopting SFAS 133 on its financial statements and has not determined the timing of or method of its adoption of SFAS 133. Inflation Inflation may cause or may be accompanied by increases in gasoline prices and interest rates. Such increases may adversely affect the sales of the Company's products. Because of the low level of inflation, inflation did not have a significant impact on operating results during the quarter ended March 31, 2000. Market Risk The Company is exposed to market risk from changes in interest and foreign exchange rates and commodity prices. From time to time, the Company enters into financial arrangements in the ordinary course of business to hedge these exposures. Changes in market risk did not have a significant impact on operating results during the quarter ended March 31, 2000. Forward-Looking Statements This report on Form 10-Q contains forward-looking statements, which may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 Form 10-Q 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 that could cause actual events or results to differ materially from those projected and which include, but are not limited to, the impact of competitive products and pricing, successful implementation of turnaround strategies, product demand and market acceptance, new product development, availability of raw materials, the availability of adequate financing on terms and conditions acceptable to the Company, and general economic conditions including interest rates and consumer confidence. Investors are also directed to other risks discussed in this report on Form 10-Q and documents filed by the Company with the Securities and Exchange Commission. 21 Part II--OTHER INFORMATION Item 1. Legal Proceedings During the three months ended March 31, 2000, no reportable events or material developments occurred regarding the legal proceedings of the Company. Item 6. Exhibits and Reports on Form 8-K a. Exhibits. Reference is made to the Exhibit Index on Page 24 b. Reports on Form 8-K. On January 28, 2000 the Company filed a Report on Form 8-K announcing the issuance of 650,000 shares of Series A Convertible Preferred Stock, par value $.01 per share, and Warrants to purchase an aggregate of 5,750,000 shares of its Common Stock, par value $.01 per share, for an aggregate consideration of $65.0 million in a private placement transaction to Greenlake Holdings II, LLC and Quantum Industrial Partners, LDC. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Outboard Marine Corporation
Signature Title Date --------- ----- ---- /s/ Eric T. Martinez Interim Chief Financial May 15, 2000 ______________________________________ Officer and Vice Eric T. Martinez President and Treasurer (Principal Financial Officer)
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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"))* 3.1(a)(1) Amendement to Restated Certificate of Incorporation of the Company, (filed as Exhibit 3.1(a)(1) to the 1999 10K)* Amended and Restated bylaws of the Company (filed as Exhibit 3(B) to 3.2(a) the 1997 10-K)* (a)(1) Amended and Restated bylaws of the Company (adopted July 23, 1998)(filed as Exhibit 3.2(a)(1) to the Company's Registration Statement on Form S-4 (Registration No. 333-57949) (the "Form S- 4"))* 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 (filed as Exhibit 4.1 to the Form S-4)* 4.2 Form of Exchange Note (filed as Exhibit 4.2 to the Form S-4)* 4.3 Form of Subsidiary guarantee of the Old Notes and the Exchange Notes (included in Exhibit 4.1) (filed as Exhibit 4.1 to the Form S-4)* 4.4 Depositary Agreement dated as of May 27, 1998 among the Company, State Street Bank and Trust Company, as trustee, NationsBank, N.A., as administrator agent, and State Street Bank and Trust Company, as depositary agent (filed as Exhibit 4.6 to the Form S-4)* 4.5 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* 4.6 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* 4.7 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* 4.8 Outboard Marine Corporation Certificate of the Powers, Designations, Preferences and Rights of the Series A Convertible Preferred Stock, Par Value $.01 Per Share (filed as Exhibit 4.8 to the 1999 10-K)* 4.9 Series A Convertible Preferred Stock and Warrant Purchase Agreement (filed as Exhibit 4.9 to the 1999 10-K)* 4.10 Stockholder Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC and Greenlake Holdings II LLC (filed as Exhibit 4.10 to the 1999 10-K)* 4.11 Warrant to Purchase Shares of Common Stock of Outboard Marine Corporation by Quantum Industrial Partners LDC (filed as Exhibit 4.11 to the 1999 10-K)* 4.12 Warrant to Purchase Shares of Common Stock of Outboard Marine Corporation by Greenlake Holdings II LLC (filed as Exhibit 4.12 to the 1999 10-K)* 4.13 Registration Rights Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II LLC and Greenmarine Holdings LLC (filed as Exhibit 4.13 to the 1999 10-K)* 4.14 Subordinated Note and Warrant Purchase Agreement between Outboard Marine Corporation, Greenlake Holdings III LLC and Quantum Industrial Partners LDC, attached hereto and incorporated herein as Exhibit 4.14.
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Exhibit Number Description ------- ----------- 4.15 Certificate of Amendment of Certificate of Powers, Designations, Preferences and Rights of the Series A Convertible Preferred Stock Par Value $.01 per share of Outboard Marine Corporations, attached hereto and incorporated herein as Exhibit 4.15. 4.16 First Amendment to Stockholder Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II LLC & Greenlake Holdings III LLC, attached hereto and incorporated herein as Exhibit 4.16. 4.17 First Amendment to Registration Rights Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II LLC, Greenlake Holdings III LLC and Greenmarine Holdings LLC, attached hereto and incorporated herein as Exhibit 4.17. 4.18 Warrant to purchase Shares of Common Stock of Outboard Marine Corporation by Quantum Industrial Partners LDC, attached hereto and incorporate herein as Exhibit 4.18. 10.1 Severance Agreements between the Company and certain elected and appointed officers and certain other executives of the Company, reference is made to Exhibit 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 Employment Agreement of Mr. Hines dated October 6, 1997, reference is made to Exhibit 10(J) to the 1997 10-K* 10.3 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* 10.4 First Amendment to Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated May 21, 1998 (filed as Exhibit 10.5 to the Form S-4)* 10.5 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* 10.6 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* 10.7 Employment Agreement of Robert Gowens dated October 1, 1998 (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1998 (the "1998 10-K"))* 10.8 Second Amendment to Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated effective as of August 31, 1998 (filed as Exhibit 10.9 to the 1998 10-K)* 10.9 Third Amendment to Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated effective as of December 21, 1998 (filed as Exhibit 10.10 to the 1998 10-K)* 10.10 Fourth Amendment to Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated effective as of February 1, 1999 (filed as Exhibit 10.11 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.11 Fifth Amendment to Amended and Restated Loan and Security Agreement between the Company and NationsBank of Texas, N.A. dated effective as of February 25, 1999 (filed as Exhibit 10.12 to the Transition Report on Form 10-K for the transition period December 31, 1998)*
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Exhibit Number Description ------- ----------- 10.12 Promissory Note dated December 4, 1998 with Robert Gowens, Jr. and Donna Gowens, as Maker, and the Company, as Payee (filed as Exhibit 10.16 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.13 Second Mortgage dated December 4, 1998 with Robert Gowens, Jr. and Donna Gowens, as Mortgagor, and the Company, as Mortgagee (filed as Exhibit 10.17 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.14 Nonqualified Stock Option Agreement dated October 1, 1998 between the Company and Robert B. Gowens (filed as Exhibit 10.18 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.15 Secured Promissory Note dated October 6, 1997 with Andrew Hines, as Maker, and the Company, as Payee (filed as Exhibit 10.19 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.16 Sixth Amendment to Amended and Restated Loan and Security Agreement between the Company and Bank of America, N.A., dated effective as of July 30, 1999 (filed as Exhibit 10.16 to the Company's Quarterly Report on form 10-Q for the fiscal quarter ended June 30, 1999)* 10.17 Pledge and Security Agreement dated October 6, 1997 between the Company and Andrew Hines (filed as Exhibit 10.20 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.18 Nonqualified Stock Option Grant Agreement dated October 6, 1997 between the Company and Andrew Hines (filed as Exhibit 10.21 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.19 Incentive Stock Option Grant Agreement dated December 30, 1997 between the Company and David Jones (filed as Exhibit 10.22 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.20 Nonqualified Stock Option Grant Agreement dated March 10, 1998 between the Company and David Jones (filed as Exhibit 10.23 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.21 Nonqualified Stock Option Grant Agreement dated March 10, 1998 between the Company and David Jones (filed as Exhibit 10.24 to the Transition Report on Form 10-K for the transition period ended December 31, 1998)* 10.22 Seventh Amendment to Amended and Restated Loan and Security Agreement between the Company and Bank of America, N.A., dated effective as of October 27, 1999 (filed as Exhibit 10.22 to the Form 10-Q for the period ended September 30, 1999)* 10.23 Eighth Amendment to Amended and Restated Loan and Security Agreement between the Company and Bank of America, N.A., dated effective as of January 31, 2000 (filed as Exhibit 10.23 to the 1999 10-K)* 10.24 Subordinated Note dated May 2, 2000 issued by Outboard Marine Corporation to Quantum Industrial Partners LDC as lender, attached hereto and incorporated herein as Exhibit 10.24. 11. Computation of per share earnings (loss) 21. Subsidiaries of Registrant (filed as Exhibit 21 to the 1999 10-K)*. 27. Financial Data Schedule
- -------- * Incorporated herein by reference. 26 EX-4.14 2 SUBORDINATED NOTE & WARRANT PURCHASE AGREEMENT EXHIBIT 4.14 ================================================================================ SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT among OUTBOARD MARINE CORPORATION, QUANTUM INDUSTRIAL PARTNERS LDC and GREENLAKE HOLDINGS III LLC ______________________________ May 1, 2000 ______________________________ ================================================================================ Table of Contents -----------------
Page # ---- ARTICLE I DEFINITIONS............................................... 1 1.1 Definitions............................................... 1 ARTICLE II PURCHASE AND SALE OF SUBORDINATED NOTES AND WARRANTS 7 2.1 Purchase and Sale of Subordinated Notes and Warrants...... 7 2.2 Use of Proceeds........................................... 7 2.3 Closing................................................... 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................... 7 3.1 Corporate Existence and Power............................. 7 3.2 Authorization; No Contravention........................... 8 3.3 Governmental Authorization; Third Party Consents.......... 8 3.4 Binding Effect............................................ 8 3.5 Compliance with Laws...................................... 9 3.6 Capitalization............................................ 9 3.7 No Default or Breach; Contractual Obligations............. 10 3.8 Financial Statements...................................... 10 3.9 No Material Adverse Change; Ordinary Course of Business... 10 3.10 Private Offering.......................................... 10 3.11 Intellectual Property..................................... 11 3.12 Broker's, Finder's or Similar Fees........................ 11 3.13 Litigation; Observance of Statutes and Orders............. 11 3.14 Taxes..................................................... 12 3.15 Title to Property; Leases................................. 12 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.......... 12 4.1 Existence and Power....................................... 12 4.2 Authorization; No Contravention........................... 12 4.3 Governmental Authorization; Third Party Consents.......... 13 4.4 Binding Effect............................................ 13 4.5 Purchase for Own Account.................................. 13 4.6 Restricted Securities..................................... 14 4.7 Broker's, Finder's or Similar Fees........................ 14 4.8 Accredited Investor....................................... 14 4.9 Disclosure of Information................................. 14 4.10 Investment Experience..................................... 14
ARTICLE V CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE..................................................... 15 5.1 Representations and Warranties............................ 15 5.2 Secretary's Certificate................................... 15 5.3 Subordinated Notes........................................ 15 5.4 Warrants 15 5.5 Registration Rights Agreement Amendment................... 15 5.6 Stockholders Agreement Amendment.......................... 15 5.7 Certificate of Designation Amendment...................... 16 5.8 Opinion of Counsel........................................ 16 ARTICLE VI CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE................................... 16 6.1 Representations and Warranties............................ 16 6.2 Payment of Purchase Price................................. 16 6.3 Registration Rights Agreement Amendment................... 16 6.4 Stockholders Agreement Amendment.......................... 16 6.5 Certificate of Designation Amendment...................... 16 ARTICLE VII INDEMNIFICATION............................................ 17 7.1 Indemnification........................................... 17 7.2 Notification.............................................. 17 7.3 Limitation on Indemnification............................. 18 ARTICLE VIII AFFIRMATIVE COVENANTS..................................... 19 8.1 Financial Statements and Other Information................ 19 8.2 Reservation of Stock...................................... 20 8.3 Books and Records......................................... 20 8.4 Inspection................................................ 20 ARTICLE IX MISCELLANEOUS............................................. 20 9.1 Survival of Representations and Warranties................ 20 9.2 Notices................................................... 20 9.3 Successors and Assigns; Third Party Beneficiaries......... 22 9.4 Amendment and Waiver...................................... 22 9.5 Counterparts.............................................. 22 9.6 Headings.................................................. 23 9.7 GOVERNING LAW............................................. 23 9.8 Severability.............................................. 23 9.9 Rules of Construction..................................... 23 9.10 Right to Conduct Activities............................... 23 9.11 Entire Agreement.......................................... 23 9.12 Fees...................................................... 23 9.13 Publicity................................................. 24 9.14 Further Assurances........................................ 24
ii EXHIBITS A Form of Subordinated Note B Form of Warrant C Form of Certificate of Designations D Form of Registration Rights Agreement Amendment E Form of Stockholders Agreement Amendment F Form of Certificate of Designation Amendment G Form of OMC Opinion of Counsel SCHEDULES 2.1 Purchased Shares, Warrant Shares and Purchase Price iii SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT, dated May 1, 2000 (this "Agreement"), among Outboard Marine Corporation, a Delaware corporation --------- (the "Company") Quantum Industrial Partners LDC ("QIP") and Greenlake Holdings ------- --- III LLC ("Greenlake" and together with QIP, the "Purchasers"). --------- ---------- WHEREAS, upon the terms and conditions set forth in this Agreement, the Company proposes to issue and sell to each of the Purchasers, for the aggregate purchase price set forth opposite such Purchaser's name on Schedule -------- 2.1 hereto, (i) a Subordinated Note substantially in the form of Exhibit A - --- --------- hereto (each, a "Subordinated Note") in the face amount set forth opposite such ----------------- Purchaser's name on Schedule 2.1 hereto, and (ii) a warrant (the "Warrant") to ------------ ------- purchase, subject to the terms and conditions thereof, the aggregate number of shares (subject to adjustment) of Common Stock, par value $.01 per share, of the Company (the "Common Stock") set forth opposite such Purchaser's name on ------------ Schedule 2.1 hereto, at an exercise price of $.01 per share (subject to - ------------ adjustment), containing the terms and conditions set forth in the form of warrant attached hereto as Exhibit B. --------- NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I. DEFINITIONS ----------- A. Definitions. As used in this Agreement, and unless the context ----------- requires a different meaning, the following terms have the meanings indicated: "Affiliate" shall mean any Person who is an "affiliate" (as defined in --------- Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of, and any Person controlling, controlled by, or under common control with, any Purchaser. For the purposes of this Agreement, "control" includes the ability to have investment discretion through contractual means or by operation of law. "Agreement" means this Agreement as the same may be amended, --------- supplemented or modified in accordance with the terms hereof. "Audited Financial Statements" has the meaning set forth in Section ---------------------------- 3.8 of this Agreement. 2 "Board of Directors" means the Board of Directors of the Company. ------------------ "Business Day" means any day other than a Saturday, Sunday or other ------------ day on which commercial banks in the State of New York are authorized or required by law or executive order to close. "By-laws" means the by-laws of the Company in effect on the Closing ------- Date, as the same may be amended from time to time. "Certificate of Designation" means a Certificate of Designation with -------------------------- respect to the shares of Series B Preferred Stock which shall be adopted by the Board of Directors and duly filed with the Secretary of State of the State of Delaware on or before the Conversion Date substantially in the form attached hereto as Exhibit C. --------- "Certificate of Designation Amendment" means a Certificate of ------------------------------------ Amendment to the Certificate of Designation of the Series A Preferred Stock substantially in the form attached hereto as Exhibit F. --------- "Certificate of Incorporation" means the Certificate of Incorporation ---------------------------- of the Company, as the same may be amended from time to time. "Claims" has the meaning set forth in Section 7.1 of this Agreement. ------ "Closing" has the meaning set forth in Section 2.3 of this Agreement. ------- "Closing Date" has the meaning set forth in Section 2.3 of this ------------ Agreement. "Code" means the Internal Revenue Code of 1986, as amended, or any ---- successor statute thereto. "Commission" means the United States Securities and Exchange ---------- Commission or any similar agency then having jurisdiction to enforce the Securities Act. "Common Stock" has the meaning set forth in the recitals to this ------------ Agreement. "Company" has the meaning set forth in the preamble to this Agreement. ------- "Condition of the Company" means the assets, business, properties, ------------------------ prospects, operations or financial condition of the Company. "Contingent Obligation" means, as applied to any Person, any direct or --------------------- indirect liability of that Person with respect to any Indebtedness, lease, dividend, guaranty, letter of credit or other obligation, contractual or otherwise (the "primary obligation") of ------------------ 3 another Person (the "primary obligor"), whether or not contingent, (a) to --------------- purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof. "Contractual Obligations" means, as to any Person, any provision of ----------------------- any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound. "Conversion Date" means the date on which shares of Series B Preferred --------------- Stock are first issued upon conversion of the Subordinated Notes issued hereunder. "Copyrights" means any foreign or United States copyright ---------- registrations and applications for registration thereof, and any non-registered copyrights. "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ and the rules and regulations of the Commission thereunder. "GAAP" means United States generally accepted accounting principles in ---- effect from time to time. "Governmental Authority" means the government of any nation, state, ---------------------- city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Greenlake" has the meaning set forth in the recitals to this --------- Agreement. "Indebtedness" means, as to any Person, (a) all obligations of such ------------ Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured), (b) all obligations of such Person evidenced by notes, bonds, 4 debentures or similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (d) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (g) all indebtedness secured by any Lien (other than Liens in favor of lessors under leases other than leases included in clause (f)) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person, and (h) any Contingent Obligation of such Person. "Indemnified Party" has the meaning set forth in Section 7.1 of this ----------------- Agreement. "Indemnifying Party" has the meaning set forth in Section 7.1 of this ------------------ Agreement. "Intellectual Property" has the meaning set forth in Section 3.10 of --------------------- this Agreement. "Interim Financial Statements" has the meaning set forth in Section ---------------------------- 3.8 of this Agreement. "Internet Assets" means any Internet domain names and other computer --------------- user identifiers and any rights in and to sites on the worldwide web, including rights in and to any text, graphics, audio and video files and html or other code incorporated in such sites. "Knowledge" means the knowledge of the Company. --------- "Lien" means any mortgage, deed of trust, pledge, hypothecation, ---- assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences). "Losses" has the meaning set forth in Section 7.1 of this Agreement. ------ "Material Adverse Effect" means a material adverse effect on (i) the ----------------------- business, operations, financial condition, assets, prospects or properties of the Company 5 and its subsidiaries taken as a whole, or (ii) the ability of the Company to perform its obligations under the Transaction Documents, or (iii) the validity or enforceability of the Transaction Documents. "Orders" has the meaning set forth in Section 3.2 of this Agreement. ------ "Patents" means any foreign or United States patents and patent ------- applications, including any divisions, continuations, continuations-in-part, substitutions or reissues thereof, whether or not patents are issued on such applications and whether or not such applications are modified, withdrawn or resubmitted. "Permits" has the meaning set forth in Section 3.5 of this Agreement. ------- "Person" means any individual, firm, corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, joint stock company, limited liability company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Purchasers" has the meaning set forth in the preamble to this ---------- Agreement. "QIP" has the meaning set forth in the recitals to this Agreement. --- "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement, dated January 28, 2000, among the Company, QIP and Greenlake Holdings II LLC. "Registration Rights Agreement Amendment" means an amendment to --------------------------------------- Registration Rights Agreement in substantially the form of Exhibit D hereto. --------- "Requirements of Law" means, as to any Person, any law, statute, ------------------- treaty, rule, regulation, right, privilege, qualification, license or franchise or determination of an arbitrator or a court or other Governmental Authority or stock exchange, in each case applicable or binding upon such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "Securities" means the Subordinated Note and the Warrants issuable ---------- hereunder, the shares of Series B Preferred Stock issuable upon conversion of the Subordinated Notes, the shares of Common Stock issuable upon conversion of the Series B Preferred Stock, and the Warrant Shares. "Securities Act" means the Securities Act of 1933, as amended, and the -------------- rules and regulations of the Commission thereunder. "Series A Preferred Stock" means the shares of Series A Convertible ------------------------ Preferred Stock, par value $.01 per share, of the Company having the powers, 6 designations, preferences and rights set forth in the Certificate of the Powers, Designations, Preferences and Rights of the Series A Convertible Preferred Stock, Par Value $.01 Per Share of the Company, as filed by the Company with the Secretary of State of Delaware on January 28, 2000. "Series B Preferred Stock" means the shares of Series B Convertible ------------------------ Preferred Stock, par value $.01 per share, of the Company having the powers, designations, preferences and rights set forth in the Certificate of Designation, and issuable by the Company upon conversion of the Subordinated Notes in accordance with the terms set forth in this Agreement and in the Subordinated Notes. "Software" means any computer software programs, source code, object -------- code, data and documentation, including, without limitation, any computer software programs that incorporate and run the Company's pricing models, formulae and algorithms. "Stock Equivalents" means any security or obligation which is by its ----------------- terms convertible into or exchangeable for shares of common stock or other capital stock or securities of the Company, and any option, warrant or other subscription or purchase right with respect to common stock or such other capital stock or securities. "Stockholders Agreement" means the Stockholders Agreement dated ---------------------- January 28, 2000, among the Company, QIP and Greenlake Holdings II LLC. "Stockholders Agreement Amendment" means an amendment to Stockholders -------------------------------- Agreement in substantially the form of Exhibit E hereto. --------- "Trade Secrets" means any trade secrets, research records, processes, ------------- procedures, manufacturing formulae, technical know-how, technology, blue prints, designs, plans, inventions (whether patentable and whether reduced to practice), invention disclosures and improvements thereto. "Trademarks" means any foreign or United States trademarks, service ---------- marks, trade dress, trade names, brand names, designs and logos, corporate names, product or service identifiers, whether registered or unregistered, and all registrations and applications for registration thereof. "Transaction Documents" means, collectively, this Agreement, the --------------------- Subordinated Notes, the Warrants, the Registration Rights Agreement Amendment and the Stockholders Agreement Amendment. "Warrant" has the meaning set forth in the recitals to this Agreement. ------- 7 "Warrant Shares" has the meaning set forth in Section 2.1 of this -------------- Agreement. ARTICLE II. PURCHASE AND SALE OF SUBORDINATED NOTES AND WARRANTS ---------------------------------------------------- A. Purchase and Sale of Subordinated Notes and Warrants. Subject ---------------------------------------------------- to the terms and conditions herein set forth, the Company agrees to issue and sell to each Purchaser, and each Purchaser agrees to purchase from the Company, for the aggregate purchase price set forth opposite such Purchaser's name on Schedule 2.1 hereto, on the Closing Date (a) a Subordinated Note in the face - ------------ amount set forth opposite such Purchaser's name on Schedule 2.1 hereto, and (ii) ------------ a Warrant to purchase the aggregate number of shares of Common Stock set forth opposite such Purchaser's name on Schedule 2.1 hereto (all of the shares of ------------ Common Stock issuable upon exercise of the Warrants being purchased pursuant hereto being referred to herein as the "Warrant Shares"). -------------- B. Use of Proceeds. The Company shall use the proceeds from the --------------- sale of the Subordinated Notes and the Warrants to the Purchasers for general corporate purposes, including to fund the Company's working capital and to make capital expenditures. C. Closing. The closing of the sale and purchase of the ------- Subordinated Notes and Warrants (the "Closing") shall take place at the offices ------- of Paul, Weiss, Rifkind, Wharton & Garrison, at 10:00 a.m., local time, on May 1, 2000 or at such other time, place and date that the Company and the Purchasers may agree in writing (the "Closing Date"). On the Closing Date, the ------------ Company shall deliver to each Purchaser (a) a Subordinated Note in the face amount set forth beside such Purchaser's name in Schedule 2.1 hereto and (b) a Warrant to purchase the number of Warrant Shares set forth beside such Purchaser's name in Schedule 2.1 hereto against delivery by such Purchaser to the Company of the aggregate purchase price therefor as set forth beside such Purchaser's name in Schedule 2.1 hereto by wire transfer of immediately available funds. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company represents and warrants to each of the Purchasers as follows: A. Corporate Existence and Power. The Company (a) is a corporation ----------------------------- duly organized, validly existing and in good standing under the laws of the jurisdiction of 8 its incorporation; (b) has all requisite power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is proposed to be, engaged; and (c) is duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction in which its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to so qualify would not, individually or in the aggregate, have a Material Adverse Effect. The Company has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Transaction Documents. B. Authorization; No Contravention. The execution, delivery and ------------------------------- performance by the Company of this Agreement and each of the other Transaction Documents and of each of the transactions contemplated hereby and thereby, including, without limitation, the sale, issuance and delivery of the Securities (assuming, in the case of the issuance of the shares of Series B Preferred Stock, the filing of the Certificate of Designation with the Secretary of State of Delaware prior to the issuance thereof), (a) have been duly authorized by all necessary corporate action of the Company; (b) do not contravene the terms of the Certificate of Incorporation or the By-laws; (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation of the Company or any Requirement of Law applicable to the Company, except as would not have a Material Adverse Effect; and (d) do not violate any judgment, injunction, writ, award, decree or order of any nature (collectively, "Orders") of any Governmental Authority against, or ------ binding upon, the Company. C. Governmental Authorization; Third Party Consents. Except for the ------------------------------------------------ filing with the Secretary of State of Delaware of the Certificate of Designation prior to the issuance of any shares of Series B Preferred Stock, or with respect to filings that are required or permitted to be made pursuant to federal or state securities laws, no approval, consent, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the sale, issuance and delivery of the Securities) by, or enforcement against, the Company of this Agreement and the other Transaction Documents or the transactions contemplated hereby and thereby. D. Binding Effect. This Agreement and each of the other Transaction -------------- Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). 9 E. Compliance with Laws. -------------------- (1) The Company is in compliance with all Requirements of Law and all Orders issued by any court or Governmental Authority against the Company in all material respects. (2) (i) The Company has all licenses, permits and approvals of any Governmental Authority (collectively, "Permits") that are necessary for the ------- conduct of the business of the Company; (ii) such Permits are in full force and effect; and (iii) no violations are or have been recorded in respect of any Permit, in each case, except as would not, individually or in the aggregate, have a Material Adverse Effect. F. Capitalization. On the Closing Date, the authorized capital -------------- stock of the Company shall consist of (i) 36,000,000 shares of Common Stock, of which 20,439,531 shares shall be issued and outstanding, (ii) 650,000 shares of Series A Preferred Stock, all of which are issued and outstanding, and (iii) 350,000 shares of undesignated "blank check" preferred stock. The Company has reserved an aggregate of (1) 4,642,857 shares of Common Stock for issuance upon conversion of the Series A Preferred Stock, (2) 5,750,000 shares of Common Stock for issuance upon exercise of common stock purchase warrants issued under that certain Series A Convertible Preferred Stock and Warrant Purchase Agreement, dated January 28, 2000, among the Company, QIP and Greenlake Holdings II LLC, (3)330,000 shares of Common Stock for issuance upon exercise of the Warrants, and (4) an aggregate of 1,900,000 shares of Common Stock for issuance upon the exercise of stock options issued or issuable under the Outboard Marine Corporation Personal Rewards and Opportunities Plan. Except as described in the immediately preceding sentence or as provided in the Transaction Documents, on the Closing Date, there will be no options, warrants, conversion privileges, subscription or purchase rights or other rights outstanding to purchase or otherwise acquire (i) any authorized but unissued, unauthorized or treasury shares of the Company's capital stock, (ii) any Stock Equivalents or (iii) other securities of the Company. The issuance of the Subordinated Notes and the Warrants has been duly authorized. Assuming the accuracy of and compliance with each Purchaser's representations, warranties and covenants contained in Sections 4.5, 4.6, 4.8, 4.9 and 4.10 hereof and in each of Section 17 of the Warrant, Section 13 of the Subordianted Note and Sections 2.1 through (and including) 2.4 of the Stockholders Agreement, as amended by the Stockholders Agreement Amendment, the issuance and sale to the Purchasers of the Subordinated Notes and Warrants, the conversion of the Subordinated Notes in accordance with the terms hereof and thereof, and the exercise of the Warrants in accordance with the terms thereof will be exempt from the registration requirements of the Securities Act. The Warrant Shares and the shares of Series B Preferred Stock and any shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock will be, when issued in accordance with the Transaction Documents, duly authorized, fully paid and non-assessable and not subject to any preemptive rights or similar rights that have not been satisfied. The issued and outstanding 10 shares of Common Stock are all duly authorized, validly issued, fully paid and non-assessable. G. No Default or Breach; Contractual Obligations. The Company has --------------------------------------------- not received notice of a current or pending default and is not in default under, or with respect to, any Contractual Obligation nor, to the Company's knowledge, does any condition exist that with notice or lapse of time or both would constitute a default thereunder, except as would not have a Material Adverse Effect. All of the Contractual Obligations are valid, subsisting, in full force and effect and binding upon the Company and, to the Company's Knowledge, the other parties thereto. To the Knowledge of the Company, no other party to any such Contractual Obligation is in material default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a material default by such other party thereunder. H. Financial Statements. The consolidated balance sheet of the -------------------- Company and its subsidiaries as of December 31, 1999, and the related consolidated statements of income, stockholders equity and cash flows for the year then ended, including the notes and schedules thereto, certified by KPMG LLP, independent public accountants, that have been delivered by the Company to the Purchasers fairly present the consolidated financial position of the Company and its subsidiaries as at December 31, 1999 and the consolidated results of operations for the Company and its subsidiaries for the period then ended, in each case in accordance with generally accepted accounting principles consistently applied for the period covered thereby (the foregoing consolidated financial statements at and for the period ending December 31, 1999 are referred to herein as the "Audited Financial Statements"). The unaudited consolidated ---------------------------- balance sheet of the Company and its subsidiaries as of March 31, 2000 and the related unaudited consolidated statements of income, stockholders equity and cash flows for the three months then ended, that have been delivered by the Company to the Purchasers fairly present the consolidated financial position of the Company and its subsidiaries as at March 31, 2000 and the consolidated results of operations for the Company and its subsidiaries for the three months then ended, in each case in accordance with generally accepted accounting principles applied on a basis consistent with the Audited Financials, except for normal year-end adjustments and the absence of footnotes required by GAAP (the foregoing unaudited consolidated financial statements at March 31, 2000 and for the three months then ending are referred to herein as the "Interim Financial ----------------- Statements"). - ---------- I. No Material Adverse Change; Ordinary Course of Business. Since ------------------------------------------------------- December 31, 1999, there has been no change in the financial condition, operations, business or properties of the Company or any of its subsidiaries except (x) as disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended, as filed with the Securities and Exchange Commission subsequent to December 31, 1999 and prior to the date hereof, (y) as disclosed in the Interim Financial Statements or (y) changes that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. 11 J. Private Offering. No form of general solicitation or general ---------------- advertising was used by the Company or its representatives in connection with the offer or sale of the Subordinated Notes or the Warrants. K. Intellectual Property. --------------------- (1) Except as would not, individually or in the aggregate, have a Material Adverse Effect: (i) The Company is the owner of all, or has the license or right to use, sell and license all of, the Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Software and other proprietary rights (collectively, "Intellectual Property") that are used in connection with its --------------------- business as presently conducted or contemplated in its business plan, free and clear of all Liens. (ii) None of the Intellectual Property of the Company is subject to any outstanding Order, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the Knowledge of the Company, threatened, which challenges the validity, enforceability, use or ownership of the item. (iii) To the knowledge of the Company, none of the Intellectual Property currently sold or licensed by the Company to any Person or used by or licensed to the Company by any Person infringes upon or otherwise violates any Intellectual Property rights of others. (iv) No litigation is pending and no Claim has been made against the Company or, to the Knowledge of the Company, is threatened, contesting the right of the Company to sell or license to any Person or use the Intellectual Property presently sold or licensed to such Person or used by the Company. (2) To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Intellectual Property rights of the Company. L. Broker's, Finder's or Similar Fees. There are no brokerage ---------------------------------- commissions, finder's fees or similar fees or commissions payable by the Company in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company or any action taken by the Company. M. Litigation; Observance of Statutes and Orders. --------------------------------------------- 1. There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any subsidiary or any property of the Company or any subsidiary in any court or before any arbitrator of any kind or before or by any governmental authority that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. 12 2. Neither the Company nor any subsidiary is in default under any order, judgment, decree or ruling of any court, arbitrator or governmental authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation environmental laws) of any governmental authority, which default or violation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. N. Taxes. The Company and its subsidiaries have filed all income ----- tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments payable by them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (x) the amount of which, or the failure to file with respect to which, is not individually or in the aggregate material or (y) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a subsidiary, as the case may be, has established adequate reserves in accordance with generally accepted accounting principles. O. Title to Property; Leases. The Company and its subsidiaries ------------------------- have good title to their respective properties, including all such properties reflected in the audited balance sheet as of December 31, 1999 or purported to have been acquired by the Company or any subsidiary after said date (except as sold or otherwise disposed of), in each case free and clear of liens, except for (x) liens securing the Company's obligations under the Company's credit facilities and in respect of the Company's borrowings, and (y) those defects in title and liens that, individually or in the aggregate, would not have a Material Adverse Effect. All material leases are valid and subsisting and are in full force and effect in all material respects except to the extent that the failure to be so would not, individually or in the aggregate, have a Material Adverse Effect. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS ------------------------------------------------ Each of the Purchasers hereby represents and warrants, severally and not jointly, to the Company as follows: A. Existence and Power. Such Purchaser (a) is duly organized and ------------------- validly existing under the laws of the jurisdiction of its formation and (b) has the requisite power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Transaction Agreements to which it is a party. 13 B. Authorization; No Contravention. The execution, delivery and ------------------------------- performance by such Purchaser of this Agreement and each of the other Transaction Agreements to which it is a party and the transactions contemplated hereby and thereby, (a) have been duly authorized by all necessary action, (b) do not contravene the terms of such Purchaser's organizational documents, or any amendment thereof, and (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation of such Purchaser or any Requirement of Law applicable to such Purchaser, and (d) do not violate any Orders of any Governmental Authority against, or binding upon, such Purchaser. C. Governmental Authorization; Third Party Consents. No approval, ------------------------------------------------ consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person, and no lapse of a waiting period under any Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the purchase of the Subordinated Notes and the Warrants) by, or enforcement against, such Purchaser of this Agreement and each of the other Transaction Agreements to which it is a party or the transactions contemplated hereby and thereby. D. Binding Effect. This Agreement and each of the other Transaction -------------- Agreements to which it is a party have been duly executed and delivered by such Purchaser and constitutes the legal, valid and binding obligations of such Purchaser, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity). E. Purchase for Own Account. The Subordinated Notes and the ------------------------ Warrants to be acquired by such Purchaser pursuant to this Agreement and any shares of Series B Preferred Stock or shares of Common Stock received upon conversion or exercise of the Subordinated Notes, the shares of Series B Preferred Stock or the Warrants or as a result of the ownership thereof are being or will be acquired for investment for its own account and with no intention of distributing, transferring, assigning or reselling or otherwise disposing thereof or any part thereof in any transaction that would be in violation of the securities laws of the United States of America, or any state, without prejudice, however, to the rights of such Purchaser at all times to sell or otherwise dispose of all or any part of such Securities under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and subject, nevertheless, to the disposition of such Purchaser's property being at all times within its control. If such Purchaser should in the future decide to dispose of any of the Securities, such Purchaser understands and agrees that it may do so only once it reasonably satisfies the Company that such transfer is in compliance with the Securities Act and applicable state securities laws, as then in effect. Such Purchaser agrees to the imprinting, 14 so long as required by law, of a legend on certificates representing all of the Securities to the following effect: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE EXERCISE OR CONVERSION THEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE SECURITIES REPRESENTED HEREBY. TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS." F. Restricted Securities. Such Purchaser understands that the --------------------- Securities are "restricted securities" under the Securities Act and will not be registered at the time of their issuance under the Securities Act for the reason that the sale provided for in this Agreement is exempt pursuant to Section 4(2) of the Securities Act and that the reliance of the Company on such exemption is predicated in part on such Purchaser's representations set forth herein and on such Purchaser's agreement to comply with Section 17 of the Warrant and Section 13 of the Subordinated Note, and that such Securities may be resold without registration under the Securities Act only in certain limited circumstances defined therein. Such Purchaser represents that it is reasonably familiar with such resale restrictions in the Securities Act, Rule 144 promulgated thereunder, and the other applicable federal and state rules and regulations. G. Broker's, Finder's or Similar Fees. There are no brokerage ---------------------------------- commissions, finder's fees or similar fees or commissions payable by such Purchaser in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with such Purchaser or any action taken by such Purchaser. H. Accredited Investor. Such Purchaser is an "Accredited Investor" ------------------- within the meaning of Rule 501 of Regulation D under the Securities Act, as presently in effect. 15 I. Disclosure of Information. Such Purchaser has carefully reviewed ------------------------- the representations and warranties concerning the Company contained in this Agreement and has had adequate opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and the business, assets, prospects and financial condition of the Company. J. Investment Experience. Such Purchaser is, or has been, an --------------------- investor in securities of companies similar to the Company and has or is represented by one who has such knowledge and experience in financial or business matters that it is capable of evaluation of the merits and risks of an investment in the Securities. ARTICLE V. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE ---------------------------- The obligation of the Purchasers to purchase the Subordinated Notes and the Warrants, to pay the purchase price therefor at the Closing and to perform any obligations hereunder shall be subject to the satisfaction as determined by, or waiver by, the Purchasers of the following conditions on or before the Closing Date. A. Representations and Warranties. The representations and ------------------------------ warranties of the Company contained in Article III hereof shall be true and correct in all material respects at and on the Closing Date as if made at and on such date, except to the extent that any representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such date and except for any activities or transactions which may have taken place after the date hereof which are contemplated by this Agreement. B. Secretary's Certificate. The Purchasers shall have received a ----------------------- certificate from the Company, in form and substance satisfactory to the Purchasers, dated the Closing Date and signed by the Secretary or an Assistant Secretary of the Company, certifying as to the incumbency and specimen signature of each officer of the Company executing this Agreement, each other Transaction Document and any other document delivered in connection herewith on behalf of the Company. C. Subordinated Notes. The Company shall have delivered to each of ------------------ the Purchasers a Subordinated Note in the face amount set forth opposite such Purchaser's name on Schedule 2.1 hereto. ------------ D. Warrants. The Company shall have duly executed and delivered to -------- each of the Purchasers a Warrant to purchase that number of shares of Common Stock set forth opposite such Purchaser's name on Schedule 2.1 hereto. ------------ 16 E. Registration Rights Agreement Amendment. The Company shall have --------------------------------------- duly executed and delivered the Registration Rights Agreement Amendment. F. Stockholders Agreement Amendment. The Company shall have duly -------------------------------- executed and delivered the Stockholders Agreement Amendment. G. Certificate of Designation Amendment. The Company shall have ------------------------------------ filed with the Secretary of State of Delaware the Certificate of Designation Amendment substantially in the form of Exhibit F hereto. --------- H. Opinion of Counsel. The Purchasers shall have received an ------------------ opinion of Counsel for the Company, dated the Closing Date, relating to the transactions contemplated by or referred to herein, substantially in the form attached hereto as Exhibit G. --------- ARTICLE VI. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE --------------------------- The obligation of the Company to issue and sell the Subordinated Notes and the Warrants and the obligation of the Company to perform its other obligations hereunder shall be subject to the satisfaction as determined by, or waiver by, the Company of the following conditions on or before the Closing Date: A. Representations and Warranties. The representations and ------------------------------ warranties of the Purchasers contained in Article IV hereof shall be true and correct on at and on the Closing Date as if made at and on such date, except to the extent that any representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct as of such date and except for any activities or transactions which may have taken place after the date hereof which are contemplated by this Agreement. B. Payment of Purchase Price. Each Purchaser shall have paid the ------------------------- aggregate purchase price for the Subordinated Note and the Warrant to be purchased by such Purchaser. C. Registration Rights Agreement Amendment. Each Purchaser shall --------------------------------------- have duly executed and delivered the Registration Rights Agreement Amendment. D. Stockholders Agreement Amendment. Each Purchaser have duly -------------------------------- executed and delivered the Stockholders Agreement Amendment. 17 E. Certificate of Designation Amendment. The stockholders of the ------------------------------------ Company (including the holders of at least 75% of the shares of Series A Preferred Stock voting separately as a class) shall have approved the filing by the Company of the Certificate of Designation Amendment. ARTICLE VII. INDEMNIFICATION --------------- A. Indemnification. Except as otherwise provided in this Article --------------- VII, the Company (the "Indemnifying Party") agrees to indemnify, defend and hold ------------------ harmless each of the Purchasers and its Affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, an "Indemnified Party") to the fullest extent ----------------- permitted by law from and against any and all losses, actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations (collectively, "Claims" or written threats thereof (including, without ------ limitation, any Claim by a third party), damages, expenses (including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in any action between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party) or other liabilities (collectively, "Losses") resulting from or arising out of any breach of any ------ representation or warranty, covenant or agreement by the Company in this Agreement or the other Transaction Documents; provided, however, that the -------- ------- Indemnifying Party shall not be liable under this Article VII to an Indemnified Party to the extent that it is finally judicially determined that such Losses resulted or arose from the breach by such Indemnified Party of any representation, warranty, covenant or other agreement of such Indemnified Party contained in this Agreement or the other Transaction Documents or the willful misconduct or gross negligence of such Indemnified Party; and provided further, -------- ------- that if and to the extent that such indemnification is unenforceable for any reason, the Indemnifying Party shall make the maximum contribution to the payment and satisfaction of such Losses which shall be permissible under applicable laws. The amount of any payment to any Indemnified Party herewith in respect of any Loss shall be of sufficient amount to make such Indemnified Party whole. In connection with the obligation of the Indemnifying Party to indemnify for expenses as set forth above, the Indemnifying Party shall, upon presentation of appropriate invoices containing reasonable detail, reimburse each Indemnified Party for all such expenses (including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in any action between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party) as they are incurred by such Indemnified Party; provided, -------- however, that if an Indemnified Party is reimbursed under this Article VII for - ------- any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Losses in question resulted primarily from the willful misconduct or gross negligence of such Indemnified Party. 18 B. Notification. Each Indemnified Party under this Article VII ------------ shall, promptly after the receipt of notice of the commencement of any Claim against such Indemnified Party in respect of which indemnity may be sought from the Indemnifying Party under this Article VII, notify the Indemnifying Party in writing of the commencement thereof. The omission of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other than pursuant to this Article VII or (b) under this Article VII unless, and only to the extent that, such omission results in the Indemnifying Party's forfeiture of substantive rights or defenses. In case any such Claim shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, -------- however, that any Indemnified Party may, at its own expense, retain separate - ------- counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any Claim in which both the Indemnifying Party, on the one hand, and an Indemnified Party, on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of such Claim if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that the Indemnifying Party (i) shall not be -------- ------- liable for the fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for all of such fees and expenses of such counsel incurred in any action between the Indemnifying Party and the Indemnified Parties or between the Indemnified Parties and any third party, as such expenses are incurred. The Indemnifying Party agrees that it will not, without the prior written consent of the Purchasers, settle, compromise or consent to the entry of any judgment in any pending or threatened Claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising or that may arise out of such Claim. The Indemnifying Party shall not be liable for any settlement of any Claim effected against an Indemnified Party without its written consent, which consent shall not be unreasonably withheld. The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the - -------- ------- contrary contained in this Agreement, nothing in this Article VII shall restrict or limit any rights that any Indemnified Party may have to seek equitable relief. C. Limitation on Indemnification. Anything in this Agreement to the ----------------------------- contrary notwithstanding, no payment shall be made to an Indemnified Party pursuant to Section 7.1 of this Agreement until the amounts which the Purchasers would otherwise be entitled to receive as indemnification under this Agreement aggregate at least $115,000, at which time the Purchaser shall be entitled to receive any such payments and any 19 subsequent payments in full. Anything in this Agreement to the contrary notwithstanding, the liability of the Company under this Article shall in no event exceed the total purchase price paid for the Subordinated Notes and the Warrants received by the Company pursuant to this Agreement. ARTICLE VIII. AFFIRMATIVE COVENANTS --------------------- The Company hereby covenants and agrees with each Purchaser that so long as such Purchaser holds any Subordinated Note, shares of Series B Preferred Stock or Warrant: A. Financial Statements and Other Information. The Company shall ------------------------------------------ deliver to such Purchaser, in form and substance reasonably satisfactory to such Purchaser: 3. as soon as available, but not later than ninety (90) days after the end of each fiscal year of the Company, a copy of the audited balance sheet of the Company as of the end of such fiscal year and the related statements of operations and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail and accompanied by a management summary and analysis of the operations of the Company for such fiscal year and by the opinion of a nationally recognized independent certified public accounting firm which report shall state without qualification that such financial statements present fairly the financial condition as of such date and results of operations and cash flows for the periods indicated in conformity with GAAP applied on a consistent basis; 4. commencing with the quarterly fiscal period ending on June 30, 2000, as soon as available, but in any event not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year, the unaudited balance sheet of the Company, and the related statements of operations and cash flows for such quarter and for the period commencing on the first day of the fiscal year and ending on the last day of such quarter, all certified by an appropriate officer of the Company as presenting fairly the financial condition as of such date and results of operations and cash flows for the periods indicated in conformity with GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP; and 5. commencing with the month ending on May 31, 2000, as soon as available, but in any event not later than thirty (30) days after the end of the first eleven months of each fiscal year, the unaudited balance sheet of the Company, and the related statements of operations and cash flows for such month and for the period commencing on the first day of the fiscal year and ending on the last day of such month, all certified by an appropriate officer of the Company as presenting fairly the financial condition as of such date and results of operations and cash flows for the periods indicated in conformity with 20 GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP. B. Reservation of Stock. The Company shall at all times reserve -------------------- and keep available out of its authorized shares of preferred stock the maximum number of shares of preferred stock that may be required to be designated as shares of Series B Preferred Stock and issued upon conversion of the Subordinated Notes. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuing and delivering such shares upon conversion of the shares of Series B Preferred Stock, as provided in the Certificate of Designations, and the exercise of the Warrants, the maximum number of shares of Common Stock that may be issuable or deliverable upon such conversion or exercise. C. Books and Records. The Company shall keep proper books of ----------------- record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company in accordance with GAAP consistently applied. D. Inspection. The Company shall permit representatives of the ---------- Purchasers to visit and inspect any of its properties, to examine its corporate, financial and operating records and make copies thereof or abstracts therefrom, to discuss its affairs, finances and accounts with their respective directors, officers and independent public accountants, and shall provide the Purchasers and their representatives with reasonable access to its officers and employees, all at such reasonable times during normal business hours and as often as may be reasonably requested upon reasonable advance notice to the Company. ARTICLE IX. MISCELLANEOUS ------------- A. Survival of Representations and Warranties. All of the ------------------------------------------ representations and warranties made herein shall survive the execution and delivery of this Agreement until the first anniversary of the Closing Date. B. Notices. All notices, demands and other communications provided ------- for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: if to the Company: Outboard Marine Corporation 21 100 Sea Horse Drive Waukegan, IL 60085 Telecopy: (847) 689-6200 Attention: General Counsel with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Telecopy: (212) 450-4800 Attention: Julia K. Cowles, Esq. (i) if to Quantum Industrial Partners LDC.: Kaya Flamboyan 9, Villemstad Curacao Netherlands-Antilles with a copy to: Soros Fund Management LLC 888 Seventh Avenue New York, NY 10016 Telecopy: (212) 664-0544 Attention: Michael Neus, Esq. and a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Telecopy: (212) 757-3990 Attention: Richard S. Borisoff, Esq. (ii) If to Greenlake: Greenlake Holdings III LLC c/o Greenway Partners, L.P. 277 Park Avenue New York, NY 10016 Telecopy: (212) 350-5253 Attention: Gary Duberstein 22 with a copy to: Weil, Gotshal & Manges 767 Fifth Avenue New York, New York 10153 Telecopy: (212) 310-8007 Attention: David Blittner, Esq. All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied. C. Successors and Assigns; Third Party Beneficiaries. This ------------------------------------------------- Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Subject to applicable securities laws and the terms and conditions thereof, the Purchasers may assign any of their rights under this Agreement or the other Transaction Documents to any of their respective Affiliates. The Company may not assign any of its rights under this Agreement without the written consent of the Purchasers. Except as provided in Article VII, no Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement. D. Amendment and Waiver. -------------------- 6. No failure or delay on the part of the Company or the Purchasers in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or the Purchasers at law, in equity or otherwise. 7. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Company or the Purchasers from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by the Company and the Purchasers purchasing 75% in principal amount of the Subordinated Notes, and (ii) only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. 23 E. 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. F. Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. G. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ------------- IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. H. Severability. If any one or more of the provisions contained ------------ herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. I. Rules of Construction. Unless the context otherwise requires, --------------------- "or" is not exclusive and references to sections or subsections refer to sections or subsections of this Agreement. J. Right to Conduct Activities. The Company and each Purchaser --------------------------- hereby acknowledges that some or all of the Purchasers are professional investment funds, and as such, invest in numerous portfolio companies, some of which may be competitive with the Company's business. No Purchaser shall be liable to the Company or to any other Purchaser for any claim arising out of, or based upon, the investment activities of such Purchaser, including without limitation, any claim arising out of, or based upon, (i) the investment by Purchaser in an entity competitive to the Company, or (ii) actions taken by any partner, officer or other representative of any Purchaser to assist any such competitive company, or otherwise, and whether or not such action has a detrimental effect of the Company. K. Entire Agreement. This Agreement, together with the exhibits ---------------- and schedules hereto, and the other Transaction Documents are 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 and therein. There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents supersede all prior agreements and understandings between the parties with respect to such subject matter. 24 L. Fees. Upon the Closing, the Company shall reimburse each of the ---- Purchasers for all expenses incurred by each such Purchaser in the course of conducting such Purchaser's due diligence investigation of the Company (including any fees and expenses of outside consultants to such Purchaser) and for the fees, disbursements and other charges of counsel incurred in connection with the transactions contemplated by this Agreement. M. Publicity. --------- (a) Except as may be required by applicable Requirements of Law, none of the parties hereto shall issue a publicity release or public announcement or otherwise make any disclosure concerning this Agreement and the transactions contemplated hereby without prior approval by the other parties hereto. If any announcement is required by law or the rules of any securities exchange or market on which shares of Common Stock are traded to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other parties and shall give the other parties reasonable opportunity to comment thereon. (b) For so long as QIP or any of its Affiliates owns any Securities, QIP shall have the opportunity to review and modify any provision of any public release, public announcement or government filing which is to be released to the public, which provision mentions QIP or any of its Affiliates, prior to the release of such document to the public, it being understood and agreed that Soros Private Equity Partners LLC will be identified as making investments on behalf of QIP. N. Further Assurances. Each of the parties shall execute such ------------------ documents and use reasonable efforts to perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Subordinated Note and Warrant Purchase Agreement on the date first written above. OUTBOARD MARINE CORPORATION By:/s/ Eric T. Martinez ------------------------------------ Name: Eric T. Martinez Title: Interim CFO and Vice President and Treasurer QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Michael C. Neus ------------------------------------ Name: Michael C. Neus Title: Attorney-In-Fact GREENLAKE HOLDINGS III LLC By: /s/ Gary K. Duberstein ------------------------------------ Name: Gary K. Duberstein Title: Vice President SCHEDULE 2.1 ------------ PURCHASED SHARES AND WARRANT SHARES AND PURCHASE PRICE ------------------------------------------------------
--------------------------------------------------------------------------------------------------------- Purchaser/1/ Face Amount of Warrant Shares Purchase Price Subordinated Note Quantum Industrial $15,000,000 330,000 $15,000,000 Partners LDC Greenlake Holdings III LLC ___________ _______ ___________
___________________ /1/ Subsequent to the Closing, QIP may sell a portion of the Subordinated Notes and Warrants purchased at the Closing to Greenlake or its Affiliate on such terms as QIP and Greenlake may agree. EX-4.15 3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF POWERS EXHIBIT 4.15 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES A CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE OF OUTBOARD MARINE CORPORATION _______________________________ (Pursuant to Section 242 of the General Corporation Law of the State of Delaware) Outboard Marine Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), does hereby certify as follows: 1. The name of the Corporation is Outboard Marine Corporation. 2. The date of filing of the Amended and Restated Certificate of Incorporation of the Corporation with the Secretary of State was September 30, 1997, and the date of filing of the Certificate of the Powers, Designations, Preferences and Rights of the Series A Convertible Preferred Stock, Par Value $.01 Per Share (the "Certificate of Designation"), with the Secretary of State was January 28, 2000. 3. This Certificate of Amendment amends the Certificate of Designation, as now in effect, to (i) provide for the issuance of shares of Series B Convertible Preferred Stock as Senior Stock and (ii) exempt from the anti-dilution adjustment provisions contained therein certain specific issuances of Common Stock by the Corporation. 4. Section 2 of the Certificate of Designation is hereby amended to read in its entirety as follows: 2. Rank. The Series A Preferred Stock shall, with respect to ---- dividend distributions and distributions of assets and rights upon the liquidation, winding up and dissolution of the Corporation, rank (i) junior to the outstanding shares of Senior Stock, and (ii) senior to all classes of common stock of the 2 Corporation (including, without limitation, the common stock, par value $.01 per share, of the Corporation (the "Common Stock")) and to each other class or series of capital stock of the Corporation hereafter created other than the shares of Series B Preferred Stock (the Common Stock and each other class or series of capital stock of the Corporation other than the Senior Stock are hereinafter collectively referred to as the "Junior Stock"). 5. Section 5(c)(iii) of the Certificate of Designation is hereby amended to read in its entirety as follows: (iii) Issuance of Common Stock Below Current -------------------------------------- Market Price or Conversion Price. If the Corporation shall, at any time or -------------------------------- from time to time, sell or issue shares of Common Stock (regardless of whether originally issued or from the Corporation's treasury), or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock (excluding (A) shares issued in any of the transactions described in Section 5(c)(i) or (ii), (B) shares issued upon the conversion of any shares of Series A Preferred Stock, (C) options issuable pursuant to bona fide employee benefit plans or arrangements approved or adopted by the Corporation's Board of Directors, and the shares of Common Stock issuable on exercise of such options, (D) warrants issued by the Corporation pursuant to the Purchase Agreement and the shares of Common Stock issuable upon exercise of such warrants, (E) Common Stock purchase warrants issued pursuant to that certain Subordinated Notes and Warrant Purchase Agreement, dated May 1, 2000 (the "Note Purchase Agreement") among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and the shares of Common Stock issuable upon the exercise of such warrants, and (F) shares issuable upon the conversion of any shares of Series B Preferred Stock which may be issued upon conversion of the Subordinated Notes issued by the Corporation pursuant to the Note Purchase Agreement) at a price per share of Common Stock (determined, in the case of rights, options, warrants or convertible or exchangeable securities, by dividing (x) the total consideration received or receivable by the Corporation in consideration of the sale or issuance of such rights, options, warrants or convertible or exchangeable securities, plus the total consideration payable to the Corporation upon exercise or conversion or exchange thereof, by (y) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable securities) lower than either the Current Market Price per share of Common Stock or the Conversion Price immediately prior to such sale or issuance, then the Conversion Price shall be reduced to the price determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of (I) the number of shares of Common Stock outstanding immediately prior to such sale or issuance, plus (II) the quotient obtained by dividing the aggregate consideration received (determined as provided below) for such sale or issuance by the Applicable Price, and the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such sale or issuance. Such adjustment shall be made successively whenever such sale or issuance is made. For the purposes of such adjustments, the shares of Common Stock which the holder of any such rights, options, warrants, or convertible or exchangeable securities shall be entitled to 3 subscribe for or purchase shall be deemed to be issued and outstanding as of the date of such sale or issuance and the consideration "received" by the Corporation therefor shall be deemed to be the consideration actually received or receivable by the Corporation (plus any underwriting discounts or commissions in connection therewith) for such rights, options, warrants or convertible or exchangeable securities, plus the consideration stated in such rights, options, warrants or convertible or exchangeable securities to be payable to the Corporation for the shares of Common Stock covered thereby. If the Corporation shall sell or issue shares of Common Stock for a consideration consisting, in whole or in part, of property other than cash or its equivalent, then in determining the "price per share of Common Stock" and the "consideration" received or receivable by or payable to the Corporation for purposes of the first sentence and the immediately preceding sentence of this Section 5(c)(iii), the fair value of such property shall be determined in good faith by the Board of Directors of the Corporation and shall be the value which is agreed upon by at least 75% of the members thereof or if 75% of the members of the Board of Directors of the Corporation are unable to agree upon the value of such consideration, the value thereof shall be determined by an independent investment bank of nationally recognized stature that is selected by 75% of the members of the Board of Directors. The determination of whether any adjustment is required under this Section 5(c)(iii) by reason of the sale and issuance of rights, options, warrants or convertible or exchangeable securities and the amount of such adjustment, if any, shall be made only at the time of such issuance or sale and not at the subsequent time of issuance or sale of Common Stock upon the exercise or conversion of such rights, options, warrants or convertible or exchangeable securities. Upon the expiration of any such options, warrants or rights, the termination of any such rights to convert or exchange or the expiration of any options, warrants or rights related to such convertible or exchangeable securities, the then current Conversion Price, to the extent in any affected by or computed using such options, warrants, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. 6. Section 6(a) of the Certificate of Designation is hereby amended to read in its entirety as follows: (a) Redemption Demand. Upon the demand of the holders of at ----------------- least 75% of the outstanding shares of Series A Preferred Stock made in writing to the Corporation at any time after October 1, 2008 (a "Redemption Demand"), the Corporation shall be required to redeem all of the shares of Series A Preferred Stock, at a redemption price per share equal to the Liquidation Preference per share plus an amount in cash equal to the product of (x) 15% of the then current Liquidation Preference, multiplied by (y) a fraction, the numerator of which is the actual number of days from (and including) the most recent Dividend Payment Date to (but excluding) the Redemption Date, and the denominator of which is 365 (the "Redemption Price"), but only to the extent that (A) funds are legally available therefor, (B) such redemption would not cause a default or event of default under any 4 documents governing the Corporation's outstanding indebtedness or lines of credit, and (C) such redemption would not violate the terms governing any Senior Stock then outstanding. If at the time a Demand Notice is received by the Corporation funds are legally available to redeem some but not all of the outstanding shares of Series A Preferred Stock, then the Corporation shall redeem as many shares of Series A Preferred Stock as its legally available funds permit. 7. Section 6(b) of the Certificate of Designation is hereby amended to read in its entirety as follows: (b) Redemption at Corporation's Option. On and after ---------------------------------- the date on which fewer than 10% of the shares of Series A Preferred Stock issued on the Series A Preferred Stock Issue Date remain outstanding, the Corporation shall have the right, at its sole option and election, to redeem all of the outstanding shares of Series A Preferred Stock, on not less than 30 days' notice of the date of redemption (any such redemption date pursuant to this Section 6(b) being referred to herein as an "Optional Redemption Date") at a redemption price per share equal to the Liquidation Preference per share plus an amount in cash equal to the product of (x) 15% of the then current Liquidation Preference, multiplied by (y) a fraction, the numerator of which is the actual number of days from (and including) the most recent Dividend Payment Date to (but excluding) the Optional Redemption Date, and the denominator of which is 365 (the "Optional Redemption Price"), but only to the extent that (A) funds are legally available therefor, (B) such redemption would not cause a default or event of default under any documents governing the Corporation's outstanding indebtedness or lines of credit, and (C) such redemption would not violate the terms governing any Senior Stock then outstanding. 8. Section 8 of the Certificate of Designation is hereby amended to read in its entirety as follows: 8. Reissuance of Series A Preferred Stock. Shares of Series A -------------------------------------- Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged, shall (upon compliance with any applicable provisions of the laws of Delaware) have the status of authorized and unissued shares of preferred stock undesignated as to series and may be redesignated and reissued as part of any series of preferred stock (other than Series A Preferred Stock or Series B Preferred Stock). 9. Section 10 of the Certificate of Designation is hereby amended to add the following additional defined terms: "Senior Stock" means the outstanding shares of Series B Preferred Stock. "Series B Preferred Stock" means the outstanding shares of the Corporation's Series B Convertible Preferred Stock, par value $.01 per share. 5 10. Such amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware and by Section 7(c) of the Certificate of Designation. IN WITNESS WHEREOF, the Corporation has authorized the undersigned to execute this certificate on this second day of May, 2000. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez -------------------- Name: Eric T. Martinez Title: Interim CFO and Vice President and Treasurer EX-4.16 4 FIRST AMENDMENT TO STOCKHOLDER AGREEMENT EXHIBIT 4.16 FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT AMENDMENT, dated May 2, 2000 (this "Amendment Agreement"), among ------------------- Outboard Marine Corporation, a Delaware corporation (the "Company"), Quantum ------- Industrial Partners LDC, a Cayman Islands limited duration company ("QIP"), --- Greenlake Holdings II LLC, a Delaware limited liability company ("Greenlake II") ------------ and Greenlake Holdings III LLC, a Delaware limited liability company ("Greenlake --------- III"), to that certain STOCKHOLDERS AGREEMENT, dated January 28, 2000 (the - --- "Existing Agreement"), among the Company, QIP, and Greenlake II. Unless ------------------ otherwise set forth in this Amendment Agreement, capitalized terms have the respective meanings assigned to them in the Existing Agreement. WHEREAS, the Company, QIP and Greenlake II entered into the Existing Agreement in connection with their acquisition on January 28, 2000 of an aggregate of 650,000 shares of the Company's Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), and warrants ------------------------ (the "Existing Warrants") to purchase an aggregate of 5,750,000 shares of the ----------------- Company's Common Stock in order to restrict the transfer of such securities and to provide for, among other things, first offer, tag-along and preemptive rights and certain other rights under certain conditions; and WHEREAS, the Company proposes to issue and sell to QIP and Greenlake III or their affiliates $15,000,000 aggregate principal amount of the Company's Subordinated Notes due June 1, 2000 (the "Subordinated Notes"), and warrants ------------------ (the "New Warrants") to purchase an aggregate of 330,000 shares of the Company's ------------ Common Stock pursuant to the terms of a Subordinated Note and Warrant Purchase Agreement, dated the date hereof (the "Subordinated Notes Purchase Agreement"), ------------------------------------- among the Company, QIP and Greenlake III; and WHEREAS, the Existing Agreement provides that the Existing Agreement may amended by an amendment in writing signed by the Company and the Stockholders holding 75% of the voting power of the Shares held by Stockholders; and WHEREAS, QIP and Greenlake II hold, in the aggregate, in excess of 75% of the voting power of the Shares held by Stockholders; and WHEREAS, the parties wish to amend the Existing Agreement in order to (i) exempt the transactions contemplated by the Subordinated Notes Purchase Agreement from the preemptive rights provisions of the Existing Agreement, (ii) restrict the transfer of the securities to be issued pursuant to the Subordinated Notes Purchase Agreement, and (iii) to add Greenlake III as a Stockholder hereunder; 2 NOW, THEREFORE, the Company, QIP, Greenlake II and Greenlake III hereby agree to amend the Existing Agreement as follows: 1. Amendments to Section 1 of the Existing Agreement (Definitions). --------------------------------------------------------------- (a) Section 1 of the Existing Agreement is hereby amended to add the following additional definitions: "Amendment Agreement" means the Amendment Agreement, dated ------------------- May 2, 2000, among the Company, QIP, Greenlake II and Greenlake III amending that certain Stockholders Agreement, dated January 28, 2000, among the Company, QIP, and Greenlake II. "Existing Agreement" is defined in the preamble to the ------------------ Amendment Agreement. "Existing Warrants" is defined in the first recital of the ----------------- Amendment Agreement. "Greenlake II" is defined in the preamble to the Amendment ------------ Agreement. "Greenlake III" is defined in the preamble to the Amendment ------------- Agreement. "New Warrants" is defined in the second recital of the ------------ Amendment Agreement. "Series A Preferred Stock" is defined in the first recital ------------------------ of the Amendment Agreement. "Series B Preferred Stock" means the shares of the Company's ------------------------ Series B Convertible Preferred Stock issuable upon conversion of the Subordinated Notes. "Subordinated Notes" is defined in the second recital of the ------------------ Amendment Agreement. "Subordinated Notes Purchase Agreement" is defined in the ------------------------------------- second recital of the Amendment Agreement. 3 (b) Section 1 of the Existing Agreement is hereby further amended by substituting the following definitions for the definition of such terms contained in the Existing Agreement: "Preferred Stock" means the shares of the Company's Series A --------------- Preferred Stock and Series B Preferred Stock. "Stockholders" means (a) QIP, Greenlake II and Greenlake III ------------ and any transferee thereof who has agreed to be bound by the terms and conditions of this Agreement in accordance with Section 2.4 and (b) any Person who has agreed to be bound by the terms and conditions of this Agreement in accordance with Section 5.2(a), and the term "Stockholder" ----------- shall mean any such Person. "Warrants" means the Existing Warrants and the New Warrants. -------- 2. Amendment of Section 4 of the Existing Agreement (Future Issuance ----------------------------------------------------------------- of Shares; Preemptive Rights). Section 4 of the Existing Agreement is hereby - ----------------------------- amended by adding an new Subsection 4.5 providing as follows: 4.5 Exempt Transactions. Anything in Sections 4.1 through ------------------- 4.4 to the contrary notwithstanding, the Company may consummate the transactions contemplated by the Subordinated Notes Purchase Agreement, including the issuance of the Subordinated Notes and the New Warrants, without complying with the provisions of said Sections 4.1 through 4.4, and the holders of the securities issued pursuant to the Subordinated Notes Purchase Agreement, as well as any securities into which such securities may be converted or for which such securities may be exercised, shall enjoy all rights of ownership thereof notwithstanding the fact that the Company has not complied with the provisions of Section 4.1 through 4.4 hereof in connection with the initial issuance thereof. 3. Amendment to Section 5.1 of the Existing Agreement (After- ---------------------------------------------------------- Acquired Securities). Section 5.1 of the Existing Agreement is hereby amended - -------------------- and restated in its entirety to read as follows: 5.1 After-Acquired Securities. All of the provisions of ------------------------- this Agreement shall apply to all of the Shares and Common Stock Equivalents issued pursuant to the Stock Purchase Agreement and to the Subordinated Notes Purchase Agreement (including, without limitation, shares of Series B Preferred Stock issued upon conversion of the Subordinated Notes). 4 4. Amendment to Section 6.4 of the Existing Agreement (Board --------------------------------------------------------- Representation). Section 6.4 of the Existing Agreement is hereby amended and - --------------- restated in its entirety to read as follows: 6.4 Board Representation. For so long as QIP, Greenlake II -------------------- and Greenlake III, or Affiliates thereof, collectively own at least 50% of the outstanding shares of Preferred Stock, the Company's Board of Directors shall be expanded to add one additional director (the "Additional ---------- Director") who shall be selected by the holders of a majority of the -------- outstanding shares of Preferred Stock. The Company will use its best efforts to cause the Additional Director to be nominated and to solicit proxies for his or her election. 5. Representations and Agreements of Greenlake III. Greenlake III ----------------------------------------------- does hereby acknowledge and agree that (i) it has been given a copy of the Existing Agreement and this Amendment Agreement, afforded ample opportunity to read and to have counsel review it, and is thoroughly familiar with its terms, (ii) any Shares (including any Common Stock Equivalents) which it may now or hereafter acquire are and shall be subject to the terms and conditions set forth in the Existing Agreement, as amended by this Amendment Agreement (the "Agreement"), and (iii) it agrees fully to be bound by the terms of the Agreement as a Stockholder, as such term is defined in the Agreement. 6. Miscellaneous. ------------- 6.1 Headings. The headings in this Amendment Agreement are for -------- convenience of reference only and shall not limit or otherwise affect the meaning hereof. 6.2 GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED ------------- AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION. 6.3 Continuation of Existing Agreement. Any reference in the ---------------------------------- Existing Agreement to "this Agreement" of "hereof" or using words of similar meaning, shall be deemed to refer to the Existing Agreement as amended by this Amendment Agreement. Except as specifically amended hereby, the Existing Agreement shall continue in full force and effect in accordance with its terms. 5 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Amendment Agreement on the date first written above. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez ------------------------------- Name: Eric T. Martinez Title: Interim CFO and Vice President and Treasurer QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Michael C. Neus -------------------------------- Name: Michael C. Neus Title: Attorney-In-Fact GREENLAKE HOLDINGS II LLC By: /s/ Gary K. Duberstein -------------------------------- Name: Gary K. Duberstein Title: Vice President GREENLAKE HOLDINGS III LLC By: /s/ Gary K. Duberstein -------------------------------- Name: Gary K. Duberstein Title: Vice President EX-4.17 5 FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.17 FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT AMENDMENT, dated May 2, 2000 (this "Amendment Agreement"), among ------------------- Outboard Marine Corporation, a Delaware corporation (the "Company"), Quantum ------- Industrial Partners LDC, a Cayman Islands limited duration company ("QIP"), --- Greenlake Holdings II LLC, a Delaware limited liability company ("Greenlake --------- II"), Greenlake Holdings III LLC, a Delaware limited liability company ("Greenlake III") and Greenmarine Holdings LLC, a Delaware limited liability ------------- company ("Greenmarine") to that certain REGISTRATION RIGHTS AGREEMENT, dated ----------- January 28, 2000 (the "Existing Agreement"), among the Company, QIP, Greenlake ------------------ II, and Greenmarine. Unless otherwise set forth in this Amendment Agreement, capitalized terms have the respective meanings assigned to them in the Existing Agreement. WHEREAS, the Company, QIP, Greenlake II and Greenmarine entered into the Existing Agreement in connection with the acquisition by QIP and Greenlake II on January 28, 2000 of an aggregate of 650,000 shares of the Company's Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred ------------------ Stock"), and warrants (the "Existing Warrants") to purchase an aggregate of - ----- ----------------- 5,750,000 shares of the Company's Common Stock in order to grant to the holders of such securities registration rights with respect thereto; and WHEREAS, the Company proposes to issue and sell to QIP and Greenlake III or their affiliates $15,000,000 aggregate principal amount of the Company's Subordinated Notes due June 1, 2000 (the "Subordinated Notes"), and warrants ------------------ (the "New Warrants") to purchase an aggregate of 330,000 shares of the Company's ------------ Common Stock pursuant to the terms of a Subordinated Note and Warrant Purchase Agreement, dated the date hereof (the "Subordinated Notes Purchase Agreement"), ------------------------------------- among the Company, QIP and Greenlake III; and WHEREAS, the Subordinated Notes are convertible, under certain circumstances, into shares of the Company's Series B Convertible Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"); and ------------------------ WHEREAS, in order to induce each of QIP and Greenlake III to purchase the Subordinated Notes and New Warrants from the Company, the Company has agreed to amend the Existing Agreement to grant registration rights with respect to the shares of Common Stock issuable upon exercise of the New Warrants or upon conversion of the shares of Series B Preferred Stock; WHEREAS, the Existing Agreement provides that the Existing Agreement may amended by an amendment in writing signed by the Company and the Stockholders holding Registrable Securities representing at least a majority of the aggregate number of Registrable Securities owned by all of the Stockholders; and 2 WHEREAS, QIP, Greenlake II and Greenmarine hold, in the aggregate, in excess of a majority of the aggregate number of Registrable Securities owned by all of the Stockholders; NOW, THEREFORE, the Company, QIP, Greenlake II, Greenlake III and Greenmarine hereby agree to amend the Existing Agreement as follows: 1. Amendments to Section 1 of the Existing Agreement (Definitions). --------------------------------------------------------------- (a) Section 1 of the Existing Agreement is hereby amended to add the following additional definitions: "Amendment Agreement" means the Amendment Agreement, dated ------------------- May 2, 2000, among the Company, QIP, Greenlake II, Greenlake III and Greenmarine, amending that certain Registration Rights Agreement, dated January 28, 2000, among the Company, QIP, Greenlake II, and Greenmarine. "Existing Agreement" is defined in the preamble to the ------------------ Amendment Agreement. "Existing Warrants" is defined in the first recital of the ----------------- Amendment Agreement. "Greenlake II" is defined in the preamble to the Amendment ------------ Agreement. "Greenlake III" is defined in the preamble to the Amendment ------------- Agreement. "New Warrants" is defined in the second recital of the ------------ Amendment Agreement. "Series A Preferred Stock" is defined in the first recital ------------------------ of the Amendment Agreement. "Series B Preferred Stock" is defined in the third recital ------------------------ of the Amendment Agreement. 3 "Subordinated Notes" is defined in the second recital of the ------------------ Amendment Agreement. "Subordinated Notes Purchase Agreement" is defined in the ------------------------------------- second recital of the Amendment Agreement. (b) Section 1 of the Existing Agreement is hereby further amended by substituting the following definitions for the definition of such terms contained in the Existing Agreement: "Preferred Stock" means the shares of the Company's Series A --------------- Preferred Stock and Series B Preferred Stock. "Registrable Securities" means each of the following: (a) ---------------------- any and all shares of Common Stock owned by the Designated Holders after giving effect to the consummation of the transactions contemplated by the Subordinated Notes Purchase Agreement or issued or issuable to such Designated Holders upon conversion of shares of Preferred Stock (including, without limitation, shares of Common Stock issued or issuable upon conversion of any shares of Series B Preferred Stock which may be issued upon conversion of the Subordinated Notes) or exercise of the Warrants and (b) any shares of Common Stock issued or issuable to any of the Designated Holders with respect to the Registrable Securities by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise and any shares of Common Stock issuable upon conversion, exercise or exchange thereof. "Stockholders" means each of QIP, Greenlake II, Greenlake ------------ III and Greenmarine and any transferee of any of them to whom Registrable Securities are transferred in accordance with Section 10(f) of this Agreement. "Stockholders' Agreement" means the Stockholders' Agreement, ----------------------- dated January 28, 2000, among the Company, QIP and Greenlake II, as the same may be amended from time to time. "Warrants" means the Existing Warrants and the New Warrants. -------- 2. Amendments to Section 10 of the Exiting Agreement ------------------------------------------------- (Miscellaneous). - --------------- (a) Section 10(k) of the Existing Agreement is hereby amended and restated to read in its entirety as follow: 4 (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 and in the Stock Purchase Agreement, the Subordinated Notes Purchase Agreement and the Stockholders' Agreement. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. (b) Section 10(m) of the Existing Agreement is hereby amended and restated to read in its entirety as follow: (m) Other Agreements. Nothing contained in this Agreement ---------------- shall be deemed to be a waiver of, or release from, any obligations any party hereto may have under, or any restrictions on the transfer of Registrable Securities or other securities of the Company imposed by, any other agreement including, but not limited to, the Stock Purchase Agreement, the Subordinated Notes Purchase Agreement or the Stockholders' Agreement. 3. Miscellaneous. ------------- 3.1 Headings. The headings in this Amendment Agreement are for -------- convenience of reference only and shall not limit or otherwise affect the meaning hereof. 3.2 GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED ------------- AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION. 3.3 Continuation of Existing Agreement. Any reference in the ---------------------------------- Existing Agreement to "this Agreement" of "hereof" or using words of similar meaning, shall be deemed to refer to the Existing Agreement as amended by this Amendment Agreement. Except as specifically amended hereby, the Existing Agreement shall continue in full force and effect in accordance with its terms. [Remainder of Page Intentionally Left Blank] 5 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Amendment Agreement on the date first written above. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez -------------------------------------- Name: Eric T. Martinez Title: Interim CFO and Vice President and Treasurer QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Michael C. Neus -------------------------------------- Name: Michael C. Neus Title: Attorney-In-Fact GREENLAKE HOLDINGS II LLC By: /s/ Gary K. Duberstein -------------------------------------- Name: Gary K. Duberstein Title: Vice President GREENLAKE HOLDINGS III LLC By: /s/ Gary K. Duberstein -------------------------------------- Name: Gary K. Duberstein Title: Vice President GREENMARINE HOLDINGS LLC By: /s/ Michael C. Neus -------------------------------------- Name: Michael C. Neus Title: Attorney-In-Fact EX-4.18 6 WARRANT TO PURCHASE SHARES OF COMMON STOCK EXHIBIT 4.18 THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE EXERCISE OR CONVERSION THEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE SECURITIES REPRESENTED HEREBY. TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS. -------------------------- Date: May 2, 2000 WARRANT TO PURCHASE 330,000 SHARES OF COMMON STOCK OF OUTBOARD MARINE CORPORATION Void after 5:00 P.M. (Eastern Time) on the Expiration Date (as defined herein) THIS CERTIFIES that Quantum Industrial Partners LDC (the "Warrant Holder"), or registered assigns, is entitled to purchase from OUTBOARD MARINE CORPORATION (the "Company"), a Delaware corporation, at any time after the date hereof and until 5:00 P.M. (Eastern Time) on the Expiration Date, Three Hundred and Thirty Thousand (330,000) fully paid and nonassessable shares of Common Stock of the Company, $.01 par value per share (the "Common Stock"), at a purchase price of $.01 per share, in each case subject to adjustment as provided in Section 6 hereof. 1 1. Definitions. For the purpose of this Warrant: ----------- (a) "Expiration Date" shall mean May 2, 2010. --------------- (b) "Warrant Price" shall mean the price per share at which ------------- shares of Common Stock of the Company are purchasable hereunder, as such price may be adjusted from time to time hereunder. (c) "Warrant Shares" shall mean the Common Stock purchased upon -------------- exercise of Warrants. (d) "Warrants" shall mean this original Warrant to purchase -------- Common Stock of the Company and any and all Warrants which are issued in exchange or substitution for the Warrant pursuant to the terms of this Warrant. 2. Method of Exercise of Warrants. This Warrant may be exercised at ------------------------------ any time and from time to time after the date hereof and prior to 5:00 P.M. (Eastern Time) on the Expiration Date, in whole or in part (but not as to fractional shares), by the surrender of the Warrant, manually or by facsimile transmission, with the Purchase Agreement attached hereto as Exhibit A properly --------- completed and duly executed, at the principal office of the Company at the address set forth in Section 10(ii) hereof, or such other location which shall at that time be the principal office of the Company (the "Principal Office"), ---------------- and upon payment to it by certified check or bank draft or wire transfer of immediately available funds to the order of the Company of the purchase price for the shares to be purchased upon such exercise. The person entitled to the shares so purchased shall be treated for all purposes as the holder of such shares as of the close of business on the date of exercise and certificates for the shares of stock so purchased shall be delivered to the person so entitled within a reasonable time, not exceeding thirty (30) days, after such exercise. Unless this Warrant has expired, a new Warrant of like tenor and for such number of shares as the holder of this Warrant shall direct, representing in the aggregate the right to purchase a number of shares with respect to which this Warrant shall not have been exercised, shall also be issued to the holder of this Warrant within such time. 3. Conversion Right. ---------------- (a) In lieu of the payment of the Exercise Price, the Warrant Holder shall have the right (but not the obligation), to require the Company to convert this Warrant, in whole or in part, into shares of Common Stock (the "Conversion Right") as provided for in this Section 3. Upon exercise of the --------- ----- Conversion Right, the Company shall deliver to the Warrant Holder (without payment by the Warrant Holder of any of the Warrant Price) in accordance with Section 2 that number of shares of Common Stock equal to the quotient obtained by dividing (i) the value of the Warrant at the time the Conversion Right is exercised (determined by subtracting the aggregate Warrant Price in effect immediately prior to the exercise of the Conversion Right from the aggregate Current Market Price (as defined herein) for the shares of Common Stock issuable upon exercise of the Warrant immediately prior to the exercise of the Conversion Right) 2 by (ii) the Current Market Price of one share of Common Stock immediately prior to the exercise of the Conversion Right. (b) The Conversion Right may be exercised by the Warrant Holder at any time and from time to time prior to 5:00 p.m. (Eastern Time) on the Expiration Date by surrender of the Warrant, together with notice of such exercise, to the Company, and specifying the total number of shares of Common Stock that the Warrant Holder will be issued pursuant to such conversion. (c) Current Market Price of a share of Common Stock as of a particular date (the "Determination Date") shall mean the average closing price ------------------ of the Company's Common Stock on the principal securities exchange or market on which such shares are then traded for the last thirty (30) trading days prior to the Determination Date, or if the Common Stock is not traded on any such principal securities exchange or market at the time the Conversion Right is exercised, a market price per share determined in good faith by the Board of Directors of the Company or, if such determination is not satisfactory to the Warrant Holder, by a nationally recognized investment banking firm selected by the Company and the Warrant Holder, the expenses for which shall be borne equally by the Company and the Warrant Holder. 4. Exchange. This Warrant is exchangeable, upon the surrender -------- hereof by the holder hereof at the Principal Office of the Company, for new Warrants of like tenor registered in such holder's name and representing in the aggregate the right to purchase the number of shares purchasable under the Warrant being exchanged, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by said holder at the time of such surrender. 5. Transfer. Any transfer or assignment of this Warrant, whether in -------- whole or in part without, must be made in compliance with all applicable federal and state securities laws and the Company shall not be required to give effect to any such purported transfer or assignment unless it is reasonably satisfied that such transfer has been made in compliance with all applicable federal and state securities laws. Subject to the immediately preceding sentence, this Warrant is transferable, in whole or in part, at the Principal Office of the Company by the holder hereof, in person or by duly authorized attorney, upon presentation of this Warrant, properly endorsed, for transfer. Each holder of this Warrant, by holding it, agrees that the Warrant, when endorsed in blank, may be deemed negotiable, and that the holder hereof, when the Warrant shall have been so endorsed, may be treated by the Company and all other persons dealing with the Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by the Warrant, or to the transfer thereof on the books of the Company, any notice to the contrary notwithstanding. 6. Certain Covenants of the Company. The Company covenants and -------------------------------- agrees that all shares which may be issued upon the exercise of this Warrant will, upon issuance, be duly authorized and validly issued, fully paid and nonassessable. The Company covenants and agrees that none of the shares which may be issued upon the exercise of this Warrant will, upon issuance, be in violation of or subject to any preemptive rights of any person. The Company further 3 covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 7. Adjustment of Warrant Price and Number of Shares. The number and ------------------------------------------------ kind of securities purchasable upon the exercise of the Warrants and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) Reclassification, Consolidation or Merger. At any time while the ----------------------------------------- Warrants remain outstanding and unexpired, in case of any reclassification or change of outstanding securities issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination of outstanding securities issuable upon the exercise of the Warrants) or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is a continuing corporation and which does not result in any reclassification or change of rights of outstanding securities issuable upon exercise of the Warrants, other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of outstanding securities issuable upon exercise of the Warrants), the Company, or such successor corporation, as the case may be, shall, without payment of any additional consideration therefor, execute new Warrants providing that the holders of the Warrants shall have the right to exercise such new Warrants (upon terms not less favorable to the holders than those then applicable to the Warrants) and to receive upon such exercise, in lieu of each share of Common Stock or other security theretofore issuable upon exercise of the Warrants, the kind and amount of shares of stock, other securities, money or property receivable upon such reclassification, change, consolidation or merger by the holder of one share of Common Stock or other security issuable upon exercise of the Warrants had the Warrants been exercised immediately prior to such reclassification, change, consolidation or merger. Such new Warrants shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 7. The provisions of this subsection 7(a) shall similarly apply to successive reclassifications, changes, consolidations and mergers. (b) Subdivision or Combination of Shares. If the Company at any ------------------------------------ time while the Warrants remain outstanding and unexpired shall subdivide or combine its Common Stock, (i) the Warrant Price shall be proportionately reduced, and the number of shares of Common Stock for which this Warrant may be exercised shall be proportionately increased, in case of subdivision of such shares, as of the effective date of such subdivision, or, if the Company shall take a record of holders of its Common Stock for the purpose of so subdividing, as of such record date, whichever is earlier, or (ii) the Warrant Price shall be proportionately increased, and the number of shares of Common Stock for which this Warrant may be exercised shall be proportionately reduced, in the case of combination of such shares, as of the effective date of such combination, or, if the Company shall take a record of holders of its Common Stock for the purpose of so combining, as of such record date, whichever is earlier. 4 (c) Stock Dividends. If the Company at any time while the --------------- Warrants remain outstanding and unexpired shall pay a dividend in shares of its Common Stock, or make other distribution to the holders of Common Stock or of options, warrants or rights to subscribe for or purchase shares of Common Stock or of evidences of indebtedness issued by the Company or any other person, then the Warrant Price shall be adjusted, as of the date the Company shall take a record of the holders of its Common Stock for the purpose of receiving such dividend or other distribution (or if no such record is taken, as at the date of such payment or other distribution), to that price determined by multiplying the Warrant Price in effect immediately prior to such payment or other distribution by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution (the "Fraction"), and the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted by multiplying such number by the reciprocal of the Fraction. The number of shares of Common Stock at any time outstanding shall not include any shares thereof then directly or indirectly owned or held by or for the account of the Company or any wholly-owned subsidiary. The provisions of this subsection 7(c) shall not apply under any of the circumstances for which an adjustment is provided in subsections 7(a) or 7(b). (d) Liquidating Dividends, Etc. If the Company at any time while -------------------------- the Warrants remain outstanding and unexpired makes a distribution of its assets to the holders of its Common Stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company's assets (other than under the circumstances provided for in the foregoing subsections 7(a) through 7(c)), the Warrant Holder shall be entitled to receive upon the exercise hereof, in addition to the shares of Common Stock receivable upon such exercise, and without payment of any consideration other than the Warrant Price, an amount of such assets so distributed equal to the value of such distribution per share of Common Stock multiplied by the number of shares of Common Stock which, on the record date for such distribution, are issuable upon exercise of this Warrant (with no further adjustment being made following any event which causes a subsequent adjustment in the number of shares of Common Stock issuable upon the exercise hereof), and an appropriate provision therefor shall be made a part of any such distribution. The value of a distribution which is paid in other than cash shall be determined by 75% of the members of the Board of Directors of the Company, or if 75% of the members of the Board of Directors are unable to agree upon the value of such consideration, the value thereof shall be determined by an independent investment bank of nationally recognized stature that is selected by 75% of the members of the Board of Directors. (e) Notice of Adjustments. Whenever the Warrant Price or the --------------------- number of shares of Common Stock purchasable under the terms of this Warrant at the Warrant Price shall be adjusted pursuant to this Section 6, the Company shall promptly prepare a certificate signed by its President or a Vice President and by its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a 5 description of the basis on which the Company's Board of Directors made any determination hereunder), and the Warrant Price and number of shares of Common Stock purchasable at that Warrant Price after giving effect to such adjustment, and shall promptly cause copies of such certificate to be mailed (by first class and postage prepaid) to the registered holder of this Warrant. 8. Fractional Shares. No fractional shares of the Company's Common ----------------- Stock will be issued in connection with any purchase hereunder but in lieu of such fractional shares, the Company shall make a cash refund therefor equal in amount to the product of the applicable fraction multiplied by the Warrant Price paid by the holder for its Warrant Shares upon such exercise. 9. Loss, Theft, Destruction or Mutilation. Upon receipt by the -------------------------------------- Company of evidence reasonably satisfactory to it that any Warrant has been mutilated, destroyed, lost or stolen, and in the case of any destroyed, lost or stolen Warrant, a bond of indemnity reasonably satisfactory to the Company, or in the case of a mutilated Warrant, upon surrender and cancellation thereof, the Company will execute and deliver in the Warrant Holder's name, in exchange and substitution for the Warrant so mutilated, destroyed, lost or stolen, a new Warrant of like tenor substantially in the form thereof with appropriate insertions and variations. 10. Notices. All notices, demands and other communications provided -------- for or permitted hereunder shall be made in writing and shall be by registered or certified first class mail, return receipt requested, telecopier, courier service, overnight mail or personal delivery: 6 (i) if to the Warrant Holder: Quantum Industrial Partners LDC Kaya Flamboyan 9, Villemstad Curacao Netherlands-Antilles with a copy to each of: Soros Fund Management LLC 888 Seventh Avenue New York, NY 10016 Telecopy: (212) 664-0544 Attention: Michael Neus, Esq. and Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019 Telecopy: (212) 757-3990 Attention: Richard Borisoff, Esq. (ii) if to the Company, to the attention of each of its Treasurer and General Counsel at: Outboard Marine Corporation 100 Sea-Horse Drive Waukegan, IL 60085 Telecopy: (847) 689-6246 with a copy to: Davis, Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Telecopy: (212) 450-4800 Attention: Julia K. Cowles, Esq. All such notices and communications shall be deemed to have been duly given when hand delivered by hand, if personally delivered; when delivered by courier or overnight mail, if delivered by commercial courier service or overnight mail; five (5) business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically 7 acknowledged, if telecopied. Any party may by notice given in accordance with this Section 10 designate another address or person for receipt of notices hereunder. 11. Headings. The descriptive headings of the several sections of -------- this Warrant are inserted for convenience only and do not constitute a part of this Warrant. 12. Payment of Taxes. The issuance of certificates for Warrant ---------------- Shares shall be made without charge to the Warrant Holder for any stock transfer or other issuance tax in respect thereto; provided, however, that the Warrant -------- ------- Holder shall be required to pay any and all taxes that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then Warrant Holder as upon the books of the Company. 13. Binding Effect; Benefits. This Warrant shall inure to the ------------------------ benefit of and shall be binding upon the Company and the Warrant Holder and their respective successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person other than the Company and the Warrant Holder, or their respective successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Warrant. 14. Severability. Any term or provision of this Warrant which is ------------ invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the terms and provisions of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction. 15. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED ------------- IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. 16. No Rights or Liabilities as Stockholders. No Warrant Holder ---------------------------------------- shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Common Stock that may at any time be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the Warrant Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until such Warrant Holder shall have exercised this Warrant and been issued Common Stock in accordance with the provisions hereof. Nothing contained in this Warrant shall be determined as imposing any liabilities on the Warrant Holder to purchase any securities, whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise. 8 17. Compliance with Securities Laws. ------------------------------- (a) The Warrant Holder, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired solely for the Warrant Holder's own account and not as a nominee for any other party, and for investment, and that the Warrant Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act or any state securities laws. Upon exercise of this Warrant, the Warrant Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired solely for the Warrant Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (b) This warrant and all shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE EXERCISE OR CONVERSION THEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE SECURITIES REPRESENTED HEREBY. TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS." 18. Market Stand-Off Agreement. Each holder of this Warrant or any -------------------------- portion hereof hereby agrees that, during the period of duration specified by the Company and, in the case of an underwritten public offering, an underwriter of Common Stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale, grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) all or any portion of this Warrant or shares of Common Stock issued or issuable upon exercise of the Warrant held by it at any time during such period except common stock included in such registration; provided, however, that such market stand-off time period shall not exceed 180 days in the case of an initial public offering and 90 days in the case of all other offerings. 9 In order to enforce the foregoing covenant, the Company may impose stop-transfer instruction with respect to the foregoing restriction until the end of such period. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer on the date of this Warrant. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez ---------------------------- 10 Exhibit A --------- PURCHASE AGREEMENT ------------------ Date: ______________________________ TO: The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby agrees to purchase __________ shares of Common Stock covered by such Warrant, and makes payment herewith in full therefor at the price per share provided by this Warrant. Signature: ________________________________ Address: ________________________________ ________________________________ ________________________________ * * * ASSIGNMENT ---------- For Value Received, __________________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered by such Warrant, to: NAME OF ASSIGNEE ADDRESS NO. OF SHARES - ---------------- ------- ------------- Dated: _______________________ Signature: _____________________________ Witness: _____________________________ 11 EX-10.24 7 SUBORDINATED NOTE DATE MAY 2, 2000 -1- EXHIBIT 10.24 THIS NOTE, AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE, AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF, MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF ARE SUBJECT TO A STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THIS NOTE. TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS. OUTBOARD MARINE CORPORATION SUBORDINATED NOTE $15,000,000 New York, New York May 2, 2000 SECTION 1. Payment of Principal and Interest. --------------------------------- OUTBOARD MARINE CORPORATION (the "Issuer"), a Delaware corporation, hereby promises to pay to the order of Quantum Industrial Partners LDC or its successors or assigns (the "Holder") the principal sum of Fifteen Million Dollars ($15,000,000). The principal amount of this Promissory Note (herein, this "Note") remaining unpaid from time to time shall bear interest from the date hereof, until paid in full, payable in accordance with Section 3 hereof. This Note is one of a series of notes (the "Notes") in the aggregate principal amount of $15,000,000 issued under the terms of a Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000 (the "Purchase Agreement"), among the Issuer, Quantum Industrial Partners LDC and Greenlake Holdings III LLC. All payments of principal and interest under this Note and the other Notes shall be paid ratably to the respective holders thereof (the "Holders") based on the respective outstanding principal amount of each of the Notes. The Issuer agrees to repay the entire principal amount of the Notes, and all accrued and unpaid interest -2- thereon, on the Maturity Date (as defined below), unless this Note has been converted in accordance with Section 6 hereof. SECTION 2. Maturity Date. ------------- The "Maturity Date" shall be June 1, 2000 (the "Initial Maturity Date"), provided, however, that at the Issuer's request, upon not less than five days written notice in advance of the Initial Maturity Date or the upcoming Extended Maturity Date (as defined below), as the case may be, the Issuer may, with the consent of the Holders, extend the Maturity Date for an additional thirty day period (each such extended Maturity Date being referred to as an "Extended Maturity Date"); provided, however, that no more than four such extensions shall be permitted hereunder. SECTION 3. Interest. -------- (a) Interest on all amounts outstanding under the Notes shall be payable on the Initial Maturity Date and each Extended Maturity Date, if any. Interest shall be paid on the unpaid principal amount of the Notes at the rate of 15% per annum. All interest on the Notes shall be calculated on the basis of a 365 day year and the actual number of days elapsed. The Issuer shall pay interest on any overdue principal at the rate per annum set forth above; it shall pay interest on any overdue payment of interest at the same rate to the extent lawful. (b) Notwithstanding anything herein to the contrary, the interest payable by the Issuer with respect to the Notes shall not exceed the maximum amount permitted by applicable law and, to the extent that any payments in excess of such permitted amount are received by the Holder, such excess shall be considered payments in respect of the principal amount of the Notes. SECTION 4. Payments Generally. ------------------ (a) Principal and interest hereunder shall be payable to the Holder without set-off or counterclaim by wire transfer of immediately available funds, in lawful money of the United States of America, to the bank account of the Holder as notified in writing to the Issuer. (b) If any payment on this Note becomes due and payable on a day other than a Business Day, the date such payment becomes due and payable shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable during such extension at the rate set forth in Section 3 hereof. SECTION 5. Optional Redemption. ------------------- At its option, the Issuer may prepay the Notes in whole or in part at any time or from time to time upon not less than 5 days' advance written notice to the Holder (the "Optional Redemption") but only to the extent that such Optional Redemption would not violate Section 10 -3- hereof or result in a default or event of default under or in respect of the Senior Obligations. If the Issuer exercises such Optional Redemption, there shall be no prepayment penalty or premium. SECTION 6. Mandatory Conversion. -------------------- Subject to the terms and provisions of this Section 6, the holders of the outstanding Notes shall have the right, at their option, exercisable by giving a Qualified Demand (as defined below) to the Issuer, to cause all outstanding indebtedness evidenced by the Notes (including default interest, if any, to the Conversion Time (as defined below)) to be converted, into shares of Series B Preferred Stock (as defined in the Purchase Agreement) as provided in the immediately following paragraph; provided, however, that (i) any Qualified -------- ------- Demand made on or prior to tenth day preceding the Maturity Date shall be deemed to be a demand to convert on the Maturity Date, and (ii) any Qualified Demand made subsequent to the tenth day preceding the Maturity Date shall be deemed to be a demand to convert on such date as may be selected by the Issuer and set forth in a written notice given to all holders of Notes but which shall in no event be earlier than the Maturity Date or later than the tenth day following the date of receipt by the Issuer of a Qualified Demand; provided further, ---------------- however, the receipt by the Issuer of a Qualified Demand at any time prior to - ------- the Maturity Date shall not prevent the Issuer from paying the Notes in full on the Maturity Date and upon such payment, any Qualified Demand theretofore received by the Issuer shall be null and void. As used herein, a "Qualified Demand," means a written demand to convert the Notes into shares of Series B Preferred Stock made upon the Issuer by the holders of not less than 75% of the outstanding principal amount of the Notes. Any such Qualified Demand shall state that such demand is being made pursuant to this Section 6 and shall set forth the amount (the "Proposed Series B Conversion Price") to be included in Section 5 (a) of the Certificate of Designation (as defined in the Purchase Agreement) as the "Conversion Price" of the shares of Series B Preferred Stock (the "Series B Conversion Price"). Upon receipt by the Issuer of a Qualified Demand, the Issuer shall notify the holders of the Notes in writing (an "Issuer Notice") whether or not it agrees to the Proposed Series B Conversion Price, and if it does so agree it shall further state that it has received a Qualified Demand and that the Issuer will either (i) pay the full principal amount of the Notes and all accrued interest thereon on the then current Maturity Date (it being understood that the Issuer may elect this alternative only if such payment would not violate Section 10 hereof or result in a default or event of default under or in respect of the Senior Obligations), or (ii) issue, on the date specified in the Issuer Notice (the "Specified Date"), in exchange for the delivery of the Notes, shares of Series B Preferred Stock at the rate of one share of Series B Preferred Stock for each $100 of outstanding principal amount of the Notes and accrued interest thereon, if any, to the Specified Date, and cash in lieu of fractional shares. If the Qualified Demand was received by the Issuer on or prior to the tenth day preceding the Maturity Date, the Specified Date shall be the Maturity Date; if the Qualified Demand was received by the Issuer after the tenth day preceding the Maturity Date the Specified Date shall be a Business Day selected by the Issuer which shall not be earlier than the Maturity Date nor later than 10 days following the date on which the Issuer received the Qualified Demand. If the Issuer agrees to the Proposed Series B Conversion Price, such amount shall be the Series B Conversion Price and on or prior to the Conversion Date the -4- Issuer shall use its best efforts to (i) cause such amount to be set forth in the Certificate of Designation, and (ii) cause the Certificate of Designation to be duly executed on behalf of the Issuer and filed with the Secretary of State of the State of Delaware. If the Issuer does not agree with the Proposed Series B Conversion Price, it shall so inform the Holders, and it shall not be required to proceed with the mandatory conversion contemplated hereby. Under no circumstances will the Series B Conversion Price be greater than the conversion price then applicable to the shares of the Issuer's Series A Convertible Preferred Stock. Any conversion of the Notes shall be deemed to occur at 11:00 am New York time on the Specified Date (the "Conversion Time") and the rights of the holder of any Note shall cease with respect to such Note at such time and the holder of a Note shall thereafter be treated for all purposes as having become the record holder of the shares of Series B Preferred Stock into which such Note has been converted. Following the Conversion Time, the Issuer shall promptly deliver to each holder of a Note, upon surrender of such Note to the Issuer, a certificate representing the number of fully paid and nonassessable shares of Series B Preferred Stock into which such Note was converted, together with cash in lieu of any fractional shares. SECTION 7. Covenants. --------- In addition to the other undertakings herein contained, the Issuer hereby covenants to the Holder that so long as any amount payable hereunder is outstanding the Issuer shall perform the following obligations: (a) Use of Proceeds. The Issuer shall use the proceeds of the Notes as --------------- set forth in the Purchase Agreement. (b) Merger, Consolidation, etc. The Issuer shall not consolidate with or -------------------------- merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person unless: (i) either (A) the Issuer is the surviving corporation of such merger (in the case of a merger), or (B) the successor formed by such consolidation or the survivor of such merger (if other than the Issuer) or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Issuer as an entirety, as the case may be, is a corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and such Person has executed and delivered to the Holder its assumption (in form reasonably satisfactory to the Holder) of the due and punctual performance and observance of each covenant and condition of this Note; and (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. -5- SECTION 8. Events of Default. ----------------- Except upon the occurrence of an event under (e) or (f) below, whereupon this Note shall become immediately due and payable without notice or declaration by the Holder, the Holder may, subject to Section 10, by written notice to the Issuer, declare this Note immediately due and payable, whereupon this Note and all sums due hereunder shall become immediately due and payable without protest, presentment, demand or notice (except the notice referred to above in this Section 8) or without petition to any court, all of which are expressly waived by the Issuer, if any of the following events (each an "Event of Default") shall occur: (a) principal or interest due under this Note shall not be paid as and when due, whether at maturity, by declaration or otherwise, except where such payment is prohibited by the terms of Section 10; or (b) any representation by the Issuer in the Purchase Agreement shall prove to be false or incorrect in any material respect as of the date made; or (c) the Issuer shall default in any material respect in the due performance of any term or covenant of this Note (which is not the subject of another subsection of this Section 8) which default, if remediable, shall continue unremedied for a period of thirty (30) days after the earlier of (i) the day an officer of the Issuer obtains actual knowledge of such default, and (ii) the day the Holder gives written notice of such default to the Issuer; or (d) (i) the Issuer or any subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $2,000,000 beyond any period of grace provided with respect thereto, or (ii) the Issuer or any subsidiary is in default in the performance of or compliance with any term of any Indebtedness in an aggregate outstanding principal amount of at least $2,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment; or (e) the Issuer or any subsidiary shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator for itself or any of its assets or properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or any answer admitting the material allegations of a petition filed against it in any proceeding under any such law or if action shall be taken by the Issuer or such subsidiary for the purpose of effecting any of the foregoing, (vi) have commenced against it any case, proceeding or other action of a nature described in (i) through (v) above which results in the -6- entry of an order for relief, or which remains undismissed for a period of 60 days or (vii) take or be subject to any action similar to those specified in clauses (i) through (vi) in any jurisdiction; or (f) an order, judgment or decree shall be entered, without the application, approval or consent of the Issuer or any subsidiary, with respect to the Issuer or such subsidiary or all or a substantial part of the assets of the Issuer or any such subsidiary, appointing a receiver, trustee or liquidator of the Issuer or such subsidiary, or any similar order, judgment or decree shall be entered or appointment made in any jurisdiction, and such order, judgment or decree or appointment shall continue unstayed and in effect for a period of 60 days; or (g) a final judgment or judgments for the payment of money aggregating in excess of $2,000,000 are rendered against one or more of the Issuer and its subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay. SECTION 9. Application of Payments. ----------------------- Each payment or prepayment received by the Holder hereunder, except as expressly set forth herein, shall be applied, first, to the payment of accrued interest on this Note to the date of such payment and second, to the payment of the principal amount of this Note. SECTION 10. Subordination Agreement. ----------------------- (a) The Issuer covenants and agrees and the Holder, by the Holder's acceptance hereof, likewise covenants and agrees, for itself and any future holder of this Note or the Indebtedness evidenced hereby, that, to the extent and in the manner set forth below in this Section 10, the Company's Senior Obligations will be senior in right of payment to the Debt. The Holder by accepting this Note acknowledges and agrees that the subordination provisions set forth in this Section 10 are, and are intended to be, an inducement and a consideration to each holder of any Senior Obligation, whether such Senior Obligation was created or acquired before or after the issuance of this Note, to acquire and continue to hold, or to continue to hold, such Senior Obligation and such holder of Senior Obligations shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or continuing to hold, such Senior Obligations. (b) As used herein, "senior in right of payment" means that unless and until the Senior Obligations have been paid in full, without the express prior written consent of the holders of such Senior Obligations, the Holder will not take, demand (including by means of any legal action) or receive from the Issuer, and the Issuer will not make, give or permit, directly or indirectly, by set-off, redemption, purchase or in any other manner, any payment of or security for the whole or any part of the Debt (other than equity securities of the Issuer, including, but not limited to shares of Series B Preferred Stock upon conversion of the Note pursuant to Section 6 hereof); provided, however, that -------- ------- (x) subject to clauses (i), (ii), (iii) and (iv) below, the Issuer may make, and the Holder may receive, scheduled payments on account of the Debt in accordance with -7- the terms hereof except (i) during a Senior Blockage Period (as defined below), (ii) when a default in the payment of any principal of, premium if any, or interest on the Senior Obligations has occurred and is continuing or would result therefrom, (iii) when any noncompliance with the requirements of Section 12.1(a) of the Amended and Restated Loan and Security Agreement (as defined below) has occurred and is continuing or would result therefrom, or (iv) an Insolvency Event occurs, and (y) upon the acceleration of the maturity of any Senior Obligations, the Holder may accelerate the scheduled maturities of the Debt if and to the extent permitted hereby at such time but such acceleration shall not give the Holder any right to take, demand (including by means of any legal action) or receive from the Issuer, or the Issuer the right to make, give or permit, directly or indirectly, by set-off, redemption, purchase or in any other manner, any payment of or security for the whole or any part of the Debt unless and until the Senior Obligations have been paid in full. As used herein "Senior Blockage Period" means a period commencing on the date that the holders of the Senior Obligations shall have delivered to the Issuer a Senior Blockage Notice (as defined below) and ending on the earliest of (A) 189 days after the date of such Senior Blockage Notice, (B) the date the default identified in such Senior Blockage Notice is cured or waived, (C) the date that the holders of the Senior Obligations shall have given notice to the Issuer of termination of the Senior Blockage Period, and (D) the date on which the Senior Obligations are paid in full. As used herein "Senior Blockage Notice" means a notice given to the Issuer by a holder of Senior Obligations that a Senior Blockage Event (as defined below) has occurred; provided, however, that under no circumstances may a Senior Blockage Notice be given more than one time during any 365 day consecutive period by or one behalf of each of (x) the holders of the Issuer's 10-3/4% Senior Notes due 2008, and (y) the holders of the Secured Obligations, as defined in the Amended and Restated Loan and Security Agreement. As used herein "Senior Blockage Event" means a default in the performance or observance of any term or condition relating to any Senior Obligations (other than a default in the payment of any principal of, premium, if any, or interest on the Senior Obligations or a default in compliance with the requirements of Section 12.1(a) of the Amended and Restated Loan and Security Agreement) has occurred and is continuing that, with the passage of time or the giving of notice, or both, permits or would permit the holders of the Senior Obligations to declare such Senior Obligations to be due and payable. (c) Any payment or distribution of assets of the Issuer, whether in cash, property or securities, to which the Holder would be entitled except for the provisions hereof, shall be paid or delivered by the Holder, or any receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other Person making such payment or distribution, to the holders of the Senior Obligations or their representative, as their respective interests may appear, to the extent necessary to pay in full all Senior Obligations, before any payment or distribution shall be made to the Holder. (d) The expressions "prior payment in full," "payment in full," "paid in full" and any other similar terms or phrases when used herein with respect to the Senior Obligations shall mean the payment in full in money or money's worth of all the Senior Obligations and the expression "any payment of or security for the whole or any part of the Debt" and any other similar terms of phrases when used herein shall not be deemed to include a payment or distribution of stock or -8- securities of the Issuer provided for by a plan or reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law or of any other corporation provided for by such plan of reorganization or readjustment, which stock or securities are subordinated in right of payment to all then outstanding Senior Obligations to the same extent as this Note is so subordinated as provided in this Section 10. The consolidation of the Issuer with, or the merger of the Issuer into, another Person or the liquidation or dissolution of the Issuer following the conveyance or transfer of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Section 7(b) shall not be deemed a "proceeding" for the purposes of this Section 10 if the Person formed by such consolidation or into which the Issuer is merged or the Person which acquires by conveyance or transfer such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Section 7(b). (e) If any payment or distribution, whether consisting of money, property or securities, is collected or received by the Holder in respect of the Debt, except payments of principal or interest permitted hereunder, the Holder forthwith shall promptly deliver the same to Issuer, in the form received, duly endorsed to Issuer. Until so delivered, such payment or distribution shall be held in trust by the Holder as the property of Issuer (subject to the interests of any holders of Senior Obligations, as their interests may appear), segregated from other funds and property held by the Holder. (f) As used herein, "Senior Obligations" shall mean collectively the unpaid principal of, premium, if any, and interest on (including, without limitation, interest accruing after the maturity thereof and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Issuer, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Issuer's outstanding 10-3/4% Senior Notes due 2008, and all Secured Obligations, as defined in the Amended and Restated Loan and Security Agreement, dated effective as of January 6, 1998, as amended through and including the Eighth Amendment thereto, dated effective as of January 31, 2000 (the "Amended and Restated Loan and Security Agreement"), by and among the Issuer and the other borrowers and guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as agent for such lenders, now or hereafter owing (including, without limitation, any increases thereof), and any and all renewals, extensions, restatements, replacements and refinancing thereof (whether among the same parties, or any of them, or with any other lender or lenders). (g) Issuer and Holder each agrees that (i) any default under or in connection with the Senior Obligations may be waived, and any demand for payment of any Senior Obligations made by any holder of Senior Obligations may be rescinded, in whole or in part by such holder, (ii) the holders of any Senior Obligations may exercise, or refrain from exercising, any rights and remedies in respect of the Senior Obligations, (iii) the Senior Obligations may be extended, modified, increased, compromised or released, in whole or in part and (iv) any agreement evidencing, securing or otherwise governing or relating to the Senior Obligations may be -9- amended, renewed, extended, refinanced, increased, replaced or otherwise modified, in each case without impairing, releasing or otherwise affecting the provisions of Section 10. (g) Nothing set forth in this Section 10 shall be deemed in any way to limit or prevent the holder of this Note from exercising its rights under, or the Issuer from complying with its obligations under, Section 6 hereof, or prevent the Issuer at any time from issuing or the Holder from at any time receiving and retaining equity securities of the Issuer in exchange for or in full or partial satisfaction of the Debt evidenced hereby, regardless of whether or not any payment by the Issuer under this Note would otherwise be prohibited under the terms of this Section 10. SECTION 11. Additional Definitions. ---------------------- As used herein, the following terms have the respective meanings set forth below: "Business Day" means, for the purposes of this Note, any day other than a Saturday, a Sunday or a day on which commercial banks in New York are required or authorized to be closed. "Capital Leases" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with generally accepted accounting principles. "Debt" means collectively the unpaid principal of, premium, if any, and interest on (including, without limitation, interest accruing after the maturity date of the Notes and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Issuer, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Notes and all other indebtedness of the Issuer in respect thereof, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, in each case whether on account of principal, premium, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise. "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet -10- condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Indebtedness" with respect to any Person, means, on any date of determination (without duplication): (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business consistent with past practice); (c) all liabilities appearing on its balance sheet in accordance with generally accepted accounting principles in respect of Capital Leases; (d) all liabilities for borrowed money secured by any lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. "Insolvency Event" means (A) a Loan Party (as defined in the Amended and Restated Loan and Security Agreement) shall commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or -11- composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, (vii) take any corporate action for the purpose of authorizing any of the foregoing or (B) a case or other proceeding shall be commenced against a Loan Party or any of its subsidiaries in any court of competent jurisdiction seeking relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or the appointment of a trustee, receiver, custodian, liquidator or the like of a Loan Party or any of its subsidiaries or of all or any substantial part of the assets, domestic or foreign, of a Loan Party or any of its subsidiaries. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Preferred Stock" means any class of capital stock of a corporation that is preferred over any other class of capital stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its subsidiaries or such Person and one or more of its subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its subsidiaries or such Person and one or more of its subsidiaries. Unless the context otherwise clearly requires, any reference to a "subsidiary" is a reference to a subsidiary of the Issuer. "Swaps" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Note, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. SECTION 12. Issuer's Obligations Unconditional. ---------------------------------- -12- Except as expressly set forth herein, the obligations of the Issuer hereunder are unconditional and neither any reference to any other document or agreement herein nor the subordination for the benefit of the holders of the Senior Obligations pursuant to Section 10 hereof is intended or shall be deemed to render the Issuer's obligations hereunder conditional as between the Issuer and the Holder. SECTION 13. Assignment, Etc. ---------------- (a) This Note shall be binding upon each of the Issuer, the Holder and their respective successors and assigns; provided, however, the Issuer may -------- ------- not assign this Note without the prior written consent of the Holder. The Holder may sell, assign or transfer this Note without any requirement of consent by the Issuer, provided, however, that the Indebtedness evidenced by this Note shall continue to be subject to the terms of Section 10 hereof. (b) The Holder, by acceptance hereof, acknowledges that this Note and the shares of Series B Preferred Stock issuable upon conversion hereof in accordance with Section 6 hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Note or any shares of Series B Preferred Stock issuable upon conversion hereof in accordance with Section 6 hereof except under circumstances that will not result in a violation of the Securities Act of 1933 or any state securities laws. Upon conversion of this Note in accordance with Section 6 hereof, the Holder shall, if requested by the Issuer, confirm in writing, in a form reasonably satisfactory to the Issuer, that the shares of Series B Preferred Stock to be issued to such Holder are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) All shares of Series B Preferred Stock issuable upon conversion hereof in accordance with Section 6 hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE CONVERSION HEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE SECURITIES REPRESENTED HEREBY. -13- TRANSFEREES OF SUCH SECURITIES SHOULD REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS." SECTION 14. Indemnification. --------------- The Issuer shall pay, indemnify, and hold the Holder harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees and expenses) or disbursements of any kind or nature whatsoever ("Losses") arising out of or in connection with (a) the enforcement of any rights of the Holder under this Note, and (b) any claim (whether or not asserted in any legal proceeding), litigation, investigation, arbitration or proceeding relating to this Note (collectively, "indemnified liabilities") provided that the Issuer -------- shall have no obligation hereunder to the Holder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Holder. The agreements in this Section 11 shall survive the repayment of this Note and all other amounts payable hereunder. SECTION 15. No Waiver, Cumulative Remedies. ------------------------------ The Holder shall not by any act (except by a written instrument signed by the Holder), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Holder, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Holder would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. SECTION 16. Waiver of Protest, Presentment, etc. ------------------------------------ The Issuer hereby waives protest, presentment, notice of dishonor and notice of acceleration of maturity and agrees to continue to remain bound for the payment of principal, interest and all other sums due under this Note notwithstanding any change or changes by way of release, surrender, exchange, modification or substitution of any security for this Note or by way of any extension or extensions of time for the payment of principal and interest. SECTION 17. Notice. ------ All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be sent by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: -14- a. if to the Issuer, to the attention of each of its Treasurer and General Counsel, at: Outboard Marine Corporation 100 Sea-Horse Drive Waukegan, IL 60085 Facsimile No.: (847) 689-6246 b. if to the Holder: Quantum Industrial Parters LDC Kaya Flamboyan 9, Villemstad Curacao Netherlands-Antilles with a copy to: Soros Fund Management LLC 888 Seventh Avenue New York, NY 10016 Telecopy: (212) 664-0544 Attention: Michael Neus, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five business days after being deposited in the mail, post prepaid, if mailed; and when receipt is acknowledged, if telecopied. The Issuer or the Holder may change the address to which notices, demands and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. SECTION 18. Governing Law. ------------- THIS NOTE AND THE LEGAL RELATIONS BETWEEN THE ISSUER AND THE HOLDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. SECTION 19. Consent to Jurisdiction and Service of Process. ---------------------------------------------- Any legal action, suit or proceeding arising out of or relating to this Note or the agreements and transactions contemplated hereby may be instituted only in a state or federal court of the State of New York located in the borough of Manhattan and the Issuer agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that -15- it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that the action, suit or proceeding is brought in an inconvenient forum, that the venue of the action, suit or proceeding is improper or that this Note, the agreements contemplated hereby or the subject matter hereof or thereof may not be enforced in or by such court. The Issuer further irrevocably submits to the jurisdiction of any such court in any such action, suit or proceeding. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against the Issuer if given by registered or certified mail, return receipt requested, or by any other means of mail that requires a signed receipt, postage prepaid, mailed to the Issuer as herein provided. SECTION 20. WAIVER OF JURY TRIAL. -------------------- THE ISSUER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY AGREEMENT OR TRANSACTIONS CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM IN CONNECTION HEREWITH. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez -------------------- Name: Eric T. Martinez Title: Interim CFO and Vice President and Treasurer EX-11 8 COMPUTATION OF PER SHARE EARNINGS (LOSS) OUTBOARD MARINE CORPORATION EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
Three Months Ended March 31, ------------------------------ (Dollars and Shares in Millions Except per Share Data) 2000 1999 -------------- ------------- Basic Earnings per Share: Net loss of common shareholders ($31.5) ($11.9) Weighted Average Number of Shares 20.4 20.4 ------------- --------------- Basic Earnings (Loss) Per Share ($1.54) ($0.58) ============= =============== Diluted Earnings Per Shares: Net Income (Loss) ($31.5) ($11.9) Weighted Average Number of Shares 20.4 20.4 Common Stock Equivalents (Stock Options) ---- ---- ------------- --------------- Average Shares Outstanding 20.4 20.4 ------------- --------------- Diluted Earnings (Loss) Per Share ($1.54) ($0.58) ============= ===============
EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 39,000 0 142,700 0 194,400 396,200 194,200 0 901,200 371,000 236,400 0 30,900 200 83,000 901,200 269,100 269,100 225,700 225,700 63,700 0 8,306 (28,600) 1,100 (29,700) 0 0 0 (31,500) (1.54) (1.54)
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