-----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, MaioQQ9x3X8zrXNxmfeefeytS1mSEVqgwK/IQtFfZvbfQ/p2FhLTLeFmF5MwF0rK HXrIAqgORzkqICCBg7X1Dg== /in/edgar/work/20000815/0000950131-00-004943/0000950131-00-004943.txt : 20000922 0000950131-00-004943.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950131-00-004943 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OUTBOARD MARINE CORP CENTRAL INDEX KEY: 0000075149 STANDARD INDUSTRIAL CLASSIFICATION: [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: 701534 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 0001.txt 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 June 30, 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 of (IRS Employer incorporation or organization) Identification No.) 100 Sea Horse Drive Waukegan, Illinois 60085 (Address of principal executive offices) (Zip Code)
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 June 30, 2000 was 20,439,531 shares. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OUTBOARD MARINE CORPORATION FORM 10-Q PART I FINANCIAL INFORMATION ITEM 1--FINANCIAL STATEMENTS OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
Six Months Three Months Ended Ended June June 30, 30, -------------------- -------------- 2000 1999 2000 1999 --------- --------- ------ ------ (Dollars in millions except amounts per share) Net sales................................ $ 296.6 $ 315.6 $565.7 $570.8 Costs of goods sold...................... 251.5 245.4 477.2 447.3 --------- --------- ------ ------ Gross earnings......................... 45.1 70.2 88.5 123.5 Selling, general, and administrative expense................................. 59.9 43.3 124.3 100.4 Restructuring income..................... -- (14.0) -- (14.0) --------- --------- ------ ------ Earnings (loss) from operations........ (14.8) 40.9 (35.8) 37.1 Interest expense......................... 9.6 7.9 17.9 16.0 Other income, net........................ (0.8) (1.9) (1.5) (3.0) --------- --------- ------ ------ Earnings (loss) before provision for income taxes.......................... (23.6) 34.9 (52.2) 24.1 Provision for income taxes............... 1.5 1.1 2.6 2.2 --------- --------- ------ ------ Earnings (loss) before preferred dividends............................. (25.1) 33.8 (54.8) 21.9 Preferred dividends...................... 2.9 -- 4.7 -- --------- --------- ------ ------ Net earnings (loss) of common shareholders.......................... $ (28.0) $ 33.8 $(59.5) $ 21.9 ========= ========= ====== ====== Net earnings (loss) of common shareholders............................ $ (28.0) $ 33.8 $(59.5) $ 21.9 Other comprehensive income (expense) Foreign currency translation adjustments........................... (1.3) 0.7 (2.8) (0.9) Minimum pension liability.............. -- 15.5 -- 15.5 --------- --------- ------ ------ Other comprehensive income (expense)........................... (1.3) 16.2 (2.8) 14.6 --------- --------- ------ ------ Comprehensive income (loss).......... $ (29.3) $ 50.0 $(62.3) $ 36.5 ========= ========= ====== ====== Net earnings (loss) per share of common stock Basic.................................. $ (1.37) $ 1.66 $(2.92) $ 1.07 ========= ========= ====== ====== Diluted................................ $ (1.37) $ 1.64 $(2.92) $ 1.06 ========= ========= ====== ====== Average shares of common stock outstanding Basic.................................. 20.4 20.4 20.4 20.4 Diluted................................ 20.4 20.6 20.4 20.6
The accompanying notes are an integral part of these statements. 2 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
June 30, December 31, 2000 1999 ----------- ------------ (Unaudited) (Dollars in millions) ASSETS Current Assets: Cash and cash equivalents............................ $ 42.8 $ 25.0 Receivables, net..................................... 123.8 104.9 Inventories, net..................................... 191.6 188.6 Other current assets................................. 22.5 17.2 ------- ------- Total current assets............................... 380.7 335.7 Restricted cash........................................ 22.3 30.6 Property, plant and equipment, net..................... 190.9 200.5 Product tooling, net................................... 28.9 29.5 Goodwill, net.......................................... 105.7 107.2 Trademarks, patents and other intangibles, net......... 78.3 79.3 Other assets........................................... 70.3 65.6 ------- ------- Total assets....................................... $ 877.1 $ 848.4 ======= ======= LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Loans payable........................................ $ 66.4 $ 58.0 Accounts payable..................................... 100.1 99.2 Accrued and other.................................... 181.2 183.2 Current maturities of long-term debt................. 7.0 8.4 ------- ------- Total current liabilities.......................... 354.7 348.8 Long-term debt......................................... 235.7 241.4 Postretirement benefits other than pensions............ 97.9 99.1 Other non-current liabilities.......................... 79.7 78.8 Preferred stock........................................ 49.6 -- Shareholders' investment Common stock and capital surplus..................... 318.9 277.5 Accumulated deficit.................................. (248.6) (189.2) Accumulated other comprehensive income............... (10.8) (8.0) ------- ------- Total shareholders' investment..................... 59.5 80.3 ------- ------- Total liabilities and shareholders' investment..... $ 877.1 $ 848.4 ======= =======
The accompanying notes are an integral part of these statements. 3 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ---------------------- 2000 1999 ---------- ---------- (Dollars in Millions) Cash Flows from Operating Activities: Net earnings (loss) of common shareholders........... $ (59.5) $ 21.9 Adjustments to reconcile net earnings (loss) of common shareholders to net cash provided by (used for) operations: Depreciation and amortization...................... 27.0 24.6 Curtailment gain................................... -- (7.1) Restructuring income............................... -- (14.0) Changes in current accounts excluding the effects of noncash transactions: Increase in receivables.......................... (18.9) (0.3) (Increase) decrease in inventories............... (3.0) 22.2 (Increase) decrease in other current assets...... (5.3) 0.1 (Decrease) increase in accounts payable and accrued liabilities............................. (1.1) 5.3 Other, net....................................... (5.4) (0.3) ---------- ---------- Net cash provided by (used for) operating activities.................................... (66.2) 52.4 ---------- ---------- Cash Flows from Investing Activities: Expenditures for plant and equipment, and tooling.... (17.3) (22.1) Proceeds from sale of plant and equipment............ 4.8 1.3 ---------- ---------- Net cash used for investing activities......... (12.5) (20.8) ---------- ---------- Cash Flows from Financing Activities: Net increase (decrease) in short-term debt........... 8.4 (3.4) Payments of long-term debt, including current maturities.......................................... (6.1) (10.9) Proceeds from issuance of preferred stock and warrants............................................ 86.6 -- Decrease (increase) in restricted cash............... 8.3 (0.7) Other, net........................................... -- (0.2) ---------- ---------- Net cash provided by (used for) financing activities.................................... 97.2 (15.2) ---------- ---------- Exchange rate effect on cash........................... (0.7) 0.7 ---------- ---------- Net increase in cash and cash equivalents.............. 17.8 17.1 Cash and cash equivalents at beginning of period....... 25.0 13.6 ---------- ---------- Cash and cash equivalents at end of period............. $ 42.8 $ 30.7 ========== ========== Supplemental Cash Flow Disclosures: Interest paid........................................ $ 19.2 $ 15.9 ========== ========== Income taxes paid.................................... $ 2.8 $ 1.9 ========== ========== Preferred dividends accrued.......................... $ 4.7 $ -- ========== ==========
The accompanying notes are an integral part of these statements. 4 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 to 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. As of June 30, 2000, the Company was in compliance with all of its covenants except its minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") covenant. On August 9, 2000 the Company entered into a Ninth Amendment to the Amended and Restated Loan and Security Agreement which among other things (i) waived compliance with the June 30, 2000 EBITDA covenant test and (ii) established new EBITDA covenant tests for the quarters ending September 30 and December 31 of 2000. The Company's ability to comply 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. On May 2, 2000, the Company sold a $15.0 million Subordinated Note (the "Sub-note") and warrants (the "May 2, 2000 Warrants") to purchase 330,000 shares of the Company's Common Stock, par value $0.01, to Quantum Industrial Partners LDC. The Sub-note bears an interest rate of 15% and has an initial maturity date of May 31, 2000, which can be extended for four additional 30-day periods upon 5 days written notice by the Company. The Sub-note is convertible into shares of the Company's Series B Convertible Preferred Stock, which if issued, would have terms and conditions similar in nature to the Series A Preferred Stock (See Note 6 of the Notes to Condensed Consolidated Financial Statements). The conversion price of the Series B Convertible Preferred Stock has not yet been set. The Company has extended the term of the Sub-note and anticipates that the Sub-note will be extended to September 30, 2000 at which time it may be converted into shares of the Company's Series B Convertible Preferred Stock. The May 2, 2000 Warrants are excercisable 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. Upon the sale of the Sub-note and the May 2, 2000 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 May 2, 2000 Warrant on the date of issuance using the 5 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Black-Scholes option-pricing model was $4.94 for an aggregate fair value of $1.6 million. The fair value of the May 2, 2000 Warrants was estimated on the date of issuance using the following assumptions: risk-free interest rate of 6.3% and an expected life of approximately 8 years. The fair value of the Sub- note was determined as the difference between the aggregate amount of $15.0 million and the value of the May 2, 2000 Warrants, or $13.4 million. The third-party supplier issues, which arose earlier in the year, have persisted longer than previously anticipated. As a result, the cash flow consequences have been more severe. If the Company's performance does not improve and it is not able to refinance existing debt or obtain additional financing, its cash flow from operations together with available cash from (i) the previous sales of Preferred Stock and Warrants, (ii) the Sub-note and May 2, 2000 Warrants, (iii) the available borrowing capacity under the Credit Agreement, and (iv) the interest reserve accounts and its other sources of liquidity, may not be adequate to meet its presently anticipated requirements for working capital and accrued liabilities, capital expenditures, interest payments, and scheduled principal payments for the remainder of the year. The Company is currently exploring various options to raise additional cash which may take the form of refinancing all or a portion of its existing debt, selling assets or obtaining additional financing. There can be no assurance that any such refinancing or asset sales would be possible or permitted under existing debt instruments or that any additional financing could be obtained on attractive terms, particularly in view of the Company's high level of debt. In such an event, the Company could be forced to dispose of assets under circumstances that might not be favorable to realizing the best prices for such assets. Furthermore, there can be no assurances that assets could be sold quickly enough or for proceeds sufficient enough to enable the Company to meet its obligations. The Company's ability to remain in compliance with the requirements of its financial instruments 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. A failure to comply with the conditions of the various financial instruments, if not cured or waived, could permit acceleration of the relevant indebtedness and acceleration of indebtedness under other instruments that may contain cross- default or cross-acceleration provisions. 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 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 June 30, 2000 the Company has accrued approximately $23 million for costs related to remediation at contaminated sites 6 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 $34 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 six month periods ended June 30, 2000 and 1999, the Company repurchased approximately $0.4 million and $2.5 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. 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. During the second quarter of 2000, the Company completed the closure of the Milwaukee, WI plant by outsourcing a majority of the sub- assembly production previously performed in this facility and transferring the balance of production to other facilities within the Company. The Company plans to do the same for the Waukegan, IL facility, but anticipates that this will not occur until sometime during 2001. Previously the Company had anticipated that substantial completion of this plan would occur by the end of fiscal year 2000. The Company had been in negotiations with a third party to supply the components that are currently manufactured in the Waukegan, IL facility, but these negotiations ended unsuccessfully during the second quarter of 2000. As of June 30, 2000, the Company has made payments approximating $9.1 million against the restructuring reserve established in fiscal year 1998. The remaining $14.7 million restructuring reserve (excluding curtailment gains/losses) will be substantially spent in the remainder of fiscal years 2000 and 2001 as the plants are closed and prepared for sale. 5. Inventories Inventories consisted of the following (in millions):
June 30, December 31, 2000 1999 -------- ------------ Raw materials, work-in-process and service parts..... $124.8 $122.0 Finished goods....................................... 66.8 66.6 ------ ------ Total inventories.................................. $191.6 $188.6 ====== ======
6. 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 "January 28, 2000 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 Quantum Industrial Partners, LDC and Greenlake Holdings II, LLC. 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 7 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 January 28, 2000 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. Upon issuance of the Series A Preferred Stock and January 28, 2000 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 January 28, 2000 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 January 28, 2000 Warrants was estimated on the date of issuance using the following assumptions: risk-free interest rate of 6.3% and an expected life of approximately 8 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 January 28, 2000 Warrants, or $29.1 million. On May 2, 2000 the Company sold the Sub-note and the May 2, 2000 Warrants to Quantum Industrial Partners LDC. See Note 2 of the Notes to Condensed Consolidated Financial Statements. On May 31, 2000, the Company sold an aggregate of 200,000 shares of Series C Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), and warrants (the "May 31, 2000 Warrants") to purchase an aggregate of 846,154 shares of its Common Stock, par value $.01 per share (the "Common Stock"), for an aggregate consideration of $20.0 million in a private placement transaction with Quantum Industrial Partners, LDC. The Series C Preferred Stock has an initial liquidation preference of $100 per share and an initial conversion price of $6.25 per share (in each case, subject to adjustment upon occurrence of certain events). The Series C Preferred Stock is convertible into Common Stock at any time. The Series C 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 C 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 C Preferred Stock if, at any time, less than 10% of the total Series C Preferred Stock originally sold on May 31, 2000 remains outstanding. The May 31, 2000 Warrants are exercisable at any time until May 31, 2010, at an exercise price of $.01 per share of Common Stock, payable in cash or in shares of Common Stock. Upon issuance of the Series C Preferred Stock and May 31, 2000 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 May 31, 2000 Warrant on the date of issuance using the Black-Scholes option-pricing model was $4.94 for an aggregate fair value of $4.2 million. The fair value of the May 31, 2000 Warrants was estimated on the date of issuance using the following assumptions: risk-free interest rate of 6.3% and an expected life of approximately 8 years. The fair value of the Series C Preferred Stock was determined as the difference between the aggregate amount of $20.0 million and the value of the May 31, 2000 Warrants, or $15.8 million. In the three months ended June 30, 2000, the Company has accrued $2.7 million in total preferred dividend expense and $0.2 million in total amortization expense related to the discounts on the preferred stock. In the six months ended June 30, 2000, the Company has accrued $4.3 million in total preferred dividend expense and $0.4 million in total amortization expense related to the discounts on the preferred stock. These amounts have been recorded in the Company's Statement of Consolidated Operations and Comprehensive Income as Preferred dividends. 8 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. 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. In 1999, the "Other" column also includes a curtailment gain and restructuring income.
Marine Engines Boats Other Total ------- ------ ------ ------ (Dollars in millions) Three Months Ended June 30, 2000 Revenues................................... $155.7 $140.9 $ -- $296.6 Intersegment revenues...................... 13.2 -- -- 13.2 Earnings (loss) from operations............ (14.4) 5.0 (5.4) (14.8) Three Months Ended June 30, 1999 Revenues................................... $191.7 $123.9 $ -- $315.6 Intersegment revenues...................... 21.5 -- -- 21.5 Earnings from operations................... 14.4 3.9 22.6 40.9 Six Months Ended June 30, 2000 Revenues................................... $294.2 $271.5 $ -- $565.7 Intersegment revenues...................... 28.3 -- -- 28.3 Earnings (loss) from operations............ (29.0) 6.1 (12.9) (35.8) Six Months Ended June 30, 1999 Revenues................................... $331.9 $238.9 $ -- $570.8 Intersegment revenues...................... 43.1 0.2 -- 43.3 Earnings from operations................... 15.8 5.1 16.2 37.1
A reconciliation of loss from operations for combined reportable segments to consolidated loss before provision for income taxes is as follows:
Three Six Months Ended Months Ended June 30, June 30, ------------- ------------- 2000 1999 2000 1999 ------ ----- ------ ----- (Dollars in millions) Earnings (loss) from operations for reportable segments........................ $(14.8) $40.9 $(35.8) $37.1 Interest expense............................ 9.6 7.2 17.9 14.5 Other income, net........................... (0.8) (1.2) (1.5) (1.5) ------ ----- ------ ----- Earnings (loss) before provision for income taxes...................................... $(23.6) $34.9 $(52.2) $24.1 ====== ===== ====== =====
8. Subsequent Events On July 19, 2000, the Company sold 200,000 shares of Series D Convertible Preferred Stock, par value $.01 per share (the "Series D Preferred Stock"), and warrants (the "July 19, 2000 Warrants") to purchase 846,154 shares of its Common Stock, par value $.01 per share (the "Common Stock"), for an aggregate consideration of $20.0 million in a private placement transaction to Quantum Industrial Partners, LDC. The Series D Preferred Stock has an initial liquidation preference of $100 per share and an initial conversion price of $6.25 per share (in each case, subject to adjustment upon occurrence of certain events). The Series D 9 OUTBOARD MARINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Preferred Stock is convertible into Common Stock at any time. The Series D 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 D 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 D Preferred Stock if, at any time, less than 10% of the total Series D Preferred Stock originally sold on July 19, 2000 remains outstanding. The July 19, 2000 Warrants are exercisable at any time until July 19, 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 D Preferred Stock and July 19, 2000 Warrants for general corporate purposes, including funding its operations, working capital and making capital expenditures. As discussed in Note 2 of the Notes to Condensed Consolidated Financial Statements, on August 9, 2000 the Company entered into a Ninth Amendment to the Amended and Restated Loan and Security Agreement. 9. 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 June 30, 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 Holdings LLC during 1997. 10 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION JUNE 30, 2000 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) ASSETS ------ Current Assets: Cash and cash equivalents.......... $ 26.4 $ -- $ 16.4 $ -- $ 42.8 Receivables, net...... 57.9 22.2 43.7 -- 123.8 Intercompany receivables (payables)........... 5.2 7.9 (13.1) -- -- Inventories, net...... 103.9 51.2 39.1 (2.6) 191.6 Other current assets.. 13.9 1.5 7.1 -- 22.5 ------- ------- ------- -------- ------- Total current assets............. 207.3 82.8 93.2 (2.6) 380.7 Restricted cash......... 22.3 -- -- -- 22.3 Property, plant and equipment, net......... 141.5 31.9 17.5 -- 190.9 Product tooling, net.... 23.3 5.4 0.2 -- 28.9 Goodwill and other intangibles, net....... 179.4 -- 4.6 -- 184.0 Other assets............ 62.8 0.5 7.0 -- 70.3 Intercompany notes, net.................... (125.2) -- 125.2 -- -- Investment in subsidiaries........... 268.3 -- -- (268.3) -- ------- ------- ------- -------- ------- Total assets........ $ 779.7 $ 120.6 $ 247.7 $ (270.9) $ 877.1 ======= ======= ======= ======== ======= LIABILITIES AND SHAREHOLDERS' INVESTMENT ---------------------------------------- Current Liabilities: Loan payable.......... $ 66.4 $ -- $ -- $ -- $ 66.4 Accounts payable...... 72.5 18.8 8.8 -- 100.1 Accrued and other..... 126.3 33.2 21.7 -- 181.2 Current maturities of long-term debt....... 6.6 0.4 -- -- 7.0 ------- ------- ------- -------- ------- Total current liabilities........ 271.8 52.4 30.5 -- 354.7 Long-term debt.......... 233.8 1.9 -- -- 235.7 Other non-current liabilities............ 162.4 7.7 7.5 -- 177.6 Preferred stock......... 49.6 -- -- -- 49.6 Shareholders' investment............. 62.1 58.6 209.7 (270.9) 59.5 ------- ------- ------- -------- ------- Total liabilities and shareholders' investment......... $ 779.7 $ 120.6 $ 247.7 $ (270.9) $ 877.1 ======= ======= ======= ======== =======
11 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 -- 0.0 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 ====== ====== ====== ======= ======
12 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME THREE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) Net sales............... $161.3 $138.9 $79.2 $(82.8) $296.6 Cost of goods sold...... 144.6 121.0 68.2 (82.3) 251.5 ------ ------ ----- ------ ------ Gross earnings........ 16.7 17.9 11.0 (0.5) 45.1 Selling, general and administrative expense................ 38.8 13.6 7.5 -- 59.9 ------ ------ ----- ------ ------ Earnings (loss) from operations........... (22.1) 4.3 3.5 (0.5) (14.8) Non-operating expense (income)............... 11.6 (0.1) (2.7) -- 8.8 Equity earnings (loss) in subsidiaries........ 9.2 -- -- (9.2) 0.0 ------ ------ ----- ------ ------ Earnings (loss) before provision for income taxes................ (24.5) 4.4 6.2 (9.7) (23.6) Provision for income taxes.................. -- -- 1.5 -- 1.5 ------ ------ ----- ------ ------ Net earnings (loss) before preferred dividends............ (24.5) 4.4 4.7 (9.7) (25.1) Preferred dividends..... 2.9 -- -- -- 2.9 ------ ------ ----- ------ ------ Net earnings (loss) of common shareholders.. $(27.4) $ 4.4 $ 4.7 $ (9.7) $(28.0) ====== ====== ===== ====== ====== Net earnings (loss) of common shareholders.... $(27.4) $ 4.4 $ 4.7 $ (9.7) $(28.0) Other comprehensive expense Foreign currency translation adjustment........... -- -- (1.3) -- (1.3) ------ ------ ----- ------ ------ Other comprehensive expense............ -- -- (1.3) -- (1.3) ------ ------ ----- ------ ------ Comprehensive income (loss).... $(27.4) $ 4.4 $ 3.4 $ (9.7) $(29.3) ====== ====== ===== ====== ======
13 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME THREE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) Net sales............... $186.3 $119.9 $72.1 $(62.7) $315.6 Cost of goods sold...... 143.6 104.1 60.3 (62.6) 245.4 ------ ------ ----- ------ ------ Gross earnings........ 42.7 15.8 11.8 (0.1) 70.2 Selling, general and administrative expense................ 23.1 12.6 7.6 -- 43.3 Restructuring income.... (14.0) -- -- -- (14.0) ------ ------ ----- ------ ------ Earnings (loss) from operations........... 33.6 3.2 4.2 (0.1) 40.9 Non-operating expense (income)............... 8.9 -- (2.9) -- 6.0 Equity earnings (loss) in subsidiaries........ 9.2 -- -- (9.2) -- ------ ------ ----- ------ ------ Earnings (loss) before provision for income taxes................ 33.9 3.2 7.1 (9.3) 34.9 Provision for income taxes.................. -- -- 1.1 -- 1.1 ------ ------ ----- ------ ------ Net earnings (loss) before preferred dividends............ 33.9 3.2 6.0 (9.3) 33.8 Preferred dividends..... -- -- -- -- -- ------ ------ ----- ------ ------ Net earnings (loss) of common shareholders.. $ 33.9 $ 3.2 $ 6.0 $ (9.3) $ 33.8 ====== ====== ===== ====== ====== Net earnings (loss) of common shareholders.... $ 33.9 $ 3.2 $ 6.0 $ (9.3) $ 33.8 Other comprehensive expense Foreign currency translation adjustment........... (0.4) -- 1.1 -- 0.7 Minimum pension liability.......... 15.5 -- -- -- 15.5 ------ ------ ----- ------ ------ Other comprehensive expense............ 15.1 -- 1.1 -- 16.2 ------ ------ ----- ------ ------ Comprehensive income (loss).... $ 49.0 $ 3.2 $ 7.1 $ (9.3) $ 50.0 ====== ====== ===== ====== ======
14 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) Net sales............... $305.8 $270.9 $141.4 $(152.4) $565.7 Cost of goods sold...... 270.0 236.4 121.5 (150.7) 477.2 ------ ------ ------ ------- ------ Gross earnings........ 35.8 34.5 19.9 (1.7) 88.5 Selling, general and administrative expense................ 81.1 28.4 14.8 -- 124.3 ------ ------ ------ ------- ------ Earnings (loss) from operations........... (45.3) 6.1 5.1 (1.7) (35.8) Non-operating expense (income)............... 20.3 (0.2) (3.7) -- 16.4 Equity earnings (loss) in subsidiaries........ 12.5 -- -- (12.5) -- ------ ------ ------ ------- ------ Earnings (loss) before provision for income taxes................ (53.1) 6.3 8.8 (14.2) (52.2) Provision for income taxes.................. -- -- 2.6 -- 2.6 ------ ------ ------ ------- ------ Net earnings (loss) before preferred dividends............ (53.1) 6.3 6.2 (14.2) (54.8) Preferred dividends..... 4.7 -- -- -- 4.7 ------ ------ ------ ------- ------ Net earnings (loss) of common shareholders.. $(57.8) $ 6.3 $ 6.2 $ (14.2) $(59.5) ====== ====== ====== ======= ====== Net earnings (loss) of common shareholders.... $(57.8) $ 6.3 $ 6.2 $ (14.2) $(59.5) Other comprehensive expense Foreign currency translation adjustment........... (0.1) -- (2.7) -- (2.8) ------ ------ ------ ------- ------ Other comprehensive expense............ (0.1) -- (2.7) -- (2.8) ------ ------ ------ ------- ------ Comprehensive income (loss).... $(57.9) $ 6.3 $ 3.5 $ (14.2) $(62.3) ====== ====== ====== ======= ======
15 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
Parent Guarantor Other Consolidated Company Subsidiaries Subsidiaries Eliminations Total ------- ------------ ------------ ------------ ------------ (Dollars in Millions) Net sales............... $328.0 $236.1 $140.7 $(134.0) $570.8 Cost of goods sold...... 257.5 205.3 117.8 (133.3) 447.3 ------ ------ ------ ------- ------ Gross earnings........ 70.5 30.8 22.9 (0.7) 123.5 Selling, general and administrative expense................ 59.4 25.7 15.3 0.0 100.4 Restructuring income.... (14.0) 0.0 0.0 0.0 (14.0) ------ ------ ------ ------- ------ Earnings (loss) from operations........... 25.1 5.1 7.6 (0.7) 37.1 Non-operating expense (income)............... 18.7 0.2 (5.9) 0.0 13.0 Equity earnings (loss) in subsidiaries........ 16.2 0.0 0.0 (16.2) 0.0 ------ ------ ------ ------- ------ Earnings (loss) before provision for income taxes................ 22.6 4.9 13.5 (16.9) 24.1 Provision for income taxes.................. 0.0 0.0 2.2 0.0 2.2 ------ ------ ------ ------- ------ Net earnings (loss) before preferred dividends............ 22.6 4.9 11.3 (16.9) 21.9 Preferred dividends..... 0.0 0.0 0.0 0.0 0.0 ------ ------ ------ ------- ------ Net earnings (loss) of common shareholders.. $ 22.6 $ 4.9 $ 11.3 $ (16.9) $ 21.9 ====== ====== ====== ======= ====== Net earnings (loss) of common shareholders.... $ 22.6 $ 4.9 $ 11.3 $ (16.9) $ 21.9 Other comprehensive expense Foreign currency translation adjustment........... (0.6) 0.0 (0.3) 0.0 (0.9) Minimum pension liability.......... 15.5 0.0 0.0 0.0 15.5 Other comprehensive expense............ 14.9 0.0 (0.3) 0.0 14.6 ------ ------ ------ ------- ------ Comprehensive income (loss).... $ 37.5 $ 4.9 $ 11.0 $ (16.9) $ 36.5 ====== ====== ====== ======= ======
16 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS SIX MONTHS ENDED JUNE 30, 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... $(57.8) $6.3 $ 6.2 $(14.2) $(59.5) Adjustments to reconcile net earnings (loss) of common shareholders to net cash provided by (used for) operations: Depreciation and amortization........ 23.6 2.4 1.0 -- 27.0 Changes in current accounts excluding the effects of noncash transactions: Decrease (increase) in receivables.... 0.2 (5.4) (13.7) -- (18.9) Decrease (increase) in intercompany receivables and payables, and intercompany note receivables and note payables..... (2.6) (6.7) 9.3 -- -- Decrease (increase) in inventories.... (1.3) (4.5) 2.0 0.8 (3.0) Decrease (increase) in other current assets............ (4.3) 0.5 (1.5) -- (5.3) Increase (decrease) in accounts payable, accrued liabilities and income taxes...... (8.3) 6.0 (0.4) 1.6 (1.1) Other, net........... (5.9) 2.2 (1.0) (0.7) (5.4) ------ ---- ----- ------ ------ Net cash provided by (used for) operating activities....... (56.4) 0.8 1.9 (12.5) (66.2) ------ ---- ----- ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling............... (13.8) (3.2) (0.3) -- (17.3) Proceeds from sale of plant and equipment... 2.8 2.0 -- -- 4.8 Equity earnings (loss)................ (12.5) -- -- 12.5 -- Change in subsidiary investment............ -- -- -- -- -- Other, net............. -- -- -- -- -- ------ ---- ----- ------ ------ Net cash provided by (used for) investing activities....... (23.5) (1.2) (0.3) 12.5 (12.5) ------ ---- ----- ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short- term debt............. 8.4 -- -- -- 8.4 Payments of long-term debt, including current maturities.... (6.0) (0.1) -- -- (6.1) Issuance of preferred stock and warrants.... 86.6 -- -- -- 86.6 Change in subsidiary capital............... -- -- -- -- -- Change in restricted cash.................. 8.3 -- -- -- 8.3 Other, net............. -- -- -- -- -- ------ ---- ----- ------ ------ Net cash provided by (used for) financing activities....... 97.3 (0.1) -- -- 97.2 ------ ---- ----- ------ ------ Exchange Rate Effect on Cash................... (0.3) -- (0.4) -- (0.7) ------ ---- ----- ------ ------ Net increase (decrease) in Cash and Cash Equivalents............ 17.1 (0.5) 1.2 -- 17.8 Cash and Cash Equivalents at Beginning of Period.... 9.3 0.5 15.2 -- 25.0 ------ ---- ----- ------ ------ Cash and Cash Equivalents at End of Period................. $ 26.4 $-- $16.4 $ -- $ 42.8 ====== ==== ===== ====== ======
17 OUTBOARD MARINE CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS SIX MONTHS ENDED JUNE 30, 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... $ 22.6 $ 4.9 $ 11.3 $(16.9) $ 21.9 Adjustments to reconcile net earnings (loss) of common shareholders to net cash provided by (used for) operations: Depreciation and amortization........ 15.9 7.5 1.2 -- 24.6 Curtailment (gain)... (7.1) -- -- -- (7.1) Restructuring income.............. (14.0) -- -- -- (14.0) Changes in current accounts excluding the effects of noncash transactions: Decrease (increase) in receivables.... 12.9 (2.9) (10.3) -- (0.3) Decrease (increase) in intercompany receivables and payables, and intercompany note receivables and note payables..... 11.7 (4.4) (7.3) -- (0.0) Decrease (increase) in inventories.... 4.9 7.5 9.0 0.8 22.2 Decrease (increase) in other current assets............ (2.2) 1.1 0.1 1.1 0.1 Increase (decrease) in accounts payable, accrued liabilities and income taxes...... 3.4 1.5 0.5 (0.1) 5.3 Other, net........... 1.7 (4.1) 3.1 (1.0) (0.3) ------ ------ ------ ------ ------ Net cash provided by (used for) operating activities....... 49.8 11.1 7.6 (16.1) 52.4 ------ ------ ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant and equipment, and tooling............... (2.3) (18.3) (1.5) -- (22.1) Proceeds from sale of plant and equipment... 0.7 0.4 0.2 -- 1.3 Equity earnings (loss)................ (16.2) -- -- 16.2 -- Change in subsidiary investment............ (4.6) -- -- 4.6 -- Other, net............. 0.6 0.4 (1.0) -- -- ------ ------ ------ ------ ------ Net cash provided by (used for) investing activities....... (21.8) (17.5) (2.3) 20.8 (20.8) ------ ------ ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short- term debt............. (3.4) -- -- -- (3.4) Payments of long-term debt, including current maturities.... (13.3) 2.4 -- -- (10.9) Change in subsidiary capital............... 0.1 4.2 0.3 (4.6) -- Change in restricted cash.................. (0.7) -- -- -- (0.7) Other, net............. (0.1) -- -- (0.1) (0.2) ------ ------ ------ ------ ------ Net cash provided by (used for) financing activities....... (17.4) 6.6 0.3 (4.7) (15.2) ------ ------ ------ ------ ------ Exchange Rate Effect on Cash................... (0.6) -- 1.3 -- 0.7 ------ ------ ------ ------ ------ Net increase (decrease) in Cash and Cash Equivalents............ 10.0 0.2 6.9 -- 17.1 Cash and Cash Equivalents at Beginning of Period.... 2.2 0.1 11.3 -- 13.6 ------ ------ ------ ------ ------ Cash and Cash Equivalents at End of Period................. $ 12.2 $ 0.3 $ 18.2 $ -- $ 30.7 ====== ====== ====== ====== ======
18 OUTBOARD MARINE CORPORATION FORM 10-Q PART 1, ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS JUNE 30, 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. Based on third-party information, as of June 30, 2000, the Company's twelve-month rolling North American outboard engine market share was 28%. This is down from the December 31, 1999 level of 31%. Boat market share, as of June 30, 2000, has remained at its December 31, 1999 level of approximately 9%. Results of Operations Periods Ended June 30, 2000 Compared to Periods Ended June 30, 1999 Net Sales. Net sales decreased to $296.6 million in the three months ended June 30, 2000, from $315.6 million in the three months ended June 30, 1999, a decrease of $19.0 million or 6.0%. Net sales decreased to $565.7 million in the six months ended June 30, 2000, from $570.8 million in the six months ended June 30, 1999, a decrease of $5.1 million or 0.9%. The decreased sales were a result of lower marine engine segment sales which decreased $36.0 million and $37.7 million in the quarter and year-to-date periods versus the comparable periods in the prior year. This decrease occurred as worldwide engine unit sales were negatively affected by third-party supplier problems. Boat segment sales increased $17.0 million and $32.6 million in the quarter and year-to-date periods versus the comparable periods in the prior year as a result of continued higher unit sales of recreational and fishing boats. Cost of Goods Sold. Cost of goods sold increased to $251.5 million in the three months ended June 30, 2000 from $245.4 million in the three months ended June 30, 1999, an increase of $6.1 million or 2.5%. Gross earnings in the three months ended June 30, 2000 was 15.2% of net sales as compared with 22.2% of net sales for the comparable period in 1999. Cost of goods sold increased to $477.2 million in the six months ended June 30, 2000 from $447.3 million in the six months ended June 30, 1999, an increase of $29.9 million or 6.7%. Gross earnings in the six months ended June 30, 2000 was 15.6% of net sales as compared with 21.6% of net sales for the comparable period in 1999. The reduction in gross earnings percent for the quarter and year-to-date periods was attributable mainly to the marine engine segment which had higher manufacturing costs versus the comparable periods in the prior years. The increased manufacturing costs were primarily driven by spending related to productivity and quality improvement initiatives at each engine facility and manufacturing inefficiency and disruption costs incurred as a result of third- party supplier problems. Selling, General and Administrative ("SG&A") Expense. SG&A expense increased to $59.9 million in the three months ended June 30, 2000 from $43.3 million in the three months ended June 30, 1999, an increase of $16.6 million or 38.3%. SG&A expense as a percentage of net sales increased to 20.2% in the three months ended June 30, 2000 from 13.7% in the three months ended June 30, 1999. SG&A expense increased to $124.3 million in the six months ended June 30, 2000 from $100.4 million in the six months ended June 30, 1999, an increase of $23.9 million or 23.8%. SG&A expense as a percentage of net sales increased to 22.0% in the six months ended June 30, 2000 from 17.6% in the six months ended June 30, 1999. The SG&A expense increase for both the quarter and year-to-date periods was primarily due to (i) the prior-year periods including a $7.1 million curtailment gain to reflect changes made to the pension and postretirement plans and (ii) the prior-year 19 periods including a favorable legal settlement. In addition, the year-to-date period for 2000, as compared to the prior year, was negatively impacted by increased marketing expense for promotional programs. Restructuring Charge. During the three months ended June 30, 1999, the Company recorded a $14.0 million reversal of a previously recorded restructuring charge. The adjustment resulted from the Company completing its negotiations of the closing agreements with the unions representing workers in the Milwaukee, WI and Waukegan, IL manufacturing plants. Earnings (Loss) from Operations. The loss from operations was $14.8 million in the three months ended June 30, 2000 compared with earnings of $40.9 million in the three months ended June 30, 1999, a decrease of $55.7 million. The loss from operations was $35.8 million in the six months ended June 30, 2000 compared with earnings of $37.1 million in the six months ended June 30, 1999, a decrease of $72.9 million. The decreases were attributable to higher cost of goods sold and SG&A expense, as discussed above, along with the non-recurring restructuring income in 1999. Non-Operating Expense (Income). Interest expense increased to $9.6 million in the three months ended June 30, 2000 from $7.9 million in the three months ended June 30, 1999. Interest expense increased to $17.9 million in the six months ended June 30, 2000 from $16.0 million in the six months ended June 30, 1999. The increased interest expense resulted from increased debt levels as compared to those in the prior year. Other non-operating income was $0.8 million in the three months ended June 30, 2000 compared to $1.9 million in the three months ended June 30, 1999. Other non-operating income was $1.5 million in the six months ended June 30, 2000 compared to $3.0 million in the six months ended June 30, 1999. Provision for Income Taxes. The provision for income taxes was $1.5 million in the three months ended June 30, 2000 as compared to $1.1 million in the three months ended June 30, 1999. The provision for income taxes was $2.6 million in the six months ended June 30, 2000 as compared to $2.2 million in the six months ended June 30, 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 Company's Convertible Preferred Stock (see Note 6 of the Notes to the Condensed Consolidated Financial Statements), was $2.9 million in the three months ended June 30, 2000 reflecting an accrual of $2.7 million in preferred dividend expense and $0.2 million in amortization expense related to the discount on the preferred stock. Preferred dividend expense was $4.7 million in the six months ended June 30, 2000 reflecting an accrual of $4.3 million in preferred dividend expense and $0.4 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 June 30, 2000 increased $45.0 million from December 31, 1999 due primarily to increases in receivables and cash and cash equivalents balances. Receivables at June 30, 2000 increased $18.9 million due primarily to the seasonal nature of the Company's business (i.e., increased sales volume during the summer season). Cash and cash equivalents increased by $17.8 million due primarily to the Company's issuance of preferred stock and warrants in May 2000 (see Note 6 of the Notes to Condensed Consolidated Financial Statements). The Company had $22.3 million in restricted cash at June 30, 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 $66.2 million for the six months ended June 30, 2000 compared with cash provided by operations of $52.4 million for the six months ended June 30, 1999. This increase in cash used 20 was driven primarily by the increased net loss as well as the increase in accounts receivable. Expenditures for plant and equipment and tooling were $17.3 million for the six months ended June 30, 2000 compared to $22.1 million for the six months ended June 30, 1999. The lower level of expenditures is primarily due to the timing of implementing certain capital projects in 2000. The $17.3 million was used primarily for production enhancements, information technology projects, and new model development. Total short-term debt was $66.4 million at June 30, 2000, and was composed of (i) borrowings under the Company's Revolving Credit Facility of $53.0 million and (ii) a Subordinated Note payable to Quantum Industrial Partners LDC of $13.4 million. These borrowings were used to fund operations (as discussed above), pay $5.8 million of the Company's Medium-Term Notes Series A which came due in March 2000, and fund capital expenditures. On July 19, 2000, the Company sold 200,000 shares of Series D Convertible Preferred Stock, par value $.01 per share, and warrants to purchase 846,154 shares of its Common Stock, par value $.01 per share, for an aggregate consideration of $20.0 million in a private placement transaction to Quantum Industrial Partners, LDC. (See Note 8 of the Notes to Condensed Consolidated Financial Statements). On May 31, 2000, the Company sold an aggregate of 200,000 shares of Series C Convertible Preferred Stock, par value $.01 per share, and warrants to purchase 846,154 shares of its Common Stock, par value $.01 per share, for an aggregate consideration of $20.0 million in a private placement transaction with Quantum Industrial Partners, LDC. (See Note 6 of the Notes to Condensed Consolidated Financial Statements). On May 2, 2000 the Company sold a $15.0 million Subordinated Note (the "Sub- note") and warrants to purchase 330,000 shares of the Company's Common Stock, par value $0.01, to Quantum Industrial Partners LDC. The Sub-note bears an interest rate of 15% and has an initial maturity date of May 31, 2000, which can be extended for four additional 30-day periods upon 5 days written notice by the Company. The Sub-note is convertible into shares of the Company's Series B Convertible Preferred Stock, which if issued, would have terms and conditions similar in nature to the Series A Preferred Stock. The conversion price of the Series B Convertible Preferred Stock has not yet been set. The Company has extended the term of the Sub-note and anticipates that the Sub-note will be extended to September 30, 2000 at which time it may be converted into shares of the Company's Series B Convertible Preferred Stock. (See Notes 2 and 6 of the Notes to Consolidated Financial Statements). On January 28, 2000, the Company sold an aggregate 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 Quantum Industrial Partners, LDC and Greenlake Holdings II, LLC. 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. (See Note 6 of the Notes to Condensed Consolidated Financial Statements). The Company intends to use the proceeds from the various sales of convertible Preferred Stock and Warrants for general corporate purposes, including funding its working capital and making capital expenditures. 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 June 30, 2000, the Company had $53.0 million of borrowings outstanding and $41.8 million of letters of credit outstanding under the Revolving Credit Agreement. This resulted in the Company having $1.6 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, 21 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. As of June 30, 2000, the Company was in compliance with all of its covenants except its minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") covenant. On August 9, 2000 the Company entered into a Ninth Amendment to the Amended and Restated Loan and Security Agreement which among other things (i) waived compliance with the June 30, 2000 EBITDA covenant test and (ii) established new EBITDA covenant tests for the quarters ending September 30 and December 31 of 2000. The Company's ability to comply 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. On May 27, 1998, the Company issued $160.0 million of 10 3/4% Senior Notes due 2008 ("Notes"), with interest payable semiannually on June 1 and December 1 of each year. The net proceeds from the issuance of the 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 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 Notes and 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 June 30, 2000, the "Restricted Cash" held in these interest reserve accounts totaled $22.3 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. In June 2000, the Company accessed $8.6 million of "Restricted Cash" to make its semi-annual interest payments for the Notes. At June 30, 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 June 20, 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 June 30, 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 date 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 June 30, 2000, $6.7 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 $6.7 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. 22 The Company has various Industrial Revenue Bonds outstanding in an aggregate principal amount of approximately $10.6 million as of June 30, 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%. 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 $34 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 six-month periods ended June 30, 2000 and 1999, the Company repurchased approximately $0.4 million and $2.5 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. The third-party supplier issues, which arose earlier in the year, have persisted longer than previously anticipated. As a result, the cash flow consequences have been more severe. The Company believes that its (i) available cash (ii) the available borrowing capacity under the Credit Agreement (iii) the interest reserve accounts and (iv) some or all of its other sources of liquidity, including asset sales, equity infusions and amendment to current debt, all of which are currently being negotiated should be adequate to meet its presently anticipated requirements for working capital and accrued liabilities, capital expenditures, interest payments, and scheduled principal payments through the remainder of the year. In order to continue to meet its obligations after such time, the Company will need to significantly improve its operating performance, refinance its indebtedness, or obtain additional financing. There can be no assurance that any of these other sources of liquidity would be consummated or that any additional financing could be obtained on attractive terms, particularly in view of the Company's high level of debt. In such an event, the Company could be forced to dispose of assets under circumstances that might not be favorable to realizing the best prices for such assets. Furthermore, there can be no assurances that assets could be sold quickly enough or for proceeds sufficient enough to enable the Company to continue to meet its obligations. The Company's ability to improve its operating performance and remain in compliance with the requirements of its financial instruments will depend upon several factors, including its ability to generate product 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. A failure to comply with the conditions of the various financial instruments, if not cured or waived, could permit acceleration of the relevant indebtedness and acceleration of indebtedness under other instruments that may contain cross-default or cross-acceleration provisions. Third-Party Suppliers As part of the closure of the Company's Milwaukee, WI engine component facility, the Company outsourced products manufactured at that facility 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, incremental inventory was adequate to allow the Company to manufacture finished outboard engines 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 have taken longer than anticipated and production of finished outboard engines has been constrained during the first and second quarters of 2000. As previously stated, these third-party supplier issues have persisted longer than previously anticipated, and it appears that these supply issues will continue to affect the Company's production into the second half of 2000. The Company has dedicated significant resources, in 23 the form of manpower, to help resolve these issues. However, there can be no assurances that such efforts will be successful. 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 is 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. Recent Accounting Pronouncements Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" (as amended) and SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities" are effective for financial statements for fiscal years beginning after June 15, 2000, but may be adopted in earlier periods. The Company is evaluating the new standards' provisions and has not yet determined what the effect of SFAS Nos. 133 and 138 will be on the earnings and the financial position of the Company. The Company intends to adopt the standards on January 1, 2001. Inflation Inflation may cause or may be accompanied by increased 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 June 30, 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. The changes in this market risk related to the Company have not significantly changed in the quarter ended June 30, 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 24 of adequate financing on terms and conditions acceptable to the Company, adequate supply of third party components, 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. PART 1, ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes to the information provided at the end of the Company's 1999 fiscal year. Part II--OTHER INFORMATION Item 1. Legal Proceedings During the three months ended June 30, 2000, no reportable events or material developments occurred regarding the legal proceedings of the Company. Item 2. Changes in securities and use of Proceeds: During the three months ended June 30, 2000, the Company issued the following securities to Quantum Industrial Partners, LDC: (i) a placement of $15 million convertible subordinated notes and warrants to purchase 330,000 shares of common stock completed on May 2, 2000, and (ii) a placement of 200,000 shares of convertible Series C Preferred Stock and warrants to purchase 846,154 shares of common stock, completed on May 31, 2000 for an aggregate consideration of $20 million. The placements were exempt from registration pursuant to section 4(2) of the Securities Act. Terms of the securities are further described in Notes 2 and 6 of the Notes to Condensed Consolidated Financial Statements. Item 6. Exhibits and Reports on Form 8-K a. Exhibits. Reference is made to the Exhibit Index on page 27. b. Reports on Form 8-K. On June 5, 2000 the Company filed a Report on Form 8-K announcing that it had sold an aggregate of 200,000 shares of Series C Convertible Preferred Stock, par value $.01 per share, and warrants to purchase an aggregate of 846,154 shares of its common stock, par value $.01 per share, for an aggregate consideration of $20.0 million in a private placement transaction with Quantum Industrial Partners, LDC. 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Outboard Marine Corporation
Signature Title Date --------- ----- ---- /s/ Eric T. Martinez Chief Financial Officer August 14, 2000 ______________________________________ (Principal Financial Eric T. Martinez 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)* 3.1(a)(2) Amendment to Restated Certificate of Incorporation of the Company, attached hereto and incorporated herein as Exhibit 3.1(a)(2) 3.1(a)(3) Amendment to Restated Certificate of Incorporation of the Company, attached hereto and incorporated herein as Exhibit 3.1(a)(3) 3.2(a) 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)*
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Exhibit Number Description ------- ----------- 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 (filed as Exhibit 4.14 to the March 31, 2000 10-Q)* 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 (filed as Exhibit 4.15 to the March 31, 2000 10-Q)* 4.16 First Amendment to Stockholder Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II LLC & Greenlake Holdings III LLC (filed as Exhibit 4.16 to the March 31, 2000 10-Q)* 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 (filed as Exhibit 4.17 to the March 31, 2000 10-Q)* 4.18 Warrant to purchase Shares of Common Stock of Outboard Marine Corporation by Quantum Industrial Partners LDC (filed as Exhibit 4.18 to the March 31, 2000 10-Q)* 4.19 Series C Convertible Preferred Stock and Warrant Purchase Agreement, attached hereto and incorporated herein as Exhibit 4.19 4.20 Second Amendment to Stockholder Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II LLC and Greenlake Holdings III LLC, attached hereto and incorporated herein as Exhibit 4.20 4.21 Warrant to Purchase Shares of Common Stock of Outboard Marine Corporation by Quantum Industrial Partners LDC, attached hereto and incorporated herein as Exhibit 4.21 4.22 Second 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 4.22 4.23 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 4.23 4.24 Certificate of Powers, Designations, Preferences and Rights of the Series C Convertible Preferred Stock Par Value $.01 per share of Outboard Marine Corporations, attached hereto and incorporated herein as Exhibit 4.24 4.25 Series D Convertible Preferred Stock and Warrant Purchase Agreement, attached hereto and incorporated herein as Exhibit 4.25 4.26 Third Amendment to Stockholder Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II LLC, Greenlake Holdings III LLC and Greenlake Holdings IV LLC, attached hereto and incorporated herein as Exhibit 4.26 4.27 Warrant to Purchase Shares of Common Stock of Outboard Marine Corporation by Quantum Industrial Partners LDC, attached hereto and incorporated herein as Exhibit 4.27
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Exhibit Number Description ------- ----------- 4.28 Third Amendment to Registration Rights Agreement between Outboard Marine Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II LLC, Greenlake Holdings III LLC, Greenlake Holdings IV LLC and Greenmarine Holdings LLC, attached hereto and incorporated herein as Exhibit 4.28 4.29 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 4.29 4.30 Certificate of Amendment of Certificate of Powers, Designations, Preferences and Rights of the Series C Convertible Preferred Stock Par Value $.01 per share of Outboard Marine Corporations, attached hereto and incorporated herein as Exhibit 4.30 4.31 Certificate of Powers, Designations, Preferences and Rights of the Series D Convertible Preferred Stock Par Value $.01 per share of Outboard Marine Corporations, attached hereto and incorporated herein as Exhibit 4.31 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 (filed as Exhibit 10.24 to the March 31, 2000 10-Q)* 10.25 Employment Agreement of Mr. Fix dated May 26, 2000, attached hereto and incorporated herein as Exhibit 10.25 10.26 Ninth Amendment to Amended and Restated Loan and Security Agreement between the Company and Bank of America, N.A., dated effective as of August 9, 2000, attached hereto and incorporated herein as Exhibit 10.26
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Exhibit Number Description ------- ----------- 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. 31 EX-3.1(A)(2) 2 0002.txt AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION CERTIFICATE OF AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF OUTBOARD MARINE CORPORATION Pursuant to Sections 228 and 242 of the General Corporation Law of the State of Delaware * * * * * Outboard Marine Corporation, a Delaware corporation (hereinafter called the "Corporation"), does hereby certify as follows: FIRST: That the Board of Directors of the Corporation adopted a resolution proposing and declaring advisable the following amendment to the Restated Certificate of Incorporation of the Corporation: RESOLVED, that the Restated Certificate of Incorporation be amended by changing the fourth Article thereof so that, as amended, such Article shall be and read as follows: "FOURTH: The total number of all classes of stock which the Corporation shall have authority to issue is 43,500,000 shares, consisting of: (a) 1,500,000 shares of Preferred Stock, par value $0.01 per share; and (b) 42,000,000 shares of Common Stock, par value $0.01 per share." SECOND: That in lieu of a meeting of stockholders, the stockholders of the Corporation have duly adopted the amendment by unanimous written consent in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the state of Delaware. IN WITNESS WHEREOF, OUTBOARD MARINE CORPORATION has caused this certificate to be duly executed in its corporate name as of this 31st day of May, 2000. OUTBOARD MARINE CORPORATION By: /s/ Robert S. Romano -------------------------------------- Name: Robert S. Romano Title: Vice President, General Counsel and Secretary 2 EX-3.1(A)(3) 3 0003.txt AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION CERTIFICATE OF AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF OUTBOARD MARINE CORPORATION Pursuant to Sections 228 and 242 of the General Corporation Law of the State of Delaware * * * * * Outboard Marine Corporation, a Delaware corporation (hereinafter called the "Corporation"), does hereby certify as follows: FIRST: That the Board of Directors of the Corporation adopted a resolution proposing and declaring advisable the following amendment to the Restated Certificate of Incorporation of the Corporation: RESOLVED, that the Restated Certificate of Incorporation be amended by changing the fourth Article thereof so that, as amended, such Article shall be and read as follows: "FOURTH: The total number of all classes of stock which the Corporation shall have authority to issue is 43,500,000 shares, consisting of: (a) 1,500,000 shares of Preferred Stock, par value $0.01 per share; and (b) 42,000,000 shares of Common Stock, par value $0.01 per share." SECOND: That in lieu of a meeting of stockholders, the stockholders of the Corporation have duly adopted the amendment by unanimous written consent in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the state of Delaware. IN WITNESS WHEREOF, OUTBOARD MARINE CORPORATION has caused this certificate to be duly executed in its corporate name as of this 19th day of July, 2000. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez --------------------- Name: Eric T. Martinez Title: Sr. Vice President, Finance and Treasurer 2 EX-4.19 4 0004.txt PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT 1 EXHIBIT 4.19 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT, dated May 31, 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) the number of shares of the Company's Series C Preferred Stock 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 A. The shares of Series C Preferred Stock to be sold pursuant hereto are collectively referred to as the "Purchased Shares" and the Warrants to be sold pursuant hereto are collectively referred to as the "Warrants." 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 ----------- 1.1 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. 2 "Audited Financial Statements" has the meaning set forth in Section 3.8 of this Agreement. "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 the Certificate of the Powers, Designations, Preferences and Rights of the Series C Convertible Preferred Stock, Par Value $.01 Per Share of the Company, as filed by the Company with the Secretary of State of Delaware on May 31, 2000, a true and correct copy of which is annexed as Exhibit B hereto. "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, 3 letter of credit or other obligation, contractual or otherwise (the "primary obligation") of 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. "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. "Greenlake II" means Greenlake Holdings II LLC, a Delaware limited liability company. "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, debentures or similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or 4 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 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. 5 "May 2 Agreement" means that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Company, QIP and Greenlake. "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, Greenlake II and Greenlake, as amended. "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. "Second Registration Rights Agreement Amendment" means an amendment to the Registration Rights Agreement in substantially the form of Exhibit D hereto. "Second Stockholders Agreement Amendment" means an amendment to the Stockholders Agreement in substantially the form of Exhibit E hereto. "Securities" means the shares of Series C Preferred Stock and the Warrants issuable hereunder, the shares of Common Stock issuable upon conversion of the Series C 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. 6 "Series A Preferred Stock" means the shares of Series A Convertible Preferred Stock, par value $.01 per share, of the Company having the powers, 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 Series B Certificate of Designation annexed hereto as Exhibit C, and issuable by the Company upon conversion of the Subordinated Notes in accordance with the terms set forth in this May 2 Agreement, as amended hereby, and in the Subordinated Notes. "Series C Preferred Stock" means the shares of Series C 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. "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, as amended, among the Company, QIP, Greenlake II and Greenlake. "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 Warrants, the Second Registration Rights Agreement Amendment and the Second 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 PREFERRED STOCK AND WARRANTS ------------------------------------------------- 2.1 Purchase and Sale of Preferred Stock 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) the number of shares of Series C Preferred Stock 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"). 2.2 Use of Proceeds. The Company shall use the proceeds from the sale of the Purchased Shares and the Warrants to the Purchasers for general corporate purposes, including to fund the Company's working capital and to make capital expenditures. 2.3 Closing. The closing of the sale and purchase of the Purchased Shares 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 31, 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 certificate evidencing the number of shares of Series C Preferred Stock 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: 3.1 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 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 8 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. 3.2 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, (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. 3.3 Governmental Authorization; Third Party Consents. 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. 3.4 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). 3.5 Compliance with Laws. (a) 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. (b) (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 9 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. 3.6 Capitalization. On the Closing Date, the authorized capital stock of the Company shall consist of (i) 42,000,000 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, (iii) 200,000 shares of Series C Preferred Stock, all of which will be issued in accordance with this Agreement, and (iii) 150,000 shares of undesignated "blank check" preferred stock, all of which are reserved for future issuance upon conversion of the Subordinated Notes into shares of Series B 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 common stock purchase warrants issued under the May 2 Agreement, (4) 846,154 shares of Common Stock for issuance upon exercise of the Warrants, (5) 3,200,000 shares of Common Stock for issuance upon conversion of the Purchased Shares, and (6) 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. In addition, the Company has agreed that upon issuance of any shares of Series B Preferred Stock, the Company shall reserve such additional number of shares of Common Stock as may be necessary in order to permit the conversion of the shares of Series B Preferred Stock in accordance with the terms of such stock. Except as described in the immediately preceding three sentences 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 shares of Series C Preferred Stock 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, and Sections 2.1 through (and including) 2.4 of the Stockholders Agreement, as amended by the Second Stockholders Agreement Amendment, the issuance and sale to the Purchasers of the Purchased Shares and the Warrants, the conversion of the Purchased Shares in accordance with the terms set forth in the Certificate of Designation, 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 Purchased Shares and any shares of Common Stock issuable upon conversion of the Purchased Shares 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 shares of Common Stock are all duly authorized, validly issued, fully paid and non-assessable. 10 3.7 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. 3.8 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"). 3.9 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. 3.10 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 Purchased Shares or the Warrants. 3.11 Intellectual Property. 11 (a) 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. (b) To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Intellectual Property rights of the Company. 3.12 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. 3.13 Litigation; Observance of Statutes and Orders. (a) 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. (b) 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. 12 3.14 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. 3.15 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: 4.1 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. 4.2 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. 13 4.3 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 Purchased Shares 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. 4.4 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). 4.5 Purchase for Own Account. The shares of Series C Preferred Stock and the Warrants to be acquired by such Purchaser pursuant to this Agreement and any shares of Common Stock received upon conversion or exercise of the shares of Series C 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, 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 14 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." 4.6 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 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. 4.7 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. 4.8 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. 4.9 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. 4.10 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. 15 ARTICLE V. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE -------------------------- The obligation of the Purchasers to purchase the Purchased Shares 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. 5.1 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. 5.2 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. 5.3 Purchased Shares. The Company shall have delivered to each of the Purchasers a stock certificate evidencing the number of shares of Series C Preferred Stock set forth opposite such Purchaser's name on Schedule 2.1 hereto. 5.4 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. 5.5 Second Registration Rights Agreement Amendment. The Company shall have duly executed and delivered the Second Registration Rights Agreement Amendment. 5.6 Second Stockholders Agreement Amendment. The Company shall have duly executed and delivered the Second Stockholders Agreement Amendment. 5.7 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. 5.8 Certificate of Designation. The Company shall have filed with the Secretary of State of Delaware the Certificate of Designation. 16 5.9 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 Purchased Shares 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: 6.1 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. 6.2 Payment of Purchase Price. Each Purchaser shall have paid the aggregate purchase price for the shares of Series C Preferred Stock and the Warrant to be purchased by such Purchaser. 6.3 Second Registration Rights Agreement Amendment. Each Purchaser shall have duly executed and delivered the Second Registration Rights Agreement Amendment. 6.4 Second Stockholders Agreement Amendment. Each Purchaser have duly executed and delivered the Second Stockholders Agreement Amendment. 6.5 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 --------------- 7.1 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, 17 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. 7.2 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 18 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. 7.3 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 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 Purchased Shares 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 Purchased Shares or Warrants: 8.1 Financial Statements and Other Information. The Company shall deliver to such Purchaser, in form and substance reasonably satisfactory to such Purchaser: (a) 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 19 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; (b) 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 (c) 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 GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP. 8.2 Reservation of Stock. 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 Purchased Shares, as provided in the Certificate of Designation, 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. 8.3 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. 8.4 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 20 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. AMENDMENT OF MAY 2 AGREEMENT ---------------------------- 9.1 Amendment of May 2 Agreement. The parties to this Agreement, being all of the parties to the May 2 Agreement, and the Purchasers, being the holders of all outstanding Subordinated Notes issued pursuant to the May 2 Agreement (the "Subordinated Notes"), hereby agree to amend, and do amend the May 2 Agreement by deleting the form of Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $.01 Per Share of the Company, annexed to such May 2 Agreement as Exhibit C thereto, and by replacing such Exhibit C with the form of Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $.01 Per Share of the Company annexed as Exhibit C to this Agreement. The parties further agree that each reference in the May 2 Agreement or the Subordinated Notes to the "Certificate of Designation" or "Exhibit C hereto" shall hereafter be understood to refer to the form of Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $.01 Per Share of the Company annexed as Exhibit C to this Agreement. Except as specifically amended hereby, the May 2 Agreement and each outstanding Subordinated Note shall continue in full force and effect in accordance with its terms. ARTICLE X. MISCELLANEOUS ------------- 10.1 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. 10.2 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 100 Sea Horse Drive Waukegan, IL 60085 Telecopy: (847) 689-6200 21 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: James Dubin, 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. 10.3 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. 10.4 Amendment and Waiver. (a) 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. (b) 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% of the outstanding Purchased Shares, 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. 10.5 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so exe- 23 cuted shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 10.6 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 10.7 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. 10.8 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. 10.9 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. 10.10 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. 10.11 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. 10.12 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 24 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. 10.13 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. 10.14 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 Preferred Stock and Warrant Purchase Agreement on the date first written above. OUTBOARD MARINE CORPORATION By: /s/ James Pekarek --------------------------- Name: James Pekarek Title: Vice President and Controller 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 ------------------------------------------------------
Number of Shares of Series C Preferred Purchaser/1/ Stock Warrant Shares Purchase Price - --------------------------------------------------------------------------------------------------------- Quantum Industrial Partners LDC 200,000 846,154 $20,000,000.00 Greenlake Holdings III LLC _________ ________ $_____________ - ----------------
/1/ Subsequent to the Closing, QIP may sell a portion of the shares of Series C Preferred Stock and Warrants purchased at the Closing to Greenlake or its Affiliate on such terms as QIP and Greenlake may agree. ================================================================================ PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT among OUTBOARD MARINE CORPORATION, QUANTUM INDUSTRIAL PARTNERS LDC and GREENLAKE HOLDINGS III LLC ______________________________ May 31, 2000 ______________________________ ================================================================================ Table of Contents ----------------- Page # ------ ARTICLE I DEFINITIONS............................................. 1 1.1 Definitions............................................... 1 ARTICLE II PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS...... 7 2.1 Purchase and Sale of Preferred Stock and Warrants......... 7 2.2 Use of Proceeds........................................... 7 2.3 Closing................................................... 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 8 3.1 Corporate Existence and Power............................. 8 3.2 Authorization; No Contravention........................... 8 3.3 Governmental Authorization; Third Party Consents.......... 8 3.4 Binding Effect............................................ 9 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... 11 3.10 Private Offering.......................................... 11 3.11 Intellectual Property..................................... 11 3.12 Broker's, Finder's or Similar Fees........................ 12 3.13 Litigation; Observance of Statutes and Orders............. 12 3.14 Taxes..................................................... 12 3.15 Title to Property; Leases................................. 12 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS....... 13 4.1 Existence and Power....................................... 13 4.2 Authorization; No Contravention........................... 13 4.3 Governmental Authorization; Third Party Consents.......... 13 4.4 Binding Effect............................................ 13 4.5 Purchase for Own Account.................................. 14 4.6 Restricted Securities..................................... 14 4.7 Broker's, Finder's or Similar Fees........................ 15 4.8 Accredited Investor....................................... 15 4.9 Disclosure of Information................................. 15 4.10 Investment Experience..................................... 15 ARTICLE V CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE. 15 5.1 Representations and Warranties............................ 15 5.2 Secretary's Certificate................................... 16 5.3 Purchased Shares.......................................... 16 i 5.4 Warrants.................................................. 16 5.5 Second Registration Rights Agreement Amendment............ 16 5.6 Second Stockholders Agreement Amendment................... 16 5.7 Certificate of Designation Amendment...................... 16 5.8 Certificate of Designation................................ 16 5.9 Opinion of Counsel........................................ 16 ARTICLE VI CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE.. 16 6.1 Representations and Warranties............................ 17 6.2 Payment of Purchase Price................................. 17 6.3 Second Registration Rights Agreement Amendment............ 17 6.4 Second Stockholders Agreement Amendment................... 17 6.5 Certificate of Designation Amendment...................... 17 ARTICLE VII INDEMNIFICATION....................................... 17 7.1 Indemnification........................................... 17 7.2 Notification.............................................. 18 7.3 Limitation on Indemnification............................. 19 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 AMENDMENT OF MAY 2 AGREEMENT........................... 21 9.1 Amendment of May 2 Agreement.............................. 21 ARTICLE X MISCELLANEOUS.......................................... 21 10.1 Survival of Representations and Warranties................ 21 10.2 Notices................................................... 21 10.3 Successors and Assigns; Third Party Beneficiaries......... 23 10.4 Amendment and Waiver...................................... 23 10.5 Counterparts.............................................. 23 10.6 Headings.................................................. 23 10.7 GOVERNING LAW............................................. 24 10.8 Severability.............................................. 24 10.9 Rules of Construction..................................... 24 10.10 Right to Conduct Activities............................... 24 10.11 Entire Agreement.......................................... 24 10.12 Fees...................................................... 24 10.13 Publicity................................................. 25 10.14 Further Assurances........................................ 25 ii EXHIBITS A Form of Warrant B Form of Certificate of Designation of Series C Preferred Stock C Form of Certificate of Designation of Series B Preferred Stock D Form of Second Registration Rights Amendment E Form of Second 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 EX-4.20 5 0005.txt SECOND AMENDMENT TO STOCKHOLDER AGREEMENT 1 SECOND AMENDMENT TO STOCKHOLDERS AGREEMENT AMENDMENT, dated May 31, 2000 (this "Second 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, as amended by an Amendment dated May 2, 2000 (the "Existing Agreement"), among the Company, QIP, Greenlake II and Greenlake III. Unless otherwise set forth in this Second Amendment Agreement, capitalized terms have the respective meanings assigned to them in the Existing Agreement. WHEREAS, the parties entered into the Existing Agreement in connection with (i) 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 "January 28 Warrants") to purchase an aggregate of 5,750,000 shares of the Company's Common Stock, and (ii) the acquisition by QIP and Greenlake III on May 2, 2000 of $15,000,000 aggregate principal amount of the Company's Subordinated Notes due June 1, 2000 (the "Subordinated Notes"), which 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 warrants (the "May 2 Warrants" and together with the January 28 Warrants, the "Existing Warrants") to purchase an aggregate of 330,000 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 an aggregate of 200,000 shares of the Company's Series C Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), and warrants (the "New Warrants") to purchase an aggregate of 846,154 shares of the Company's Common Stock pursuant to the terms of a Preferred Stock and Warrant Purchase Agreement, dated the date hereof (the "Preferred Stock 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 2 WHEREAS, QIP and Greenlake II and Greenlake III 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 Preferred Stock Purchase Agreement from the preemptive rights provisions of the Existing Agreement, and (ii) restrict the transfer of the securities to be issued pursuant to the Preferred Stock Purchase Agreement; 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 delete the definitions contained therein of the terms "Existing Agreement," "Existing Warrants," "New Warrants," "Preferred Stock" and "Warrants" in their entirety and to add the following additional definitions: "Existing Agreement" is defined in the preamble to the Second Amendment Agreement. "Existing Warrants" is defined in the first recital of the Second Amendment Agreement. "New Warrants" is defined in the second recital of the Second Amendment Agreement. "Second Amendment Agreement" means the Amendment, dated May 31, 2000, among the Company, QIP, Greenlake II and Greenlake III, to this Agreement. "Series C Preferred Stock" is defined in the second recital of the Second Amendment Agreement. "Preferred Stock" means the shares of the Company's Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. "Preferred Stock Purchase Agreement" is defined in the second recital of the Second Amendment Agreement. "Warrants" means the Existing Warrants and the New Warrants. 2. Amendment of Section 4.5 of the Existing Agreement (Future Issuance of Shares; Preemptive Rights). Section 4.5 of the Existing Agreement is hereby amended and restated in its entirety to read as follows: 3 4.5 Exempt Transactions. Anything in Sections 4.1 through 4.4 to the contrary notwithstanding, the Company may consummate the transactions contemplated by (i) the Subordinated Notes Purchase Agreement, including, without limitation, the issuance of the Subordinated Notes and the May 2 Warrants, and (ii) the Preferred Stock Purchase Agreement, including without limitation the issuance of the shares of Series C Preferred Stock 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 and the Preferred Stock 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, the Subordinated Notes Purchase Agreement (including, without limitation, shares of Series B Preferred Stock issued upon conversion of the Subordinated Notes) and the Preferred Stock Purchase Agreement. 4. Miscellaneous. 4.1 Headings. The headings in this Second Amendment Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 4.2 GOVERNING LAW. THIS SECOND 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. 4.3 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 Second Amendment Agreement. Except as specifically amended hereby, the Existing Agreement shall continue in full force and effect in accordance with its terms. 4 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Second Amendment Agreement on the date first written above. OUTBOARD MARINE CORPORATION By: /s/ James B. Pekarek -------------------- Name: James B. Pekarek Title: Vice President and Controller 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-4.21 6 0006.txt WARRANT TO PURCHASE SHARES OF COMMON STOCK EXHIBIT 4.21 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 31, 2000 WARRANT TO PURCHASE 846,154 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, Eight Hundred Forty-Six Thousand, One Hundred Fifty-Four (846,154) 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. Definitions. For the purpose of this Warrant: (a) "Expiration Date" shall mean May 31, 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) 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 2 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 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 3 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. (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 4 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 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. 5 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: (i) if to the Warrant Holder: Quantum Industrial Partners LDC Kaya Flamboyan 9, Villemsted Curacao Netherlands-Antilles with a copy to each of: Soros Fund Management LLC 888 Seventh Avenue New York, NY 10016 Attention: Michael Neus, Esq. and Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019 Attention: James Dubin, 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: 6 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 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 7 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. 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 8 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. 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/ James Pekarek ----------------------------- 9 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: _______________________________ EX-4.22 7 0007.txt SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.22 SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT AMENDMENT, dated May 31, 2000 (this "Second 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, as amended by an Amendment dated May 2, 2000 (the "Existing Agreement"), among the Company, QIP, Greenlake II, Greenlake III 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 the parties entered into the Existing Agreement in connection with (i) 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 "January 28 Warrants") to purchase an aggregate of 5,750,000 shares of the Company's Common Stock, and (ii) the acquisition by QIP and Greenlake III on May 2, 2000 of $15,000,000 aggregate principal amount of the Company's Subordinated Notes due June 1, 2000 (the "Subordinated Notes"), which 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 warrants (the "May 2 Warrants" and together with the January 28 Warrants, the "Existing Warrants") to purchase an aggregate of 330,000 shares of the Company's Common Stock, in order to grant to the holders of such securities certain registration rights with respect thereto; and WHEREAS, the Company proposes to issue and sell to QIP and Greenlake III or their affiliates an aggregate of 200,000 shares of the Company's Series C Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), and warrants (the "New Warrants") to purchase an aggregate of 846,154 shares of the Company's Common Stock pursuant to the terms of a Preferred Stock and Warrant Purchase Agreement, dated the date hereof (the "Preferred Stock Purchase Agreement"), among the Company, QIP and Greenlake III; and WHEREAS, in order to induce each of QIP and Greenlake III to purchase the Series C Preferred Stock 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 C 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 2 holding Registrable Securities representing at least a majority of the aggregate number of Registrable Securities owned by all of the Stockholders; and WHEREAS, QIP, Greenlake II, Greenlake III 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). Section 1 of the Existing Agreement is hereby amended to delete the definitions contained therein of the terms "Amendment Agreement," "Existing Agreement," "Existing Warrants," Existing Agreement," "New Warrants," "Preferred Stock" and "Registrable Securities" in their entirety and to add the following additional definitions: "Existing Agreement" is defined in the preamble to the Second Amendment Agreement. "Existing Warrants" is defined in the first recital of the Second Amendment Agreement. "New Warrants" is defined in the second recital of the Second Amendment Agreement. "Second Amendment Agreement" means the Amendment, dated May 31, 2000, among the Company, QIP, Greenlake II, Greenlake III and Greenmarine, to this Agreement. "Series C Preferred Stock" is defined in the second recital of the Second Amendment Agreement. "Preferred Stock Purchase Agreement" is defined in the second recital of the Second Amendment Agreement. "Preferred Stock" means the shares of the Company's Series A Preferred Stock, Series B Preferred Stock and Series C 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 Preferred Stock 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, 3 recapitalization, merger, consolidation or other reorganization or otherwise and any shares of Common Stock issuable upon conversion, exercise or exchange thereof. 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: (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, the Preferred Stock 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, the Preferred Stock Purchase Agreement or the Stockholders' Agreement. 3. Miscellaneous. 3.1 Headings. The headings in this Second Amendment Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 3.2 GOVERNING LAW. THIS SECOND 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 Second Amendment Agreement. Except as specifically amended hereby, the Existing Agreement shall continue in full force and effect in accordance with its terms. 4 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Second Amendment Agreement on the date first written above. OUTBOARD MARINE CORPORATION By: /s/ James B. Pekarek -------------------- Name: James B. Pekarek Title: Vice President and Controller 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-4.23 8 0008.txt RIGHTS OF THE SERIES A CONVERTIBLE PREFERRED STOCK EXHIBIT 4.23 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. The Certificate of Designation was amended by the filing of a Certificate of Amendment with the Secretary of State on May 5, 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 and Series C 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 as now in effect 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 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 Senior 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 as now in effect 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 of Common Stock issued upon the conversion of any shares of Series A Preferred Stock, (C) Common Stock purchase warrants issued pursuant to the Purchase Agreement and the shares of Common Stock issued upon the exercise of such warrants, (D) the Subordinated Notes issued under that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and any shares of Series B Preferred Stock issued upon conversion thereof, (E) shares of Common Stock issued upon the conversion of any shares of Series B Preferred Stock, (F) Common Stock purchase warrants issued by the Corporation pursuant to that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC and the shares of Common Stock issuable upon exercise of such warrants, (G) shares of Series C Preferred Stock issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and shares of Common Stock issued upon the conversion of shares of any shares of Series C Preferred Stock, (H) Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and shares of Common Stock issued upon the exercise of such warrants, and (I) 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) 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 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 8 of the Certificate of Designation as now in effect 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, Series B Preferred Stock or Series C Preferred Stock). 7. The definition of "Senior Stock" set forth in Section 10 of the Certificate of Designation as now in effect is hereby amended to read in its entirety as follows: "Senior Stock" means the Series B Preferred Stock and Series C Preferred Stock that may from time to time be outstanding. 8. Section 10 of the Certificate of Designation as now in effect is hereby further amended to add the following additional defined terms: "Series C Preferred Stock" means the shares of the Corporation's Series C Convertible Preferred Stock, par value $.01 per share. 9. 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 as now in effect. IN WITNESS WHEREOF, the Corporation has authorized the undersigned to execute this certificate on this 31st day of May, 2000. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez --------------------------- Name: Eric T. Martinez Title: Sr. Vice President Finance and Treasurer EX-4.24 9 0009.txt RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK 1 EXHIBIT 4.24 OUTBOARD MARINE CORPORATION CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES C CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE Pursuant to Section 151 of the General Corporation Law of the State of Delaware The following resolution was duly adopted by the Board of Directors of Outboard Marine Corporation, a Delaware corporation (the "Corporation"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, on May 31, 2000, by the unanimous written consent of the Board of Directors of the Corporation: WHEREAS, the Board of Directors of the Corporation is authorized, within the limitations and restrictions stated in the Certificate of Incorporation of the Corporation, to provide by resolution or resolutions for the issuance of shares of preferred stock, par value $.01 per share, of the Corporation, in one or more series with such voting powers, full or limited, or without voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions as shall be stated and expressed in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in the Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) such provisions as may be desired concerning voting, 2 redemption, dividends, dissolution or the distribution of assets and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the General Corporation Law of the State of Delaware; and WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of preferred stock and the number of shares constituting such series; NOW, THEREFORE, BE IT RESOLVED: 1. Designation and Number of Shares. There shall be hereby established a series of preferred stock designated as "Series C Convertible Preferred Stock" (such series being hereinafter referred to as the "Series C Preferred Stock"). The authorized number of shares of Series C Preferred Stock shall be 200,000. The initial liquidation preference of each share Series C Preferred Stock upon issuance shall be $100 per share (the "Initial Liquidation Preference"). As used herein, the "Liquidation Preference" of a share of Series C Preferred Stock shall be an amount equal to the Initial Liquidation Preference plus all amounts added thereto in accordance with Section 3(a) hereof. 2. Rank. The Series C 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) on parity with the then outstanding shares of Parity Stock, and (ii) senior to all classes of common stock of the Corporation (including, without limitation, the common stock, par value $.01 per share, of the Corporation (the "Common Stock")), the Series A Preferred Stock and to each other class or series of capital stock of the Corporation hereafter created other than Parity Stock (the Common Stock, the Series A Preferred Stock and each other class or series of capital stock of the Corporation other than the Parity Stock are hereinafter collectively referred to as the "Junior Stock"). 3 3. Dividends. --------- (a) Beginning on the date of issuance of the Series C Preferred Stock, the holders of the outstanding shares of Series C Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available therefor, cash dividends on each share of Series C Preferred Stock at a quarterly rate equal to 3.75% of the then current Liquidation Preference, payable in arrears on each Dividend Payment Date commencing on the Initial Dividend Payment Date or the next succeeding Business Day, if the applicable Dividend Payment Date is not a Business Day. Notwithstanding the foregoing, the dividend payable on each share of Series C Preferred Stock with respect to the Initial Dividend Period shall be equal to the product of (i) 15.0% of the Initial Liquidation Preference multiplied by (ii) a fraction the numerator of which is the actual number of days from (and including) the Series C Preferred Stock Issue Date to (but excluding) the Dividend Payment Date with respect to the Initial Dividend Period, and the denominator of which is 365. If any dividend (or portion thereof) payable on any Dividend Payment Date is not declared or paid in full on such Dividend Payment Date, the amount of such dividend payable that is not paid on such date shall automatically be added to and cause to be increased the then applicable Liquidation Preference. Each distribution on the Series C Preferred Stock shall be payable to holders of record as they appear on the stock books of the Corporation on such record dates, not less than ten (10) nor more than sixty (60) days preceding the related Dividend Payment Date, as shall be fixed by the Board of Directors of the Corporation. (b) All dividends paid with respect to shares of Series C Preferred Stock pursuant to Section 3(a) shall be paid pro rata and in like manner to all of the holders entitled thereto. No dividends or other distributions may be declared or paid or set apart for 4 payment on the Series C Preferred Stock or any other Parity Stock, and no Parity Stock, including the Series C Preferred Stock, may be repurchased, exchanged, redeemed or otherwise acquired by the Corporation (other than upon conversion thereof in accordance with the terms of such Parity Stock), nor may funds be set apart for payment with respect thereto, unless such dividend, repurchase, exchange, redemption or other acquisition (other than upon conversion thereof in accordance with the terms of such Parity Stock) is applied pro rata and in a like manner to all outstanding shares of Parity Stock. (c) Nothing herein contained shall in any way or under any circumstances be construed or deemed to require the Board of Directors of the Corporation to declare, or the Corporation to pay or set apart for payment, any dividends on shares of the Series C Preferred Stock at any time. (d) Beginning on the Series C Preferred Stock Issue Date, if the Board of Directors of the Corporation shall declare a dividend or make any other distribution (including, without limitation, in cash or other property or assets) to holders of shares of Common Stock (other than (i) dividends payable in capital stock for which adjustment is made under Section 5(c)(i) or (ii) subscription rights or warrants for which an adjustment is made under Section 5(c)(ii)), then the holders of each share of Series C Preferred Stock shall be entitled to receive a dividend or distribution in an amount equal to the amount of such dividend or distribution received by a holder of the number of shares of Common Stock for which such share of Series C Preferred Stock is convertible on the record date for such dividend or distribution. Any such amount shall be paid to the holders of shares of Series C Preferred Stock at the same time such dividend or distribution is made to holders of Common Stock. The foregoing notwithstanding, so long as any shares of the Series C Preferred Stock are outstanding, the Corporation shall not declare, pay or set apart for 5 payment any dividend on any shares of Junior Stock or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any shares of Junior Stock or any warrants, rights, calls or options exercisable for or convertible into any shares of Junior Stock, or make any distribution in respect thereof, either directly or indirectly, whether in cash, obligations or shares of the Corporation or other property unless prior to such declaration, payment and set apart, the holders of not less than 85% of the outstanding shares of Series C Preferred Stock shall have consented thereto in writing. 4. Liquidation, Dissolution or Winding Up. -------------------------------------- (a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, before any distribution or payment to holders of Junior Stock, the holders of shares of Series C Preferred Stock shall be entitled to be paid an amount equal to the greater of (i) the Liquidation Preference, plus an amount in cash equal to the product of (x) 15% of the then current Liquidation Preference, and (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 date fixed for liquidation, dissolution or winding-up of the Corporation, and the denominator of which is 365, and (ii) the amount that the holders of shares of Series C Preferred Stock would be entitled to receive in connection with such liquidation, dissolution or winding up if all of the holders of the Series C Preferred Stock had converted their shares immediately prior to any relevant record date or payment in connection with such liquidation, dissolution or winding up, in either case, before any payment or distribution is made to any class or series of capital stock. (b) If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to the holders of 6 outstanding shares of Parity Stock, including, without limitations, outstanding shares of Series C Preferred Stock, shall be insufficient to permit payment in full to such holders of the sums which such holders are entitled to receive in such case, then all of the assets available for distribution to holders of outstanding shares of Parity Stock, including, without limitations, outstanding shares of Series C Preferred Stock, shall be distributed among and paid to such holders ratably in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit payment in full. (c) Neither the consolidation or merger of the Corporation with or into any other Person nor the sale or other distribution to another Person of all or substantially all the assets, property or business of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 4. 5. Conversion. ---------- (a) Stockholders' Right To Convert. Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time, or from time to time, into fully paid and nonassessable shares of Common Stock at the Conversion Price. As used herein the "Conversion Price" shall be $6.25 per share, subject to adjustment as set forth in this Section 5. (b) Number of Shares of Common Stock Issuable upon Conversion. The number of shares of Common Stock to be issued upon conversion of shares of Series C Preferred Stock pursuant to Section 5(a) shall be equal to the product of (i) a fraction, the numerator of which is the then current Liquidation Preference and the denominator of which is the Conversion Price, and (ii) the number of shares of Series C Preferred Stock to be converted. 7 (c) Antidilution Adjustments. The Conversion Price shall be adjusted from time to time in certain cases as follows: (i) Dividend, Subdivision, Combination or Reclassification of Common Stock. If the Corporation shall, at any time or from time to time, (a) declare a dividend on the Common Stock payable in shares of its capital stock (including Common Stock), (b) subdivide the outstanding Common Stock, (c) combine the outstanding Common Stock into a smaller number of shares, or (d) issue any shares of its capital stock in a reclassification of the Common Stock (excluding any such reclassification in connection with a consolidation or merger in which the Corporation is the continuing corporation), then in each such case, the Conversion Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification and the number and kind of shares of capital stock issuable on such date shall be proportionately adjusted so that, in connection with a conversion after such date, the holder of the Series C Preferred Stock shall be entitled to receive the aggregate number and kind of shares of capital stock which, if the conversion had occurred immediately prior to such date, the holder would have owned upon such conversion and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. Any such adjustment shall become effective immediately after the record date of such dividend or the effective date of such subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. If a dividend is declared and such dividend is not paid, the Conversion Price shall be adjusted to the Conversion Price in effect immediately prior to such record date. (ii) Issuance of Rights to Purchase Common Stock Below Current Market Price or Conversion Price. If the Corporation shall, at any time or from time 8 to time, fix a record date for the issuance of rights or warrants to all holders of Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Stock or securities convertible into Common Stock at a price per share of Common Stock, or having a conversion price per share of Common Stock, if a security is convertible into Common Stock (determined by dividing (x) the sum of (A) the total consideration, if any, paid to the Corporation for such rights, warrants or other securities convertible into Common Stock, and (B) the total consideration payable to the Corporation upon exercise, conversion or exchange of such rights, warrants or other securities convertible into Common Stock (the sum of (A) and (B) being the "Conversion Consideration"), by (y) the total number of shares of Common Stock covered by such rights, warrants or other securities convertible into Common Stock), lower than either the Current Market Price per share of Common Stock on such record date (or, if an ex-dividend date has been established for such record date, on the day next preceding such ex-dividend date) or the then current Conversion Price, then the current Conversion Price shall be reduced to the price determined by multiplying (1) the Conversion Price in effect immediately prior to such record date by (2) a fraction, the numerator of which shall be the sum of (I) the number of shares of Common Stock outstanding on such record date, plus (II) the quotient obtained by dividing the Conversion Consideration by the Applicable Price, and the denominator of which shall be the sum of (I) the number of shares of Common Stock outstanding on such record date plus (II) the number of additional shares of Common Stock to be offered for subscription or purchase (or the total number of shares of Common Stock covered by such rights, warrants or other securities convertible into Common Stock). In case such price for subscription or purchase may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be determined in good faith by the 9 Board of Directors of the Corporation and shall be that value which is agreed upon by at least 75% of the members thereof; provided, that if the holders of 25% of the shares of Series C Preferred Stock object to such valuation as determined by the Board of Directors within fifteen (15) days of receipt of written notice of such valuation 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. Any such adjustment shall become effective immediately after the record date for such rights or warrants. Such adjustment shall be made successively whenever such a record date is fixed. If such rights or warrants are not so issued, the then current Conversion Price shall be adjusted to the Conversion Price in effect immediately prior to such record date. The determination of whether any adjustment is required under this Section 5(c)(ii) 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, warrant, options 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 Conversion Price, to the extent in any way 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. 10 (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 of Common Stock issued upon conversion of any shares of Series A Preferred Stock, (C) shares of Common Stock issued upon the exercise of Common Stock purchase warrants issued pursuant to that certain Series A Preferred Stock and Warrant Purchase Agreement, dated January 28, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings II LLC, (D) any shares of Series B Preferred Stock issued upon the conversion the Subordinated Notes issued under that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, (E) shares of Common Stock issued upon the conversion of any shares of Series B Preferred Stock, (F) shares of Common Stock issued upon exercise of Common Stock purchase warrants issued by the Corporation pursuant to that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, (G) shares of Common Stock issued upon the conversion of any shares of Series C Preferred Stock, (H) Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, 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 (I) options issuable pursuant to bona fide employee benefit plans or arrangements approved or adopted by the Corporation's Board of 11 Directors, and the shares of Common Stock issuable on exercise of such options) 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 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 12 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 was 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. 13 (d) De Minimis Adjustments. No adjustment of the then current Conversion Price shall be made if the amount of such adjustment would result in a change in the then current Conversion Price per share of less than $.10, but in such case any adjustment that would otherwise be required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, which together with any adjustment so carried forward, would result in a change in the then current Conversion Price of at least $.10 per share. Notwithstanding the provisions of the first sentence of this Section 5(d), any adjustment postponed pursuant to this Section 5(d) shall be made no later than the earlier of (i) three years from the date of the transaction that would, but for the provisions of the first sentence of this Section 5(d), have required such adjustment and (ii) the date of any conversion of shares of Series C Preferred Stock into shares of Common Stock. (e) Fractional Shares. Notwithstanding any other provision of this Certificate of Designation or the Corporation's Certificate of Incorporation, the Corporation shall not be required to issue fractions of shares upon conversion of any shares of Series C Preferred Stock or to distribute certificates which evidence fractional shares. In lieu of fractional shares, the Corporation may pay therefore, at the time of any conversion of shares of Series C Preferred Stock as herein provided, an amount in cash equal to such fraction multiplied by the greater of the Current Market Price of a share of Common Stock on such date and the Conversion Price. (f) Reorganization, Reclassification, Merger and Sale of Assets Adjustment. If there occurs any capital reorganization or any reclassification of the Common Stock (other than a reorganization or reclassification that results in an adjustment pursuant to provisions of Section 5(c) hereof), the consolidation or merger of the Corporation with or 14 into another Person (other than a merger or consolidation of the Corporation in which the Corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock) or the sale, transfer or other disposition of all or substantially all of the assets of the Corporation to another Person, then each share of Series C Preferred Stock shall thereafter be convertible into the same kind and amounts of securities (including shares of stock) or other assets, or both, which were issuable or distributable to the holders of outstanding Common Stock upon such reorganization, reclassification, consolidation, merger, sale or conveyance (but only to the extent that a dividend or distribution with respect thereto was not or is not made pursuant to Section 3(d) hereof), in respect of that number of shares of Common Stock into which such share of Series C Preferred Stock might have been converted immediately prior to such reorganization, reclassification, consolidation, merger, sale or conveyance; and, in any such case, appropriate adjustments (as determined in good faith by the Board of Directors of the Corporation) shall be made to assure that the provisions set forth herein (including provisions with respect to changes in, and other adjustments of, the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to any securities or other assets thereafter deliverable upon the conversion of the Series C Preferred Stock. (g) Mechanics of Conversion. The option to convert shall be exercised by surrendering for such purpose to the Corporation, at any place where the Corporation shall maintain a transfer agent for its Common Stock, certificates representing the shares to be converted, duly endorsed in blank or accompanied by proper instruments of transfer, and at the time of such surrender, the Person in whose name any certificate for shares of Common Stock shall be issuable upon such conversion shall be deemed to be the holder of record of such shares of Common Stock on such date, notwithstanding that the 15 share register of the Corporation shall then be closed or that the certificates representing such Common Stock shall not then be actually delivered to such Person. (h) Certificate as to Adjustments. Whenever the Conversion Price and the number of shares of Common Stock issuable, or the securities or other property deliverable upon the conversion of the Series C Preferred Stock, shall be adjusted pursuant to the provisions hereof, the Corporation shall promptly give written notice thereof to each holder of shares of Series C Preferred Stock at such holder's address as it appears on the transfer books of the Corporation and shall forthwith file, at its principal executive office and with any transfer agent or agents for the Series C Preferred Stock and the Common Stock, a certificate, signed by the President or one of the Vice Presidents of the Corporation, and by its Chief Financial Officer, its Treasurer or one of its Assistant Treasurers, stating the adjusted Conversion Price, the number of shares of Common Stock issuable, or the securities or other property deliverable, per share of Series C Preferred Stock converted, calculated to the nearest one-tenth of one cent or to the nearest one-hundredth of a share and setting forth in reasonable detail the method of calculation and the facts requiring such adjustment and upon which such calculation is based. Each adjustment shall remain in effect until a subsequent adjustment hereunder is required. (i) Reservation of Common Stock. The Corporation shall at all times reserve and keep available for issuance upon the conversion of the shares of Series C Preferred Stock the maximum number of its authorized but unissued shares of Common Stock as is reasonably anticipated to be sufficient to permit the conversion of all outstanding shares of Series C Preferred Stock and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but 16 unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series C Preferred Stock. (j) No Conversion Charge or Tax. The issuance and delivery of certificates for shares of Common Stock upon the conversion of shares of Series C Preferred Stock shall be made without charge to the holder of shares of Series C Preferred Stock for any issue or transfer tax, or other incidental expense in respect of the issuance or delivery of such certificates or the securities represented thereby, all of which taxes and expenses shall be paid by the Corporation. 6. Redemption. (a) Redemption Demand. Upon the demand of the holders of at least 75% of the outstanding shares of Parity Stock made in writing to the Corporation at any time after October 1, 2008 (a "Redemption Demand"), the Corporation shall be required to redeem (i) all of the shares of Series C 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"), and (ii) all of the outstanding shares of each other series of Parity Stock in accordance with the terms of such security, but only, in each case, to the extent that (A) funds are legally available therefor and (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. 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 Parity Stock, including, without limitation, the shares of Series C Preferred Stock, then 17 the Corporation shall redeem as many shares of Parity Stock, including, without limitation, the shares of Series C Preferred Stock, as its legally available funds permit. (b) Redemption at Corporation's Option. On and after the date on which fewer than 10% of the shares of Series C Preferred Stock issued on the Series C 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 C 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) the Corporation redeems all outstanding shares of the other series of Parity Stock to the extent permitted to do so in accordance with the terms thereof. 18 (c) Redemption Notice. At least 30 days and not more than 60 days before a Redemption Date, the Corporation shall mail a notice of Redemption (the "Redemption Notice") by first class mail, postage prepaid, to each holder of record on the record date fixed for such redemption at such holder's address as it appears on the stock register of the Corporation; provided, however, that neither the failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Series C Preferred Stock to be redeemed except as to the holder or holders to whom the Corporation has failed to give said notice or except as to the holder or holders whose notice was defective. The Redemption Notice shall be mailed by the Corporation to the holders of the shares of Series C Preferred Stock (and in the case of a Demand Redemption, such Redemption Notice shall be mailed not later than 10 days after receipt by the Corporation of a Redemption Demand) and shall state: (i) that the Corporation is redeeming shares of Series C Preferred Stock in response to a Redemption Demand or in connection with an Optional Redemption, as the case may be; (ii) the Redemption Price; (iii) in the case of a Demand Redemption, whether funds are legally available to redeem all or less than all of the outstanding shares of the Series C Preferred Stock and the total number of shares of the Series C Preferred Stock being redeemed; (iv) if, in the case of a Demand Redemption, less than all of the shares of Series C Preferred Stock held by such holder are to be redeemed, the number of shares of Series C Preferred Stock held by such holder, as of the appropriate record date, that the Corporation intends to redeem; 19 (v) the Redemption Date; (vi) that the holder is to surrender to the Corporation, at the place or places where certificates for shares of Series C Preferred Stock are to be surrendered for redemption, in the manner and at the price designated, his or her certificate or certificates representing the shares of Series C Preferred Stock to be redeemed; and (vii) that dividends on the shares of the Series C Preferred Stock to be redeemed shall cease to accrue and increase on such Optional Redemption Date unless the Corporation defaults in the payment of the Optional Redemption Price. (d) Pro-Rata Redemption. In the event of a redemption pursuant to Section 6(a) of less than all of the then outstanding shares of Parity Stock, the Corporation shall effect such redemption pro rata according to the number of shares held by each holder of Parity Stock. (e) Surrender of Shares; Payment. Each holder of Series C Preferred Stock shall surrender the certificate or certificates representing such shares of Series C Preferred Stock to the Corporation, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date or the Optional Redemption Date the full Redemption Price or Optional Redemption Price, as the case may be, for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued by the Corporation representing the unredeemed shares. 20 (f) Effect on Redeemed Shares. Unless the Corporation defaults in the payment in full of the Redemption Price or the Optional Redemption Price, dividends on the Series C Preferred Stock called for redemption shall cease to accumulate and increase on the Redemption Date or Optional Redemption Date, as the case may be, and the holders of such redeemed shares shall cease to have any further rights with respect thereto on the Redemption Date or Optional Redemption Date, other than the right to receive the Redemption Price or Optional Redemption Price, as the case may be. 7. Voting Rights. (a) The holders of Series C Preferred Stock, except as otherwise required under Delaware law or as set forth in Sections 7(b) and (c) below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation. (b) So long as the Series C Preferred Stock is outstanding, each share of Series C Preferred Stock shall entitle the holder thereof to vote, in person or by proxy, at a special or annual meeting of stockholders, on all matters entitled to be voted on by holders of Common Stock voting together as a single class with other shares entitled to vote thereon. With respect to any such vote, each share of Series C Preferred Stock shall entitle the holder thereof to cast that number of votes per share as is equal to the number of votes that such holder would be entitled to cast had such holder converted its shares of Series C Preferred Stock into shares of Common Stock on the record date for determining the stockholders of the Corporation eligible to vote on any such matters. The foregoing notwithstanding, if the acquisition by any holder of shares of Series C Preferred Stock would require such holder and/or the Corporation to comply with the pre-merger notification requirements of the Hart- Scott-Rodino Antitrust Improvement Act of 1976, as amended (the 21 "HSR Act"), then the shares of Series C Preferred Stock acquired by such holder shall not entitle the holder thereof to vote, in person or by proxy, at any special or annual meeting of stockholders, on any matter covered by this Section 7(b), but not with respect to matters covered by Section 7(c), unless and until (i) such holder and the Corporation have complied with the requirements of the HSR Act and (ii) the applicable waiting period under the HSR Act shall have expired or been terminated. (c) Unless the consent or approval of a greater number of shares shall then be required by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the outstanding shares of Series C Preferred Stock, voting as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose or by written consent, shall be necessary to authorize, adopt or approve an amendment to this Certificate of Designation or the Certificate of Incorporation of the Corporation that would alter or change the powers, preferences or special rights of the shares of Series C Preferred Stock so as to affect the shares of Series C Preferred Stock adversely. 8. Reissuance of Series C Preferred Stock. Shares of Series C 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, Series B Preferred Stock or Series C Preferred Stock). 9. Business Day. If any payment or redemption shall be required by the terms hereof to be made on a day that is not a Business Day, such payment or redemption shall be made on the immediately succeeding Business Day. 22 10. Definitions. As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: "Applicable Price" shall mean the higher of (a) the Current Market Price per share of Common Stock on the applicable record or other relevant date and (b) the then current Conversion Price. "Board of Directors" shall have the Board of Directors of the Corporation. "Business Day" means any day except a Saturday, a 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. "Closing Price" shall mean, with respect to the Common Stock for any day, (a) the last reported sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case as reported on the principal national securities exchange on which such Common Stock is listed or admitted for trading or (b) if the Common Stock is not listed or admitted for trading on any national securities exchange, the last reported sale price or, in case no such sale takes place on such day, the average of the highest reported bid and the lowest reported asked quotation for the Common Stock, in either case as reported on the Nasdaq Stock Market, Inc. or a similar service if the Nasdaq Stock Market, Inc. is no longer reporting such information. "Common Stock" shall have the meaning ascribed to it in Section 2 hereof. "Conversion Consideration" shall have the meaning ascribed to it in Section 5(c)(ii) hereof. "Conversion Price" shall have the meaning ascribed to it in Section 5(a). 23 "Corporation" shall mean Outboard Marine Corporation, a Delaware corporation. "Current Market Price" shall mean, with respect to the Common Stock on any date, the average of the daily Closing Prices per share of Common Stock for the 10 consecutive trading days commencing 15 days before such date. If on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq Stock Market, Inc. or a similar service, the Current Market Price for such shares shall be the fair market value of such shares on such date as determined in good faith by the Board of Directors of the Corporation and shall be the value which is agreed upon by 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 a nationally recognized stature that is selected by the holders of 75% of the members of the Board of Directors. "Dividend Payment Date" means each of March 31, June 30, September 30 and December 31 of each year. "Dividend Period" means the Initial Dividend Period and, thereafter, each Quarterly Dividend Period. "HSR Act" shall have the meaning ascribed to it in Section 7(b). "Initial Dividend Period" means the dividend period commencing on, and including, the Series C Preferred Stock Issue Date and ending on, and excluding, the first Dividend Payment Date to occur thereafter. "Initial Liquidation Preference" shall have the meaning ascribed to it in Section 1 hereof. "Junior Stock" shall have the meaning ascribed to it in Section 2 hereof. 24 "Liquidation Preference" shall have the meaning ascribed to it in Section 1 hereof. "Parity Stock" means the Series B Preferred Stock and Series C Preferred Stock. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind. "Quarterly Dividend Period" shall mean the quarterly periods commencing on, and including, each Dividend Payment Date and ending on, and excluding, each next Dividend Payment Date occurring immediately thereafter, respectively. "Redemption Date" means, with respect to any shares of Series C Preferred Stock, the date on which such shares are to be redeemed by the Corporation pursuant to Section 6 hereof. "Redemption Demand" shall have the meaning ascribed to it in Section 6(a) "Redemption Notice" shall have the meaning ascribed to it in Section 6(c) hereof. "Redemption Price" shall have the meaning ascribed to it in Section 6(a) hereof. "Series A Preferred Stock" means the outstanding shares of the Corporation's Series A Convertible Preferred Stock, par value $.01 per share. "Series B Preferred Stock" means the shares of the Corporation's Series B Convertible Preferred Stock, par value $.01 per share, that may from time to time be outstanding. 25 "Series C Preferred Stock" shall have the meaning ascribed to it in Section 1 hereof. "Series C Preferred Stock Issue Date" means the date on which the Series C Preferred Stock is originally issued by the Corporation. [Remainder of Page Left Intentionally Blank] 26 IN WITNESS WHEREOF, OUTBOARD MARINE CORPORATION has caused this certificate to be duly executed by its Vice President and Controller this 31st day of May, 2000. OUTBOARD MARINE CORPORATION By: /s/ James Pekarek --------------------------------- Name: James Pekarek Title: Vice President and Controller EX-4.25 10 0010.txt SERIES D STOCK & PURCHASE AGREEMENT EXHIBIT 4.25 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT, dated July 19, 2000 (this "Agreement"), among Outboard Marine Corporation, a Delaware corporation (the "Company") Quantum Industrial Partners LDC ("QIP") and Greenlake Holdings V 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) the number of shares of the Company's Series D Preferred Stock 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 A. The shares of Series D Preferred Stock to be sold pursuant hereto are collectively referred to as the "Purchased Shares" and the Warrants to be sold pursuant hereto are collectively referred to as the "Warrants." 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 ----------- I.1 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. 2 "Audited Financial Statements" has the meaning set forth in Section 3.8 of this Agreement. "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 the Certificate of the Powers, Designations, Preferences and Rights of the Series D Convertible Preferred Stock, Par Value $.01 Per Share of the Company, as filed by the Company with the Secretary of State of Delaware on July __, 2000, a true and correct copy of which is annexed as Exhibit B hereto. "Certificate of Designation Amendments" means each of a Certificate of Amendment to the Certificate of Designation of the Series A Preferred Stock substantially in the form attached hereto as Exhibit F and a Certificate of Amendment to the Certificate of Designation of the Series C Preferred Stock substantially in the form attached hereto as Exhibit G. "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. 3 "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 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. "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. "Greenlake II" means Greenlake Holdings II LLC, a Delaware limited liability company. "Greenlake III" means Greenlake Holdings III LLC, a Delaware limited liability company. 4 "Greenlake IV" means Greenlake Holdings IV LLC, a Delaware limited liability company. "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, 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. 5 "Material Adverse Effect" means a material adverse effect on (i) the business, operations, financial condition, assets, prospects or properties of the Company 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. "May 2 Agreement" means that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Company, QIP and Greenlake, as amended by that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000. "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, as amended prior to the date hereof, among the Company, QIP, Greenlake II and Greenlake III. "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 shares of Series D Preferred Stock and the Warrants issuable hereunder, the shares of Common Stock issuable upon conversion of the Series D Preferred Stock, and the Warrant Shares. 6 "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, 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, as amended. "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 Series B Certificate of Designation annexed hereto as Exhibit C, and issuable by the Company upon conversion of the Subordinated Notes in accordance with the terms set forth in the May 2 Agreement, as amended hereby, and in the Subordinated Notes. "Series C Preferred Stock" means the shares of Series C Convertible Preferred Stock, par value $.01 per share, of the Company having the powers, designations, preferences and rights set forth in the Certificate of the Powers, Designations, Preferences and Rights of the Series C Convertible Preferred Stock, Par Value $.01 Per Share of the Company, as filed by the Company with the Secretary of State of Delaware on May 31, 1999, as amended. "Series D Preferred Stock" means the shares of Series D 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. "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, as amended prior to the date hereof, among the Company, QIP, Greenlake II and Greenlake III. "Third Registration Rights Agreement Amendment" means an amendment to the Registration Rights Agreement in substantially the form of Exhibit D hereto. 7 "Third Stockholders Agreement Amendment" means an amendment to the 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 Warrants, the Third Registration Rights Agreement Amendment and the Third Stockholders Agreement Amendment. "Warrant" has the meaning set forth in the recitals to this Agreement. "Warrant Shares" has the meaning set forth in Section 2.1 of this Agreement. ARTICLE II PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS ------------------------------------------------- II.1 Purchase and Sale of Preferred Stock 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) the number of shares of Series D Preferred Stock 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"). II.2 Use of Proceeds. The Company shall use the proceeds from the sale of the Purchased Shares and the Warrants to the Purchasers for general corporate purposes, including to fund the Company's working capital and to make capital expenditures. II.3 Closing. The closing of the sale and purchase of the Purchased Shares and Warrants (the "Closing") shall take place at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, at 10:00 a.m., local time, on July __, 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 certificate 8 evidencing the number of shares of Series D Preferred Stock 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: III.1 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 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. III.2 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, (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. III.3 Governmental Authorization; Third Party Consents. 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. 9 III.4 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). III.5 Compliance with Laws. (a) 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. (b) (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. III.6 Capitalization. On the Closing Date, the authorized capital stock of the Company shall consist of (i) 42,000,000 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, (iii) 200,000 shares of Series C Preferred Stock, all of which are issued and outstanding, (iii) 200,000 shares of Series D Preferred Stock, all of which will be issued in accordance with this Agreement, and (iv) 150,000 shares of undesignated "blank check" preferred stock, _______ of which are reserved for future issuance upon conversion of the Subordinated Notes into shares of Series B 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) 3,200,000 shares of Common Stock for issuance upon conversion of the Series C Preferred Stock, (3) 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, (4) 330,000 shares of Common Stock for issuance upon exercise of common stock purchase warrants issued under the May 2 Agreement, (5) 846,154 shares of Common Stock for issuance upon exercise of the warrants under that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Company, QIP and Greenlake Holdings III LLC, (6) 846,154 shares of Common Stock for issuance upon exercise of the Warrants, (7) 3,200,000 shares of Common Stock for issuance upon conversion of the Purchased Shares, and (8) an aggregate of 5,600,000 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. In addition, the Company has agreed that upon issuance of any shares of Series B Preferred Stock, the Company shall reserve such additional number of shares of 10 Common Stock as may be necessary in order to permit the conversion of the shares of Series B Preferred Stock in accordance with the terms of such stock. Except as described in the immediately preceding three sentences 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 shares of Series D Preferred Stock 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, and Sections 2.1 through (and including) 2.4 of the Stockholders Agreement, as amended by the Third Stockholders Agreement Amendment, the issuance and sale to the Purchasers of the Purchased Shares and the Warrants, the conversion of the Purchased Shares in accordance with the terms set forth in the Certificate of Designation, 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 Purchased Shares and any shares of Common Stock issuable upon conversion of the Purchased Shares 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 shares of Common Stock are all duly authorized, validly issued, fully paid and non-assessable. III.7 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. III.8 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 11 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"). III.9 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. III.10 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 Purchased Shares or the Warrants. III.11 Intellectual Property. (a) 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. 12 (b) To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Intellectual Property rights of the Company. III.12 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. III.13 Litigation; Observance of Statutes and Orders. (a) 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. (b) 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. III.14 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. III.15 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. 13 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: IV.1 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. IV.2 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. IV.3 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 Purchased Shares 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. IV.4 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). IV.5 Purchase for Own Account. The shares of Series D Preferred Stock and the Warrants to be acquired by such Purchaser pursuant to this Agreement and any shares of Common Stock received upon conversion or exercise of the shares of Series D 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, 14 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, 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." IV.6 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 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. IV.7 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. 15 IV.8 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. IV.9 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. IV.10 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 Purchased Shares 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. V.1 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. V.2 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. V.3 Purchased Shares. The Company shall have delivered to each of the Purchasers a stock certificate evidencing the number of shares of Series D Preferred Stock set forth opposite such Purchaser's name on Schedule 2.1 hereto. 16 V.4 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. V.5 Third Registration Rights Agreement Amendment. The Company shall have duly executed and delivered the Third Registration Rights Agreement Amendment. V.6 Third Stockholders Agreement Amendment. The Company shall have duly executed and delivered the Third Stockholders Agreement Amendment. V.7 Certificate of Designation Amendments. The Company shall have filed with the Secretary of State of Delaware the Certificate of Designation Amendments substantially in the form of Exhibit F and Exhibit G hereto. V.8 Certificate of Designation. The Company shall have filed with the Secretary of State of Delaware the Certificate of Designation. V.9 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 H. ARTICLE VI CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE ----------------------- The obligation of the Company to issue and sell the Purchased Shares 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: VI.1 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. VI.2 Payment of Purchase Price. Each Purchaser shall have paid the aggregate purchase price for the shares of Series D Preferred Stock and the Warrant to be purchased by such Purchaser. 17 VI.3 Third Registration Rights Agreement Amendment. Each party thereto other than the Company shall have duly executed and delivered the Third Registration Rights Agreement Amendment. VI.4 Third Stockholders Agreement Amendment. Each party thereto other than the Company shall have duly executed and delivered the Third Stockholders Agreement Amendment. VI.5 Certificate of Designation Amendment (Series A Preferred Stock). 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 relating to the Series A Preferred Stock. VI.6 Certificate of Designation Amendment (Series C Preferred Stock). The stockholders of the Company (including the holders of at least 75% of the shares of Series C Preferred Stock voting separately as a class) shall have approved the filing by the Company of the Certificate of Designation Amendment relating to the Series C Preferred Stock. ARTICLE VII INDEMNIFICATION --------------- VII.1 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 18 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. VII.2 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 19 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. VII.3 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 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 Purchased Shares 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 Purchased Shares or Warrants: VIII.1 Financial Statements and Other Information. The Company shall deliver to such Purchaser, in form and substance reasonably satisfactory to such Purchaser: (a) 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; (b) 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 20 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 (c) commencing with the month ending on June 30, 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 GAAP applied on a consistent basis, subject to normal year-end adjustments and the absence of footnotes required by GAAP. VIII.2 Reservation of Stock. 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 Purchased Shares, as provided in the Certificate of Designation, 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. VIII.3 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. VIII.4 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 AMENDMENT OF MAY 2 AGREEMENT ---------------------------- IX.1 Amendment of May 2 Agreement. The Company, QIP and Greenlake III, being all of the parties to the May 2 Agreement, and QIP and Greenlake III, being the holders of all outstanding Subordinated Notes issued pursuant to the May 2 Agreement (the "Subordinated Notes"), hereby agree to amend, and do amend the May 2 Agreement by deleting the form of Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $.01 Per Share of the Company, annexed as Exhibit C to the Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, 21 among the Company, QIP and Greenlake III, and by replacing such Exhibit C with the form of Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $.01 Per Share of the Company, annexed as Exhibit C to this Agreement. The parties further agree that each reference in the May 2 Agreement or the Subordinated Notes to the "Certificate of Designation" or "Exhibit C hereto" shall hereafter be understood to refer to the form of Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $.01 Per Share of the Company annexed as Exhibit C to this Agreement. Except as specifically amended hereby, the May 2 Agreement and each outstanding Subordinated Note shall continue in full force and effect in accordance with its terms. ARTICLE X MISCELLANEOUS ------------- X.1 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. X.2 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 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 22 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: James Dubin, Esq. (ii) If to Greenlake: Greenlake Holdings V LLC c/o Greenway Partners, L.P. 277 Park Avenue New York, NY 10016 Telecopy: (212) 350-5253 Attention: Gary Duberstein 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. X.3 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 23 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. X.4 Amendment and Waiver. (a) 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. (b) 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% of the outstanding Purchased Shares, 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. X.5 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. X.6 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. X.7 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. X.8 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. 24 X.9 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. X.10 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. X.11 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. X.12 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. X.13 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 25 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. X.14 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 Preferred Stock and Warrant Purchase Agreement on the date first written above. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez ---------------------------------------------------- Name: Eric T. Martinez Title: Sr. Vice President Finance and Treasurer QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Michael C. Neus ---------------------------------------------------- Name: Michael C. Neus Title: Attorney in Fact GREENLAKE HOLDINGS V LLC By: /s/ Gary K. Duberstein ---------------------------------------------------- Name: Gary K. Duberstein Title: Vice President GREENLAKE HOLDINGS III LLC (solely with respect to Article IX hereto) By: /s/ Gary K. Duberstein ---------------------------------------------------- Name: Gary K. Duberstein Title: Vice President SCHEDULE 2.1 ------------ PURCHASED SHARES AND WARRANT SHARES AND PURCHASE PRICE ------------------------------------------------------
Number of Shares of Purchaser/1/ Series D Preferred Warrant Shares Purchase Price Stock - -------------------------------------------------------------------------------- Quantum Industrial 200,000 846,154 $20,000,000 Partners LDC Greenlake Holdings V LLC 0 0 $0
- ---------------------- /1/ Subsequent to the Closing, QIP may sell a portion of the shares of Series D Preferred Stock and Warrants purchased at the Closing to Greenlake or its Affiliate on such terms as QIP and Greenlake may agree. ================================================================================ PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT among OUTBOARD MARINE CORPORATION, QUANTUM INDUSTRIAL PARTNERS LDC and GREENLAKE HOLDINGS V LLC ______________________________ July 19, 2000 ______________________________ ================================================================================ Table of Contents -----------------
Page # ------ ARTICLE I DEFINITIONS.................................................1 1.1 Definitions..............................................1 ARTICLE II PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS..........7 2.1 Purchase and Sale of Preferred Stock and Warrants........7 2.2 Use of Proceeds..........................................8 2.3 Closing..................................................8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............8 3.1 Corporate Existence and Power............................8 3.2 Authorization; No Contravention..........................8 3.3 Governmental Authorization; Third Party Consents.........9 3.4 Binding Effect...........................................9 3.5 Compliance with Laws.....................................9 3.6 Capitalization...........................................9 3.7 No Default or Breach; Contractual Obligations...........10 3.8 Financial Statements....................................11 3.9 No Material Adverse Change; Ordinary Course of Business.11 3.10 Private Offering........................................11 3.11 Intellectual Property...................................11 3.12 Broker's, Finder's or Similar Fees......................12 3.13 Litigation; Observance of Statutes and Orders...........12 3.14 Taxes...................................................12 3.15 Title to Property; Leases...............................13 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........13 4.1 Existence and Power.....................................13 4.2 Authorization; No Contravention.........................13 4.3 Governmental Authorization; Third Party Consents........13 4.4 Binding Effect..........................................14 4.5 Purchase for Own Account................................14 4.6 Restricted Securities...................................15 4.7 Broker's, Finder's or Similar Fees......................15 4.8 Accredited Investor.....................................15 4.9 Disclosure of Information...............................15 4.10 Investment Experience...................................15 ARTICLE V CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE....16 5.1 Representations and Warranties..........................16 5.2 Secretary's Certificate.................................16 5.3 Purchased Shares........................................16
i 5.4 Warrants.................................................16 5.5 Third Registration Rights Agreement Amendment............16 5.6 Third Stockholders Agreement Amendment...................16 5.7 Certificate of Designation Amendments....................16 5.8 Certificate of Designation...............................17 5.9 Opinion of Counsel.......................................17 ARTICLE VI CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE.......17 6.1 Representations and Warranties...........................17 6.2 Payment of Purchase Price................................17 6.3 Third Registration Rights Agreement Amendment............17 6.4 Third Stockholders Agreement Amendment...................17 6.5 Certificate of Designation Amendment.....................17 6.6 Certificate of Designation Amendment.....................17 ARTICLE VII INDEMNIFICATION...........................................18 7.1 Indemnification..........................................18 7.2 Notification.............................................19 7.3 Limitation on Indemnification............................19 ARTICLE VIII AFFIRMATIVE COVENANTS....................................20 8.1 Financial Statements and Other Information...............20 8.2 Reservation of Stock.....................................21 8.3 Books and Records........................................21 8.4 Inspection...............................................21 ARTICLE IX AMENDMENT OF MAY 2 AGREEMENT...............................21 9.1 Amendment of May 2 Agreement.............................21 ARTICLE X MISCELLANEOUS...............................................22 10.1 Survival of Representations and Warranties...............22 10.2 Notices..................................................22 10.3 Successors and Assigns; Third Party Beneficiaries........23 10.4 Amendment and Waiver.....................................24 10.5 Counterparts.............................................24 10.6 Headings.................................................24 10.7 GOVERNING LAW............................................24 10.8 Severability.............................................24 10.9 Rules of Construction....................................24 10.10 Right to Conduct Activities..............................25 10.11 Entire Agreement.........................................25 10.12 Fees.....................................................25 10.13 Publicity................................................25 10.14 Further Assurances.......................................26
ii EXHIBITS A Form of Warrant B Form of Certificate of Designation of Series D Preferred Stock C Form of Certificate of Designation of Series B Preferred Stock D Form of Third Registration Rights Amendment E Form of Third Stockholders Agreement Amendment F Form of Series A Certificate of Designation Amendment G Form of Series C Certificate of Designation Amendment H Form of OMC Opinion of Counsel SCHEDULES 2.1 Purchased Shares, Warrant Shares and Purchase Price iii EX-4.26 11 0011.txt THIRD AMENDMENT TO STOCKHOLDER AGREEMENT EXHIBIT 4.26 THIRD AMENDMENT TO STOCKHOLDERS AGREEMENT AMENDMENT, dated July 19, 2000 (this "THIRD 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"), Greenlake Holdings IV LLC, a Delaware limited liability company ("GREENLAKE IV") and Greenlake Holdings V LLC, a Delaware limited liability company ("GREENLAKE V"), to that certain STOCKHOLDERS AGREEMENT, dated January 28, 2000, as amended by Amendments dated May 2, 2000 and May 31, 2000 (the "EXISTING AGREEMENT"), among the Company, QIP, Greenlake II and Greenlake III. Unless otherwise set forth in this Third Amendment Agreement, capitalized terms have the respective meanings assigned to them in the Existing Agreement. WHEREAS, the the parties entered into the Existing Agreement in connection with (i) 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 "JANUARY 28 WARRANTS") to purchase an aggregate of 5,750,000 shares of the Company's Common Stock, (ii) the acquisition by QIP and Greenlake III on May 2, 2000 of $15,000,000 aggregate principal amount of the Company's Subordinated Notes due June 1, 2000 (the "SUBORDINATED NOTES"), which 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 warrants (the "MAY 2 WARRANTS"), and (iii) the acquisition by QIP and Greenlake III on May 31, 2000 of an aggregate of 200,000 shares of the Company's Series C Convertible Preferred Stock, par value $.01 per share (the "SERIES C PREFERRED STOCK"), and warrants (the "MAY 31 WARRANTS" and together with the January 28 Warrants and the May 2 Warrants, the "EXISTING WARRANTS") to purchase an aggregate of 846,154 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, Greenlake III has assigned its right to acquire certain securities governed by the Existing Agreement to Greenlake IV; and WHEREAS, the Company proposes to issue and sell to QIP and Greenlake V or their affiliates an aggregate of 200,000 shares of the Company's Series D Convertible Preferred Stock, par value $.01 per share (the "SERIES D PREFERRED STOCK"), and warrants (the "NEW WARRANTS") to purchase an aggregate of 846,154 shares of the Company's Common Stock pursuant to the terms of a Preferred Stock and Warrant Purchase Agreement, dated the date hereof (the "SERIES D PREFERRED STOCK PURCHASE AGREEMENT"), among the Company, QIP and Greenlake V (and solely for purposes of Article IX thereof, Greenlake III); and 2 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 and Greenlake III 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 Series D Preferred Stock Purchase Agreement from the preemptive rights provisions of the Existing Agreement, (ii) restrict the transfer of the securities to be issued pursuant to the Series D Preferred Stock Purchase Agreement, and (iii) add Greenlake IV and Greenlake V as Stockholders thereunder; NOW, THEREFORE, the parties hereto 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 delete the definitions contained therein of the terms "Existing Agreement," "Existing Warrants," "New Warrants," "Preferred Stock," "Stockholders" and "Warrants" in their entirety and to add the following additional definitions: "EXISTING AGREEMENT" is defined in the preamble to the Third Amendment Agreement. "EXISTING WARRANTS" is defined in the first recital of the Third Amendment Agreement. "GREENLAKE IV" is defined in the preamble to the Third Amendment Agreement. "GREENLAKE V" is defined in the preamble to the Third Amendment Agreement. "MAY 31 WARRANTS" is defined in the first recital of the Third Amendment Agreement. "NEW WARRANTS" is defined in the third recital of the Third Amendment Agreement. "PREFERRED STOCK" means the shares of the Company's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. "SERIES D PREFERRED STOCK" is defined in the third recital of the Third Amendment Agreement. 3 "SERIES D PREFERRED STOCK PURCHASE AGREEMENT" is defined in the third recital of the Third Amendment Agreement. "STOCKHOLDERS" means (a) QIP, Greenlake II, Greenlake III, Greenlake IV and Greenlake V 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. "THIRD AMENDMENT AGREEMENT" means the Amendment, dated July __, 2000, among the Company, QIP, Greenlake II, Greenlake III, Greenlake IV and Greenlake V, to this Agreement. "WARRANTS" means the Existing Warrants and the New Warrants. 2. Amendment of Section 4.5 of the Existing Agreement (Future Issuance of Shares; Preemptive Rights). Section 4.5 of the Existing Agreement is hereby amended and restated in its entirety to read 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 (i) the Subordinated Notes Purchase Agreement, including, without limitation, the issuance of the Subordinated Notes and the May 2 Warrants, (ii) the Preferred Stock Purchase Agreement, including without limitation the issuance of the shares of Series C Preferred Stock and the May 31 Warrants, and (iii) the Series D Preferred Stock Purchase Agreement, including without limitation the issuance of the shares of Series D Preferred Stock 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, the Preferred Stock Purchase Agreement and the Series D Preferred Stock 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, the Subordinated Notes Purchase Agreement (including, without limitation, shares of Series B Preferred Stock issued upon conversion of the Subordinated Notes), the Preferred Stock Purchase Agreement and the Series D Preferred Stock Purchase Agreement. 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, Greenlake III, Greenlake IV, Greenlake V 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 IV and Greenlake V. Each of Greenlake IV and Greenlake V does hereby acknowledge and agree that (i) it has been given a copy of the Existing Agreement and this Third 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 Third 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 Third Amendment Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 6.2 GOVERNING LAW. THIS THIRD 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 Third 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 Third Amendment Agreement on the date first written above. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez -------------------- Name: Eric T. Martinez Title: Sr. Vice President Finance 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 GREENLAKE HOLDINGS IV LLC By: /s/ Gary K. Duberstein ---------------------- Name: Gary K. Duberstein Title: Vice President GREENLAKE HOLDINGS V LLC By: /s/ Gary K. Duberstein ---------------------- Name: Gary K. Duberstein Title: Vice President EX-4.27 12 0012.txt WARRANT TO PURCHASE STOCK EXHIBIT 4.27 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: July 19, 2000 WARRANT TO PURCHASE 846,154 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, Eight Hundred Forty-Six Thousand, One Hundred Fifty-Four (846,154) 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. Definitions. For the purpose of this Warrant: (a) "Expiration Date" shall mean July 19, 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) by (ii) the Current Market Price of one share of Common Stock immediately prior to the exercise of the Conversion Right. 2 (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 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 3 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. (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 4 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 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. 5 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: (i) if to the Warrant Holder: Quantum Industrial Partners LDC Kaya Flamboyan 9, Villemsted 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: James Dubin, Esq. (ii) if to the Company, to the attention of each of its Treasurer and General Counsel at: 6 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 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. 7 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. 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. 8 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. 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 ------------------------------- 9 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: ___________________________ 10 EX-4.28 13 0013.txt THIRD AMENDMENT TO RIGHTS AGREEMENT EXHIBIT 4.28 THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT AMENDMENT, dated July 19, 2000 (this "Third 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"), Greenlake Holdings IV LLC, a Delaware limited liability company ("Greenlake IV"), Greenlake Holdings V LLC, a Delaware limited liability company ("Greenlake V") and Greenmarine Holdings LLC, a Delaware limited liability company ("Greenmarine") to that certain REGISTRATION RIGHTS AGREEMENT, dated January 28, 2000, as amended by an Amendments dated May 2, 2000 and May 31, 2000 (the "Existing Agreement"), among the Company, QIP, Greenlake II, Greenlake III and Greenmarine. Unless otherwise set forth in this Third Amendment Agreement, capitalized terms have the respective meanings assigned to them in the Existing Agreement. WHEREAS, the the parties entered into the Existing Agreement in connection with (i) 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 "January 28 Warrants") to purchase an aggregate of 5,750,000 shares of the Company's Common Stock, (ii) the acquisition by QIP and Greenlake III on May 2, 2000 of $15,000,000 aggregate principal amount of the Company's Subordinated Notes due June 1, 2000 (the "Subordinated Notes"), which 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 warrants (the "May 2 Warrants"), and (iii) the acquisition by QIP and Greenlake III on May 31, 2000 of an aggregate of 200,000 shares of the Company's Series C Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), and warrants (the "May 31 Warrants" and together with the January 28 Warrants and the May 2 Warrants, the "Existing Warrants") to purchase an aggregate of 846,154 shares of the Company's Common Stock, in order to grant to the holders of such securities certain registration rights with respect thereto; and WHEREAS, Greenlake III has assigned its right to acquire certain securities governed by the Existing Agreement to Greenlake IV; and WHEREAS, the Company proposes to issue and sell to QIP and Greenlake V or their affiliates an aggregate of 200,000 shares of the Company's Series D Convertible Preferred Stock, par value $.01 per share (the "Series D Preferred Stock"), and warrants (the "New Warrants") to purchase an aggregate of 846,154 shares of the Company's Common Stock pursuant to the terms of a Preferred Stock and Warrant Purchase Agreement, dated the date hereof (the "Series D Preferred 2 Stock Purchase Agreement"), among the Company, QIP and Greenlake V (and, with respect to Article IX thereof, Greenlake III); and WHEREAS, in order to induce each of QIP and Greenlake V to purchase the Series D Preferred Stock 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 D 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 WHEREAS, QIP, Greenlake II, Greenlake III 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) . Section 1 of the Existing Agreement is hereby amended to delete the definitions contained therein of the terms "Amendment Agreement," "Existing Agreement," "Existing Warrants," Existing Agreement," "New Warrants," "Preferred Stock," "Registrable Securities" and "Stockholders" in their entirety and to add the following additional definitions: "Existing Agreement" is defined in the preamble to the Third Amendment Agreement. "Existing Warrants" is defined in the first recital of the Third Amendment Agreement. "Greenlake IV" is defined in the preamble to the Third Amendment Agreement. "Greenlake V" is defined in the preamble to the Third Amendment Agreement. "New Warrants" is defined in the third recital of the Third Amendment Agreement. 3 "Preferred Stock" means the shares of the Company's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D 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 Series D Preferred Stock 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. "Series D Preferred Stock" is defined in the third recital of the Third Amendment Agreement. "Series D Preferred Stock Purchase Agreement" is defined in the third recital of the Third Amendment Agreement. "Stockholders" means each of QIP, Greenlake II, Greenlake III, Greenlake IV, Greenlake V and Greenmarine and any transferee of any of them to whom Registrable Securities are transferred in accordance with Section 10(f) of this Agreement. "Third Amendment Agreement" means the Amendment, dated July __, 2000, among the Company, QIP, Greenlake II, Greenlake III, Greenlake IV and Greenlake V and Greenmarine, to this Agreement. 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: (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, the Preferred Stock Purchase Agreement, the Series D Preferred Stock Purchase Agreement and the Stockholders' Agreement. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. 4 (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, the Preferred Stock Purchase Agreement, the Series D Preferred Stock Purchase Agreement or the Stockholders' Agreement. 3. Miscellaneous. ------------- 3.1 Headings. The headings in this Third Amendment Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 3.2 GOVERNING LAW. THIS THIRD 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 Third 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] IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Third Amendment Agreement on the date first written above. 5 OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez ------------------------ Name: Eric T. Martinez Title: Sr. Vice President Finance 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 GREENLAKE HOLDINGS IV LLC By: /s/ Gary K. Duberstein ---------------------- Name: Gary K. Duberstein Title: Vice President GREENLAKE HOLDINGS V 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-4.29 14 0014.txt RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK EXHIBIT 4.29 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. The Certificate of Designation was previously amended by the filing of Certificates of Amendment with the Secretary of State on May 5, 2000 and May 31, 2000. 3. This Certificate of Amendment amends the Certificate of Designation, as now in effect, to (i) provide for the issuance of shares Series D 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. 2 4. Section 5(c)(iii) of the Certificate of Designation as now in effect 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 of Common Stock issued upon the conversion of any shares of Series A Preferred Stock, (C) Common Stock purchase warrants issued pursuant to the Purchase Agreement and the shares of Common Stock issued upon the exercise of such warrants, (D) the Subordinated Notes issued under that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and any shares of Series B Preferred Stock issued upon conversion thereof, (E) shares of Common Stock issued upon the conversion of any shares of Series B Preferred Stock, (F) Common Stock purchase warrants issued by the Corporation pursuant to that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC and the shares of Common Stock issuable upon exercise of such warrants, (G) shares of Series C Preferred Stock issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and shares of Common Stock issued upon the conversion of shares of any shares of Series C Preferred Stock, (H) Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and shares of Common Stock issued upon the exercise of such warrants, (I) shares of Series D Preferred Stock issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated July __, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings V LLC, and shares of Common Stock issued upon the conversion of shares of any shares of Series D Preferred Stock, (J) Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated July __, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings V LLC, and shares of Common Stock issued upon the exercise of such warrants, and (K) 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) 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 3 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 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. 5. Section 8 of the Certificate of Designation as now in effect is hereby amended to read in its entirety as follows: 4 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, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock). 6. The definition of "Senior Stock" set forth in Section 10 of the Certificate of Designation as now in effect is hereby amended to read in its entirety as follows: "Senior Stock" means the shares of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock that may from time to time be outstanding. 7. Section 10 of the Certificate of Designation as now in effect is hereby further amended to add the following additional defined terms: "Series D Preferred Stock" means the shares of the Corporation's Series D Convertible Preferred Stock, par value $.01 per share, that may from time to time be outstanding. 8. 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 as now in effect. 5 IN WITNESS WHEREOF, the Corporation has authorized the undersigned to execute this certificate on this 19th day of July, 2000. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez ------------------------- Name: Eric T. Martinez Title: Sr. Vice President Finance and Treasurer EX-4.30 15 0015.txt RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK EXHIBIT 4.30 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES C 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 C Convertible Preferred Stock, Par Value $.01 Per Share (the "Certificate of Designation"), with the Secretary of State was May 31, 2000. 3. This Certificate of Amendment amends the Certificate of Designation, as now in effect, to (i) provide for the issuance of shares Series D 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. 2 4. Section 2 of the Certificate of Designation as now in effect is hereby amended to read in its entirety as follows: 2. Rank. The Series D 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 then outstanding shares of Senior Stock, (ii) on parity with the then outstanding shares of Parity Stock, and (iii) senior to all classes of common stock of the Corporation (including, without limitation, the common stock, par value $.01 per share, of the Corporation (the "Common Stock")), the Series A Preferred Stock and to each other class or series of capital stock of the Corporation hereafter created other than Senior Stock and Parity Stock (the Common Stock, the Series A Preferred Stock and each other class or series of capital stock of the Corporation other than Senior Stock and Parity Stock are hereinafter collectively referred to as the "Junior Stock"). 5. Section 5(c)(iii) of the Certificate of Designation as now in effect 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 of Common Stock issued upon the conversion of any shares of Series A Preferred Stock, (C) Common Stock purchase warrants issued pursuant to the Purchase Agreement and the shares of Common Stock issued upon the exercise of such warrants, (D) the Subordinated Notes issued under that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and any shares of Series B Preferred Stock issued upon conversion thereof, (E) shares of Common Stock issued upon the conversion of any shares of Series B Preferred Stock, (F) Common Stock purchase warrants issued by the Corporation pursuant to that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC and the shares of Common Stock issuable upon exercise of such warrants, (G) shares of Series C Preferred Stock issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and shares of Common Stock issued upon the conversion of shares of any shares of Series C Preferred Stock, (H) Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, and shares of Common Stock issued upon the exercise of such warrants, (I) shares of Series D Preferred Stock issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated July __, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings V LLC, and shares of Common Stock issued upon 3 the conversion of shares of any shares of Series D Preferred Stock, (J) Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated July __, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings V LLC, and shares of Common Stock issued upon the exercise of such warrants, and (K) 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) 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 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 4 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 as now in effect 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 Parity Stock made in writing to the Corporation at any time after October 1, 2008 (a "Redemption Demand"), the Corporation shall be required to redeem (i) all of the shares of Series C 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"), and (ii) all of the outstanding shares of each other series of Parity Stock in accordance with the terms of such security, but only, in each case, 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. 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 Parity Stock, including, without limitation, the shares of Series C Preferred Stock, then the Corporation shall redeem as many shares of Parity Stock, including, without limitation, the shares of Series C Preferred Stock, as its legally available funds permit. 7. Section 6(b) of the Certificate of Designation as now in effect 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 C Preferred Stock issued on the Series C 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 C 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 5 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, (C) such redemption would not violate the terms governing any Senior Stock then outstanding, and (D) the Corporation redeems all outstanding shares of the other series of Parity Stock to the extent permitted to do so in accordance with the terms thereof. 8. Section 8 of the Certificate of Designation as now in effect is hereby amended to read in its entirety as follows: 8. Reissuance of Series C Preferred Stock. Shares of Series C 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, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock). 9. Section 10 of the Certificate of Designation as now in effect is hereby further amended to add the following additional defined terms: "Senior Stock" means the shares of Series D Preferred Stock that may from time to time be outstanding. "Series D Preferred Stock" means the shares of the Corporation's Series D Convertible Preferred Stock, par value $.01 per share, that may from time to time be outstanding. 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 as now in effect. 6 IN WITNESS WHEREOF, the Corporation has authorized the undersigned to execute this certificate on this 19th day of July, 2000. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez ---------------------------- Name: Eric T. Martinez Title: Senior Vice President Finance and Treasurer EX-4.31 16 0016.txt RIGHTS OF SERIES D CONVERTIBLE PREFERRED STOCK EXHIBIT 4.31 OUTBOARD MARINE CORPORATION CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES D CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE Pursuant to Section 151 of the General Corporation Law of the State of Delaware The following resolution was duly adopted by the Board of Directors of Outboard Marine Corporation, a Delaware corporation (the "Corporation"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, on July __, 2000, by the unanimous written consent of the Board of Directors of the Corporation: WHEREAS, the Board of Directors of the Corporation is authorized, within the limitations and restrictions stated in the Certificate of Incorporation of the Corporation, to provide by resolution or resolutions for the issuance of shares of preferred stock, par value $.01 per share, of the Corporation, in one or more series with such voting powers, full or limited, or without voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions as shall be stated and expressed in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in the Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) such provisions as may be desired concerning 2 voting, redemption, dividends, dissolution or the distribution of assets and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the General Corporation Law of the State of Delaware; and WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of preferred stock and the number of shares constituting such series; NOW, THEREFORE, BE IT RESOLVED: 1. Designation and Number of Shares. There shall be hereby established a series of preferred stock designated as "Series D Convertible Preferred Stock" (such series being hereinafter referred to as the "Series D Preferred Stock"). The authorized number of shares of Series D Preferred Stock shall be 200,000. The initial liquidation preference of each share Series D Preferred Stock upon issuance shall be $100 per share (the "Initial Liquidation Preference"). As used herein, the "Liquidation Preference" of a share of Series C Preferred Stock shall be an amount equal to the Initial Liquidation Preference plus all amounts added thereto in accordance with Section 3(a) hereof. 2. Rank. The Series D 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) on parity with the then outstanding shares of Parity Stock, and (ii) senior to all classes of common stock of the Corporation (including, without limitation, the common stock, par value $.01 per share, of the Corporation (the "Common Stock"), the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and to each other class or series of capital stock of the Corporation hereafter created other than Parity Stock (the Common Stock, the Series 3 A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and each other class or series of capital stock of the Corporation other than the Parity Stock are hereinafter collectively referred to as the "Junior Stock")). 3. Dividends. (a) Beginning on the date of issuance of the Series D Preferred Stock, the holders of the outstanding shares of Series D Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available therefor, cash dividends on each share of Series D Preferred Stock at a quarterly rate equal to 3.75% of the then current Liquidation Preference, payable in arrears on each Dividend Payment Date commencing on the Initial Dividend Payment Date or the next succeeding Business Day, if the applicable Dividend Payment Date is not a Business Day. Notwithstanding the foregoing, the dividend payable on each share of Series D Preferred Stock with respect to the Initial Dividend Period shall be equal to the product of (i) 15% of the Initial Liquidation Preference multiplied by (ii) a fraction the numerator of which is the actual number of days from (and including) the Series D Preferred Stock Issue Date to (but excluding) the Dividend Payment Date with respect to the Initial Dividend Period, and the denominator of which is 365. If any dividend (or portion thereof) payable on any Dividend Payment Date is not declared or paid in full on such Dividend Payment Date, the amount of such dividend payable that is not paid on such date shall automatically be added to and cause to be increased the then applicable Liquidation Preference. Each distribution on the Series D Preferred Stock shall be payable to holders of record as they appear on the stock books of the Corporation on such record dates, not less than ten (10) nor more than sixty (60) days preceding the related Dividend Payment Date, as shall be fixed by the Board of Directors of the Corporation. 4 (b) All dividends paid with respect to shares of Series D Preferred Stock pursuant to Section 3(a) shall be paid pro rata and in like manner to all of the holders entitled thereto. No dividends or other distributions may be declared or paid or set apart for payment on the Series D Preferred Stock or any other Parity Stock, and no Parity Stock, including the Series D Preferred Stock, may be repurchased, exchanged, redeemed or otherwise acquired by the Corporation (other than upon conversion thereof in accordance with the terms of such Parity Stock), nor may funds be set apart for payment with respect thereto, unless such dividend, repurchase, exchange, redemption or other acquisition (other than upon conversion thereof in accordance with the terms of such Parity Stock) is applied pro rata and in a like manner to all outstanding shares of Parity Stock. (c) Nothing herein contained shall in any way or under any circumstances be construed or deemed to require the Board of Directors of the Corporation to declare, or the Corporation to pay or set apart for payment, any dividends on shares of the Series D Preferred Stock at any time. (d) Beginning on the Series D Preferred Stock Issue Date, if the Board of Directors of the Corporation shall declare a dividend or make any other distribution (including, without limitation, in cash or other property or assets) to holders of shares of Common Stock (other than (i) dividends payable in capital stock for which adjustment is made under Section 5(c)(i) or (ii) subscription rights or warrants for which an adjustment is made under Section 5(c)(ii)), then the holders of each share of Series D Preferred Stock shall be entitled to receive a dividend or distribution in an amount equal to the amount of such dividend or distribution received by a holder of the number of shares of Common Stock for which such share of Series D Preferred Stock is convertible on the record date for such dividend or distribution. Any such amount shall be paid to 5 the holders of shares of Series D Preferred Stock at the same time such dividend or distribution is made to holders of Common Stock. The foregoing notwithstanding, so long as any shares of the Series D Preferred Stock are outstanding, the Corporation shall not declare, pay or set apart for payment any dividend on any shares of Junior Stock or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any shares of Junior Stock or any warrants, rights, calls or options exercisable for or convertible into any shares of Junior Stock, or make any distribution in respect thereof, either directly or indirectly, whether in cash, obligations or shares of the Corporation or other property unless prior to such declaration, payment and set apart, the holders of not less than 85% of the outstanding shares of Series D Preferred Stock shall have consented thereto in writing. 4. Liquidation, Dissolution or Winding Up. (a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, before any distribution or payment to holders of Junior Stock, the holders of shares of Series D Preferred Stock shall be entitled to be paid an amount equal to the greater of (i) the Liquidation Preference, plus an amount in cash equal to the product of (x) 15% of the then current Liquidation Preference, and (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 date fixed for liquidation, dissolution or winding-up of the Corporation, and the denominator of which is 365, and (ii) the amount that the holders of shares of Series D Preferred Stock would be entitled to receive in connection with such liquidation, dissolution or winding up if all of the holders of the Series D Preferred Stock had converted their shares immediately prior to any 6 relevant record date or payment in connection with such liquidation, dissolution or winding up, in either case, before any payment or distribution is made to any class or series of capital stock. (b) If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to the holders of outstanding shares of Parity Stock, including, without limitations, outstanding shares of Series D Preferred Stock, shall be insufficient to permit payment in full to such holders of the sums which such holders are entitled to receive in such case, then all of the assets available for distribution to holders of outstanding shares of Parity Stock, including, without limitations, outstanding shares of Series D Preferred Stock, shall be distributed among and paid to such holders ratably in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit payment in full. (c) Neither the consolidation or merger of the Corporation with or into any other Person nor the sale or other distribution to another Person of all or substantially all the assets, property or business of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 4. 5. Conversion. (a) Stockholders' Right To Convert. Each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof, at any time, or from time to time, into fully paid and nonassessable shares of Common Stock at the Conversion Price. As used herein the "Conversion Price" shall be $6.25 per share, subject to adjustment as set forth in this Section 5. (b) Number of Shares of Common Stock Issuable upon Conversion. The number of shares of Common Stock to be issued upon conversion of shares of Series D Preferred Stock pursuant to Section 5(a) shall be equal to the product of (i) a fraction, the numerator of which 7 is the then current Liquidation Preference and the denominator of which is the Conversion Price, and (ii) the number of shares of Series D Preferred Stock to be converted. (c) Antidilution Adjustments. The Conversion Price shall be adjusted from time to time in certain cases as follows: (i) Dividend, Subdivision, Combination or Reclassification of Common Stock. If the Corporation shall, at any time or from time to time, (a) declare a dividend on the Common Stock payable in shares of its capital stock (including Common Stock), (b) subdivide the outstanding Common Stock, (c) combine the outstanding Common Stock into a smaller number of shares, or (d) issue any shares of its capital stock in a reclassification of the Common Stock (excluding any such reclassification in connection with a consolidation or merger in which the Corporation is the continuing corporation), then in each such case, the Conversion Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification and the number and kind of shares of capital stock issuable on such date shall be proportionately adjusted so that, in connection with a conversion after such date, the holder of the Series D Preferred Stock shall be entitled to receive the aggregate number and kind of shares of capital stock which, if the conversion had occurred immediately prior to such date, the holder would have owned upon such conversion and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. Any such adjustment shall become effective immediately after the record date of such dividend or the effective date of such subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. If a dividend is declared and such dividend is not paid, the Conversion Price shall be adjusted to the Conversion Price in effect immediately prior to such record date. 8 (ii) Issuance of Rights to Purchase Common Stock Below Current Market Price or Conversion Price. If the Corporation shall, at any time or from time to time, fix a record date for the issuance of rights or warrants to all holders of Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Stock or securities convertible into Common Stock at a price per share of Common Stock, or having a conversion price per share of Common Stock, if a security is convertible into Common Stock (determined by dividing (x) the sum of (A) the total consideration, if any, paid to the Corporation for such rights, warrants or other securities convertible into Common Stock, and (B) the total consideration payable to the Corporation upon exercise, conversion or exchange of such rights, warrants or other securities convertible into Common Stock (the sum of (A) and (B) being the "Conversion Consideration"), by (y) the total number of shares of Common Stock covered by such rights, warrants or other securities convertible into Common Stock), lower than either the Current Market Price per share of Common Stock on such record date (or, if an ex-dividend date has been established for such record date, on the day next preceding such ex- dividend date) or the then current Conversion Price, then the current Conversion Price shall be reduced to the price determined by multiplying (1) the Conversion Price in effect immediately prior to such record date by (2) a fraction, the numerator of which shall be the sum of (I) the number of shares of Common Stock outstanding on such record date, plus (II) the quotient obtained by dividing the Conversion Consideration by the Applicable Price, and the denominator of which shall be the sum of (I) the number of shares of Common Stock outstanding on such record date plus (II) the number of additional shares of Common Stock to be offered for subscription or purchase (or the total number of shares of Common Stock covered by such rights, warrants or other securities convertible into 9 Common Stock). In case such price for subscription or purchase may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be determined in good faith by the Board of Directors of the Corporation and shall be that value which is agreed upon by at least 75% of the members thereof; provided, that if the holders of 25% of the shares of Series D Preferred Stock object to such valuation as determined by the Board of Directors within fifteen (15) days of receipt of written notice of such valuation 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. Any such adjustment shall become effective immediately after the record date for such rights or warrants. Such adjustment shall be made successively whenever such a record date is fixed. If such rights or warrants are not so issued, the then current Conversion Price shall be adjusted to the Conversion Price in effect immediately prior to such record date. The determination of whether any adjustment is required under this Section 5(c)(ii) 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, warrant, options 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 Conversion Price, to the extent in any way 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 10 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. (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 of Common Stock issued upon conversion of any shares of Series A Preferred Stock, (C) shares of Common Stock issued upon the exercise of Common Stock purchase warrants issued pursuant to that certain Series A Preferred Stock and Warrant Purchase Agreement, dated January 28, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings II LLC, (D) any shares of Series B Preferred Stock issued upon the conversion the Subordinated Notes issued under that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, (E) shares of Common Stock issued upon the conversion of any shares of Series B Preferred Stock, (F) shares of Common Stock issued upon exercise of Common Stock purchase warrants issued by the Corporation pursuant to that certain Subordinated Note and Warrant Purchase Agreement, dated May 2, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings III LLC, (G) shares of Common Stock issued upon the conversion of any shares of Series C Preferred Stock, (H) shares of Common Stock issued upon the exercise of Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated May 31, 2000, among the Corporation, Quantum Industrial Partners LDC 11 and Greenlake Holdings III LLC, (I) shares of Common Stock issued upon the conversion of any shares of Series D Preferred Stock, (J) Common Stock purchase warrants issued pursuant to that certain Preferred Stock and Warrant Purchase Agreement, dated July __, 2000, among the Corporation, Quantum Industrial Partners LDC and Greenlake Holdings V LLC, and the shares of Common Stock issuable upon the exercise of such warrants, and (K) 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) 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 12 holder of any such rights, options, warrants, or convertible or exchangeable securities shall be entitled to 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 13 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 was 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. (d) De Minimis Adjustments. No adjustment of the then current Conversion Price shall be made if the amount of such adjustment would result in a change in the then current Conversion Price per share of less than $.10, but in such case any adjustment that would otherwise be required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, which together with any adjustment so carried forward, would result in a change in the then current Conversion Price of at least $.10 per share. Notwithstanding the provisions of the first sentence of this Section 5(d), any adjustment postponed pursuant to this Section 5(d) shall be made no later than the earlier of (i) three years from the date of the transaction that would, but for the provisions of the first sentence of this Section 5(d), have required such adjustment and (ii) the date of any conversion of shares of Series D Preferred Stock into shares of Common Stock. (e) Fractional Shares. Notwithstanding any other provision of this Certificate of Designation or the Corporation's Certificate of Incorporation, the Corporation shall not be required to issue fractions of shares upon conversion of any shares of Series D Preferred Stock or to distribute certificates which evidence fractional shares. In lieu of fractional shares, the Corporation may pay therefore, at the time of any conversion of shares of Series D Preferred Stock 14 as herein provided, an amount in cash equal to such fraction multiplied by the greater of the Current Market Price of a share of Common Stock on such date and the Conversion Price. (f) Reorganization, Reclassification, Merger and Sale of Assets Adjustment. If there occurs any capital reorganization or any reclassification of the Common Stock (other than a reorganization or reclassification that results in an adjustment pursuant to provisions of Section 5(c) hereof), the consolidation or merger of the Corporation with or into another Person (other than a merger or consolidation of the Corporation in which the Corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock) or the sale, transfer or other disposition of all or substantially all of the assets of the Corporation to another Person, then each share of Series D Preferred Stock shall thereafter be convertible into the same kind and amounts of securities (including shares of stock) or other assets, or both, which were issuable or distributable to the holders of outstanding Common Stock upon such reorganization, reclassification, consolidation, merger, sale or conveyance (but only to the extent that a dividend or distribution with respect thereto was not or is not made pursuant to Section 3(d) hereof), in respect of that number of shares of Common Stock into which such share of Series D Preferred Stock might have been converted immediately prior to such reorganization, reclassification, consolidation, merger, sale or conveyance; and, in any such case, appropriate adjustments (as determined in good faith by the Board of Directors of the Corporation) shall be made to assure that the provisions set forth herein (including provisions with respect to changes in, and other adjustments of, the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to any securities or other assets thereafter deliverable upon the conversion of the Series D Preferred Stock. 15 (g) Mechanics of Conversion. The option to convert shall be exercised by surrendering for such purpose to the Corporation, at any place where the Corporation shall maintain a transfer agent for its Common Stock, certificates representing the shares to be converted, duly endorsed in blank or accompanied by proper instruments of transfer, and at the time of such surrender, the Person in whose name any certificate for shares of Common Stock shall be issuable upon such conversion shall be deemed to be the holder of record of such shares of Common Stock on such date, notwithstanding that the share register of the Corporation shall then be closed or that the certificates representing such Common Stock shall not then be actually delivered to such Person. (h) Certificate as to Adjustments. Whenever the Conversion Price and the number of shares of Common Stock issuable, or the securities or other property deliverable upon the conversion of the Series D Preferred Stock, shall be adjusted pursuant to the provisions hereof, the Corporation shall promptly give written notice thereof to each holder of shares of Series D Preferred Stock at such holder's address as it appears on the transfer books of the Corporation and shall forthwith file, at its principal executive office and with any transfer agent or agents for the Series D Preferred Stock and the Common Stock, a certificate, signed by the President or one of the Vice Presidents of the Corporation, and by its Chief Financial Officer, its Treasurer or one of its Assistant Treasurers, stating the adjusted Conversion Price, the number of shares of Common Stock issuable, or the securities or other property deliverable, per share of Series D Preferred Stock converted, calculated to the nearest one-tenth of one cent or to the nearest one-hundredth of a share and setting forth in reasonable detail the method of calculation and the facts requiring such adjustment and upon which such calculation is based. Each adjustment shall remain in effect until a subsequent adjustment hereunder is required. 16 (i) Reservation of Common Stock. The Corporation shall at all times reserve and keep available for issuance upon the conversion of the shares of Series D Preferred Stock the maximum number of its authorized but unissued shares of Common Stock as is reasonably anticipated to be sufficient to permit the conversion of all outstanding shares of Series D Preferred Stock and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series D Preferred Stock. (j) No Conversion Charge or Tax. The issuance and delivery of certificates for shares of Common Stock upon the conversion of shares of Series D Preferred Stock shall be made without charge to the holder of shares of Series D Preferred Stock for any issue or transfer tax, or other incidental expense in respect of the issuance or delivery of such certificates or the securities represented thereby, all of which taxes and expenses shall be paid by the Corporation. 6. Redemption. (a) Redemption Demand. Upon the demand of the holders of at least 75% of the outstanding shares of Parity Stock made in writing to the Corporation at any time after October 1, 2008 (a "Redemption Demand"), the Corporation shall be required to redeem (i) all of the shares of Series D 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"), and (ii) all of the 17 outstanding shares of each other series of Parity Stock in accordance with the terms of such security, but only, in each case, to the extent that (A) funds are legally available therefor and (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. 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 Parity Stock, including, without limitation, the shares of Series D Preferred Stock, then the Corporation shall redeem as many shares of Parity Stock, including, without limitation, the shares of Series D Preferred Stock, as its legally available funds permit. (b) Redemption at Corporation's Option. On and after the date on which fewer than 10% of the shares of Series D Preferred Stock issued on the Series D 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 D 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) the Corporation redeems all outstanding shares of the other series of Parity Stock to the extent permitted to do so in accordance with the terms thereof. 18 (c) Redemption Notice. At least 30 days and not more than 60 days before a Redemption Date, the Corporation shall mail a notice of Redemption (the "Redemption Notice") by first class mail, postage prepaid, to each holder of record on the record date fixed for such redemption at such holder's address as it appears on the stock register of the Corporation; provided, however, that neither the failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Series D Preferred Stock to be redeemed except as to the holder or holders to whom the Corporation has failed to give said notice or except as to the holder or holders whose notice was defective. The Redemption Notice shall be mailed by the Corporation to the holders of the shares of Series D Preferred Stock (and in the case of a Demand Redemption, such Redemption Notice shall be mailed not later than 10 days after receipt by the Corporation of a Redemption Demand) and shall state: (i) that the Corporation is redeeming shares of Series D Preferred Stock in response to a Redemption Demand or in connection with an Optional Redemption, as the case may be; (ii) the Redemption Price; (iii) in the case of a Demand Redemption, whether funds are legally available to redeem all or less than all of the outstanding shares of the Series D Preferred Stock and the total number of shares of the Series D Preferred Stock being redeemed; (iv) if, in the case of a Demand Redemption, less than all of the shares of Series D Preferred Stock held by such holder are to be redeemed, the number of shares of Series D Preferred Stock held by such holder, as of the appropriate record date, that the Corporation intends to redeem; 19 (v) the Redemption Date; (vi) that the holder is to surrender to the Corporation, at the place or places where certificates for shares of Series D Preferred Stock are to be surrendered for redemption, in the manner and at the price designated, his or her certificate or certificates representing the shares of Series D Preferred Stock to be redeemed; and (vii) that dividends on the shares of the Series D Preferred Stock to be redeemed shall cease to accrue and increase on such Optional Redemption Date unless the Corporation defaults in the payment of the Optional Redemption Price. (d) Pro-Rata Redemption. In the event of a redemption pursuant to Section 6(a) of less than all of the then outstanding shares of Parity Stock, the Corporation shall effect such redemption pro rata according to the number of shares held by each holder of Parity Stock. (e) Surrender of Shares; Payment. Each holder of Series D Preferred Stock shall surrender the certificate or certificates representing such shares of Series D Preferred Stock to the Corporation, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date or the Optional Redemption Date the full Redemption Price or Optional Redemption Price, as the case may be, for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued by the Corporation representing the unredeemed shares. 20 (f) Effect on Redeemed Shares. Unless the Corporation defaults in the payment in full of the Redemption Price or the Optional Redemption Price, dividends on the Series D Preferred Stock called for redemption shall cease to accumulate and increase on the Redemption Date or Optional Redemption Date, as the case may be, and the holders of such redeemed shares shall cease to have any further rights with respect thereto on the Redemption Date or Optional Redemption Date, other than the right to receive the Redemption Price or Optional Redemption Price, as the case may be. 7. Voting Rights. (a) The holders of Series D Preferred Stock, except as otherwise required under Delaware law or as set forth in Sections 7(b) and (c) below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation. (b) So long as the Series D Preferred Stock is outstanding, each share of Series D Preferred Stock shall entitle the holder thereof to vote, in person or by proxy, at a special or annual meeting of stockholders, on all matters entitled to be voted on by holders of Common Stock voting together as a single class with other shares entitled to vote thereon. With respect to any such vote, each share of Series D Preferred Stock shall entitle the holder thereof to cast that number of votes per share as is equal to the number of votes that such holder would be entitled to cast had such holder converted its shares of Series D Preferred Stock into shares of Common Stock on the record date for determining the stockholders of the Corporation eligible to vote on any such matters. The foregoing notwithstanding, if the acquisition by any holder of shares of Series D Preferred Stock would require such holder and/or the Corporation to comply with the pre-merger notification requirements of the Hart- Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR 21 Act"), then the shares of Series D Preferred Stock acquired by such holder shall not entitle the holder thereof to vote, in person or by proxy, at any special or annual meeting of stockholders, on any matter covered by this Section 7(b), but not with respect to matters covered by Section 7(c), unless and until (i) such holder and the Corporation have complied with the requirements of the HSR Act and (ii) the applicable waiting period under the HSR Act shall have expired or been terminated. (c) Unless the consent or approval of a greater number of shares shall then be required by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the outstanding shares of Series D Preferred Stock, voting as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose or by written consent, shall be necessary to authorize, adopt or approve an amendment to this Certificate of Designation or the Certificate of Incorporation of the Corporation that would alter or change the powers, preferences or special rights of the shares of Series D Preferred Stock so as to affect the shares of Series D Preferred Stock adversely. 8. Reissuance of Series D Preferred Stock. Shares of Series D 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, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock). 9. Business Day. If any payment or redemption shall be required by the terms hereof to be made on a day that is not a Business Day, such payment or redemption shall be made on the immediately succeeding Business Day. 22 10. Definitions. As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: "Applicable Price" shall mean the higher of (a) the Current Market Price per share of Common Stock on the applicable record or other relevant date and (b) the then current Conversion Price. "Board of Directors" shall have the Board of Directors of the Corporation. "Business Day" means any day except a Saturday, a 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. "Closing Price" shall mean, with respect to the Common Stock for any day, (a) the last reported sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case as reported on the principal national securities exchange on which such Common Stock is listed or admitted for trading or (b) if the Common Stock is not listed or admitted for trading on any national securities exchange, the last reported sale price or, in case no such sale takes place on such day, the average of the highest reported bid and the lowest reported asked quotation for the Common Stock, in either case as reported on the Nasdaq Stock Market, Inc. or a similar service if the Nasdaq Stock Market, Inc. is no longer reporting such information. "Common Stock" shall have the meaning ascribed to it in Section 2 hereof. "Conversion Consideration" shall have the meaning ascribed to it in Section 5(c)(ii) hereof. 23 "Conversion Price" shall have the meaning ascribed to it in Section 5(a). "Corporation" shall mean Outboard Marine Corporation, a Delaware corporation. "Current Market Price" shall mean, with respect to the Common Stock on any date, the average of the daily Closing Prices per share of Common Stock for the 10 consecutive trading days commencing 15 days before such date. If on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq Stock Market, Inc. or a similar service, the Current Market Price for such shares shall be the fair market value of such shares on such date as determined in good faith by the Board of Directors of the Corporation and shall be the value which is agreed upon by 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 a nationally recognized stature that is selected by the holders of 75% of the members of the Board of Directors. "Dividend Payment Date" means each of March 31, June 30, September 30 and December 31 of each year. "Dividend Period" means the Initial Dividend Period and, thereafter, each Quarterly Dividend Period. "HSR Act" shall have the meaning ascribed to it in Section 7(b). "Initial Dividend Period" means the dividend period commencing on, and including, the Series D Preferred Stock Issue Date and ending on, and excluding, the first Dividend Payment Date to occur thereafter. 24 "Initial Liquidation Preference" shall have the meaning ascribed to it in Section 1 hereof. "Junior Stock" shall have the meaning ascribed to it in Section 2 hereof. "Liquidation Preference" shall have the meaning ascribed to it in Section 1 hereof. "Parity Stock" means any series of preferred stock of the Corporation which may be created subsequent to the Series D Preferred Stock Issue Date and which is designated by the Board of Directors of the Corporation as being "Parity Stock" in respect of the shares of Series D Preferred Stock. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind. "Quarterly Dividend Period" shall mean the quarterly periods commencing on, and including, each Dividend Payment Date and ending on, and excluding, each next Dividend Payment Date occurring immediately thereafter, respectively. "Redemption Date" means, with respect to any shares of Series D Preferred Stock, the date on which such shares are to be redeemed by the Corporation pursuant to Section 6 hereof. "Redemption Demand" shall have the meaning ascribed to it in Section 6(a) "Redemption Notice" shall have the meaning ascribed to it in Section 6(c) hereof. "Redemption Price" shall have the meaning ascribed to it in Section 6(a) hereof. "Series A Preferred Stock" means the shares of the Corporation's Series A Convertible Preferred Stock, par value $.01 per share, that may from time to time be outstanding. 25 "Series B Preferred Stock" means the shares of the Corporation's Series B Convertible Preferred Stock, par value $.01 per share, that may from time to time be outstanding. "Series C Preferred Stock" means the shares of the Corporation's Series C Convertible Preferred Stock, par value $.01 per share, that may from time to time be outstanding. "Series D Preferred Stock" shall have the meaning ascribed to it in Section 1 hereof. "Series D Preferred Stock Issue Date" means the date on which the Series D Preferred Stock is originally issued by the Corporation. 26 IN WITNESS WHEREOF, OUTBOARD MARINE CORPORATION has caused this certificate to be duly executed by its Sr.V.P. Finance and Treasurer this 19th day of July, 2000. OUTBOARD MARINE CORPORATION By: /s/ Eric T. Martinez -------------------------- Name: Eric T. Martinez Title: Senior Vice President Finance and Treasurer EX-10.25 17 0017.txt EMPLOYMENT AGREEMENT OF MR. FIX EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of the 26th day of May, 2000, is made and entered into by OUTBOARD MARINE CORPORATION, a Delaware corporation (the "Company"), and ROGER L. FIX (the "Employee"). WHEREAS, the Company wishes to employ the Employee and the Employee wishes to be employed by the Company; and WHEREAS, the Employee is willing to make his services available to the Company upon the terms and conditions hereinafter set forth. NOW, THEREFORE, Employee and the Company, in consideration of the mutual covenants contained herein, hereby agree as follows: 1. Employment. During the term of this Agreement, the Company shall employ Employee as Chief Operating Officer of the Company ("COO") and appoint Employee as a member of its Board of Directors. Employee shall perform services customarily associated with and incident to such COO position as may be reasonably determined from time to time by the President and Chief Executive Officer of the Company (the "CEO"). Employee shall report directly to the CEO. Employee shall perform his duties faithfully, diligently and to the best of his ability, subject to reasonable direction from the CEO. Employee shall devote his full and undivided business time and attention to his duties and responsibilities to the Company and its subsidiaries. 2. Term. The term of this Agreement (the "Term") shall commence on the Effective Date (as defined below) and shall continue through the third anniversary of the Effective Date. The term Effective Date is defined as the later of (i) the date of this Agreement, or (ii) the date the Company receives assurance from Employee that he in good faith reasonably believes based on objective facts and circumstances known to him that he is free and clear to enter into this Agreement and that neither the execution, delivery or performance by Employee of this Agreement will violate or conflict with any other agreement to which Employee continues to be bound. Until the Effective Date, neither Company nor Employee shall be required to perform any of the obligations under this Agreement. The Term shall automatically be extended for additional one-year periods commencing on the third anniversary of the Effective Date and on each anniversary date thereafter, unless the Employee or the Company gives prior written notice of intent not to extend at least 30 days before the end of the initial term or before the end of any annual extension period. 3. Base Salary. During the Term, the Company agrees to pay Employee an annual salary of $450,000, commencing on or about June 22, 2000, subject to review annually for possible increases at the Company's sole discretion ("Base Salary"). Annual salary adjustments, if any, shall take effect on January 1, beginning with January 1, 2001. Employee's Base Salary shall be payable according to the Company's standard payroll practices. 4. Special Compensation. The Company agrees to pay Employee a one-time, special compensation payment of $100,000, payable within 30 days of the Effective Date and subject to applicable withholding taxes. 5. Incentive Compensation. Employee shall be eligible to participate in the Company's Annual Leadership Bonus Plan ("ALBP") and Personal Rewards and Opportunities Program ("PROP") and any other bonus or incentive compensation program applicable generally to similarly situated senior executives as a group, in each case in accordance with and subject to the terms thereof. "Similarly situated senior executives" when used in this Agreement shall mean the group of executive officers of the Company that includes the CEO and Chief Financial Officer. For fiscal year 2000, Employee shall receive any incentive compensation to which the Employee would be entitled under the terms of such programs prorated by the number of full months in which Employee was an employee of the Company during fiscal year 2000; provided, however, that Employee's incentive compensation for fiscal year 2000 shall be at least $225,000. Employee shall be eligible for a target bonus of 100% of Base Salary but the actual payout, for years after fiscal year 2000, may range from 0-200% of Base Salary. The Compensation Committee of the Board of Directors of the Company ("Committee") shall determine in its sole discretion the amount of bonus or other incentive compensation for which Employee shall be eligible. 6. Expenses. The Company shall reimburse Employee for all reasonable expenses properly incurred by him in connection with the performance of his duties hereunder, provided that proper vouchers are submitted to the Company by Employee evidencing such expenses and the purposes for which the same were incurred in accordance with Company policy. 7. Equity-Based Compensation. (a) Upon commencement of employment, the Company, shall make a grant to Employee under PROP of a non-qualified stock option to purchase 375,500 shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") at an exercise price of $5.00 per share (the "$5.00 Options") (said number of shares being equal to one-percent (1%) of the Company's outstanding shares on a fully diluted basis, without giving effect to the Fix Options) and a non-qualified stock option to purchase 375,500 shares of Common Stock at an exercise price of $11.00 per share (the "$11.00 Options") (collectively, the "Fix Options"). In the event of an equity infusion into the Company occurring within nine (9) months of the Effective Date as a result of which Employee's percentage ownership represented by the Fix Options would be diluted, the Company shall immediately adjust the number, price or other terms of such Fix Options as needed to make up for such dilutive effect (the "Anti-Dilution Adjustment"); provided, however, that Employee shall not have any right to an Anti-Dilution Adjustment with respect to securities issued by the Company in connection with any acquisition or any public offering, or with respect to securities issued by the Company to employees pursuant to any employee stock based incentive plan or program such as a stock option or stock purchase plan, or with respect to any issuance of Common Stock upon conversion of any convertible securities or upon exercise of any options, warrants or other rights or with respect to any stock dividend or stock split (other than to the extent he would -2- otherwise participate as a holder of securities). The Fix Options, however, throughout their term shall be subject to all anti-dilutive protections provided under PROP (but without duplicating the adjustments provided for herein). Both the $5.00 Options and the $11.00 Options shall vest at the same rate and become exercisable when vested. Twenty-five percent (25%) of the Fix Options shall vest immediately on the Effective Date, an additional 30% shall vest on each of the first and second anniversaries of the Effective Date, and the balance shall vest on the third anniversary of the Effective Date, subject to the provisions of Section 12 of this Agreement. In the event of termination of Employee's employment, the Fix Options shall be exercisable, if at all, as provided in the Option Agreement executed simultaneously with this Agreement (the "Option Agreement"), which Option Agreement shall be consistent with the requirements of PROP as modified by this Agreement. The exercise price of the Fix Options may be satisfied by delivery of shares of Common Stock held by Employee for at least six months having a fair market value (determined in the manner provided under PROP) equal to the exercise price or by any other method generally made available to similarly situated senior executives under PROP (all as more fully set forth in the Option Agreement), and such method of exercise shall be selected at the time of exercise by Employee. In addition, the exercise price may be satisfied by cashless exercise to the extent such exercise would not subject the Company to variable plan accounting. To the extent cashless exercise is not available without such consequence, the Company will loan Employee money in an amount equal to the exercise price, interest free, for such term as Employee requests, but such loan shall not exceed twelve (12) months. (b) Upon the occurrence of a "Change in Control" (as defined under PROP, but also including any sale to a person who is not otherwise an affiliate of the Company of more than 50% of the property, assets or business of the Company and its subsidiaries and affiliates, taken as a whole) (i) all Fix Options which have not theretofore vested shall immediately vest and (ii) the Company will make a cash payment (the "Make-up Payment") to Employee in an amount equal to the positive difference, if any, of (A) $5 million, less (B) the "Exercise Value of the Fix Options". As used herein, the "Exercise Value of the Fix Options" shall mean the positive difference, if any, of (i) the product obtained by multiplying (A) the total number of Fix Options originally granted hereunder (as adjusted for stock splits, stock dividends, combinations of stock, recapitalizations and other similar transactions), by (B) the per share price paid in the Change in Control transaction, less (ii) the aggregate exercise price for the total amount of Fix Options; provided, however, the Make-up Payment shall not be payable unless Employee shall have remained continuously employed by the Company through the date of the Change in Control. If any excise tax is imposed on Employee by reason of excess payments within the meaning of Section 280G of the Internal Revenue Code (the "Code"), the Company shall also pay Employee with his Make-up Payment a sufficient additional amount to reimburse one-half of such excise tax to Employee (plus one-half of any related tax on such amount). (c) In addition, the Company shall permit Employee to participate in any and all of the short-term and long-term stock option or other equity or quasi-equity participation plans, programs or arrangements in which similarly situated senior executives are permitted to participate -3- and at a level comparable to the level at which similarly situated senior executives are permitted to participate. 8. Savings Plan. Employee shall be eligible to participate in the Company's 401(k) plan in accordance with and subject to the terms thereof. 9. Vehicle Lease. The Company shall provide Employee with a leased vehicle and shall pay all lease payments and expenses associated with repair and maintenance of the vehicle (collectively, "Lease Payments"). At the end of each fiscal year, Company shall pay an amount to Employee sufficient to compensate Employee for federal and state income taxes imposed on the Lease Payments paid by the Company on Employee's behalf and on the payments made by the Company to Employee pursuant to this sentence, to be determined on the assumption that Employee is subject to the highest marginal federal and state income tax rates imposed on a resident of the State of Illinois. 10. Vacation. Employee shall be entitled to four weeks of paid vacation time during each calendar year in accordance with the Company's vacation policy in effect from time to time. 11. Other Benefits. After thirty (30) days of employment, Employee shall be entitled to participate in the Company's retirement, group medical and dental, disability and other employee benefit programs generally applicable to similarly situated employees as a group in accordance with and subject to the terms thereof, including, without limitation, periodic physical examinations in accordance with Company policy (with the customary and reasonable costs thereof to be paid by the Company). The Company will pay for COBRA health plan continuation coverage under Employee's former health insurance plan until the Employee is covered under the Company's group medical and dental programs. The Company, at its expense, shall provide Employee with term life insurance coverage in an amount not less than 150% of Base Salary to remain in effect during the term of this Agreement. 12. Termination of Employment. Subject to the further provisions of this Section, (i) the Company may terminate Employee's employment with the Company or any of its subsidiaries at any time for any or no reason and (ii) Employee may resign for Good Reason (as defined below) or for any other or no reason. Upon the termination of employment with the Company for any reason, Employee shall be deemed, without the need to take further action, to have resigned all positions to which he had been appointed by the Company or any of its subsidiaries, including, but not limited to, his position as an officer and a director of the Company and any subsidiary thereof and as a member of any committee established by the Company or the Board, effective on the date of termination of employment. (a) With Cause. The Company may terminate Employee's employment with the Company and its subsidiaries for cause (as defined below) upon 20 days' prior written notice to Employee; provided, however, that the Company may relieve Employee of his duties and responsibilities as of the date of such notice without such action constituting Good Reason (as defined below). Unless the notice of termination is withdrawn, the employment of Employee -4- hereunder shall be terminated as of the date set forth in such notice and the Company shall pay Employee his accrued and unpaid Base Salary through such date of termination and have no further obligation to Employee hereunder. Employee's rights under the Company's employee benefit plans shall be determined in accordance with the terms of such plans. "Cause" means any act or any failure to act on the part of Employee during the Term which constitutes: (1) fraud, theft, embezzlement or similar crime against the Company or its affiliates, or (2) a felony for which Employee is convicted or pleads nolo contendere. (b) Without Cause or With Good Reason. The Company may terminate Employee's employment with the Company and its subsidiaries without Cause, or Employee may resign from such employment upon 20 days' prior written notice to the Company and with Good Reason. Unless the Company corrects or otherwise remedies the condition constituting Good Reason within such 20 days following receipt of such notice, upon any termination of employment of Employee pursuant to this Section 12(b), the Company shall on the date his employment ends: (i) pay Employee his accrued and unpaid Base Salary and vacation as of the date of his termination of employment plus a bonus for the fiscal year in which termination of employment occurs, prorated as provided in Section 12(c) and (ii) pay Employee Severance Pay as provided in Section 12(f) below. The compensation provided for in Sections 12(b) and 12(f) shall be the only compensation to which Employee shall be entitled upon termination. In the event of termination of Employee's employment pursuant to this Section 12(b), any and all unvested stock options granted pursuant to Section 7 of this Agreement shall automatically vest as of the date of termination, and other stock options (if any) shall be exercisable in accordance with the terms of the bonus plan or stock option grant agreement pursuant to which they were issued. "Good Reason" means any of the following events occurring during the Term without Employee's consent: (1) a change in Employee's title with the Company, or removal of Employee as a member of the Board of Directors, (2) the assignment to Employee of any duties or responsibilities which are not commensurate with the Employee's title and position with the Company or any of its subsidiaries, (3) a reduction in the Employee's salary or target bonus, (4) a diminution in the scope of Employee's responsibilities, -5- (5) a change in the Employee's reporting relationship to top management, (6) a change in organizational structure whereby any current or future operating unit of the Company does not report to Employee, or (7) a failure to provide Employee with employee benefits generally provided to similarly situated senior executives as a group, provided, however, that the Employee must give the Company at least 20 days prior notice of his intent to resign for Good Reason and the Company shall have the right during the 20-day period after receipt of such notice to correct or otherwise remedy any alleged event constituting Good Reason. (c) Death. This Agreement shall automatically terminate upon Employee's death; provided, however, that the Company shall pay to Employee's estate the Base Salary and accrued and unpaid vacation owed through the date of death and any bonus for the fiscal year in which his death occurs, prorated for the number of full months Employee was employed during such fiscal year and subject to a determination by the Board, acting in good faith, that the performance criteria, if any, for such bonus would be satisfied for such fiscal year. The Company also shall pay to Employee's estate the Severance Pay specified in Section 12(f). (d) Disability. This Agreement shall automatically terminate and Employee's employment with the Company shall end upon Employee's Total Disability. The Company shall pay to Employee his Base Salary and accrued and unpaid vacation through the date on which he is determined to have a Total Disability and any Bonus for the fiscal year in which his Total Disability occurs, prorated for the number of full months Employee was employed during such fiscal year, in same manner and subject to the same conditions as applicable to employees generally (except individual performance objectives for Employee shall be disregarded in favor of the generally applicable objectives); provided, however, that the Company shall only be required to pay such amounts to Employee that are not covered by long-term disability payments, if any, to Employee pursuant to any long-term disability insurance policy or benefit plan of the Company. The Company also shall pay to Employee the Severance Pay specified in Section 12(f). "Total Disability" shall mean any mental or physical condition that (i) prevents Employee from reasonably discharging his services and employment duties hereunder, (ii) is attested to in writing by a physician mutually acceptable to Employee and the Company, and (iii) continues, for any one or related condition, during any period of three (3) consecutive months or for a period aggregating six (6) months in any twelve-month period. Total Disability shall be deemed to have occurred on the last day of such applicable three- or six-month period. (e) Delivery of a Release. The Company may, in its sole discretion, require Employee to deliver to the Company a written release, in form and substance reasonably satisfactory -6- to the Company, pursuant to which he releases the Company from any claims or liabilities other than amounts then owed to him pursuant to Sections 7 and 12, any bonus plan or other employee benefit plan or arrangement, or any vested amount under any compensation plan or arrangement of the Company; provided, however, that as a condition to the delivery of such release, the Employee shall have received all payments, of every kind, which are due to him from the Company at the time of termination of employment and a written acknowledgment from the Company of its obligations (if any) under Section 12(f) to make payments of Severance Pay. (f) Severance Pay. Except as provided below, any termination of Employee's employment with the Company, whether by termination or expiration of this Agreement or otherwise, shall entitle Employee to Severance Pay from the Company. Severance Pay shall be a series of substantially equal cash payments equal in aggregate to three years of Employee's final annual Base Salary payable over a period of three years immediately following the termination of his employment and according to the Company's standard payroll practices. The only reasons why a termination of employment will not trigger the Severance Pay obligation under this Section 12(f) are (i) termination for "Cause" by the Company, or (ii) termination by Employee without Good Reason and not within six (6) months after a Change in Control (as defined in Section 7(a) above). For purposes of this Section 12(f), at the time of expiration of this Agreement the Company's refusal to renew (on a yearly basis, as provided in Section 2), or replace this Agreement on terms at least as favorable to Employee as those then in effect, shall constitute Good Reason for Employee to terminate his employment. 13. Sale on Termination of Employment. (a) Upon Employee ceasing to be employed by the Company pursuant to this Agreement for any reason (a "Termination Event"), the Company may elect, by delivering the notice required under Section 13(c), to require (the "Repurchase Right") Executive to sell to the Company or its designee all, but not less than all, of the shares of Common Stock owned by Employee and vested stock options granted to Employee, subject to the expiration or termination or other terms of such Common Stock and stock options upon the occurrence of a Termination Event in accordance with any grant agreement or stock option plan pursuant to which such Common Stock options were granted by the Company to Employee, in accordance with Section 13(f) (such shares of Common Stock and stock options are hereinafter referred to as (the "Repurchase Securities"). In the event that a Termination Event occurs as a result of Employee's death, the rights and obligations of Employee under this Section 13 shall be deemed to be the rights and obligations of his estate, and, if such event occurs, all references to Employee in this Section 13 shall be deemed references to a representative of Employee's estate. (b) The "Repurchase Price" for each Repurchased Security that constitutes Common Stock shall be equal to the fair market value of the Common Stock as of the date of the Repurchase Notice determined by an independent appraiser mutually acceptable to the Board and to the Employee. In the event the Board and Employee cannot agree on an independent appraiser, the Board and Employee shall have a period of fifteen (15) days thereafter to each appoint an -7- appraiser. The parties' appointed appraisers must agree on the selection of a neutral appraiser. No appointed appraiser shall propose or agree to the selection of a person to serve as a neutral appraiser if the appointed appraiser has reason to believe that there exist circumstances likely to affect the impartiality or independence of that person, including any bias or any financial or personal interest in the result of the determination of fair market value, and no person who is proposed as a neutral appraiser shall accept such appointment if circumstances exist that might affect his or her impartiality, including, but not limited to, bias or financial interest. If the two appointed appraisers cannot agree upon the selection of a neutral appraiser, the parties shall request the American Arbitration Association to provide a list of neutral candidates, and the two appointed appraisers must agree upon a neutral appraiser from this list (and, if they cannot agree, they will select an appraiser from a list of five candidates provided by the American Arbitration Association through a process of elimination, where the Company's appointed appraiser and the Employee's appointed appraiser will each eliminate candidates in turn until only one candidate is left). The fair market value determination shall be made by evaluating the Company on the basis of it being a stand-alone enterprise and without any reduction as a result of the lack of liquidity of the Common Stock or the fact that the Repurchased Securities may represent a minority interest in the Company, and the "Repurchase Price" for each Repurchased Security that constitutes any vested stock option granted to Employee shall be the amount by which such fair market value per share of Common Stock subject to such option exceeds the exercise price therefor; provided, however, that, in the event shares of Common Stock are traded on a national stock exchange or a public market shall exist for the Common Stock on a national quotation system, the fair market value for the Common Stock shall be based upon the average closing price per share for the 20 trading days immediately preceding the date on which the Termination Event occurred. (c) Upon the occurrence of any Termination Event, the Company or its designee, as the case may be, may deliver written notice (the "Repurchase Notice") to Employee within one (1) year after such occurrence, specifying that the Company or its designees, as the case may be, elects to exercise its Repurchase Right pursuant to this Section 13. If the Company or its designee elects to exercise its Repurchase Right, the Company or its designee, as the case may be, shall specify the Repurchase Price for each Repurchased Security in the Repurchase Notice and consummate the purchase of such Repurchased Securities in accordance with Section 13(f). (d) Subject to Sections 7 and 12 hereof, it is hereby understood and agreed that the termination, expiration or cancellation of stock options (including shares of Common Stock underlying such stock options) that have not been exercised, to the extent permissible, as of the occurrence of any Termination Event, shall be determined pursuant to any option grant agreement or stock option plan pursuant to which such stock options were granted by the Company to Employee. (e) The aggregate amount of the Repurchase Price paid to Employee for the Repurchased Securities shall be reduced by an amount equal to the unpaid principal amount (plus accrued and unpaid interest) of any loan made by the Company to Employee, or any other -8- indebtedness of the Employee to the Company, and the principal amount of any such loan or Repurchase Price or, if applicable, canceled. (f) If the Company or its designee elects to exercise the Repurchase Right, the Repurchased Securities shall be repurchased on a date (the "Repurchase Date") not later than 90 days after the date of the Repurchase Notice. On the Repurchase Date, Employee shall deliver to the Company or its designee the certificate or certificates, or the instrument or instruments, as the case may be, representing shares of Common Stock and stock options owned or held, as the case may be, by Employee on such date against delivery by the Company or its designee to Employee of the Repurchase Price. All certificates or other instruments evidencing Repurchased Securities shall be accompanied by instruments of transfer in form and substance written certificate, in form and substance reasonably acceptable to the Company or its designee, pursuant to which Employee represents and warrants that he is the record and beneficial owner of the Repurchased Securities and has good and valid title to the Repurchased Securities, free and clear of any and all liens, claims, assessments, pledges, options or other legal and equitable encumbrances of any kind whatsoever (other than pursuant to this Agreement). If Employee shall fail to deliver such certificate or certificates, or such instrument or instruments, as the case may be, and such written certification to the Company or its designee within the terms required, the Company shall cause its books and records to show that Repurchased Securities are subject to the provisions of this Section 13 and that the Repurchased Securities, until transferred to the Company or its designee, shall not be entitled to any proxy, dividend or other rights from the date on which such certificate or certificates, or instrument or instruments, as the case may be, and such written certification should have been delivered to the Company or its designee, as the case may be. (g) The giving of the Repurchase Notice by the Company and the receipt by Employee of such notice shall constitute an irrevocable commitment by the Company and Employee to purchase and sell, as the case may be, the Repurchased Securities referred to in such Notice. 14. Confidentiality; Ownership. (a) Employee agrees that he shall forever keep secret and retain in strictest confidence and not divulge, disclose, discuss, copy or otherwise use or suffer to be used in any manner, except in connection with the business of the Company and the businesses of any of its subsidiaries or affiliates, any "Protected Information" in any "Unauthorized" manner or for any Unauthorized purpose (as such terms are hereinafter defined). (i) "Protected Information" means trade secrets, confidential, proprietary or private business information, tangible or intangible, and whether in written, oral or computer data base form, owned, developed or possessed by the Company or any of its subsidiaries or affiliates, that pertains to the Company's sales, marketing, manufacturing, engineering, research and development, managerial or professional compensation or recruiting, financial or business plans, operating procedures, products (including prices, costs, sales or content), contracts, financial information, business acquisition or disposition plans, customer lists and relationships, except as -9- disclosure may be required in the course of performing duties hereunder; provided that Protected Information shall not include information that becomes generally known to the public or the trade without violation of this Section. (ii) "Unauthorized" means: (A) in contravention of the policies or procedures of the Company or any of its subsidiaries or affiliates; (B) otherwise inconsistent with the measures taken by the Company or any of its subsidiaries or affiliates to protect their interests in any Protected Information; (C) in contravention of any lawful instruction or directive, either written or oral, of an employee of the Company or any of its subsidiaries or affiliates empowered to issue such instruction or directive; or (D) in contravention of any duty existing under law or contract. Notwithstanding anything to the contrary contained in this Section, Employee may disclose any Protected Information to the extent required by court order or decree or by the rules and regulations of a governmental agency or as otherwise required by law; provided that Employee shall provide the Company with prompt notice of such required disclosure in advance thereof so that the Company may seek an appropriate protective order in respect of such required disclosure. (b) Employee acknowledges that all developments, including, without limitation, inventions (patentable or otherwise), discoveries, formulas, improvements, patents, trade secrets, designs, reports, computer software, flow charts and diagrams, procedures, data, documentation, ideas and writings and applications thereof relating to the business or planned business of the Company or any of its subsidiaries or affiliates that, alone or jointly with others, Employee may conceive, create, make, develop, reduce to practice or acquire during the Term (collectively, the "Developments") are works made for hire and shall remain the sole and exclusive property of the Company and Employee hereby assigns to the Company, in partial consideration of his Base Salary, all of his right, title and interest in and to all such Developments. Employee shall promptly and fully disclose all future material Developments to the Board and, at any time upon request and at the expense of the Company, shall execute, acknowledge and deliver to the Company all instruments that the Company shall prepare, give evidence and take all other actions that are necessary or desirable in the reasonable opinion of the Company to enable the Company to file and prosecute applications for and to acquire, maintain and enforce all letters, patent and trademark registrations or copyrights covering the Developments in all countries in which the same are deemed necessary by the Company. All memoranda, notes, lists, drawings, records, files, computer tapes, programs, software, source and programming narratives and other documentation (and all copies thereof) made or compiled by Employee or made available to Employee concerning the Developments or otherwise concerning the business or planned business of the Company or any of its subsidiaries or affiliates shall be the property of the Company or such subsidiaries or affiliates and shall be delivered to the Company or such subsidiaries or affiliates promptly upon the expiration or termination of the Term. (c) The provisions of this Section shall, without any limitation as to time, survive the expiration or termination of Employee's employment hereunder, irrespective of the reason for any termination. -10- 15. Covenant Not to Compete. Employee agrees that during the Term and for a period of two (2) years commencing upon the expiration or termination of Employee's employment with Company for any reason (the "Non-Compete Period"), Employee shall not, directly or indirectly, without the prior written consent of the Company: (a) solicit, entice, persuade or induce any employee, consultant, agent or independent contractor of the Company or of any of its subsidiaries or affiliates to terminate his or her employment or relationship with the Company or such subsidiary or affiliate, to become employed by any person, firm or corporation other than the Company or such subsidiary or affiliate or approach any such employee, consultant, agent or independent contractor for any of the foregoing purposes, or authorize or assist in the taking of any such actions by any third party (for purposes of this Section 15(a), the terms "employee," "consultant," "agent" and "independent contractor" shall include any persons with such status at any time during the six (6) months preceding any solicitation in question); or (b) directly or indirectly engage, participate, or make any financial investment in, or become employed by or render consulting, advisory or other services to or for any person, firm, corporation or other business enterprise, wherever located, which is engaged, directly or indirectly, in competition with the Company's business or the businesses of its subsidiaries or affiliates as conducted or any business proposed to be conducted at the time of the expiration or termination of Employee's employment hereunder; provided, however, that nothing in this Section 15(b) shall be construed to preclude Employee from making any investments in the securities of any business enterprise whether or not engaged in competition with the Company or any of its subsidiaries or affiliates, to the extent that such securities are actively traded on a national securities exchange or in the over-the-counter market in the United States or on any foreign securities exchange and represent, at the time of acquisition, not more than 3% of the aggregate voting power of such business enterprise. 16. Restrictions on Transfer. During the Term and the Non-Compete Period (as defined in Section 15), Employee shall not transfer any shares of Common Stock without the prior written consent of the Company, except as provided for in and in accordance with this Agreement. 17. Specific Performance. Employee acknowledges that the services to be rendered by Employee are of a special, unique and extraordinary character and, in connection with such services, Employee will have access to confidential information vital to the Company's business and the businesses of its subsidiaries and affiliates. By reason of this, Employee consents and agrees that if Employee violates any of the provisions of Sections 14 or 15 hereof, the Company and its subsidiaries and affiliates would sustain irreparable injury and that monetary damages would not provide adequate remedy to the Company and that the Company shall be entitled to have Sections 14 or 15 hereof specifically enforced by any court having equity jurisdiction. Nothing contained herein shall be construed as prohibiting the Company or any of its subsidiaries or affiliates from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from Employee. -11- 18. Assignment. The obligations of Employee may not be delegated and, except with respect to the designation of beneficiaries in connection with any of the benefits payable to Employee hereunder, Employee may not assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest herein. Any such attempted delegation or disposition shall be null and void and without effect. The Company and Employee agree that this Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to and shall be assumed by and be binding upon any successor to the Company. The Company shall require any assignee to assume and perform Company obligations under this Agreement. The term "successor" means, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets or otherwise acquires all or a material part of the assets of the Company. 19. Amendment. This Agreement may not be altered, modified or amended except by written instrument signed by each of the Company and Employee. 20. Governing Law; Arbitration. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State. Any action to compel arbitration hereunder shall be brought in the State Court of Illinois sitting in Cook County, Illinois. In the event of disputes between the parties with respect to the terms and conditions of this Agreement, such disputes shall be resolved by and through an arbitration proceeding to be conducted under the auspices of the American Arbitration Association (or any like organization successor thereto) in Chicago, Illinois. Such arbitration proceeding shall be conducted pursuant to the commercial arbitration rules (formal or informal) of the American Arbitration Association in as expedited a manner as is then permitted by such rules (the "Arbitration"). Both the foregoing agreement of the parties to arbitrate any and all such claims, and the results, determination, finding, judgment and/or award rendered through such Arbitration, shall be final and binding on the parties hereto and may be specifically enforced by legal proceedings. Such Arbitration may be initiated by written notice from either party to the other which shall be a compulsory and binding proceeding on each party. The Arbitration shall be conducted by an arbitrator selected in accordance with the procedures of the American Arbitration Association. Time is of the essence of this arbitration procedure, and the arbitrator shall be instructed and required to render his or her decision within thirty (30) days following completion of the Arbitration. Each party shall bear its own costs of such Arbitration proceedings. 21. Deductions. The Company shall deduct from any compensation payable to Employee the sums which it is required by applicable law to deduct, including, but not limited to, federal and, if applicable, state withholding taxes, social security taxes and state disability insurance. 22. Attorney's Fees. The Company will reimburse Employee for the fees he incurs for legal services relating to the negotiation and preparation of this Agreement, including legal services provided by counsel in the U.K., up to a maximum of $12,000. -12- 23. Expenses on Relocation. In the event the Company relocates its headquarters outside of Illinois before June 15, 2003, the Company will pay to Employee (i) his commuting and temporary housing expenses until Employee moves his family to the vicinity of the Company's new headquarters' location or June 15, 2003, whichever occurs first, and (ii) his house hunting and moving expenses in connection with such relocation; provided that proper vouchers are submitted to the Company by Employee evidencing such expenses in accordance with Company policy. 24. Guaranty of Payment. Quantum Industrial Partners LDC ("Quantum") hereby irrevocably and unconditionally guarantees the full and timely payment and delivery of all salary, bonuses, awards, payments and benefits, of whatever kind or nature (including Change in Control and severance payments), provided by the Company to Employee, his dependents, heirs and beneficiaries under the terms of this Agreement. The guaranty of the obligations under this Agreement that is provided in this Section 24 shall survive the expiration of this Agreement. The execution of this Agreement by and on behalf of Quantum commits Quantum only to the guaranty provided in this Section 24. 25. Entire Agreement. This Agreement (together with the agreements and instruments to be executed as contemplated hereby, the form of which are attached hereto as appendices) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, understandings and arrangements, both oral and written, between the parties hereto with respect to such subject matter. 26. Other Representations. The Company acknowledges having been informed by Employee that he has an agreement with a former employer to maintain the confidentiality of that company's trade secrets and confidential information, and that he fully intends to comply in all respects with the agreement. Employee represents and warrants to the Company that he does not possess any confidential or proprietary documents or other written materials from his current or any former employer. The Company represents and warrants to Employee that its agreement to hire Employee is not motivated to any extent by a desire to obtain or use trade secrets or confidential information belonging to any other entity, and that the Company will not cause Employee to violate any agreement protecting trade secrets and confidential information to which he is presently a party or is otherwise bound. 27. Notices. Any notice to be given hereunder by either party to the other shall be sufficiently given if in writing and delivered in person, transmitted by telecopier or sent by registered or certified mail (postage prepaid and return receipt requested) or recognized overnight delivery service (postage prepaid) addressed as follows, or to such other address or telecopier number as either party may notify to the other in accordance with this paragraph: (i) if to the Company: Outboard Marine Corporation 100 Sea Horse Drive -13- Waukegan, Illinois 60085 Telecopier: (847) 689-6006 Attn: President and Chief Executive Officer (with a copy under separate cover to the General Counsel) (ii) if to the Employee: Roger L. Fix 1729 Holly Court Long Grove, Illinois 60047 Telephone: (847) 520-1516 With a copy to: Kenneth T. Lopatka Matkov, Salzman, Madoff & Gunn Suite 2900 55 East Monroe Street Chicago, Illinois 60603-5709 Telecopier: (312) 332-6130 (iii) if to Quantum: Quantum Industrial Partners LDC Curacao Corporation Company N.V. Kay Flamboyan 9 Willemstad, Curacao Netherlands Antilles Telex: 3445 CITCO NA Telephone: 011-599-97-322-422 Telecopier: 011-599-97-322-420 With a copy to: Soros Fund Management LLC 888 Seventh Avenue Suite 3300 New York, New York 10106 Attn: Michael C. Neus Telephone: (212) 397-5540 Telecopier: (212) 664-0544 -14- A notice will be effective (i) if delivered in person or by overnight courier, on the business day it is delivered, (ii) if transmitted by telecopier, on the business day of actual confirmed receipt by the addressee thereof, and (iii) if sent by registered or certified mail, three (3) business days after dispatch. 28. Section Headings. The section headings contained in this Agreement are for reference purpose only and shall not affect in any way the meaning or interpretation of this Agreement. 29. Survival of Provisions. The provisions of Sections 12, 14, 15, 17, and 24 shall survive the termination or expiration of this Agreement. 30. Counterparts. This Agreement may be executed in counterparts and when so executed is in full force and effect as though it had been signed by both parties. 31. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Employment Agreement as of the day and year first above written. OUTBOARD MARINE CORPORATION EMPLOYEE By: /s/ David D. Jones /s/ Roger L. Fix ------------------------------------ ---------------------------------- David D. Jones, Jr. Roger L. Fix President and Chief Executive Officer QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Michael C. Neus ----------------------------------- Michael C. Neus Attorney-in-Fact -15- EX-10.26 18 0018.txt NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT EXHIBIT 10.26 NINTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT among OUTBOARD MARINE CORPORATION, OMC ALUMINUM BOAT GROUP, INC., OMC FISHING BOAT GROUP, INC., OMC LATIN AMERICA/CARIBBEAN, INC., and RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP as Borrowers and Guarantors, and OMC RECREATIONAL BOAT GROUP, INC., and (and the other Borrowers and/or Guarantors, if any, from time to time party hereto), BANK OF AMERICA, N.A. as Agent and a Lender, (and the other Lenders, if any, from time to time party hereto), as Lenders Dated effective as of August 9, 2000 NINTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS NINTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Amendment"), dated effective as of August 9, 2000 (the "Amendment Effective Date"), is executed and entered into by and among OUTBOARD MARINE CORPORATION, a Delaware corporation ("OMC"), OMC ALUMINUM BOAT GROUP, INC., a Delaware corporation, OMC FISHING BOAT GROUP, INC., a Delaware corporation, OMC LATIN AMERICA/CARIBBEAN, INC., a Delaware corporation, RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP, a Delaware limited partnership, OMC RECREATIONAL BOAT GROUP, INC., a Delaware corporation (collectively all of the "Loan Parties", as of the Amendment Effective Date, under the Amended and Restated Loan and Security Agreement referenced under the Recitals hereinbelow; herein called the "Loan Parties"), each of the lending institutions signatory hereto (collectively all of the "Lenders", as of the Amendment Effective Date, under the Amended and Restated Loan and Security Agreement referenced under the Recitals hereinbelow; herein called the "Lenders") and BANK OF AMERICA, N.A., (a national banking association and successor in interest to Bank of America, N.A., formerly NationsBank, N.A., successor in interest to NationsBank of Texas, N.A.), in its capacity as agent for itself and the other Lenders (in such capacity, together with its successors and assigns in such capacity, herein called "Agent"). RECITALS: -------- A. The Loan Parties, the Lenders and Agent are parties to the certain Amended and Restated Loan and Security Agreement dated effective as of January 6, 1998, as amended by the certain First Amendment to Amended and Restated Loan and Security Agreement dated effective as of May 21, 1998, the Second Amendment to Amended and Restated Loan and Security Agreement dated effective as of August 31, 1998, the Third Amendment to Amended and Restated Loan and Security Agreement dated effective as of December 21, 1998, the Fourth Amendment to Amended and Restated Loan and Security Agreement dated effective as of February 1, 1999, the Fifth Amendment to Amended and Restated Loan and Security Agreement dated effective as of February 25, 1999, the Sixth Amendment to Amended and Restated Loan and Security Agreement dated effective as of July 30, 1999, the Seventh Amendment to Amended and Restated Loan and Security Agreement dated effective as of October 27, 1999, and the Eighth Amendment to Amended and Restated Loan and Security Agreement dated effective as of January 31, 2000 (hereinafter called the "Agreement"). Unless otherwise defined in this Amendment, terms defined by the Agreement, where used in this Amendment, shall have the same meanings as are prescribed by the Agreement, as amended by this Amendment. B. The Loan Parties, the Lenders and Agent have agreed to amend the Agreement as provided hereinbelow. NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: 2 ARTICLE 1 Definitions ----------- Section 1.1 Definitions. Unless otherwise defined in this Amendment, terms defined by the Agreement, where used in this Amendment, shall have the same meanings in this Amendment as are prescribed by the Agreement. ARTICLE 2 Amendments ---------- Section 2.1 Amendment to Section 1.1. Effective as of the Amendment Effective Date, Section 1.1 of the Agreement is hereby amended to amend and restate the definition of "Applicable Margin" to read in its entirety as follows: "Applicable Margin" means, for each portion of the unpaid balance of the Revolving Credit Loans, the percentage specified for each Type of Loan adjacent to such portion as set forth below, respectively: =========================================================================== Unpaid Balance of Revolving Credit Loans Eurodollar Loans Base Rate Loans =========================================================================== $0 through the amount of the 3.75% 1.75% Trademark IP Allowance --------------------------------------------------------------------------- All amounts over the amount 2.75% 1.25% of the Trademark IP Allowance =========================================================================== For purposes of determining the Applicable Margin, the unpaid balance of the Revolving Credit Loans shall be deemed to be comprised first of Eurodollar Loans outstanding and thereafter by Base Rate Loans outstanding, notwithstanding the dates on which any such Loans were funded. Section 2.2 Amendment to Section 4.4(b)(i). Effective as of the Amendment Effective Date, the first sentence of Section 4.4(b)(i) of the Agreement is hereby amended and restated to read as follows: Borrowers agree to pay to Agent for the ratable benefit of the Lenders Letter of Credit fees equal to 2.75% per annum based on the average daily aggregate Letter of Credit Amount of all Letters of Credit from time to time outstanding during the term of this Agreement. 3 Section 2.3 Amendment to Section 12.1(b). Effective as of the Amendment Effective Date, Section 12.1(b) of the Agreement is hereby amended and restated to read in its entirety as follows: (b) Minimum EBITDA. OMC's Consolidated EBITDA calculated as of the end of any fiscal quarter, shall not fail to comply with at least one of the following requirements specified as of such date: (i) for such fiscal quarter, OMC's Consolidated EBITDA shall not be less than the amount specified for such quarter-end under the heading below entitled "Quarter Amount", or (ii) for the preceding four (4) fiscal quarters, OMC's Consolidated EBITDA shall not be less than the amount specified for such quarter-end under the heading below entitled "Preceding Four Quarters Amount", or (iii) for the preceding two (2) fiscal quarters, OMC's Consolidated EBITDA shall not be less than the amount specified for such quarter-end under the heading below entitled "Preceding Two Quarters Amount", as follows (it being understood and agreed that compliance with this Section 12.1(b), as of any test date, is achieved by meeting any one of the applicable requirements for such test date): Preceding Preceding Quarter Ending Quarter Amount Four Quarters Amount Two Quarters Amount - -------------------- --------------- -------------------- ------------------- March 31, 2000 ($8,900,000) $ 74,678,000 N/A June 30, 2000 $ 28,000,000 $ 48,211,000 N/A September 30, 2000 $ 18,995,000 N/A N/A December 31, 2000 $ 7,910,000 N/A $26,905,000 March 31, 2001 $ 4,800,000 $ 59,705,000 N/A June 30, 2001 $ 41,000,000 $ 95,800,000 N/A September 30, 2001 $ 41,500,000 $103,300,000 N/A December 31, 2001 $ 21,000,000 $108,300,000 N/A ARTICLE 3 Waiver ------ Section 3.1 Waiver. Any Event of Default resulting from noncompliance with the requirements of Section 12.1(b) as of June 30, 2000 hereby is waived. Section 3.2 Limitation. The waiver granted pursuant to Section 3.1 of this Amendment is granted pursuant to Section 16.9 of the Agreement and is expressly limited as provided therein. ARTICLE 4 Miscellaneous ------------- Section 4.1 Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of each of the following conditions precedent: 4 (a) Agent shall have received all of the following, each dated the date of this Amendment (unless otherwise indicated), in form and substance satisfactory to Agent: (i) Amendment Documents. This Amendment and any other instrument, document or certificate required by Agent to be executed or delivered by any of the Loan Parties, Agent or the Lenders in connection with this Amendment, in each case duly executed (the "Amendment Documents"); (ii) Fees and Expenses. Evidence that the costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Agent incident to this Amendment or otherwise required to be paid in accordance with Section 16.2 of the Agreement, to the extent incurred and submitted to the Loan Parties, shall have been paid in full; (iii) Waiver Fee. Payment to Agent of a waiver fee in an amount agreed upon among the Loan Parties, Agent and the Lenders. (iv) Additional Information. Agent shall have received such additional documents, instruments and information as Agent may reasonably request to effect the transactions contemplated hereby; (v) Consents. All consents required by Section 16.9 of the Agreement shall have been obtained (it being understood that, pursuant to Section 16.9 of the Agreement, consent of Agent and all Lenders shall be required as a condition for effectiveness of this Amendment). (b) The representations and warranties contained herein, in the Agreement and in all other Loan Documents, as amended hereby, shall be true and correct as of the date hereof as if made on the date hereof (except those, if any, which by their terms specifically relate only to a different date). (c) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all other agreements, documents and instruments executed and/or delivered pursuant hereto, and all legal matters incident thereto, shall be satisfactory to Agent. (d) After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. Section 4.2 Representations and Warranties. The Loan Parties hereby represent and warrant to, and agree with, Agent, for the benefit of the Lenders, that, as of the date of and after giving effect to this Amendment, (a) the execution, delivery and performance of this Amendment and any and all other Amendment Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of each of the Loan Parties (as applicable) and will not violate any of such Loan Party's certificate of incorporation or bylaws (or, in the case of Recreational Boat Group Limited Partnership, its certificate of limited partnership or 5 its limited partnership agreement), (b) after giving effect to this Amendment, all representations and warranties set forth in the Agreement and in any other Loan Document are true and correct as if made again on and as of such date (except those, if any, which by their terms specifically relate only to a different date) in the Agreement), (c) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing, (d) the Agreement (as amended by this Amendment), and all other Loan Documents are and remain legal, valid, binding and enforceable obligations in accordance with the terms thereof, and (e) the certifications delivered to Agent under clause (i), clause (ii) and clause (iii) of Section 6.1(c) of the Agreement (in the case of the certification required by such clause (iii), as subsequently modified pursuant to Section 6.2(b) of the Agreement) remain true, correct and complete as of the Amendment Effective Date. Section 4.3 Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Document shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender, or any closing, shall affect the representations and warranties or the right of Agent and the Lenders to rely upon them. Section 4.4 Reference to Agreement. Each of the Loan Documents, including the Agreement, the Amendment Documents and any and all other agreements, documents or instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant to the terms of the Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement, whether direct or indirect, shall mean a reference to the Agreement as amended hereby. Section 4.5 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Section 4.6 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of the Credit Parties and the Loan Parties and their respective successors and assigns, except each of the Loan Parties may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent and the Lenders. Section 4.7 General. This Amendment, when signed by the Loan Parties, the Agent and all Lenders, (i) subject to the prior satisfaction of the conditions prescribed by Section 4.1, shall be deemed effective prospectively as of the Amendment Effective Date, (ii) contains the entire agreement among the parties and may not be amended or modified except pursuant to the Agreement in writing signed by all parties, (iii) shall be governed and construed according to the laws of the State of Texas, and (iv) may be executed in any number of counterparts, each of which shall be valid as an original and all of which shall be one and the same agreement. A telecopy or other electronic transmission of any executed counterpart shall be deemed valid as an original. 6 THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers in several counterparts effective as of the date specified in the preamble hereof. BORROWERS: OUTBOARD MARINE CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- OMC ALUMINUM BOAT GROUP, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 7 OMC FISHING BOAT GROUP, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- OMCLATIN AMERICA/CARIBBEAN, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP By: OMC Recreational Boat Group, Inc., General Partner By: ------------------------------- Name: ----------------------------- Title: ---------------------------- By: ------------------------------- Name: ----------------------------- Title: ---------------------------- 8 GUARANTOR: OMC RECREATIONAL BOAT GROUP, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- AGENT: BANK OF AMERICA, N.A. In its capacity as Agent By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- LENDERS: BANK OF AMERICA, N.A. In its capacity as Lender By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- FLEET CAPITAL CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- THE CIT GROUP/BUSINESS CREDIT, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- TRANSAMERICA BUSINESS CREDIT CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- FLEET BUSINESS CREDIT CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 9 EX-11 19 0019.txt COMPUTATION OF PER SHARE EARNINGS (LOSS) OUTBOARD MARINE CORPORATION EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
Three Months Six Months Ended June 30, Ended June 30, ----------------- ----------------- (Dollars and Shares in Millions Except per Share Data) 2000 1999 2000 1999 ------ ----- ------ ----- Basic Earnings per Share: Net earnings (loss) of common shareholders ............ $(28.0) $33.8 $(59.5) $21.9 Weighted Average Number of Shares ..................... 20.4 20.4 20.4 20.4 ------ ----- ------ ----- Basic Earnings (Loss) Per Share ....................... $(1.37) $1.66 $(2.92) $1.07 ====== ===== ====== ===== Diluted Earnings Per Shares: Net Income (Loss) ..................................... $(28.0) $33.8 $(59.5) $21.9 Weighted Average Number of Shares ..................... 20.4 20.6 20.4 20.6 Common Stock Equivalents (Stock Options) .............. -- -- -- -- ------ ----- ------ ----- Average Shares Outstanding ............................ 20.4 20.6 20.4 20.6 ------ ----- ------ ----- Diluted Earnings (Loss) Per Share .................. $(1.37) $1.64 $(2.92) $1.06 ====== ===== ====== =====
EX-27 20 0020.txt FINANCIAL DATA SCHEDULE
5 1000 6-MOS DEC-31-2000 JUN-30-2000 42,800 0 123,800 0 191,600 380,700 190,900 0 877,100 354,700 235,700 0 49,600 200 59,500 877,100 565,700 565,700 477,200 477,200 124,300 0 17,900 (52,200) 2,600 (54,800) 0 0 0 (59,500) (2.92) (2.92)
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