-----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, NrD6o2u64QuwTtupMYtpYcPqXhYXym0Ou+CXAjojdcuUr63kESqhXbJo5x6PP3m6 Y1XrZGfyTmzrEZYIuTBsZA== 0000899078-00-000041.txt : 20000202 0000899078-00-000041.hdr.sgml : 20000202 ACCESSION NUMBER: 0000899078-00-000041 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVIS BOATS & MOTORS INC CENTRAL INDEX KEY: 0001012734 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 742024798 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-20757 FILM NUMBER: 507117 BUSINESS ADDRESS: STREET 1: 13045 RESEARCH BLVD CITY: AUSTIN STATE: TX ZIP: 78746 BUSINESS PHONE: 5123478787 MAIL ADDRESS: STREET 1: 5000 PLAZA ON THE LAKE STREET 2: SUITE 250 CITY: AUSTIN STATE: TX ZIP: 78746 10-K/A 1 FORM 10-K/A FOR TRAVIS BOATS & MOTORS, INC. The following items were the subject of a Form 12b-25 and are included herein: Exhibits 10.46, 10.47 and 21.1. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required) For the Fiscal Year Ended September 30, 1999 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-20757 TRAVIS BOATS & MOTORS, INC. (Exact name of registrant as specified in its charter) TEXAS (State or other jurisdiction of incorporation or organization) 74-2024798 (I.R.S. Employer Identification Number) 5000 PLAZA ON THE LAKE, SUITE 250, AUSTIN, TEXAS 78746 (Address of principal executive offices) Registrant's telephone number, including area code: (512) 347-8787 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of class) 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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Report on Form 10-K or any amendment to this Report on Form 10-K. _____ The aggregate market value of the voting stock (which consists solely of shares of Common Stock) held by non-affiliates of the Registrant as of December 23, 1999, (based upon the last reported price of $10.25 per share) was approximately $29,973,050 on such date. The number of shares of the issuer's Common Stock, par value $.01 per share, outstanding as of December 23, 1999 was 4,326,022, of which 2,924,200 shares were held by non-affiliates. Documents Incorporated by Reference: Portions of Registrant's Proxy Statement relating to the 2000 Annual Meeting of Shareholders to be held in March 2000, have been incorporated by reference herein (Part III). 1 The Registrant files this amendment to make certain clarifying changes, to correct certain typographical errors, to update the disclosure regarding the Registrant's credit facility, and to add Exhibit 10.46, "Product Supply Agreement dated June 29, 1999 between the Company, its subsidiaries and Mercury Marine, a division of Brunswick Corporation," Exhibit 10.47, "Larson Master Dealer Agreement effective September 29, 1999 between the Company and Larson/Glastron Boats, Inc.," and Exhibit 21.1, "List of Subsidiaries of Registrant." ii
TRAVIS BOATS & MOTORS, INC. AND SUBSIDIARIES REPORT ON FORM 10-K TABLE OF CONTENTS PAGE ---- PART I.........................................................................................................7 Item 1. Business...........................................................................................7 Item 2. Properties........................................................................................12 Item 3. Legal Proceedings.................................................................................14 Item 4. Submission of Matters to a Vote of Security Holders...............................................14 PART II.......................................................................................................14 Item 5. Market for Registrant's Common Stock and Related Stockholder Matters..............................14 Item 6. Selected Financial Data...........................................................................15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................24 Item 8. Financial Statements..............................................................................26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............27 PART III......................................................................................................27 Item 10. Directors and Executive Officers..................................................................27 Item 11. Executive Compensation............................................................................27 Item 12. Security Ownership of Certain Beneficial Owners and Management....................................27 Item 13. Certain Relationships and Related Transactions....................................................27 PART IV.......................................................................................................27 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................27
2 RISK FACTORS Some of the information in this Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate," and "continue" or similar words. You should read statements that contain these words carefully because they (1) discuss our future expectations; (2) contain projections of our future results of operation or of our future financial condition; or (3) state other "forward-looking" information. We believe it is important to communicate our expectations to people that may be interested. However, unexpected events may arise in the future that we are not able to predict or control. The risk factors that we describe in this section, as well as any other cautionary language in this Report on Form 10-K, give examples of the types of uncertainties that may cause our actual performance to differ materially from the expectations we describe in our forward- looking statements. You should know that if the events described in this section and elsewhere in this Report on Form 10-K occur, they could have a material adverse effect on our business, operating results and financial condition. WE DEPEND ON STRONG SALES IN THE FIRST HALF OF THE YEAR. Our business, and the recreational boating industry in general, is very seasonal. Our strongest sales period begins in January, because many boat and recreation shows are held in that month. Strong sales demand continues from January through the summer months. Of our average annual net sales over the last three years, over 27% occurred in the quarter ending March 31 and over 41% occurred in the quarter ending June 30. With the exception of our store locations in Florida, our sales are generally much lower in the quarter ending December 31. Because the overall sales level in the December quarter are much less than in the months with warmer weather, we generally do not make a profit in the quarter ending December 31. Because of the difference in sales in the warm spring and summer months versus the cold fall and winter months, if our sales in the months of January through June are significantly lower than we expect, we may not earn profits or we may lose money and have a net loss. This experience may lead to a material adverse effect on our business, our operating results and our financial condition. See "Our Sales Depend on Good Weather" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." OUR SALES DEPEND ON GOOD WEATHER. Our business also depends on favorable weather conditions. For example, too much or too little rain, either of which may result in dangerous or inconvenient boating conditions, can force boating areas to close and severely limit our sales. A long winter can also reduce our selling season. Hurricanes and other storms could result in the disruption of our operations or result in damage to our inventories and facilities. We purchase insurance for storm damage, but the amount of insurance purchased or coverages we purchase may not repay us for all weather related damages or disruptions to our operations. Bad weather conditions in the future may decrease customer demand for our boats, which may decrease our sales and could significantly lower the trading price of our common stock. GENERAL ECONOMIC CONDITIONS IN THE UNITED STATES AND IN THE AREAS WHERE WE HAVE STORES AFFECT OUR SALES. Our industry, like many other retail industries, depends on the local, regional and national economy. High interest rates, unfavorable economic developments, volatility or declines in the stock market, changes to the tax law such as the imposition of a luxury tax, or a major employer's decision to leave a certain city can all significantly decrease the amount of money consumers are willing to spend. When these situations arise, consumers often decide not to purchase relatively expensive, "luxury" items like recreational boats. For example, from 1988 to 1990, our business suffered dramatically because of the declines in the financial, oil and gas and real estate markets in Texas. If similar downturns in the national or in local economies arise in the future, we may suffer significant operating losses. Also, changes in federal and state tax laws, such as the imposition of luxury taxes on new boat purchases also could influence consumers' decisions to purchase products we sell and could have a negative effect on our 3 sales. For example, during 1991 and 1992 the federal government imposed a luxury tax on new recreational boats with sales prices in excess of $100,000. This luxury tax coincided with a sharp decline in boating industry sales from a high of $17.9 billion in the late 1980s to a low of $10.3 billion in 1992. OUR GROWTH DEPENDS ON OUR ABILITY TO ACQUIRE AND OPEN NEW STORES. We have grown primarily through the acquisition of recreational boat dealerships. Our growth strategy involves significant risks. We began with one store in Texas in 1979 and, since then, have opened or acquired 37 new stores in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee and Texas. Stores that we acquired or opened since we went public in June of 1996 have accounted for 25.1% of our net sales in fiscal year 1997, 46.0% of our net sales in fiscal year 1998 and 60.2% of our net sales in fiscal year 1999. By comparison, our comparable store sales (which are sales in stores that are open in the same location for two consecutive years) have increased 5.7% in fiscal year 1997, 6.6% in fiscal year 1998 and 1.9% in fiscal 1999. We expect our comparable store sales to fluctuate from the impact of (i) when and where we acquire new store locations, (ii) the number of store locations that we remodel or relocate to superstores, and (iii) the market conditions in the areas or cities in which our stores are located. Although we expect our existing stores to have sales growth and to remain profitable, most of our sales growth is from newly added store locations and we may not be able to continue to grow or purchase new store locations at the same rapid pace or on terms and conditions favorable to us. We may continue to make acquisitions depending upon, among other things, the availability of suitable acquisition opportunities and our ability to finance these transactions. Our success in these acquisitions will depend on our financial strength at the time of acquisition, our ability to hire and retain qualified employees and our ability to identify markets in which we can successfully sell our products. In addition, once we identify a store that meets our criteria, our success will depend on our ability to sell the store's remaining inventory, to convert the store to a Travis Boating Center and to attract new customers to the store after the conversion. Our inability to meet our planned growth potential will severely impact our business, operating results and financial condition. Besides acquiring existing stores and converting them into Travis Boating Centers, we plan to build new stores in certain cities or towns that do not have other boat retailers that we can purchase or would like to purchase. Our success in building and operating new facilities will depend on whether we obtain reliable information about each potential market, such as how many and what type of boats have previously been sold in the market. We must then be certain that the prices of our boats are competitive with other boat dealers that sell boats in the market so that we can sell enough boats to operate our store profitably. We cannot promise or be certain that we will be able to open and operate new stores in a time frame that we are expected to by our shareholders or that we can operate stores on a profitable basis. See "Management's Discussion and Analysis of Financial Condition and Results of Operations. " OUR SUCCESS WILL DEPEND ON HOW WELL WE MANAGE OUR GROWTH. We have undergone a period of rapid growth and, consequently, we have spent much time and effort in acquiring and opening new stores. Although we believe that our systems, procedures and controls are adequate to support our growth, we cannot assure that this is the case. In addition, our growth will impose substantial added responsibilities on our existing senior management including the need to identify, recruit and integrate new senior level managers. Management may not be able to oversee the growth efficiently or to implement effectively our growth and operating strategies. Our inability to manage our growth would result in a significant and severe financial impact on our business, operating results and financial condition. WE ARE INSTALLING A NEW MIS SYSTEM IN EACH OF OUR STORES, WHICH MAY NOT OPERATE EFFECTIVELY. Beginning in fiscal year 1998, we purchased and began installing a new management information system to monitor and manage our geographically dispersed stores. This system is now operational in each of our 38 stores. We believe that our company is among the first to install this 4 management information system on a large scale, fully centralized network architecture. Accordingly, we are testing the continued application of the system in a large scale multiple user network that will accommodate future growth in the number of store locations we operate. Any faults, defects or networking limitations in this system could harm our ability to operate our stores and would result in a significant impact on our business, operating results and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Disclosure of Year 2000 Issues and Consequences." OUR SUPPLIERS COULD INCREASE THE PRICES THEY CHARGE US OR COULD DECIDE NOT SELL TO US. We have entered into non-exclusive dealer agreements with our key manufacturers. Most of these agreements are renewable each year and contain other conditions that are standard in the industry. Because of our relationship with these manufacturers and the volumes we purchase, we receive volume price discounts and other favorable terms; however, the manufacturers may change the prices they charge us for any reason at any time or could decide not to sell their products to us. A change in manufacturer's prices or changes in industry regulations could have a material adverse effect on our business, financial conditions and results of operations. WE RELY ON SEVERAL KEY MANUFACTURERS FOR ALMOST ALL OF OUR INVENTORY PURCHASES. Our success depends to a significant extent on the continued quality and popularity of the products of our manufacturers. We purchase almost all of our outboard motors from two manufacturers. In fiscal years 1998 and 1997, we purchased nearly all of the outboard motors we use on our Travis Edition line of recreational boats from Outboard Marine Corporation, which makes Johnson outboard motors. In fiscal year 1999 we also purchased outboard motors from Brunswick Corporation, which makes Mercury outboard motors. We have three-year master agreements with Outboard Marine Corporation and Brunswick Corporation that provide volume price discounts and reimbursement for certain marketing expenses. Each agreement is currently in the second year. Either of these agreements may be canceled, however, if we do not buy certain minimum quantities or if the manufacturer cannot supply the quantity we need. Cancellation or modification of our agreements to purchase outboard motors could have a material adverse effect on our business, financial condition and results of operations. We also buy much of our boat inventory from Genmar Industries, Inc., or Genmar. For example, in fiscal year 1997 we purchased 34.3% of our inventory from Genmar, in fiscal year 1998 we purchased 17.7%, and in fiscal year 1999 we purchased 12.0% from Genmar. The purchases of boats from this supplier are also made based on the terms of a three-year master agreement with volume price discounts. In addition, we purchase a large percentage of the annual production of several other boat manufacturers. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." If our sales increase, these key manufacturers may need to increase their production or we may need to locate other sources to purchase outboard motors or boats. If our suppliers cannot produce more or decide not to renew their contracts with us, and we cannot find alternative sources at similar quality and prices, we would experience inventory shortfalls which, if severe enough, could cause significant disruptions and delays in our sales and, therefore, harm our financial condition. In addition the timing, structure, and amount of manufacturer sales incentives could impact the timing and profitability of our sales. CERTAIN LAWS AND CONTRACTS MAY KEEP US FROM ENTERING NEW MARKETS. We may be required to obtain the permission of manufacturers to sell their product before we enter new markets. We received permission from some key manufacturers, including Outboard Marine Corporation, to sell their product in the areas where we have recently expanded. We have not, however, received universal approval to sell all of our products in all new markets. If our manufacturers do not give us permission to sell their products in markets where we plan to expand, we will be forced to find alternative supply sources. Besides these manufacturers' restrictions, there are also legal restrictions on our business. For example, the state of 5 Oklahoma has adopted laws that restrict the locations of competing boat dealers. While these types of laws are not common, they could have a significant effect on our industry if other states pass similar restrictions. WE MAY NOT BE ABLE TO RESPOND EFFECTIVELY TO THE SIGNIFICANT COMPETITION WE FACE. We operate in very competitive conditions. We must compete generally with other businesses trying to sell discretionary consumer products and also face intense competition from other recreational boat dealers for customers, quality products, store locations and boat show space. We rely heavily on boat shows to generate sales. If we are limited in or prevented from participating in boat shows in its markets or in markets we are targeting, this limited participation could have a negative effect on our business, financial condition and results of operation. Within our industry, our main competitors are single location boat dealers. We compete with other dealers based on the quality of available products, the price and value of the products and customer service. To a lesser extent, we also compete with national specialty marine stores, catalog retailers, sporting good stores and mass merchants, especially with respect to parts and accessories. We face significant competition in the markets where we currently operate and in the markets we plan to enter. We believe that the trend in the boating industry is for manufacturers to include more features as standard equipment on boats and for other dealers to offer packages comparable to our packages. Some of our competitors, especially those that sell boating accessories, are large national or regional chains that have substantially greater financial, marketing and other resources than we do. We cannot give any assurances that we will be able to effectively compete in the retail boating industry in the future. OUR SUBSTANTIAL INDEBTEDNESS COULD RESTRICT OUR OPERATIONS AND MAKE US MORE VULNERABLE TO ADVERSE ECONOMIC CONDITIONS. We have had and will continue to have a significant amount of indebtedness. Our growth strategy may require us to secure significant additional capital. Our future capital requirements will depend upon the size, timing and the structure of future acquisitions and our working capital. Any borrowings to finance future operations, asset purchases or acquisitions could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions or increases in interest rates on portions of debt that have variable interest rates. Our ability to make payments on our indebtedness depends on our ability to generate cash flow in the future. If our cash flow from operations is insufficient to meet our debt service requirements, we could be required to sell additional equity securities, refinance our obligations or dispose of assets in order to meet our debt service requirements. In addition, our credit arrangements generally will contain financial and operational covenants and other restrictions with which we must comply. Adequate financing may not be available if and when we need it or may not be available on terms acceptable to us. Our failure to achieve required financial and other covenants or to obtain sufficient financing on favorable terms and conditions could have a material adverse effect on our business, financial condition and results of operations and prospects. WE MAY ISSUE ADDITIONAL SECURITIES IN CONNECTION WITH ACQUISITIONS THAT WILL DILUTE OUR CURRENT SHAREHOLDERS AND IMPACT OUR EARNINGS PER SHARE. If we choose to finance future acquisitions in whole or in part through the issuance of common stock or debt instruments convertible into our common stock, our existing shareholders would experience dilution and our earnings per share could also be impacted by the issuance of additional shares of capital stock in connection with future acquisitions. WE ARE REFINANCING OUR CREDIT LINE AND MAY NOT OBTAIN FAVORABLE TERMS. One of our current credit facilities for borrowings of up to $55 million matures on January 31, 2000. We currently are in technical default under this credit facility based upon a financial ratio required under the terms of this facility; however, we have obtained written waivers from each of the lenders under the facility regarding this technical default. We are currently in the process of refinancing and increasing this credit facility to provide for borrowings of up to $125 million with several financial lenders including certain lenders that currently 6 provide a portion of the $55 million loan. The failure to refinance the $55 million credit facility or to obtain other sufficient financing on favorable terms and conditions could have a material adverse effect on our business, operating results and financial conditions. MUCH OF OUR INCOME IS FROM FINANCING, INSURANCE AND EXTENDED SERVICE CONTRACTS, WHICH IS DEPENDENT ON THIRD PARTY LENDERS AND INSURANCE COMPANIES. We receive a substantial part of our income from the fees we receive from banks and other lending companies. We call this type of income Finance and Insurance income, or F&I income. If our customers desire to borrow money to finance the purchase of their boat, we help the customers obtain the financing by referring them to certain banks that have offered to provide financing for boat purchases. The bank or other lending company pays a fee to our company for each loan that they are able to provide as a result of our referral. When we sell boats we also offer our customers the opportunity to purchase (i) a Service Contract that generally provides up to four years of additional warranty coverage on their boat's motor after the manufacturer's original warranty expires, and (ii) various types of insurance policies that will provide money to pay a customer's boat loan if the customer dies or is physically disabled. We sell these products as a broker for unrelated companies that specialize in these type of issues, and we are paid a fee for each product that we sell. Since we only broker these products on behalf of other providers, our responsibility and/or financial risk for paying claims or expenses that are eligible to be insured by these Service Contracts or other insurance policies is limited. F&I income for fiscal year 1999 was 4.3% of our net sales, and we estimate 18.8% of our net profits. In fiscal year 1998, these services accounted for 5.4% of our net sales and approximately 20.3% of our net profits. This arrangement carries several potential risks. For example, the lenders we arrange financing through may decide to lend to our customers directly rather than to work through us. If the customer goes directly to the bank to apply for a loan to purchase their boat we would not receive a fee for referral. Second, the lenders we currently refer customers to may change the criteria or terms they use to make loan decisions, which could reduce the number of customers that we can refer. Also, our customers may use the Internet or other electronic methods to find financing alternatives. If either of these events occur, we would lose a significant portion of our income and profit. OUR SUCCESS DEPENDS ON OUR MANAGEMENT TEAM. Our company depends greatly on our key management, including Mark T. Walton, Chairman of the Board and President; Ronnie L. Spradling, Executive Vice President-New Store Development; Michael B. Perrine, Chief Financial Officer, Secretary and Treasurer; and other key employees. We have bought and are the beneficiary of key-man life insurance policies on Mr. Walton and Mr. Perrine in the amount of $1,000,000, each, and on Mr. Spradling in the amount of $500,000. However, if any of these employees or other key employees died, became disabled or left Travis Boats for other reasons, their loss could have a significant negative effect on our operations and our financial performance. IF OUR PRODUCTS ARE DEFECTIVE, WE COULD BE SUED. Because we sell, service and custom package boats, motors and other boating equipment, we may be exposed to lawsuits for personal injury and property damage if any of our products are defective and cause personal injuries or property damage. Manufacturers that we purchase product from generally maintain product and general liability insurance and we carry third party product liability insurance. We have avoided any significant liability for these risks in the past. However, if a situation arises in which a claim is not covered under our insurance policy or is covered under our policy but exceeds the policy limits, it could have a significant and material adverse effect on our financial condition. OUR FAILURE AND THE FAILURE OF PARTIES WITH WHOM WE DO BUSINESS TO ADDRESS THEIR YEAR 2000 ISSUES COULD NEGATIVELY IMPACT OUR OPERATING RESULTS. The Year 2000 issue is the result of computer 7 program being written using two digits rather than four to define the applicable year. Computer equipment and software and devices with embedded technology that are time-sensitive may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. If all Year 2000 issues are not properly identified, or if assessment, remediation and testing are not effected timely with respect to Year 2000 problems that are identified, there can be no assurance that the Year 2000 issue will not materially adversely impact our financial position or results of operations or adversely affect our relationships with customers, vendors or others. Additionally, there can be no assurance that the Year 2000 issues of other entities will not have a material adverse impact on our systems or results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Disclosure of Year 2000 Issues and Consequences." OUR STOCK PRICE MAY BE VOLATILE. The price of our common stock may be highly volatile for several reasons. First, a limited number of shares of our stock are owned by the public. This may effect trading patterns which generally occur when a greater number of shares are traded. Second, the quarterly variations in our operating results, as discussed above, may result in the increase or decrease of our stock price. Third, independent parties may release information regarding pending legislation, analysts' estimates or general economic or market conditions that effect the price of our stock. Also, our stock price may be effected by the demand and the market performance of small capitalization stocks. Any of these situations may have a significant effect on the price of our common stock or our ability to raise additional equity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." IF WE ISSUE MORE STOCK, OUR STOCK PRICE MAY DECLINE. The sale of a large number of shares of our common stock in the public market could have a material adverse effect on the market price of the common stock. As of December 23, 1999, we own or control, together with our officers and directors and large shareholders, approximately 1,401,822 shares of common stock. Our sale of a large portion of these shares may decrease the price of our common stock. OUR CORPORATE DOCUMENTS MAY PREVENT OR INHIBIT A TAKEOVER OF THE COMPANY. Our Articles of Incorporation permit us to issue up to 1,000,000 shares of preferred stock, either all at once or in a series of issuances. Our Board of Directors has the power to set the terms of this preferred stock. If we issued this preferred stock, it could delay or prevent a change in control of the company. Also, our Articles of Incorporation permit the Board of Directors to determine the number of directors and do not specify a maximum or minimum number. Our Bylaws currently provide that the Board of Directors is divided into three classes with staggered terms. This arrangement could delay shareholders from replacing current board members and could delay or prevent a takeover that you may consider to be in your best interest. 8 PART I Some of the information in this Report on Form 10-K, including statements in "Item 1. Business," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate," and "continue" or similar words. You should read statements that contain these words carefully because they (1) discuss our future expectations; (2) contain projections of our future results of operation or of our future financial condition; (3) state other "forward-looking" information. We believe it is important to communicate our expectations to people that may be interested. However, unexpected events may arise in the future that we are not able to predict or control. Among the factors that could cause actual results to differ materially are: general economic conditions, competition and government regulations, as well as the risks and uncertainties discussed in this Report on Form 10-K, and the uncertainties set forth from time to time in the Company's other public reports, filings and public statements. All forward-looking statements in this Report on Form 10-K are expressly qualified in their entirety by the cautionary statements in this paragraph. ITEM 1. BUSINESS General Travis Boats & Motors, Inc. ("Travis Boats" or the "Company") is a leading multi-state superstore retailer of recreational boats, motors, trailers and related marine accessories in the southern United States. The Company, which currently operates 38 stores under the name Travis Boating Center in Texas, Arkansas, Louisiana, Alabama, Tennessee, Mississippi, Florida, Georgia and Oklahoma, seeks to differentiate itself from competitors by providing customers a unique superstore shopping experience that showcases a broad selection of high quality boats, motors, trailers and related marine accessories at firm, clearly posted low prices. Each superstore also offers complete customer service and support, including in-house financing programs and full-service repair facilities staffed by factory-trained mechanics. History Travis Boats was incorporated as a Texas corporation in 1979. As used herein and unless otherwise required by the context, the terms "Travis Boats" and the "Company"' shall mean Travis Boats & Motors, Inc. and its direct and indirect subsidiaries. Since its founding in 1979 as a single retail store in Austin, Texas, the Company has grown both through acquisitions and the establishment of new store locations. During the 1980s, the Company expanded into San Antonio, Texas with the construction of a new store facility. The Company subsequently made acquisitions of boat retailers operating within the Texas markets of Midland, Dallas and Abilene. It was during this initial period of expansion that the Company began developing the systems necessary to manage a multi-store operation and leveraging the economies of scale associated with volume purchasing. The Company's success in these areas led to the proprietary Travis Edition packaging concept and the Company's pricing philosophy. Since 1990, Travis Boats has opened or acquired 33 additional store locations in the following states: Texas (3), Arkansas (4), Louisiana (4), Alabama (2), Tennessee (5), Mississippi (1), Florida (12), Georgia (1) and Oklahoma (1). The Company sells approximately 75 different Travis Edition models of brand-name fishing, water-skiing and general recreational boats, along with motors, trailers, accessories and related equipment. Personal watercraft, off-shore fishing boats and cabin cruisers are also offered for sale at selected store locations. During fiscal 1999, substantially all of the boat units sold range in size from 16 9 to 25 feet at prices ranging from $7,500 to $25,000. Approximately 1.7% of new boat sales are personal watercraft with retail prices generally ranging from $5,000 to $10,000 and approximately 6.7% of new boat sales are off-shore fishing boats and cruisers with lengths of 27 feet or greater and generally ranging in retail price from $50,000 to $300,000. The Company's retail pricing structure seeks to maintain a consistent gross profit percentage for each of its Travis Edition models. See "Business Strategy - Travis Edition Concept." The Company custom designs and pre-packages combinations of popular brand-name boats, such as Larson, Wellcraft, Bayliner, Sprint, and Sea Ark boats with outboard motors generally manufactured by Outboard Marine Corporation or Brunswick, along with trailers and numerous accessories, under its proprietary Travis Edition product line. These signature Travis Edition packages, which account for the vast majority of total new boat sales, have been designed and developed in coordination with the manufacturers and often include distinguishing features and accessories that have historically been unavailable to, or listed as optional by, many competitors. These factors enable the Company to provide the customer with an exceptional product that is conveniently packaged for immediate enjoyment and competitively priced. The Company believes that it offers a selection of boat, motor and trailer packages that fall within the price range of the majority of all boats, motors and trailers sold in the United States. The Company's product line generally consists of boat packages priced from $7,500 to $25,000 with approximate even distribution within this price range. While the Company's sales have historically been concentrated on boats with retail sales prices below $25,000, the Company in limited market areas and quantities does sell boats that have retail sales prices in excess of $200,000. Additionally, as the Company continues to operate in Florida and enters other markets along the Gulf of Mexico or other new coastal areas, management believes that the distribution of off shore fishing boats and cabin cruisers will continue to increase as a percentage of net sales. Management believes that by combining flexible financing arrangements with an even distribution of products through a broad price range, the Company is able to offer boat packages to customers with different purchasing budgets and varying income levels. Business Strategy The Company has developed a multi-state, chain superstore merchandising strategy in the recreational boating business. The Company's objective is to continue to grow as one of the dominant retailers of recreational boats, motors, trailers and marine accessories in the southern United States. As such the Company's strategy is to increase its store location count in the southern United States while also maintaining a focus on possible expansion into other regions. Management's merchandising strategy is based on providing customers with a comprehensive selection of quality, brand name boats and boating products in a comfortable superstore environment. The Company intends to continue to build brand identity by placing the Travis Edition name on complete boating packages. Travis Boats has developed and implemented a business strategy designed to increase its market penetration within both existing and new market areas through a variety of advertising and promotional events. The Company intends to emphasize the following key elements of its business strategy: Travis Boating Center superstore. Travis Boating Center superstores have a distinctive and stylish trade dress accented with deep blue awnings, a nautical neon building decoration, expansive glass storefronts and brightly lit interiors. The stores range in size from approximately 2,000 (temporary store locations) to over 33,000 square feet and management estimates the average store size at approximately 21,000 square feet. The superstore locations present customers with a broad array of boats and often over 9,000 parts and accessories in a clean, well-stocked, air-conditioned shopping environment. All boats are typically displayed fully rigged with motor, trailer and a complete accessory package, giving a "ready to take home" impression. Professionally-trained mechanics operate service bays, providing customers with quality and reliable maintenance and repair service. 10 Travis Edition concept. The Company uses extensive market research, combined with the design resources of its manufacturers, to develop custom Travis Edition boating packages. The Company's significant purchasing power and consequent ability to coordinate designs with manufacturers have enabled the Company to obtain products directly from the factory at the lowest prices, with favorable delivery schedules and with distinguishing features and accessories that have historically been unavailable to, or listed as optional by, many competitors. The Company can also add certain additional features after receipt of the product to enhance the Company's Travis Edition packages. Each Travis Edition is a complete, full-feature package, including the boat, motor, trailer and numerous additional accessories and design features often not found on competitors' products, thus providing customers with superior value. These features often may include enhanced styling such as additional exterior colors, complete instrumentation in dashboards, transoms warranted for life, canopy tops, trolling motors, upgraded interiors with stereos, wood grain dashboards, in-dash depth finders, stainless steel motor propellers and enhanced hull design not available on other models. In addition, Travis Edition boats are generally identified by the Company's attractive private label logo as well as the respective manufacturer's logo. Unlike most recreational boat dealers, the Company establishes firm prices on its Travis Edition packages and generally maintains such prices for an entire season. Prices are advertised and clearly posted so that the customer receives the same price at any Travis Boating Center. The Company's selling philosophy is designed to eliminate customer anxiety associated with bargaining or negotiation and result in a price at or below prices generally available from competitors. The Company believes this pricing strategy and low-pressure sales style provide the customer with the comfort and confidence of having received a better boat with more features at a lower price. In the Company's view, this approach has promoted good customer relationships and enhanced the Company's reputation in the industry as a leading provider of quality and value. Acquisitions. The Company has made various acquisitions during the three year period ended September 30, 1999. All of the acquisitions were asset purchases (except for Adventure Marine and Shelby Marine, which were stock purchases) and have been accounted for using the purchase method of accounting. The operating results of the companies acquired have been included in the consolidated financial statements from the respective date of acquisition. The assets acquired generally include boat, motor and trailer inventory, parts and accessories inventory and to a lesser extent, property and equipment. A summary of the Company's acquisitions follows:
Non-compete Date of Purchase Tangible Agreements Cash Liabilities Notes Stock Name of Company Acquisition Price Net Assets and Goodwill Paid Assumed Issued Issued --------------- ----------- -------- ---------- ------------ ---- ----------- ------ ------ (In Thousands) Fiscal 1999 - ----------- AMLIN, INC. DBA MAGIC 01/99 $1,639 $6,019 $1,090 $1,639 $5,470 $ --- $--- MARINE SPORTSMAN'S HAVEN 01/99 1,748 2,624 514 1,098 1,390 650 --- PIER 68 MARINA 02/99 738 2,218 562 408 2,043 329 --- DSA MARINE SALES & 04/99 2,147 4,798 1,597 2,147 4,248 --- --- SERVICE DBA THE BOATWORKS SHELBY MARINE, INC. 06/99 1,334 3,426 1,050 809 3,142 --- 525 THE NEW 3 SEAS, INC. 09/99 1,103 1,419 1,100 0 1,416 1,103 --- Fiscal 1998 - ----------- SOUTHEASTERN MARINE 11/97 $1,730 $1,390 $ 280 $1,606 $ - $ 124 $--- WORTHEN MARINE 12/97 287 142 145 287 - --- --- HNR MARINE 04/98 359 359 - 359 - --- --- MOORE'S MARINE 05/98 777 376 401 777 - --- --- RODGERS MARINE 09/98 677 2,093 350 327 1,766 --- 350 Fiscal 1997 - ----------- NORTH ALABAMA 10/96 892 687 205 812 - 80 --- WATERSPORTS TRI-LAKES MARINE 11/96 1,243 1,892 644 643 1,937 600 --- BENT'S MARINE 02/97 1,519 840 679 1,064 - 455 --- MCLEOD MARINE 08/97 958 730 228 958 - --- --- ADVENTURE MARINE 09/97 3,023 5,536 2,690 1,430 5,203 115 1,478
11 Boat Show Participation. The Company also participates in boat shows, typically held in January through March, in each of its markets and in certain markets of close proximity. These shows are normally held at convention centers, with all area dealers purchasing space to display their respective product offerings. Boat shows and other offsite promotions generate a significant amount of interest in products and often have an immediate impact on sales at a nominal incremental cost. Although total boat show sales are difficult to assess, management attributes a significant portion of the second fiscal quarter's net sales to such shows. F&I Products. In the Travis Edition boat packages the Company offers customers the ability to purchase extended service contracts and insurance coverages, including credit life and accident/disability coverages (collectively "F&I Products"). The Company also offers to assist the customer in obtaining financing for their boat purchase through a diversified group of financial institutions with which the Company maintains financing agreements. The Company earns commissions on these F&I Products based upon the Company's mark-up over the cost of the products. F&I Products account for a substantial portion of the Company's income, the most significant component of which is the income resulting from the Company's origination of customer financing. Operations Purchasing. The Company believes it is among the largest volume buyers of outboard motors in the United States. Until fiscal year 1999, the Company purchased substantially all of its outboard motors from Outboard Marine Corporation ("OMC"), which is the manufacturer of Johnson outboard motors. Beginning with the 1999 fiscal year, the Company elected to further diversify its outboard motor selection and entered into an agreement to purchase Mercury outboard motors from Brunswick Corporation ("Brunswick"). The Company is also among the largest domestic volume buyer of boats from many of the boat manufacturers it represents. As a result, the Company has significant access to the manufacturers and substantial input into the design process for the new boats that are introduced to the market each year by such manufacturers. In addition, the Company has designed and developed, in coordination with its manufacturers, signature Travis Edition boating packages which account for the vast majority of its total new boat sales. The Company typically deals with each of its manufacturers pursuant to an annually renewable, non-exclusive dealer agreement which does not contain any contractual provisions concerning product pricing or purchasing levels. Pricing is generally established on an annual basis, but may be changed at the manufacturer's sole discretion. The Company's agreements with OMC and Brunswick to purchase outboard motors, as well as its agreements to purchase boats from GenMar Industries, Inc. ("Genmar"), unlike its other dealer agreements, are multi-year in nature. These current agreements include volume discounts from the then prevailing dealer net price over the entire term of the respective agreement. This dealers agreement typically may be canceled by either party if volume of product purchased or available to be purchased is not maintained at pre-established levels. Approximately 12% and 18% of the Company's net purchases in fiscal years 1999 and 1998, respectively, were products manufactured by boat manufacturers owned by Genmar. Genmar's boat lines purchased by the Company include Larson, AquaSport, Wellcraft, Scarab, and Carver. OMC supplied products that represented approximately $32.4 million, or 36.3%, and $17.7 million, or 42.1%, of the Company's net purchases during fiscal years 1999 and 1998, respectively. Brunswick supplied Mercury 12 outboard motors that represented approximately $32.4 million, or 36.3%, of the Company's net purchases during the 1999 fiscal year. The Company's right to display some product lines or prices in certain markets, including the Internet, may be restricted by arrangements with certain manufacturers. Floor plan and other inventory financing. The Company acquires a substantial portion of its inventory through floor plan and other financing agreements. Inventory is generally purchased under floor plan lines of credit (secured by such inventory) maintained with third party finance companies or under revolving lines of credit maintained with commercial banks, depending upon the type of product purchased. The seasonal nature of the recreational boating industry impacts the production schedules of the manufacturer's that produce marine products. During the fall and winter months, retail sales of recreational boats diminish significantly as compared to sales during the warm spring and summer months. To provide recreational boating retailers, such as Travis Boats, extra incentive to purchase boating products in the "off-season," manufacture's typically offer product for sale at a price that includes an interest subsidy. Since retail boat dealers typically utilize floor plan financing to provide working capital to purchase inventory, the interest subsidy is intended to assist the retail dealer in stocking the product until the selling season. The terms of the interest subsidy or assistance vary by manufacturer, with substantially all manufacturers in the marine industry offering such programs. Management believes that these financing arrangements are standard within the industry. As of September 30, 1999, the Company and its subsidiaries owed an aggregate of approximately $68.6 million pursuant to the floor plan and revolving lines of credit. Competition. The Company operates in a highly competitive environment. In addition to facing competition generally from businesses seeking to attract discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, access to quality products, access to boat show space in new markets and suitable store locations. The Company relies heavily on boat shows to generate sales. If the Company is impeded in its ability to participate in boat shows in its existing or targeted markets, it could have a material adverse effect on the Company's business, financial condition and results of operations. The Company competes primarily with single location or single state boat dealers and, to a lesser degree, with national specialty marine stores, catalog retailers, sporting goods stores and mass merchants, particularly with respect to parts and accessories. Dealer competition, which includes one other publicly traded multi-state retailer of recreational boats, continues to increase based on the quality of available products, the price and value of the products and attention to customer service. There is significant competition both within markets currently being served by the Company and in new markets into which the Company plans to enter. While the Company generally competes in each of its markets with retailers of brands of boats not sold by the Company in that market, it is common for other competitive retailers to sell the same brands of outboard motors. Management believes that a trend in the industry is for independent dealers to attempt to form alliances or buyer's groups, for manufacturers to include more features as standard equipment on boats and consequently, and for competitive dealers to offer packages comparable to those offered by the Company as its Travis Edition lines. In addition, several of the Company's competitors, especially those selling boating accessories, are large national or regional chains that may have substantially greater financial, marketing and other resources than the Company. There can be no assurance that the Company will be able to compete successfully in the retail marine industry in the future. Impact of Environmental and Other Regulatory Issues. On October 31, 1994, the U.S. Environmental Protection Agency ("EPA") announced proposed emissions regulations for outboard marine motors. The proposed regulations would require a 75% average reduction in hydrocarbon emissions for outboard motors and set standards for carbon monoxide and nitrogen oxide emissions as 13 well. Under the proposed regulations, manufacturers began phasing in low emission models in 1998 and had approximately nine years to achieve full compliance. Certain states, such as California, are proposing and adopting legislation that would require low emission outboards and other engines on certain bodies of water or more aggressive schedules than the EPA. The Company's primary outboard motor suppliers, Outboard Marine Corporation ("OMC") and Brunswick each have begun the phase-in process for the new EPA compliant outboard motors. However, in fiscal 1999 and 1998, the Company only purchased minimal quantities of the new EPA compliant outboard motors as a result of a lack of supply of the new product since these manufacturers are still in the initial stages of the new product's release. The Company's boat models sold with the new EPA compliant outboards in fiscal 1999 and 1998 generally were priced approximately $2,000 higher than those with traditional outboard motors. Management anticipates retail prices to generally be from $500 to $1,500 higher for the new EPA compliant outboards depending on the motor's horsepower. Management, based upon discussions with OMC and Brunswick, believes that the higher retail costs will be offset by enhanced fuel efficiency and acceleration speed, as well as reduced maintenance costs of the new EPA compliant outboard motors. Costs of comparable new models, if materially more expensive than previous models, or the manufacturer's inability to deliver responsive, fuel efficient outboard motors that comply with EPA requirements, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company, in the ordinary course of its business, is required to dispose of certain waste products that are regulated by state or federal agencies. These products include waste motor oil, tires, batteries and certain paints. It is the Company's policy to use appropriately licensed waste disposal firms to handle this refuse. If there were improper disposal of these products, it could result in potential liability for the Company. Although the Company does not own or operate any underground petroleum storage tanks, it currently maintains several above-ground tanks, which are subject to registration, testing and governmental regulation. Additionally, certain states have required or are considering requiring a license in order to operate a recreational boat or personal watercraft. While such licensing requirements are not expected to be unduly restrictive, regulations may discourage potential first-time buyers, thereby limiting future sales, which could have a material adverse effect on the Company's business, financial condition and results of operations. Trademarks and service marks. The Company does not hold any registered trade or service marks at this time but has trademark applications pending with the U.S. Patent and Trademark Office for the names "Travis Boating Center" and "Travis Edition," for its corporate logo and for the overall appearance and trade dress of its Travis Boating Centers. There can be no assurance that any of these applications will be granted. However, based on a number of years of use, the Company believes it has common law rights to these marks at least in its current market areas. Notwithstanding the foregoing, the Company has entered into an agreement with a marine dealership operating in Knoxville, Tennessee not to use the names "Travis," "Travis Boating Center" or "Travis Edition" in certain types of uses or situations in Knoxville, Tennessee and a 50 mile radius therefrom. Web site. The Company operates a Web site under the name "travisboatingcenter.com." The Company owns the URL name for this name and numerous derivations thereof. Employees. As of September 30, 1999, the Company's staff consisted of 708 employees, 668 of whom are full time. The full-time employees include 37 in store level management and 51 in corporate administration and management. The Company is not a party to any collective bargaining agreements and is not aware of any efforts to unionize its employees. The Company considers its relations with its employees to be good. ITEM 2. PROPERTIES The Company leases its corporate offices which are located at 5000 Plaza on the Lake, Suite 250, Austin, Texas. The Company also owns numerous other Travis Boating Center locations. The remaining facilities are leased under leases with original lease terms generally ranging from five to ten years with additional multi-year renewal options. The Company typically pays a fixed rent and in substantially all of the leased locations the Company is responsible for the payment of taxes, insurance, repairs and maintenance. 14
The chart below reflects the status and approximate size of the various Travis Boating Center locations operated as of December 23, 1999. Building Land Owned or Year of Market Location Square Footage* Acreage* Leased Entry -------- --------------- -------- -------- --------------- AUSTIN, TEXAS(1)......................... 20,000 3.5 Owned 1979 SAN ANTONIO, TEXAS(1)(3)................. 15,500 1.9 Leased 1982 SAN ANTONIO, TEXAS(5).................... 6.5 Owned 1999 MIDLAND, TEXAS(1)........................ 18,750 3.8 Owned 1982 DALLAS, TEXAS(1)......................... 20,000 4.2 Owned 1983 ABILENE, TEXAS(2)........................ 24,250 3.7 Owned 1989 HOUSTON, TEXAS(2)........................ 15,100 3.0 Leased 1991 BATON ROUGE, LOUISIANA(2)................ 33,200 7.5 Owned 1992 BEAUMONT, TEXAS(2)....................... 25,500 6.5 Owned 1994 ARLINGTON, TEXAS(2)...................... 31,000 6.0 Leased 1995 HEBER SPRINGS, ARKANSAS(2)............... 26,000 9.0 Leased 1995 HOT SPRINGS, ARKANSAS(2)................. 20,510 3.0 Owned 1995 NEW IBERIA, LOUISIANA(4)................. 24,000 3.3 Leased 1995 FLORENCE, ALABAMA(2)..................... 22,500 6.0 Leased 1996 HUNTSVILLE, ALABAMA(3)................... 2,000 3.0 Leased 1996 WINCHESTER, TENNESSEE(2)................. 28,000 3.5 Leased 1996 METAIRIE, LOUISIANA(2)................... 30,000 3.5 Leased 1997 PASCAGOULA, MISSISSIPPI(2)............... 28,000 4.1 Owned 1997 KEY LARGO, FLORIDA(4).................... 3,000 1.4 Owned 1997 KEY LARGO, FLORIDA(3)(4)................. 3,000 1.4 Owned 1999 FT. WALTON BEACH FL. - SALES(4).......... 7,000 2.9 Leased 1997 FT. WALTON BEACH FL. - SALES(4).......... 7,000 2.9 Leased 1999 FT. WALTON BEACH FL. - SERVICE(4)........ 7,500 2.0 Leased 1997 HENDERSONVILLE, TENNESSEE(2)............. 31,320 3.6 Leased 1997 GWINNETT, GEORGIA(1)..................... 25,000 5.0 Owned 1998 CLAREMORE, OKLAHOMA(4)................... 15,000 2.0 Owned 1998 BOSSIER CITY, LOUISIANA(2)............... 30,000 8.6 Owned 1998 KNOXVILLE, TENNESSEE(4).................. 30,000 6.5 Leased 1998 LITTLE ROCK, ARKANSAS(4)................. 16,400 3.0 Owned 1999 PINE BLUFF, ARKANSAS(4).................. 16,812 2.9 Leased 1999 LONGWOOD, FLORIDA(4)..................... 10,000 3.1 Leased 1999 CLEARWATER, FLORIDA(4)................... 21,000 5.0 Owned 1999 CLEARWATER, FLORIDA(4)................... 9,000 3.7 Leased 1999 JACKSONVILLE, FLORIDA(4)................. 8,000 1.5 Leased 1999 MIAMI, FLORIDA(3)........................ 12,000 1.0 Leased 1999 BRADENTON, FLORIDA(4).................... 20,000 5.0 Leased 1999 ENGLEWOOD, FLORIDA(4).................... 3,000 4.5 Leased 1999 MEMPHIS, TENNESSEE(2).................... 24,000 4.3 Leased 1999 PICKWICK DAM, TENNESSEE(2)............... 48,000 5.0 Leased 1999 FT. MYERS, FLORIDA(4).................... 6,000 4.0 Leased 1999 - -------------------------- * Square footage and acreage are approximate. (1) Newly constructed store. (2) Facility acquired/leased and converted to superstore. (3) Temporary facility. To be relocated. (4) Acquired/leased facility (5) Raw land. Superstore under construction.
15 ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings. The Company is, however, involved in various legal proceedings arising out of its operations in the ordinary course of business. The Company believes that the outcome of all such proceedings, even if determined adversely, would not have a material adverse effect on its business, financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders of the Company during the fourth quarter of the fiscal year ended September 30, 1999. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock trades on the Nasdaq Stock Market under the symbol: TRVS. As of December 23, 1999, the Company believes its shares are beneficially owned by more than 400 shareholders. On December 23, 1999, the last reported sales price of the common stock on the NASDAQ National Market System was $10.25 per share. The following table sets forth for the period indicated, on a per share basis, the range of high and low sales prices for the Company's common stock during fiscal years 1999 and 1998 as quoted by the NASDAQ. These price quotations reflect inter-dealer prices, without adjustment for retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions:
Fiscal 1999 Sales Price Fiscal 1998 Sales Price ----------------------- ----------------------- Quarter Ended High Low Ending High Low Ending ------------- ---- --- ------ ---- --- ------ December 31.................... $20.50 $12.25 $20.50 $24.125 $18.75 $24.125 March 31....................... $23.00 $16.50 $18.00 $26.75 $22.375 $26.625 June 30........................ $18.00 $14.00 $14.50 $29.125 $24.50 $24.50 September 30................... $16.25 $ 9.625 $ 9.625 $26.875 $15.00 $15.50
The Company has never declared or paid cash dividends on its Common Stock and presently has no plans to do so. Any change in the Company's dividend policy will be at the sole discretion of the Board of Directors and will depend on the Company's profitability, financial condition, capital needs, future loan covenants, general economic conditions, future prospects and other factors deemed relevant by the Board of Directors. The Company currently intends to retain earnings for use in the operation and expansion of the Company's business and does not anticipate paying cash dividends in the foreseeable future. Certain covenants contained in the Company's loan agreements effectively restrict the payment of any dividends without the lender's prior consent. 16 ITEM 6. SELECTED FINANCIAL DATA The following selected consolidated financial information should be read in conjunction with and is qualified in its entirety by reference to the consolidated financial statements of the Company and the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this Report on Form 10-K:
FISCAL YEAR ENDED SEPTEMBER 30, 1995(1)(5) 1995(2) 1996(1)(5) 1997(1)(5) 1998(1)(5) 1999(1)(5) ---------- ------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT STORE AND SHARE DATA) Consolidated Statement of Operations Data: Net Sales....................... $ 41,442 $ 44,617 $ 64,555 $ 91,309 $ 131,740 $ 182,259 Gross Profit.................... 10,306 10,815 16,483 23,955 34,901 46,634 Selling, general and Administrative Expense.......... 6,353 7,526 10,857 15,562 22,630 30,978 Operating income............... 3,736 3,004 5,061 7,480 11,011 13,689 Interest expense............... 670 845 1,289 1,354 2,310 3,808 Net income..................... 2,050 1,486 2,383 3,982 5,563 6,573 Basic earnings per share....... $ 0.76 $ 0.55 $ 0.78 $ 0.96 $ 1.31 $ 1.53 Diluted earnings per share..... $ 0.76 $ 0.55 $ 0.78 $ 0.94 $ 1.26 $ 1.49 Weighted avg. common Shares outstanding - basic..... 2,672 2,663 3,043 4,137 4,250 4,291 Weighted avg. common Shares outstanding - diluted... 2,672 2,663 3,043 4,252 4,417 4,409 Store Data: Stores open at period end...... 11 11 12 19 24 38 Average sales per store (6).... $ 4,886 $ 5,283 $ 5,617 $ 5,775 $ 6,383 $ 6,055 Percentage increase in Comparable store sales(4)..... 5.0% 12.2% 4.3% 5.7% 6.6% 1.9%
FISCAL YEAR ENDED SEPTEMBER 30, 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- (In Thousands) Consolidated Balance Sheet Data: Cash and cash equivalents............... $ 996 $ 1,533 $ 5,816 $ 4,618 $ 4,125 Working capital......................... 2,808 15,263 14,806 16,392 12,117 Total assets............................ 23,357 31,350 59,121 69,116 125,931 Short-term debt, including current maturities of long-term debt......... 11,443 4,661 21,447 26,105 69,547 Long-term debt less current maturities.. 4,876 4,334 5,145 4,980 6,897 Shareholders' equity.................... 4,812 18,598 24,058 30,433 37,592 - --------------------- (1) The Company's fiscal years ended on December 31 in 1994, and on September 30 in 1995, pursuant to a change adopted in 1995, resulting in a nine-month 1995 fiscal year. The Consolidated Statement of Operations Data for the fiscal years ended September 30, 1995, 1996, 1997, 1998 and 1999 has been derived from the audited consolidated financial statements of the Company. All other financial and store data has been derived from the Company's unaudited consolidated financial statements. (2) Reflects inclusion of nine-month audited financial statements for the fiscal year ended September 30, 1995 and the three-month unaudited financial statements for the quarter ended December 31, 1994, in order to provide a basis for comparing 12 months of operations in 1995 to fiscal 1996 operations. (3) Includes only those stores open for the entire preceding 12-month period. (4) New stores or upgraded facilities are included in the comparable store base at the beginning of the store's thirteenth complete month of operations. (5) Includes the operations of acquired store locations from each respective date of acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT ON FORM 10-K. THE DISCUSSION IN THIS SECTION OF THIS REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THIS SECTION, THOSE DISCUSSED IN "RISK FACTORS" AND THOSE DISCUSSED ELSEWHERE IN THIS REPORT ON FORM 10-K. Overview The following discussion compares fiscal years 1999 and 1998, which reflects the inclusion of the audited consolidated financial statements for the fiscal years ended September 30, 1999 and 1998, respectively. The results of the acquisitions listed in the chart below, from their respective dates of acquisition, are included in the discussion below of the fiscal year in which such acquisition occurred.
A summary of the Company's acquisitions follows: Non-compete Date of Purchase Tangible Agreements Cash Liabilities Notes Stock Name of Company Acquisition Price Net Assets and Goodwill Paid Assumed Issued Issued --------------- ----------- -------- ---------- ------------ ---- ----------- ------ ------ (In Thousands) FISCAL 1999 - ----------- AMLIN, INC. DBA MAGIC 01/99 $1,639 $6,019 $1,090 $1,639 $5,470 $----- $----- MARINE SPORTSMAN'S HAVEN 01/99 1,748 2,624 514 1,098 1,390 650 --- PIER 68 MARINA 02/99 738 2,218 562 408 2,043 329 --- DSA MARINE SALES & 04/99 2,147 4,798 1,597 2,147 4,248 --- --- SERVICE DBA THE BOATWORKS SHELBY MARINE, INC. 06/99 1,334 3,426 1,050 809 3,142 --- 525 THE NEW 3 SEAS, INC. 09/99 1,103 1,419 1,100 0 1,416 1,103 --- FISCAL 1998 - ----------- SOUTHEASTERN MARINE 11/97 $1,730 $1,390 $ 280 $1,606 $ - $ 124 $ - WORTHEN MARINE 12/97 287 142 145 287 - - - HNR MARINE 04/98 359 359 - 359 - - - MOORE'S MARINE 05/98 777 376 401 777 - - - RODGERS MARINE 09/98 677 2,093 350 327 1,766 - 350 FISCAL 1997 - ----------- NORTH ALABAMA WATERSPORTS 10/96 892 687 205 812 - 80 - TRI-LAKES MARINE 11/96 1,243 1,892 644 643 1,937 600 - BENT'S MARINE 02/97 1,519 840 679 1,064 - 455 - MCLEOD MARINE 08/97 958 730 228 958 - - - ADVENTURE MARINE 09/97 3,023 5,536 2,690 1,430 5,203 115 1,478
The following table sets forth for the periods indicated certain financial data as a percentage of net sales:
FISCAL YEAR ENDED SEPTEMBER 30, 1996 1997 1998 1999 ---- ---- ---- ---- NET SALES 100.0% 100.0% 100.0% 100.0% COSTS OF GOODS SOLD 74.5 73.8 73.5 74.4 ----- ----- ----- ----- GROSS PROFIT 25.5 26.2 26.5 25.6 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 16.8 17.0 17.2 17.0 OPERATING INCOME 7.8 8.2 8.4 7.5 INTEREST EXPENSE 2.0 1.5 1.8 2.1 OTHER INCOME 0.0 0.0 0.1 0.3 ----- ----- ----- ----- INCOME BEFORE INCOME TAXES 5.9 6.7 6.7 5.7 INCOME TAX EXPENSE 2.2 2.3 2.5 2.1 ----- ----- ----- ----- NET INCOME 3.7% 4.4% 4.2% 3.6% ===== ===== ===== =====
18 RESULTS OF OPERATIONS FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 Highlights Fiscal year 1999 was a record year for the Company, which included the following achievements compared to fiscal 1998: * Net sales increased 38.4% to $182.3 million. * Net income increased by 18.1% to $6.6 million from $5.6 million. * Diluted earnings per share increased by 18.3% to $1.49 from $1.26. Net sales. Net sales increased by 38.4% to $182.3 million in fiscal 1999 from $131.7 million in fiscal 1998. The primary component of the increase in net sales during the 1999 and 1998 fiscal years has been the result of newly-opened or acquired store locations. Accordingly, of the fiscal 1999 increase in net sales, $39.7 million, or 78.5%, is related to the 14 store locations that were newly opened or acquired. The Company also benefited from growth in comparable store sales. During fiscal year 1999, comparable store sales increased by 1.9%, or $1.5 million, (14 stores in base) versus 6.6%, or $3.7 million, (9 stores in base) during fiscal 1998. See "Risk Factors - Our Growth Depends on Our Ability to Acquire and Open New Stores." Growth in overall sales volume resulted, in part, from additional new Travis Edition boating packages introduced during fiscal 1999 and 1998. These new additions included the Pro-Line and Polar brand boats in 1998 and Wellcraft, Bayliner and Fishmaster boat models in fiscal 1999, as well as Mercury Motors in November 1999. During fiscal 1999, the Company experienced increased parts/accessories and service labor sales of 38% and 45%, respectively, primarily through an increased store network. Parts/accessory sales increased to $15.6 million, or 8.6% of net sales, from $11.3 million, or 8.6% of net sales, in fiscal years 1999 and 1998, respectively. Service labor sales increased to $6.9 million, or 3.8% of net sales, from $4.7 million, or 3.6% of net sales, in fiscal years 1999 and 1998, respectively. Net sales also benefited from increased used boat sales in both dollars and as a percentage of sales. Used boat sales increased by 52.5% to $11.1 million (6.1% of total sales) in fiscal 1999, from $7.3 million (5.5% of total sales) in fiscal 1998. The Company plans to continue to explore the used boat market and potential sites for used boat superstores and brokerage facilities. Net sales from comparable stores in fiscal 1999 and 1998, which had 14 and 9 stores respectively, included in the base for calculation, increased by 1.9% and 6.6% in fiscal 1999 and 1998, respectively. The Company relocated or renovated three stores and opened or acquired an additional 12 stores during fiscal years 1999 and 1998 rendering such locations to be excluded from the comparable store base. The Company's planned acquisition strategy and subsequent renovation of stores to superstore standards is expected to continue to negatively impact the number of stores includable in comparable store base calculations in relationship to the total number of store locations operated. See "Risk Factors--Our Growth Depends on Our Ability to Acquire and Open New Stores." As such, comparable store performance is expected to remain unstable until higher percentages of the Company's stores are includable in comparable store calculations. 19 Included within net sales is revenue that the Company earns related to F&I Products. The Company, through relationships with various national and local lenders, is able to place financing for its customers' boating purchases. These lenders allow the Company to "sell" the loan at a rate higher than a minimum rate established by each such lender, and the Company earns fees based on the percentage increase in the loan rate over the lender's minimum rate. The Company sells these loans without recourse, except that in certain instances the Company must return the fees earned if the customer repays the loan or defaults in the first 120-180 days. The Company also sells, as a broker, certain types of insurance (property/casualty, credit life, disability) and extended service contracts. The Company may also sell these products at amounts over a minimum established cost and earn income based upon the profit over the minimum established cost. Net sales attributable to F&I Products increased by 9.2% to approximately $7.8 million in fiscal 1999 from $7.1 million in fiscal 1998, In fiscal 1999, F&I income as a percentage of net sales decreased from 5.4% in fiscal 1998 to 4.3% in fiscal 1999 due to competitive pressures on finance rates (which resulted in lower net spreads achieved in the placement of customer financing), as well as overall decreases in the percentage of customers buying these products (which is referred to as "sell-through"), and a reduced demand in certain insurance products. Gross profit. Gross profit increased by 33.6% to approximately $46.6 million in fiscal 1999 from $34.9 million in fiscal 1998. Gross profit as a percent of sales decreased to 25.6% in fiscal 1999 from 26.5% in fiscal 1998. The Company generally seeks to maintain a gross profit margin of 21% to 23% on its boating packages and is able to further leverage the margin through sales of parts/accessories, service labor and F&I Products, all of which generally produce gross profit margins in excess of 25%. During fiscal 1999, the Company's gross profit margin was negatively impacted by a temporary reduced revenue mix in its boating package margins as a result of acquisition boat inventory that liquidated at below Company standard margins, thus, driving the Company's new boating package margins down to 20.7% and used margins down to 13.4% (Company standard of 18-20%). This, combined with the 110 basis point reduction in high yielding F&I income, as a percentage of net sales, caused the 90 basis point drop in gross profit margin as a percentage of sales. Net sales attributable to F&I Products, which have a significant impact on the gross profit margin, contributed $7.8 million, or 16.7%, of total gross profit in fiscal 1999, as compared to $7.1 million, or 20.3%, of total gross profit for fiscal 1998. Net sales attributable to F&I Products are reported on a net basis and therefore all of such sales contribute directly to the Company's gross profit. The costs associated with the sale of F&I Products are included in selling, general and administrative expenses. Selling, general and administrative expenses. Selling, general and administrative expenses increased by 36.9% to $31.0 million in fiscal 1999 from $22.6 million for fiscal 1998. Selling, general and administrative expenses as a percent of net sales decreased by 18 basis points to 17.00% in fiscal 1999 from 17.18% for fiscal 1998. In absolute dollars, the increase in selling, general and administrative expenses was primarily attributable to increased expenses associated with the operation of a larger store network, growth in the corporate-office staffing infrastructure and increased advertising and insurance costs associated with introducing Travis stores into new geographically diverse regions. Interest expense. Interest expense, in absolute dollars, increased by 64.9% to $3.8 million in fiscal 1999 from $2.3 million in fiscal 1998. Interest expense as a percent of net sales, increased to 2.1% in fiscal 1999 from 1.8% in fiscal 1998. 20 Subsequent to the Company's Initial Public Offering in June of 1996, capital expenditures and growth in operating assets (primarily inventory) have been financed with borrowings from various commercial banks and finance companies. The growth in assets is the result of the Company's larger store network, continued implementation of its management information system and its planned renovation of store locations to conform with its superstore standards. The higher debt levels have resulted in the increase in interest expense in actual dollars and as a percentage of sales in fiscal years 1999 and 1998. The Company anticipates continuing to utilize bank financing to support the growth in assets necessary to operate a larger store network and accordingly, the resulting increases in interest expense associated with such borrowings. See "Risk Factors--Our Substantial Indebtedness Could Restrict Our Operations and Make Us More Vulnerable to Adverse Economic Conditions" and "Quantitative and Qualitative Disclosures About Market Risk." Net income. Net income increased by 18.1% to approximately $6.6 million in fiscal 1999 from $5.6 million in fiscal 1998. While the Company continued to benefit from increased sales and controlled SG&A expenses in fiscal 1999, reduced margins, as a percentage of sales, and the increase in interest expense both in actual dollars and as a percent of net sales resulted in net income as a percent of sales decreasing to 3.6% from 4.2% during the same periods. Net income attributable to F&I Products increased by 9.2% to approximately $1.24 million (18.8% of net income) in fiscal 1999 from $1.13 million (20.3% of net income) in fiscal 1998. The calculation of net income attributable to F&I Products is based on an allocation of gross profit after adjusting for costs which management believes are directly allocable to F&I Products. FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO THE FISCAL YEAR ENDED SEPTEMBER 30, 1997 Net sales. Net sales increased by 44.3% to $131.7 million in fiscal 1998 from $91.3 million in fiscal 1997. The primary component of the increase in net sales during the 1998 and 1997 fiscal years has been the result of newly opened or acquired store locations. Accordingly, of the increase in net sales, $36.6 million, or 90.6% is related to the store locations that were (i) newly opened or acquired (12), or (ii) those relocated or renovated (3) to meet the Company's superstore standards during fiscal 1998 or 1997. The Company also benefited from growth in comparable store sales. During fiscal year 1998, comparable store sales increased by 6.6%, or $3.7 million, (9 stores in base) versus 5.7%, or $2.1 million, (6 stores in base) during fiscal 1997. See "Risk Factors-Our Success Will Depend on How Well We Manage Our Growth." Growth in overall sales volume was also in part the result of additional new Travis Edition boating packages introduced during fiscal 1998 and 1997. This included the new addition of the Pro- Line and Polar brand boats as well as new boat models introduced by the Company's existing boat manufacturers. These additional new Travis Edition boat lines have allowed the Company to further broaden its boat line-up in an effort to continue to address the needs and desires of the recreational boating population. During fiscal 1998, the Company experienced increased parts/accessories and service labor sales as an increased percentage of the Company's store base was relocated or renovated to superstore standards which provide larger and more accessible areas to merchandise its product selection and conduct repair work on boats. This resulted in enhanced sales of parts/accessories and service labor both in actual dollars and as a percentage of net sales. Parts/accessory sales increased to $11.3 million, or 8.6% of net sales, from $8.6 million, or 9.4% of net sales, in fiscal years 1998 and 1997, respectively. Service labor sales increased to $4.7 million, or 3.6% of net sales, from $3.3 million, or 3.6% of net sales, in fiscal years 1998 and 1997, respectively. Net sales also benefited from used boat sales including those used boat sales from the Company's used boat superstores located at its Beaumont, Texas and Heber Springs, Arkansas store locations. The used boat sales in fiscal 1998 and fiscal 1997, were approximately $7.3 million and $4.0 million, respectively. The Company plans to continue to explore the used boat market and potential sites for used boat superstores. Net sales from comparable stores, which had 9 stores included in the base for calculation, increased by 6.6% and 5.7% in fiscal year 1998 and 1997, respectively. The Company relocated or renovated 3 stores and opened or acquired an additional twelve stores during fiscal years 1998 and 1997 rendering such locations to be excluded from the comparable store base. The Company's planned acquisition strategy and subsequent renovation of stores to superstore standards is expected to continue to 21 negatively impact the number of stores includable in comparable store base calculations in relationship to the total number of store locations operated. See "Risk Factors--Our Growth Depends on Our Ability to Acquire and Open New Stores." As such, comparable store performance is expected to remain unstable until higher percentages of the Company's stores are includable in comparable store calculations. Included within net sales is revenue that the Company earns related to F&I Products. The Company, through relationships with various national and local lenders, is able to place financing for its customers' boating purchases. These lenders allow the Company to "sell" the loan at a rate higher than a minimum rate established by each such lender and the Company earns fees based on the percentage increase in the loan rate over the lender's minimum rate. The Company sells these loans without recourse except that in certain instances the Company must return the fees earned if the customer repays the loan or defaults in the first 120-180 days. The Company also sells, as a broker, certain types of insurance (property/casualty, credit life, disability) and extended service contracts. The Company may also sell these products at amounts over a minimum established cost and earn income based upon the profit over the minimum established cost. Net sales attributable to F&I Products increased by 78.2% to approximately $7.1 million in fiscal 1998 from $4.0 million in fiscal 1997. This improvement was primarily due to higher net spreads achieved in the placement of customer financing, as well as overall increases in the percentage of customers buying these products (which is referred to as "sell-through"). This increase was enhanced by the Company's continued emphasis on training of F&I employees and achievement of established goals. See "Risk Factors--Much of Our Income Is from Financing, Insurance and Extended Service Contracts, Which is Dependent on Third Party Lenders and Insurance Companies." Gross profit. Gross profit increased by 45.7% to approximately $34.9 million in fiscal 1998 from $24.0 million in fiscal 1997. Gross profit as a percent of sales increased to 26.5% in fiscal 1998 from 26.2% in fiscal 1997. The Company generally seeks to maintain a gross profit margin of 21% to 23% on its boating packages and is able to further leverage the margin through sales of parts/accessories, service labor and F&I Products, all of which generally produce gross profit margins in excess of 25%. During fiscal 1998, the Company's gross profit margin was positively impacted by the increased revenues derived from the parts/accessory, service labor and used boat sales as discussed above in Net Sales. Net sales attributable to F&I Products, which have a significant impact on the gross profit margin, contributed $7.1 million, or 20.3%, of total gross profit in fiscal 1998, as compared to $4.0 million, or 16.6%, of total gross profit for fiscal 1997. Net sales attributable to F&I Products are reported on a net basis and therefore all of such sales contribute directly to the Company's gross profit. The costs associated with the sale of F&I Products are included in selling, general and administrative expenses. 22 Selling, general and administrative expenses. Selling, general and administrative expenses increased by 45.4% to $22.6 million in fiscal 1998 from $15.6 million for fiscal 1997. Selling, general and administrative expenses as a percent of net sales increased by 14 basis points to 17.18% in fiscal 1998 from 17.04% for fiscal 1997. In absolute dollars and as a percentage of net sales, the increase in selling, general and administrative expenses was primarily attributable to increased expenses associated with the operation of a larger store network, growth in the corporate-office staffing infrastructure and increased insurance costs associated with introducing Travis stores into new geographically diverse regions. Rental expense also increased as a percent of net sales as the Company expanded and relocated its Corporate headquarters, which had previously been located in the Austin, Texas superstore facility, in June 1997. Interest expense. Interest expense, in absolute dollars, increased by 70.6% to $23 million in fiscal 1998 from $1.4 million in fiscal 1997. Interest expense as a percent of net sales, increased to 1.8% in fiscal 1998 from 1.5% in fiscal 1997. Subsequent to the Company's Initial Public Offering in June of 1996, capital expenditures and growth in operating assets (primarily inventory) have been financed with borrowings from various commercial banks and finance companies. The growth in assets is the result of the Company's larger store network, continued implementation of its management information system and its planned renovation of store locations to conform with its superstore standards. The higher debt levels have resulted in the increase in interest expense in actual dollars and as a percentage of sales in fiscal years 1999 and 1998. The Company anticipates continuing to utilize bank financing to support the growth in assets necessary to operate a larger store network and accordingly, the resulting increases in interest expense associated with such borrowings. See "Risk Factors--Our Substantial Indebtedness Could Restrict Our Operations and Make Us More Vulnerable to Adverse Economic Conditions" and "Quantitative and Qualitative Disclosures About Market Risk." Net income. Net income increased by 39.7% to approximately $5.6 million in fiscal 1998 from $4.0 million in fiscal 1997. While the Company continued to benefit from enhanced gross profit margins in fiscal 1998, the increase in interest expense both in actual dollars and as a percent of net sales resulted in net income as a percent of sales decreasing to 4.2% from 4.4% during the same periods. Net income attributable to F&I Products increased by 33.3% to approximately $1.6 million in fiscal 1998 from $1.2 million in fiscal 1997. The calculation of net income attributable to F&I Products is based on an allocation of gross profit after adjusting for costs which management believes are directly allocable to F&I Products. Quarterly Data and Seasonality The following table sets forth certain unaudited quarterly financial data for each of the Company's last eight quarters and such data expressed as a percentage of the Company's net sales for the respective quarters. The information has been derived from unaudited financial statements that, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such quarterly information. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period. 23
QUARTER ENDED ------------------------------------------------------------ Fiscal Year 1998 Fiscal Year 1999 ---------------- ---------------- DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 ------- -------- ------- -------- ------- -------- ------- -------- (IN THOUSANDS) NET SALES................... $10,142 $33,427 $55,699 $32,472 $12,097 $43,965 $74,890 $51,307 GROSS PROFIT................ 2,611 9,104 14,185 9,001 2,941 11,359 18,909 13,425 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.. 3,694 5,294 7,941 5,701 4,505 7,252 10,129 9,092 OPERATING INCOME (LOSS)..... (1,416) 3,464 5,896 3,067 (1,979) 3,703 8,202 3,763 INTEREST EXPENSE............ 461 578 649 622 555 948 1,170 1,135 NET INCOME (LOSS)........... (1,156) 1,798 3,267 1,654 (1,600) 1,777 4,459 1,936 BASIC EARNINGS (LOSS) PER SHARE.................... (.27) .42 .77 .39 (.37) .41 1.04 .45 DILUTED EARNINGS (LOSS) PER SHARE.................... (.27) .41 .74 .38 (.37) .40 1.01 .44 WTD. AVG. COMMON SHARES OUTSTANDING - BASIC...... 4,225 4,254 4,255 4,260 4,286 4,288 4,290 4,300 WTD. AVG. COMMON SHARES OUTSTANDING - DILUTED.... 4,225 4,423 4,439 4,409 4,286 4,430 4,402 4,391 AS A PERCENTAGE OF NET SALES ----------------------------------------------------------------------------- NET SALES................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ------ ------ ------ ------ ------ ------ ------ ------ GROSS PROFIT................ 25.7 27.2 25.5 27.7 24.3 25.8 25.3 26.2 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.. 36.4 15.8 14.3 17.6 37.2 16.5 13.5 17.7 OPERATING INCOME (LOSS)..... (14.0) 10.4 10.6 9.5 (16.4) 8.4 11.0 7.3 INTEREST EXPENSE............ 4.5 1.7 1.2 1.9 4.6 2.2 1.6 2.2 NET INCOME (LOSS)........... (11.4) 5.4 5.9 5.1 (13.2) 4.0 6.0 3.8
The Company's business, as well as the sales demand for various types of boats, tends to be highly seasonal. Strong sales typically begin in January with the onset of the public boat and recreation shows, and continue through July. Over the previous three-year period, the average annual net sales for the quarterly periods ended March 31 and June 30 represented approximately 27% and 41%, respectively, of the Company's annual net sales. With regard to net income, the Company historically generates profits in three of its fiscal quarters and experiences operating losses in the quarter ended December 31 due to a broad seasonal slowdown in sales. During the quarter ended September 30, inventory typically reaches its lowest levels and accumulated cash reserves reach the highest levels. During the quarter ended December 31, the Company generally builds inventory levels in preparation for the upcoming selling season which begins with boat and recreation shows occurring during January through March in certain market areas in which the Company conducts business. Travis Boats' operating results would be materially and adversely affected if net sales were to fall significantly below historical levels during the months of January through June. 24 The Company's business is also significantly affected by weather patterns. Weather conditions that are unseasonable or unusual may adversely affect the Company's results of operations. For example, drought conditions or merely reduced rainfall levels, as well as excessive rain, may affect the Company's sale of boating packages and related products and accessories. See "Risk Factors -We Depend on Strong Sales in the First Half of the Year" and "Our Sales Depend on Good Weather." Quarterly results may fluctuate as a result of the expenses associated with new store openings or acquisitions. The Company, prior to fiscal 1997, had attempted to concentrate expansion during the seasonal slowdown generally occurring in the quarter ending December 31. During fiscal 1997, the Company modified its acquisition strategy to acquire store locations through-out the fiscal year. This was done to allow the Company the opportunity to derive in-season sales from the acquisitions as well as to provide a longer period in which to integrate the acquired store's operations. Accordingly, the results for any quarterly period may not be indicative of the expected results for any other quarterly period. Liquidity and Capital Resources The Company's short-term cash needs are primarily for working capital to support operations, including inventory requirements, off-season liquidity and store expansion. These short-term cash needs have historically been financed with cash from operations and borrowings under the Company's floor plan and revolving credit lines (collectively the "credit facilities"). At September 30, 1999, the Company had working capital of $12.1 million, including $4.1 million in cash, $12.4 million in accounts receivable (primarily contracts in transit from sales) and $75.7 million in inventories, offset by approximately $6.8 million of accounts payable and accrued liabilities, $35.4 million outstanding under floor plan lines of credit, approximately $33.2 million under revolving lines of credit and $6.8 million in other current liabilities and short-term indebtedness including current maturities of long-term debt. Contracts in transit are amounts receivable from a customer or a customer's financial institution related to that customer's purchase of a boat. As of September 30, 1999, the aggregate maximum borrowing limits under floor plan and revolving lines of credit were approximately $54.0 million and $55.0 million, respectively. In fiscal 1998, operating activities generated cash flows of $2.9 million due primarily to increased net profits, controlled inventory growth and proceeds received on unearned manufacturer rebate revenues. Management believes that store inventory levels at September 30, 1998 were below standard stocking levels as the Company was in the process of contract discussions with its primary outboard motor supplier, Outboard Marine Corporation. The Company was also in discussions with a new alternate outboard motor supplier, Mercury Marine. The Company could not order outboard motor powered boats until a determination of what type of outboard motor was to be placed on the boat. The Company agreed in principal to agreements with Outboard Marine Corporation and Mercury Marine in November of 1998 and the Company has since re-stocked its store locations to levels that management believes are historically appropriate. In fiscal 1999, operating activities utilized cash flows of $13.3 million due primarily to an increase of $18.0 million and $7.3 million in inventories and accounts receivable, respectively. These amounts were offset partially by net income, before depreciation and amortization, of $8.5 million, an increase in accrued liabilities of $667,000 and an increase in income tax payables of $3.2 million. Investing activities utilized cash flows of $13.8 million due primarily to the 14 new store locations, either newly opened or acquired in fiscal 1999, along with the construction of a new facility in Gwinnett County, Georgia. In addition, the Company purchased real estate in Clearwater, Florida (for the relocation of the St. Petersburg, Florida location), Key Largo, Florida and San Antonio, Texas (to take the place of the existing one). These activities were funded through the mix of the Company's revolving line of credit facility, with Bank of America (formerly NationsBank of Texas, N.A.) as agent, mortgage debt and internal cash. 25 Financing activities in fiscal 1999 provided $26.6 million of cash flows primarily from the net proceeds of borrowings under the Company's credit facilities. The Company has a $55.0 million revolving line of credit agented by Bank of America (formerly NationsBank of Texas, N.A.) This line of credit provides for borrowing pursuant to a borrowing formula based upon certain of the Company's inventory and accounts receivable. Collateral for this indebtedness consists of a security interest in specific inventories (and proceeds thereof), accounts receivable and contracts in transit. The line has a maturity on January 31, 2000 and pricing is at the Company's election of the prime rate minus 1.00% or on a LIBOR- based price structure. There is a fee on the unused portion assessed quarterly. A comprehensive loan agreement governs the line of credit. The agreement contains financial covenants regulating debt service coverages, tangible net worth, operating leverage and restrictions on dividends or distributions. As of December 15, 1998, $41.5 million was drawn on the revolving line and the Company could borrow an additional $13.5 million, of which approximately $5.4 million was immediately available for borrowing based upon the revolving line's borrowing formula. As the Company purchases inventory, the amount purchased increases the borrowing base availability and typically the Company makes a determination to borrow depending upon anticipated working capital requirements. The Company is presently out of compliance with one of the financial ratios of the current revolving line of credit; however, the Company has obtained written waivers from each of the lenders under the facility regarding this technical default. The Company, however, is currently in the process of refinancing and increasing this credit facility to provide for borrowings up to $125.0 million with several financial lenders, including certain lenders that currently provide a portion of the $55.0 million loan. This refinancing is expected to occur on or before February 1, 2000 and will not include the ratio that is out of compliance at the present time. Management believes the Company to be in compliance with all other terms and conditions of the current loan agreement and all proposed terms and conditions being set forth in the new refinanced line of credit. The Company also maintains floor plan lines of credit with various finance companies totaling approximately $54.0 million in credit limits, which generally have no stated maturity and utilize subsidies from manufacturers to provide for certain interest free periods each calendar year (usually August through at least May). Certain floor plan lines of credit with finance companies are governed by loan agreements containing financial covenants concerning, among others, minimum tangible net worth and leverage ratios. As of December 15, 1999, approximately $46.2 million was drawn under the floor plan lines. Management believes the Company is in compliance with the terms and conditions of these loan agreements. Merchandise inventories were $38.9 million and $75.7 million as of September 30, 1998 and September 30, 1999, respectively. Accounts receivable increased by approximately $7.5 million to $12.4 million at the end of fiscal 1999 from a year earlier. The receivables amount represents primarily contracts in transit generated from sales. Costs in excess of net assets acquired increased to by approximately $5.4 million to $11.6 million in fiscal 1999 due to the acquisitions during fiscal 1999 discussed previously in the section Overview. The Company had capital expenditures of approximately $7.7 million in fiscal 1999 and approximately $4.3 million in fiscal 1998. Capital expenditures during fiscal 1998 and 1999 included the acquisitions of the store locations discussed previously in the section Overview, the renovation of several facilities to the Company's superstore standards and expenditures related to the roll-out of the Company's management information systems in certain store locations. The Company also acquired real estate in San Antonio, Texas, Key Largo, Florida, Clearwater, Florida and is under the construction of a new superstore located in Gwinnett County, Georgia (relocating the Roswell, Georgia temporary store location). The fiscal 1998 and 1999 capital expenditures were primarily financed under the Company's credit facilities, mortgages and internal cash. The Company's proposed refinanced $125.0 revolving credit facility, which includes enhanced advance rates on new and used boat inventories and certain accounts receivable, existing floorplan lines of credit and internally generated working capital should be sufficient to meet the Company's cash requirements in the near future. 26 Disclosure of Year 2000 Issues and Consequences The Year 2000 Issue ("Y2K") is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations in the Company's point of sale, accounting and other financial operations which could cause disruptions of operations, including, among other things, could result in a temporary inability to process financial transactions, or engage in similar normal business or financial reporting activities. Similarly, material suppliers to the Company may be unable to produce or ship product in the ordinary course of their business operations. Based on recent system evaluations, surveys, and on-site inventories, the Company determined that it will be required to modify or replace minimal portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. As part of a previously planned company-wide upgrade to its accounting systems initiated in March of 1998, the Company has replaced its integrated accounting and point-of-sale management information system ("MIS"). The new MIS system is currently operating in all 38 store locations. The new MIS system was selected in part due to its ability to allow the Company increased efficiencies in its efforts to further centralize full financial and accounting operations. The Company has received assurances that new MIS system is a Y2K compliant system. The Company has one other key system that is not part of the integrated package. The Company contracts with Automatic Data Processing ("ADP") for payroll processing. ADP has provided the Company with separate software, which is used to administer the company-wide payroll. The Human Resources department of the Company has completed installation of a year 2000 compliant version that has been provided to the Company by ADP. A survey has been performed on all back office software packages. We have not seen any material date macros or other date related functions that would be materially affected by dates beyond December 31, 1999. Significant non-technical systems and equipment that may contain microcontrollers that are not Y2K compliant are being identified and have been addressed if deemed critical. This includes, but is not limited to, telephone systems, copiers, fax machines and point of sale credit card authorization terminals. The Company has utilized a written questionnaire specifically designed to query significant vendors, including but not limited to, boat suppliers, parts/accessory suppliers and wholesalers, and financial institutions. Certain of the companies queried have responded to questionnaires stating that their systems are Y2K compliant. The Company is monitoring the status of the questionnaire respondents that have indicated that Y2K compliance was not yet complete, but is anticipated to be complete during calendar year 1999. The Company has not received any questionnaires from companies that have expressed an inability or business related purpose that would render them unable to reach Y2K compliance. To date, the Company is not aware of any Y2K issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that significant vendors will be Y2K ready. The inability of vendors to complete their Y2K resolution process in a timely fashion could materially impact the Company. The effect of non-compliance by significant vendors is not determinable. While the Company believes its efforts will provide reasonable assurance that material disruptions will not occur due to internal failure, the possibility of interruption still exists. In the ordinary course of business, the Company has acquired a significant amount of Y2K compliant hardware and software. These purchases were part of specific operational and financial system enhancements with completion dates during late 1999 that were planned without specific regard to the Y2K issue. These system enhancements resolve many Y2K problems and have not been delayed as a result of any additional efforts to address the Y2K issue. The Company expects that Minimal costs will be associated with Y2K issue. The Company does not expect the Y2K cost of unforeseen hardware or software applications to exceed $100,000. 27 Management believes it has an effective program in place to resolve the Y2K issue. However, disruptions in the economy generally resulting from the Y2K issues could also result in a materially adverse affect to the Company. The Company currently has assigned three management level employees to further identify risks and carry out contingency plans in the event the Company, or its vendors, does not complete all phases of the Y2K program. New Accounting Standards In September 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Because of the Company's minimal use of derivative financial instruments, management does not anticipate that the adoption of SFAS No. 133 will have a material impact on the Company's consolidated results of operations, financial position or cash flows. In April 1998, the Accounting Standards Executive Committee issued Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. The SOP requires costs of start-up activities and organization costs to be expensed as incurred, and is effective for fiscal years beginning after December 15, 1998. The effects of adoption must be reported as a cumulative change in accounting principle. The Company expects that the impact of adoption will not be material to its financial position or results of operations. Inflation The Company believes that inflation generally has not had a material impact on its operations or liquidity to date. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At September 30, 1999, approximately 84.5% of the Company's notes payable and other short term obligations bear interest at variable rates, generally tied to a reference rate such as the prime rate of interest of certain banks. During the fiscal year ended September 30, 1999, the average rate of interest of such variable rates was 5.47%. Increases in the variable interest rates result in increased interest expense and decreased earnings and cashflow. Assuming the same level of borrowings for the year ended September 30, 1999, which averaged approximately $46,853,000, an increase of 2% in the average rate of interest would result in an increase in 1999 interest expense of approximately $937,060 and a decrease in 1999 net income and after-tax cashflow of approximately $592,878. Similarly, a decrease in the average rate of interest would result in a decrease in interest expense and an increase in net income and after-tax cashflow. ITEM 8. FINANCIAL STATEMENTS For the financial statements and supplementary data required by this Item 8, see the Index to Consolidated Financial Statements and Schedules. 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS There is incorporated herein by reference that portion of the Company's proxy statement for the 2000 Annual Meeting of Shareholders which appears therein under the captions "Item 1: Election of Directors" and "Information Concerning Directors." ITEM 11. EXECUTIVE COMPENSATION There is incorporated in this Item 11 by reference that portion of the Company's definitive proxy statement for the 2000 Annual Meeting of Shareholders which appears under the caption "Executive Compensation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is incorporated in this Item 12 by reference that portion of the Company's definitive proxy statement for the 2000 Annual Meeting of Shareholders which appears under the caption "Securities Holdings of Principal Shareholders, Directors, Nominees and Officers." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is incorporated in this Item 13 by reference that portion of the Company's definitive proxy statement for the 2000 Annual Meeting of Shareholders which appears under the captions "Certain Relationships and Related Transactions" and "Compensation Committee Interlocks and Insider Participation." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS The following consolidated financial statements of the Company are included following the Index to Consolidated Financial Statements and Schedules on page F-1 of this Report. REPORT OF INDEPENDENT AUDITORS................. F-2 CONSOLIDATED BALANCE SHEETS.................... F-3 CONSOLIDATED STATEMENTS OF INCOME.............. F-5 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS.......... F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..... F-9 29 (A) 2. FINANCIAL STATEMENT SCHEDULES All schedules have been omitted because they are not applicable, not required under the instructions, or the information requested is set forth in the consolidated financial statements or related notes thereto. (A) 3. EXHIBITS The following Exhibits are incorporated by reference to the filing or are included following the Index to Exhibits. INDEX TO EXHIBITS (a) Exhibits: 3.1 --Restated Articles of Incorporation of the Registrant, as amended.(1) 3.2 --Restated Bylaws of the Registrant, as amended.(1) 10.2(a)[Intentionally left blank] 10.2(b)--Dealer Agreement dated as of October 13, 1995, between the Company and Outboard Marine Corporation.(1) 10.3 --[Intentionally left blank] 10.4 --Dealer Agreement dated as of August 17, 1995, between the Company and Mastercrafters Corporation.(1)(6) 10.5(a) --Inventory Security Agreement and Power of Attorney dated as of November 30, 1993, Between Bombardier Capital Inc. and the Company.(1) 10.5(b) --Inventory Security Agreement and Power of Attorney dated as of November 30, 1993, Between Bombardier Capital Inc. and Falcon Marine Abilene, Inc.(1) 10.6(a) --Agreement for Wholesale Financing dated as of August 17, 1995, by and among Deutsche Financial Services Corporation, the Company and its subsidiaries; and Amendment to Agreement for Wholesale Financing dated as of September 22, 1995.(1) 10.6(b) --Agreement for Wholesale Financing dated as of August 17, 1995, between Deutsche Financial Services Corporation and Travis Boats & Motors Baton Rouge, Inc.(1) 10.7(a) --Inventory Loan Agreement dated as of September 20, 1995, between TBC Arkansas, Inc. And Hibernia National Bank.(1) 10.7(b) --Commercial Security Agreement dated September 1, 1995, between TBC Arkansas, Inc. and Hibernia National Bank.(1) 10.8(a) --Inventory Loan Agreement dated as of December 17, 1992, between Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank; and First Amendment to Inventory Loan Agreement dated as of February 7, 1994.(1) 10.8(b) --Promissory Note dated May 30, 1995, in the original principal amount of $100,000, payable By Travis Boats & Motors Baton Rouge, Inc. to Hibernia National Bank.(1) 10.8(c) --Promissory Note dated May 30, 1995, in the original principal amount of $800,000, payable By Travis Boats & Motors Baton Rouge, Inc. to Hibernia National Bank.(1) 10.8(d) --Promissory Note dated July 14, 1995, in the original principal amount of $480,000, payable By Travis Boats & Motors Baton Rouge, Inc. to Hibernia National Bank.(1) 10.8(e) --Business Loan Agreement dated July 14, 1995, between Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.(1) 30 10.8(f) --Commercial Security Agreement dated July 14, 1995, between Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.(1) 10.8(g) --Collateral Mortgage dated July 14, 1995, from Travis Boats & Motors Baton Rouge, Inc. to Hibernia National Bank.(1) 10.8(h) --Assignment of Leases and Rents dated July 14, 1995, between Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.(1) 10.8(i) --Pledge of Collateral Mortgage Note dated July 14, 1995, from Travis Boats & Motors Baton Rouge, Inc. to Hibernia National Bank.(1) 10.9(a) --Promissory Note dated September 1, 1995, in the original principal amount of $3,000,000, Payable by TBC Arkansas, Inc. to Hibernia National Bank.(1) 10.9(b) --Commercial Guaranty dated September 1, 1995 by the Company in favor of Hibernia National Bank guarantying a $3,000,000 Promissory Note.(1) 10.9(c) --Promissory Note dated September 1, 1995, in the original principal amount of $250,000, Payable by TBC Arkansas to Hibernia National Bank.(1) 10.10(a) --Amended and Restated Loan Agreement dated as of September 15, 1995, by and among NationsBank of Texas, N.A., the Company and its subsidiaries.(1) 10.10(b) --Security Agreement dated July 31, 1995, by and among NationsBank of Texas, N.A., the Company and its subsidiaries.(1) 10.11--General Promissory Note dated August 31, 1995, in the original principal amount of $300,000, payable by the Company to Amerisure Property & Casualty, Ltd.(1) 10.12--General Promissory Note dated August 31, 1995, in the original principal amount of $100,000, payable by the Company to Capitol Commerce Reporter, Inc.(1) 10.13--General Promissory Note dated August 31, 1995, in the original principal amount of $75,000, payable by the Company to Capitol Commerce Reporter, Inc.(1) 10.14--General Promissory Note dated August 31, 1995, in the original principal amount of $50,000, payable by the Company to Joe Simpson and Pat Simpson.(1) 10.15--Asset Purchase Agreement dated as of September 20, 1995, by and among Red River Marine, Inc., Red River Marine, Inc. #2, and TBC Arkansas, Inc.(1) 10.16--Promissory Note dated September 20, 1995, in the original principal amount of $800,000, Payable by TBC Arkansas, Inc. to Benny Hargrove.(1) 10.17(a) --Promissory Note dated as of September 20, 1995, in the original principal amount of $462,145.53, payable by TBC Arkansas, Inc. to Red River Marine, Inc. #2.(1) 10.17(b) --Mortgage With Power of Sale (Realty) dated September 20, 1995, from TBC Arkansas, Inc. to Red River Marine, Inc. #2.(1) 10.18--Promissory Note dated September 20, 1995, in the original principal amount of $230,177.16, payable by TBC Arkansas, Inc. to Red River Marine, Inc. and Red River Marine, Inc. #2.(1) 10.19--Promissory Note dated September 20, 1995, in the original principal amount of $108,750, Payable by TBC Arkansas, Inc. to Red River Marine, Inc. and Red River Marine, Inc. #2.(1) 10.20 --Travis Boats and Motors, Inc. 1995 Incentive Plan.(1) 10.21--[Intentionally left blank] 10.22--Form of Option Agreement dated May 17, 1995, between the Company and Michael B. Perrine, Ronnie L. Spradling and Mark T. Walton.(1) 10.23--Form of Indemnification Agreement for Directors and Officers of the Company.(1) 10.24 --Management Agreement dated December 14, 1995, by and among TBC Management, Ltd., the Company and its subsidiaries.(1) 10.24--Management Agreement dated December 14, 1995 by and among TBC Management, Ltd., the Company and its subsidiaries.(1) 10.25 --[Intentionally left blank] 10.26(a) --First Lien Promissory Note dated September 15, 1995, in the original principal amount of $679,000, payable by Travis Snowden Marine, Inc. to NationsBank of Texas, N.A.(1) 10.26(c) --First Lien Deed of Trust, Assignment, Security Agreement and Financing Statement dated September 15, 1995, from Travis Snowden Marine, Inc. to Michael F. Hord, Trustee.(1) 31 10.27(a) --Second Modification and Extension Agreement dated April 26, 1994, between the Company and NationsBank of Texas, N.A.(1) 10.27(b) --"504" Note dated April 28, 1994, in the original principal amount of $454,000, payable by the Company to Cen-Tex Certified Development Corporation.(1) 10.27(c) --Deed of Trust, Assignment, Security Agreement and Financing Statement dated March 5, 1993, from the Company to Michael F. Hord, Trustee.(1) 10.27(d) --Deed of Trust dated April 28, 1994, from the Company to Wm. H. Harrison, Jr., Trustee.(1) 10.28 --Trust Agreement dated December 31, 1994, by and among Ideal Insurance Company, Ltd. and the Company.(1) 10.29(a) --Revolving Credit Agreement dated as of December 12, 1996, in the original principal Amount of $15,000,000 by and among the Company, its Subsidiaries and NationsBank of Texas, N.A. as agent.(2) 10.29(b) --Commercial Security Agreement dated as of December 12, 1996 by and among the Company, its Subsidiaries and NationsBank of Texas, N.A. as agent.(2) 10.29(c)--Promissory Note dated as of December 12, 1996 in and original principal amount of $9,000,000 among the Company, its subsidiaries and NationsBank of Texas, N.A., as agent.(2) 10.29(d) --Promissory Note dated as of December 12, 1996 in the original principal amount of $6,000,000 among the Company, its subsidiaries and NationsBank of Texas, N.A. as agent.(2) 10.30--Asset Purchase Agreement dated as of November 1, 1996 between Travis Boating Center Tennessee, Inc. and Tri-Lakes Marine, Inc.(2) 10.31--Asset Purchase Agreement dated as of November 1, 1996 between Travis Boating Center Alabama, Inc. and Tri-Lakes Marine, Inc.(2) 10.32--Asset Purchase Agreement dated as of February 19, 1997 between Travis Boating Center Louisiana, Inc. and Bent's Marine, Inc.(3) 10.33--Asset Purchase Agreement dated as of August 1, 1997 between Travis Boating Center Mississippi, Inc. and McLeod Marine, Inc.(4) 10.34--Stock Purchase Agreement dated as of September 30, 1997 among Travis Boating Center Florida, Inc. and Frederic D. Pace and John W. Reinhold providing for the purchase of 100% of the common stock of Adventure Boat Brokerage, Inc. (4) 10.35--Stock Purchase Agreement dated as of September 30, 1997 among Travis Boating Center Florida, Inc. and John W. Reinhold providing for the purchase of 100% of the common stock of Adventure Marine & Outdoors, Inc.(4) 10.36--Stock Purchase Agreement dated as of September 30, 1997 among Travis Boating Center Florida, Inc. and Frederic D. Pace and John W. Reinhold providing for the purchase of 100% of the common stock of Adventure Marine South, Inc.(4) 10.37--First Amendment to Revolving Credit Agreement dated as of October 31, 1997, in the original principal amount of $55,000,000 by and among the Company, its Subsidiaries and NationsBank of Texas, N.A. as agent.(4) 10.38--Asset Purchase Agreement dated as of November 20, 1997 between Travis Boating Center Tennessee, Inc. and Southeastern Marine Group, Inc.(4) 10.39--Travis Boats & Motors, Inc. 1995 Incentive Plan.(5) 10.40--Employment Agreement dated November 16, 1999 between TBC Management, Ltd. and Mark T. Walton. 10.41--Employment Agreement dated November 16, 1999 between TBC Management, Ltd. and Michael B. Perrine. 10.42--Employment Agreement dated November 16, 1999 between TBC Management, Ltd. and Ronald L. Spradling. 10.43--Wellcraft Master Dealer Agreement effective September 29. 1998 between the Company and Wellcraft Marine Corp. (6) 32 10.44--Aquasport Master Dealer Agreement effective September 29, 1998 between the Company and Aquasport, a division of Wellcraft Marine Corp. (6) 10.45--Outboard Marine Corporation Private Label/Retail Store Agreement dated November 13, 1998 between the Company and Outboard Marine Corporation.(6) 10.46--Product Supply Agreement dated June 29, 1999 between the Company, its subsidiaries and Mercury Marine, a division of Brunswick Corporation. (6) 10.47--Larson Master Dealer Agreement effective September 29, 1999 between the Company and Larson/Glastron Boats, Inc. (6) 16 --Letter re: change in certifying accountant(1) 21.1 --List of Subsidiaries of Registrant. 23.1 --Consent of Independent Auditors of Registrant, dated December 27, 1999. 23.2 --Consent of Independent Auditors, dated January 12, 2000. 27.1 --Financial Data Schedule (1) Incorporated by reference to the Company's Registration Statement on Form S-1 effective June 26, 1996 (File No. 333-03283). (2) Incorporated by reference to the Company's Annual Report on Form 10-K filed December 31, 1006 (File No. 000-20757) (3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed May 15, 1997 (File No. 000-20757). (4) Incorporated by reference to the Company's Annual Report on Form 10-K filed December 29, 1997 (File No. 000-20757). (5) Incorporated by reference to the Company Registration Statement on Form S-8 (File No. 333-41981). (6) Portions of this exhibit have been omitted and are subject to an application for confidential treatment filed separately with the Commission. No annual report or proxy material has been sent to security holders as of the date of this Form 10-K; however, the Company anticipates sending the annual report and proxy materials on or before any applicable deadlines. When such a report and proxy materials are furnished, the Registrant will furnish copies of such materials to the Commission. [THIS SPACE INTENTIONALLY LEFT BLANK] 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRAVIS BOATS & MOTORS, INC. Date: January 12, 2000 By: /s/ Mark T. Walton - ----------------------- ----------------------- Mark T. Walton Chairman of the Board And President POWER OF ATTORNEY TO SIGN AMENDMENTS KNOW ALL BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Mark T. Walton his true and lawful attorney-in-fact and agent for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to the Travis Boats & Motors, Inc. Annual Report on Form 10-K for the year ending September 30, 1999, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. This Power of Attorney has been signed below by the following persons in the capacities and on the dates indicated. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name Title Date Signed - ---- ----- ----------- /S/ MARK T. WALTON Chairman of the Board, President and January 12, 2000 - -------------------- Director (Principal Executive Officer) Mark T. Walton /S/ MICHAEL B. PERRINE Chief Financial Officer, Secretary and January 12, 2000 - ------------------------- Treasurer (Principal Financial and Michael B. Perrine Accounting Officer) /S/ RONNIE L. SPRADLING Executive Vice President-New Store January 12, 2000 - ------------------------ Ronnie L. Spradling Development Director Director January __, 2000 - ---------------------------- Steven W. Gurasich, Jr. _____________________ Director January __, 2000 Zach McClendon, Jr. /S/ ROBERT C. SIDDONS Director January 12, 2000 - ---------------------------- Robert C. Siddons /S/ JOSEPH E. SIMPSON Director January 12, 2000 - --------------------- Joseph E. Simpson
34 Travis Boats & Motors, Inc. and Subsidiaries Consolidated Financial Statements Years ended September 30, 1999, 1998 and 1997 CONTENTS Report of Independent Auditors...............................................F-2 Audited Consolidated Financial Statements Consolidated Balance Sheets..................................................F-3 Consolidated Statements of Income............................................F-5 Consolidated Statements of Stockholders' Equity..............................F-6 Consolidated Statements of Cash Flows........................................F-7 Notes to Consolidated Financial Statements...................................F-9 F-1 Report of Independent Auditors The Board of Directors Travis Boats & Motors, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Travis Boats & Motors, Inc. and Subsidiaries as of September 30, 1999 and 1998 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Travis Boats & Motors, Inc. and Subsidiaries as of September 30, 1999 and 1998 and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1999, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP ----------------------- December 8, 1999 Austin, Texas F-2
Travis Boats & Motors, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share data) SEPTEMBER 30, 1999 1998 ----------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 4,125 $ 4,618 Accounts receivable, net of allowance for doubtful accounts of $247 in 1999 and $0 in 1998 12,421 4,893 Prepaid expenses 1,177 1,045 Prepaid income taxes --- 425 Inventories 75,700 38,934 Deferred tax asset 136 180 ----------------- ------------------ Total current assets 93,559 50,095 Property and equipment: Land 5,819 3,516 Buildings and improvements 11,069 8,485 Furniture, fixtures and equipment 8,056 4,109 ----------------- ------------------ 24,944 16,110 Less accumulated depreciation (4,529) (3,417) ----------------- ------------------ 20,415 12,693 Deferred tax asset 121 96 Goodwill, net of accumulated amortization of $591 in 1999 and $290 in 1998 9,110 4,910 Noncompete agreements, net of accumulated amortization of $703 in 1999 and $396 in 1998 2,527 1,292 Other assets 199 30 ----------------- ------------------ Total assets $ 125,931 $ 69,116 ================= ================== F-3 SEPTEMBER 30, 1999 1998 ----------------- ------------------ LIABILITIES Current liabilities: Accounts payable $ 3,613 $ 1,697 Accrued liabilities 3,179 2,512 Amounts due for purchase of businesses 2,134 2,117 Income taxes payable 2,820 - Unearned revenue 149 1,272 Floor plan and revolving line of credit payable 68,558 25,148 Current portion of notes payable and other short-term obligations 989 957 Total current liabilities 81,442 33,703 Notes payable, less current 6,897 4,980 portion Stockholders' equity: Serial preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued or outstanding - - Common stock, $.01 par value, 50,000,000 shares authorized, 4,326,022 and 4,285,063 issued and outstanding at September 30, 1999 and 1998, respectively 43 43 Paid-in capital 14,402 13,816 Retained earnings 23,147 16,574 ----------------- ------------------ Total stockholders' equity 37,592 30,433 ----------------- ------------------ Total liabilities and stockholders' equity $ 125,931 $ 69,116 ================= ==================
See accompanying notes. F-4
Travis Boats & Motors, Inc. and Subsidiaries Consolidated Statements of Income (in thousands, except share data) Year ended September 30, 1999 1998 1997 -------------------------------------------------------- Net sales $ 182,259 $ 131,740 $ 91,309 Cost of sales 135,625 96,839 67,354 -------------------------------------------------------- Gross profit 46,634 34,901 23,955 Selling, general and administrative expenses 30,978 22,630 15,562 Depreciation and amortization 1,967 1,260 913 -------------------------------------------------------- 32,945 23,890 16,475 Operating income 13,689 11,011 7,480 Interest expense (3,808) (2,310) (1,354) Gain on sale of asset 457 --- --- Other income (expenses) 80 80 (12) --------------------------------------------------------- Income before income taxes 10,419 8,781 6,114 Income taxes 3,846 3,218 2,132 --------------------------------------------------------- Net income $ 6,573 $ 5,563 $ 3,982 Earnings per share: Basic $ 1.53 $ 1.31 $ .96 =================== =================== =================== Diluted $ 1.49 $ 1.26 $ .94 =================== =================== =================== See accompanying notes.
F-5
Travis Boats & Motors, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (in thousands) Common Stock ------------ Paid-in Retained Shares Amount Capital Earnings Total ------------------------------------------------------------------------ Balance at September 30, 1996 4,137 $41 $11,527 $ 7,029 $18,597 Issuance of common stock in purchase of business 88 1 1,477 - 1,478 Net income - - - 3,982 3,982 ------------------------------------------------------------------------ Balance at September 30, 1997 4,225 42 13,004 11,011 24,057 Issuance of common stock 40 1 462 - 463 Issuance of common stock in purchase of business 20 - 350 - 350 Net income - - - 5,563 5,563 ------------------------------------------------------------------------ Balance at September 30, 1998 4,285 43 13,816 16,574 30,433 Issuance of common stock 5 - 61 - 61 Issuance of common stock in purchase of business 36 - 525 - 525 Net income - - - 6,573 6,573 ------------------------------------------------------------------------ Balance at September 30, 1999 4,326 $43 $14,402 $23,147 $37,592 ------------------------------------------------------------------------
See accompanying notes. F-6
Travis Boats & Motors, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) Year ended September 30, 1999 1998 1997 -------------------------------------------------- OPERATING ACTIVITIES Net income $ 6,573 $ 5,563 $ 3,982 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 1,359 807 780 Amortization 608 453 133 Changes in operating assets and liabilities: Accounts receivable (7,315) (978) (1,995) Prepaid assets (132) (674) (244) Inventories (17,990) (416) (5,166) Other assets (123) 105 (18) Deferred tax asset 19 17 (92) Accounts payable 925 (570) 1,453 Accrued liabilities 667 (689) 884 Prepaid income taxes/ income tax payable 3,245 (1,506) 128 Unearned revenue (1,123) 750 (653) --------------------------------------------------- Net cash provided by (used in) operating activities (13,287) 2,862 (808) INVESTING ACTIVITIES Purchase of businesses (6,101) (4,522) (3,477) Purchase of property and equipment (7,725) (4,301) (2,256) Net cash used in investing activities (13,826) (8,823) (5,733) F-7 Travis Boats & Motors, Inc. and Subsidiaries Consolidated Statements of Cash Flows (continued) Year ended September 30, 1999 1998 1997 -------------------------------------------------- FINANCING ACTIVITIES Net increase (decrease) in notes payable and other short-term obligations $26,559 $4,300 $10,824 Net proceeds from issuance of common stock 61 463 - -------------------------------------------------- Net cash provided by financing activities 26,620 4,763 10,824 Change in cash and cash equivalents (493) (1,198) 4,283 Cash and cash equivalents, beginning of year 4,618 5,816 1,533 -------------------------------------------------- Cash and cash equivalents, end of year $ 4,125 $4,618 $ 5,816 ================================================== SUPPLEMENTAL DISCLOSURE OF DEBT AND STOCK ISSUED IN PURCHASE OF BUSINESSES - -------------------------------------------------------------------------- Year ended September 30, 1999 1998 1997 -------------------------------------------------- Debt issued in purchase of businesses $ 2,082 $ 124 $1,250 Stock issued in purchase of businesses 525 350 1,478 SEE ACCOMPANYING NOTES.
F-8 TRAVIS BOATS & MOTORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS AND CONSOLIDATION Travis Boats & Motors, Inc. (the "Company") based in Austin, Texas, is a retailer of boats, motors, trailers and related watersport accessories. The Company operates locations in the southern region of the United States. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. COMPREHENSIVE INCOME In September 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The adoption of SFAS No. 130 by the Company had no impact as the Company had no items of comprehensive income for all years presented. SEGMENTS Effective October 1, 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to stockholders. The adoption of SFAS No. 131 did not have a significant effect on the disclosure of segment information as the Company continues to consider its business activities to be in a single segment. REVENUE RECOGNITION The Company records revenue on sales of boats, motors, trailers, and related watersport parts and accessories upon delivery to or acceptance by the customer at the closing of the transaction. The Company records revenues from service operations at the time repair or service work is completed. The Company refers customers to various financial institutions to assist the customers in obtaining financing for their boat purchase. For each loan the financial institutions are able to fund as a result of the referral, the Company receives a fee. Revenue earned by the Company for financing referrals is recognized when the related boat sale is recognized. The fee amount is generally based on the loan amount and the term. Generally, the Company must return a portion of the fee amount received if the customer repays the loan or defaults on the loan within a period of up to 180 days from the initial loan date. The Company records such refunds, which are not significant, in the month in which they occur. F-9 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenues from insurance and extended service agreements are recorded at the time such agreements are executed which generally coincides with the date the boat, motor and trailer is delivered. Such revenues are not deferred and amortized over the life of the insurance or extended service agreement policies, because the Company sells such policies on behalf of third party vendors or administrators. At the time of sale, the Company records a fee for insurance and extended service agreements net of the related fee that is paid to the third-party vendors or administrators. Since its inception, the Company has incurred no additional costs related to insurance or extended service agreements beyond the fees paid to the third party vendors at the time of sale. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all investments with maturities of ninety days or less when purchased to be cash equivalents. ACCOUNTS RECEIVABLE Accounts receivable potentially expose the Company to concentrations of credit risk, as defined by the Statement of Financial Accounting Standards No. 105, Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk. Accounts receivable consist primarily of amounts due from financial institutions upon sales contract funding and amounts due from vendors under rebate programs. The accounts receivable balances consisted of the following as of September 30, 1999 and 1998 (in thousands): 1999 1998 ------------ -------------- Trade receivables............... $ 7,793 $3,708 Amounts due from manufacturers.. 4,593 1,139 Other receivables............... 282 46 Allowance for doubtful accounts. (247) 0 ------------- --------------- $12,421 $4,893 ============= =============== Activity in the Company's allowance for doubtful accounts is as follows (in thousands): Balance at September 30, 1996.......... $ -0- Additions charged to costs and expenses.................. -0- Write-offs of uncollectible accounts...................... -0- --------------------------------------- Balance at September 30, 1997.......... -0- Additions charged to costs and expenses.................. -0- Write-offs of uncollectible accounts...................... -0- --------------------------------------- Balance at September 30, 1998.......... -0- Additions charged to costs and expenses.................. 247 Write-offs of uncollectible accounts...................... -0- --------------------------------------- Balance at September 30, 1999.......... $ 247 === F-10 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES Inventories consist of boats, motors, trailers and related watersport parts and accessories. Inventories are carried at the lower of cost or market. Cost for boats, motors and trailers is determined using the specific identification method. Cost for parts and accessories is determined using the first-in, first-out method. Inventories consisted of the following as of September 30, 1999 and 1998 (in thousands): 1999 1998 ------------ ----------- New boats, motors and trailers........ $63,874 $32,089 Used boats, motors, and trailers...... 4,932 2,559 Parts, accessories and other.......... 7,273 4,559 Valuation allowance................... (379) (273) ------------ ------------ $75,700 $38,934 ============ ============ Activity in the Company's inventory valuation allowance is as follows (in thousands): Balance at September 30, 1996.......... $ -0- Additions charged to costs and expenses.................. 74 Write-offs of uncollectible accounts...................... -0- --------------------------------------- Balance at September 30, 1997.......... 74 Additions charged to costs and expenses.................. 199 Write-offs of uncollectible accounts...................... -0- --------------------------------------- Balance at September 30, 1998.......... 273 Additions charged to costs and expenses.................. 106 Write-offs of uncollectible accounts...................... -0- --------------------------------------- Balance at September 30, 1999.......... $ 379 === PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Provisions for depreciation are determined using double-declining balance and straight-line methods. The Company uses estimated useful lives of 5 - 20 years for buildings and improvements and 5 - - 10 years for furniture, fixtures and equipment. INCOME TAXES In accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, deferred income taxes are provided for temporary differences between the basis of assets and liabilities for financial reporting purposes and for income tax return purposes. INTANGIBLE ASSETS Amounts assigned to intangible assets are amortized over the respective estimated useful lives using the straight-line method as follows: Noncompete agreements 5 to 7 years Goodwill 15 to 25 years Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of," requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset in question may not be recoverable. The Company groups long-lived assets by store location for purposes of assessing the recoverability of carrying value and measuring potential impairment. F-11 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS (CONTINUED) To date, the Company has not experienced any events or changes in circumstances that indicate that the recoverability of the carrying amount of an individual store should be assessed. Goodwill and other intangible assets are recorded at the lower of unamortized cost or fair value. Management reviews the valuation and amortization of intangible assets on a periodic basis, taking into consideration any events or circumstances which might result in diminished fair value. If this review indicates goodwill will not be recoverable, as determined by the undiscounted cash flows of the entity acquired over the remaining amortization period, the carrying value of the goodwill is reduced by the estimated shortfall of cash flows. PRE-OPENING COSTS Pre-opening costs related to new store locations are expensed as incurred. SIGNIFICANT SUPPLIERS The Company purchased substantially all of its new outboard motors for use on its Travis Edition boat packages from two outboard motor manufacturers, Outboard Marine Corporation and the Brunswick Corporation, in fiscal 1999, and from a single outboard motor manufacturer, Outboard Marine Corporation, in fiscal years 1998 and 1997. Approximately 12%, 18% and 34% of the Company's net purchases (including product purchased in acquisitions) in fiscal 1999, 1998 and 1997, respectively, were manufactured by boat suppliers with common ownership. ADVERTISING COSTS Advertising costs are expensed as incurred and were approximately $1,192,000, $643,000 and $829,000 during the fiscal years ended September 30, 1999, 1998 and 1997, respectively. NOTES PAYABLE AND OTHER SHORT-TERM OBLIGATIONS Interest expense on notes payable and other short-term obligations is recorded as incurred. The Company receives interest assistance on certain floor plan payables from various boat and motor manufacturers to subsidize the carrying cost of inventory. Accordingly, no interest expense is recorded during portions of the year on floor plan payables which include noninterest bearing payment terms. Discontinuance of the interest assistance payments could result in an increase in interest expense. UNEARNED REVENUE Amounts received from vendors in connection with agreed upon rebates or discounts are deferred until the related product is sold and such rebate or discount is earned. F-12 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NET INCOME PER COMMON SHARE
YEAR ENDED SEPTEMBER 30, 1999 1998 1997 -------------- -------------- --------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Numerator: Net income $ 6,573 $ 5,563 $ 3,982 ============================================= Denominator: Denominator for basic earnings per share - weighted average shares 4,291 4,250 4,137 Effect of dilutive securities: Employee stock options 118 168 115 --------------------------------------------- Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions 4,409 4,418 4,252 ============================================= Basic earnings per share $ 1.53 $ 1.31 $ .96 Diluted earnings per share $ 1.49 $ 1.26 $ .94
Options to purchase 97,500 shares of common stock with a weighted average strike price of $21.18 and a weighted average outstanding remaining life of 7.79 years were excluded from the computation of diluted EPS for the period ended September 30, 1999 as the option's exercise prices were greater than the average market price of the Company's common stock during the fiscal year then ended. There were no option shares excluded from the computation of diluted EPS for the fiscal years ended September 30, 1998 and 1997. 2. NOTES PAYABLE AND OTHER SHORT-TERM OBLIGATIONS Notes payable and other short-term obligations consist of the following (in thousands): SEPTEMBER 30, 1999 1998 ----------------- ------------------ Floor plans payable to commercial finance companies under revolving line of credit agreements with interest ranging from 0% to prime minus 1.00% (7.25% at September 30, 1999) with no stated maturity date. $ 35,408 $ 10,148 Note payable to bank under a $55 million revolving line of credit agreement with interest ranging from prime minus 1.00% to prime minus 1.60% (7.25% at September 30, 1999), due January 31, 2000. 33,150 15,000 Notes payable (see terms below) 7,886 5,937 ----------------- ------------------ Total notes payable and other short-term obligations 76,444 31,085 Less current portion (69,547) (26,105) ----------------- ------------------ Total notes payable, less current portion $ 6,897 $ 4,980 ================= ================== F-13 2. NOTES PAYABLE AND OTHER SHORT-TERM OBLIGATIONS (CONTINUED) The floor plans payable are secured by specific boat, motor and trailer inventory, as well as general security filings on all inventory and certain equipment. The floor plans payable to commercial finance companies include noninterest bearing payment terms for part of the calendar year (typically the months of August through May). As of September 30, 1999 and 1998, the amount of noninterest bearing floor plans payable to finance companies were $9,896,260 and $3,488,888, respectively. Floor plans payable of certain of the Company's subsidiaries are guaranteed by the Company. The Company is significantly limited as to annual dividends for preferred and common stock. As of September 30, 1999, the Company was in violation of a financial ratio covenant related to its $55 million revolving line of credit agreement with a bank. The Company, however, has obtained written waivers from each of the lenders under the revolving line of credit regarding this technical default. Management of the Company is currently negotiating revolving credit facilities with two commercial financial companies in the amount of approximately $125 million. The new credit facilities would be used to refinance the expiring $55 million line of credit and to provide additional borrowing capacity. The weighted average interest rate on floor plan payables and revolving lines of credit outstanding as of September 30, 1999 and 1998 was 5.5% and 4.8%, respectively. Notes payable consist of the following: SEPTEMBER 30, 1999 1998 ----------------- ------------------ (IN THOUSANDS) Mortgage notes payable to various banks, organizations and individuals under deeds of trust with interest ranging from 6.0% to prime plus 1%, due in monthly principal and interest installments ranging from $1,493 to $10,289, maturing beginning in February 2000. $6,045 $3,480 Notes payable to various banks, a corporation and an individual for vehicles, equipment and leasehold improvements with interest ranging from 7.1% to 8.5%, due in principal installments ranging from $486, including interest, monthly to $62,500, plus interest quarterly, maturing beginning in February 2000. 757 1,030 Acquisition related notes payable to individuals and corporations with interest ranging from 8.25% to 8.75%, due in monthly principal and interest installments ranging from $291 to $12,770, maturing beginning in February 2000. 1,084 1,427 ----------------- ------------------ Total notes payable $7,886 $5,937 ================= ================== Certain notes payable are secured by assets of the Company including inventory, accounts receivable, equipment, leasehold improvements, vehicles, land and buildings. Notes payable of certain of its subsidiaries are guaranteed by the Company. F-14 2. NOTES PAYABLE AND OTHER SHORT-TERM OBLIGATIONS (CONTINUED) At September 30, 1999 and 1998, approximately 84.5% and 64.8% respectively of the Company's notes payable and other short-term obligations bear interest at variable rates, generally tied to a reference rate such as the prime rate of interest of certain banks. Accordingly, the Company believes that the carrying amount of the notes payables and other short term obligations approximates their fair value. Interest paid approximates interest expense during 1999, 1998 and 1997. Aggregate annual maturities required on notes payable at September 30, 1999 are as follows (in thousands): Year ending September 30 - ------------ 2000 $ 989 2001 990 2002 1,437 2003 661 2004 603 Thereafter 3,206 ----------- $ 7,886 =========== 3. LEASES The Company leases various facilities under operating leases. Rent expense was $2,031,000 in 1999, $1,188,000 in 1998 and $546,000 in 1997. Generally, the leases provide for renewals for various periods at stipulated rates. Future minimum rentals due under noncancelable leases are as follows for each of the years ending September 30 (in thousands): 2000 $ 2,489 2001 2,427 2002 1,813 2003 1,275 2004 886 Thereafter 1,902 --------- $10,792 ========= 4. ACQUISITIONS The Company has made various acquisitions during the three year period ended September 30, 1999. All of the acquisitions were asset purchases (except for Adventure Marine and Shelby Marine, which were stock purchases) and have been accounted for using the purchase method of accounting. The operating results of the companies acquired have been included in the consolidated financial statements from the respective date of acquisition. The assets acquired generally include boat, motor and trailer inventory, parts and accessories inventory and to a lesser extent, property and equipment. A summary of the Company's acquisitions follows: F-15 4. ACQUISITIONS (CONTINUED)
Non-compete Date of Purchase Tangible Agreements Cash Liabilities Notes Stock NAME OF COMPANY Acquisition Price Net Assets and Goodwill Paid Assumed Issued Issued --------------- ------------- ---------- ----------- -------------- --------- ------------ -------- --------- (In Thousands) ------------------------------------ FISCAL 1999 - ----------- Amlin, Inc. dba Magic 01/99 $1,639 $6,019 $1,090 $1,639 $5,470 $ --- $ --- Marine Sportsman's Haven 01/99 1,748 2,624 514 1,098 1,390 650 --- Pier 68 Marina 02/99 738 2,218 562 408 2,043 329 --- DSA Marine Sales & Service 04/99 2,147 4,798 1,597 2,147 4,248 --- --- dba The Boatworks Shelby Marine, Inc. 06/99 1,334 3,426 1,050 809 3,142 --- 525 The New 3 Seas, Inc. 09/99 1,103 1,419 1,100 0 1,416 1,103 --- FISCAL 1998 - ----------- Southeastern Marine 11/97 $1,730 $1,390 $ 280 $1,606 $ - $ 124 $ - Worthen Marine 12/97 287 142 145 287 - - - HnR Marine 04/98 359 359 - 359 - - - Moore's Marine 05/98 777 376 401 777 - - - Rodgers Marine 09/98 677 2,093 350 327 1,766 - 350 FISCAL 1997 - ----------- North Alabama Watersports 10/96 892 687 205 812 - 80 - Tri-Lakes Marine 11/96 1,243 1,892 644 643 1,937 600 - Bent's Marine 02/97 1,519 840 679 1,064 - 455 - McLeod Marine 08/97 958 730 228 958 - - - Adventure Marine 09/97 3,023 5,536 2,690 1,430 5,203 115 1,478
Pursuant to the purchase terms of The New 3 Three Seas acquisition, the Company has agreed to issue 86,005 shares of its common stock valued at approximately $1.1 million upon the registration of such shares with the Securities and Exchange Commission pursuant to the Securities Act of 1933. The shares of common stock were not registered as of the fiscal year ended September 30, 1999. Accordingly, the Company has classified the amount payable of $1.1 million as a liability due to The New 3 Seas, Inc. The Company determines the valuation of the securities issued in its purchase transactions in accordance with Emerging Issues Task Force 95-19. The Company's unaudited consolidated results of operations assuming all acquisitions accounted for under the purchase method of accounting had occurred on October 1, 1998 are as follows for the fiscal years ended September 30, 1999 and 1998: F-16 YEAR ENDED SEPTEMBER 30, 1999 1998 Net Sales $206,994,000 $197,365,000 Net Income 7,667,972 $7,192,790 Diluted earnings per share 1.74 1.63 The unaudited pro forma results of operations are presented for informational purposes only pursuant to APB 16 and may not necessarily reflect the future results of operations of the Company or what results of operations would have been had the Company owned and operated the business as of October 1, 1998. 5. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows (in thousands): September 30, 1999 1998 ----------------- ------------------ Deferred tax assets: Book over tax depreciation $ 121 $ 96 Accrued salaries and wages 136 180 ----------------- ------------------ Total deferred tax assets 257 276 Valuation allowance for deferred tax assets - - Net deferred tax assets $ 257 $ 276 ================= ================== Significant components of the provisions for income taxes are as follows (in thousands): Year ended September 30, 1999 1998 1997 --------------------------------------------------- Current expense: Federal $3,424 $2,791 $1,993 State 403 410 231 Total current expense 3,827 3,201 2,224 Deferred expense (benefit): Federal 19 17 (83) State - - (9) --------------------------------------------------- Total deferred expense (benefit) 19 17 (92) --------------------------------------------------- Total provision for income taxes $3,846 $3,218 $2,132 =================================================== The differences between the effective tax rate and the U.S. federal statutory rate of 34% are reconciled as follows (in thousands): Year ended September 30, 1999 1998 1997 -------------- -------------- -------------- Income tax expense at the federal statutory rate $3,542 $2,986 $2,079 State income taxes 403 410 223 Other (99) (178) (170) ------------------------------------------------------- $3,846 $3,218 $2,132 ======================================================= F-17 5.INCOME TAXES (CONTINUED) Income taxes paid were approximately $1,563,000; $4,207,000 and $1,900,000 in the fiscal years ended September 30, 1999, 1998 and 1997, respectively. 6.STOCKHOLDERS' EQUITY In March 1995, the Company granted options to purchase shares of the Company's common stock to certain officers of the Company which vest over five years. In December 1995, the Company adopted an Incentive Stock Option Plan (the "Plan") which originally provided for the issuance of up to 200,000 shares of the Company's common stock. The Plan provides for the granting of options (incentive stock options or non-statutory), stock appreciation rights and restricted shares to officers, key employees, non-employee directors and consultants to purchase shares of the Company's common stock. In March 1998, the Company amended its 1995 Incentive Stock Option Plan to provide that the aggregate number of shares of common stock that may be issued or transferred pursuant to awards under the Plan shall increase automatically effective on April 1 of each calendar year for the duration of the Plan so that the aggregate number of shares of common stock that may be issued or transferred pursuant to awards under the Plan is equal to 10% of the total number of shares of common stock issued and outstanding on April 1 of that year. Notwithstanding this provision, the amendment provides that (i) the aggregate number of shares of common stock that may be issued or transferred pursuant to awards under the Plan shall not be reduced in the event the total number of shares issued and outstanding decreases in any year, or (ii) the aggregate number of shares of common stock that may be issued or transferred pursuant to awards under the Plan shall not exceed 1,000,000 shares of common stock over the life of the Plan. As of September 30, 1999, the Company was eligible to issue or transfer up to an additional 109,525 shares of common stock pursuant to the Plan. Total option activity for the years ended September 30, 1999, 1998 and 1997:
Weighted Range of Average Number of Exercise Prices Exercise Shares Price -------------------------------------- --------------- Outstanding at September 30, 1996 231,533 $5.25 - $9.00 $ 6.83 Granted 38,500 $10.00-$17.00 $12.37 Exercised - - - Forfeited (5,000) $ 9.00 $ 9.00 ------------------ Outstanding at September 30, 1997 265,033 $5.25 -$17.00 $ 7.58 Granted 100,750 $15.00-$22.50 $20.83 Exercised (36,200) $5.25-$13.125 $ 6.42 Forfeited (6,300) $9.00-$13.125 $12.76 ------------------ Outstanding at September 30, 1998 323,281 $5.25 -$22.50 $11.75 Granted 7,500 $14.50-$20.00 $18.60 Exercised (5,000) $9.00 $ 9.00 Forfeited (6,500) $13.125-$19.00 $17.93 ------------------ Outstanding at September 30, 1999 319,281 $5.25 -$22.50 $11.84 ================== Exercisable at September 30, 1999 173,083 $5.25- $22.50 $ 8.82 ================== Options available for grant at September 30, 1999 109,525 ================== Common stock reserved for issuance at September 30, 1999 428,806 ==================
F-18 6. STOCKHOLDERS' EQUITY (CONTINUED) The weighted-average remaining contractual life of options at September 30, 1999 and 1998 is approximately 6.94 and 7.91 years, respectively. Options outstanding at September 30, 1999, are comprised of the following:
OUTSTANDING EXERCISABLE ----------- ----------- Weighted Avg. Range of Weighted Avg. Contractual Number of Weighted Avg. OPTIONS Exercises Prices Exercises Prices Life in Years Options Exercise Price - ----------------- ---------------------------------------- ------------------ --------------------------------------- 108,865 $5.25 $5.25 5.62 82,092 $5.25 75,666 $9.00 $9.00 6.74 57,666 $9.00 35,250 $9.50-$15.00 $12.19 7.70 13,825 $12.10 99,500 $16.13-$22.50 $21.03 8.19 19,500 $21.03 - --------------------------------------------------------------------------------------------------------------------- 319,281 $5.25-$22.50 $11.84 6.94 173,083 $8.82 - ---------------------------------------------------------------------------------------------------------------------
The Company has elected to follow Accounting Principles Board No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock- Based Compensation (Statement 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals market price of the underlying stock on the date of grant, no compensation expense is recognized. The assumptions used by the Company to determine the pro forma information regarding net income and earnings per share required by Statement No. 123 are as follows using the Black-Sholes model: YEAR ENDED SEPTEMBER 30, 1999 1998 1997 ---------------- ---------------- ---------------- Risk-free interest rate 6.00% 6.00% 6.42% Dividend yield 0% 0% 0% Expected life 5 years 5 years 5 years Volatility 39.3% 39.3% 34.3% The pro forma amounts under Statement No. 123 are as follows: YEAR ENDED SEPTEMBER 30, 1999 1998 1997 ---------------- ---------------- ---------------- Net income as reported (000's) $6,572 $5,563 $3,982 Pro forma net income (000's) $6,467 $5,467 $3,968 Diluted EPS - as reported $ 1.49 $ 1.26 $ .94 Pro forma - Diluted EPS $ 1.47 $ 1.24 $ .93 7. COMMITMENTS AND CONTINGENCIES The Company is currently involved in several matters regarding pending or threatened litigation in the normal course of business. Management does not expect the ultimate resolution of these matters to have a material adverse effect on the Company's consolidated financial statements. F-19 8. BENEFIT PLAN In January 1995, the Company adopted a 401(k) retirement plan which is available to all full-time employees. The Company may, in its discretion, make matching contributions which the Company, in its discretion, determines from year to year. The Company's expenses related to the plan were not significant in the years ended September 30, 1999, 1998 and 1997. 9. NEW ACCOUNTING PRONOUNCEMENTS In September 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Because of the Company's minimal use of derivative financial instruments, management does not anticipate that the adoption of SFAS No. 133 will have a material impact on the Company's consolidated results of operations, financial position or cash flows. In April 1998, the Accounting Standards Executive Committee issued Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. The SOP requires costs of start-up activities and organization costs to be expensed as incurred, and is effective for fiscal years beginning after December 15, 1998. The effects of adoption must be reported as a cumulative change in accounting principle. The Company expects that the impact of adoption will not be material to its financial position or results of operations. 10. SUBSEQUENT EVENTS In October 1999, the Company entered into a sale leaseback transaction with a leasing company covering substantially all of its motor vehicle fleet. Vehicle leases generally range from 24 to 60 months in term and provide for various residual balances of approximately 20% of the initial lease amount. In October 1999, the Company entered into a real estate term loan with a commercial bank providing for up to $4 million of financing for the Company's land and buildings in Dallas and San Antonio, Texas and Atlanta, Georgia. In November 1999, the Company completed the registration of 86,005 shares of common stock on Form S-3 with the Securities and Exchange Commission issued pursuant to the acquisition of The New Three Seas, Inc. (September 1999). In November 1999, the Company entered into a transaction with a finance company providing for up to $5.0 million of financing for the Company's used boat, motor and trailer inventory pursuant to a specific borrowing base formula. F-20 EX-10 2 EXHIBIT 10.40-EMPLOYMENT AGREEMENT-MARK T. WALTON EXHIBIT 10.40 TBC MANAGEMENT, LTD. November 16, 1999 Mr. Mark T. Walton Travis Boats & Motors, Inc. 5000 Plaza on the Lake Blvd., Suite 250 Austin, Texas 78746 Re: Employment Agreement -------------------- Dear Mark: This letter agreement (this "Letter Agreement") sets forth the terms of your employment relationship with TBC Management, Ltd., a Texas limited partnership (the "Company"), which has an agreement to provide management services to Travis Boats & Motors, Inc., a Texas corporation, and its subsidiaries (collectively referred to as "Travis Boats"). As an inducement to you to enter into this Letter Agreement, if for any reason the agreement between the Company and Travis Boats ceases to exist, the Company shall immediately assign this Letter Agreement to Travis Boats. Travis Boats, by signing below where indicated, agrees to accept such assignment and perform the terms of this Letter Agreement. This Letter Agreement supersedes all previous agreements between you and the Company and/or Travis Boats, including but not limited to the Letter Agreements dated December 14, 1995, as amended, and May 7, 1996 (the "May 7 Letter Agreement"). 1. Duties. You agree to perform the duties and assume the responsibilities normally incidental to the position of President of Travis Boats. You further agree to perform for the Company such other duties and responsibilities as may be reasonably prescribed from time to time by the Company. It is acknowledged that you are the President, but not an employee, of Travis Boats. 2. Extent of Service. The initial term of this employment contract with the Company shall expire on the third anniversary of the Effective Date of this Letter Agreement (as defined in paragraph 3 hereof), unless sooner terminated in accordance with the terms hereof. You shall devote such time, attention and energy to the business of the Company as shall be reasonably requested, and you will faithfully, industriously, and to the best of your ability perform all of the duties that may be required of you as an employee. You will not engage in activities, businesses, or investment that would in any way conflict with the best interests of the Company or Travis Boats. Mr. Mark T. Walton November 16, 1999 Page 2 3. Effective Date. This Letter Agreement shall be effective as of June 28, 1999 (the "Effective Date"). The parties acknowledge that this Letter Agreement shall be deemed effective as of the expiration of the May 7 Letter Agreement. 4. Salary. As long as you remain employed by the Company, the Company will pay you an annual salary of $200,000 (before federal or state withholding deductions), subject to adjustments, payable on the same schedule that salary is paid to other salaried employees of the Company. Your performance and base salary will be reviewed annually by the Company. You may be entitled to receive such further compensation as may be authorized by the Company upon such annual review or at other times deemed appropriate by the Company. 5. [Intentionally Omitted] 6. Benefits. As long as you remain employed by the Company, you shall be entitled to participate in health insurance, dental insurance, disability insurance, and accidental, death and disability insurance, as provided to the other executive employees of the Company, and such vacation and holiday time as provided in the Company's vacation/holiday policy. The Company shall provide you the use of an automobile for business use with all maintenance costs, automobile insurance premiums, gas and Company-related cellular phone charges paid by the Company. 7. Renewal and Extension Bonus Payment. As consideration for limiting other employment opportunities during the term of this Letter Agreement, the Company will pay you a renewal and extension bonus payment (the "Renewal Bonus") of $129,362.01, subject to withholding for applicable federal income tax, social security and other items required by law. The Company and you agree that you shall promptly repay a pro rata share of the Renewal Bonus to the Company based upon the initial three (3) year term of this Letter Agreement (net of any applicable taxes paid by you upon the payment of the Renewal Bonus) if you leave the employ of the Company during the initial term of this Letter Agreement, except for any termination of this Letter Agreement in connection with: (a) a termination by you for Good Reason (as defined below), (b) a termination by the Company Without Good Cause (as defined below), or (c) a termination by you Without Good Reason (as defined below) within sixty (60) days after the date of a Change of Control (as defined below). 8. Annual Bonus. As long as you remain employed by the Company and the consolidated income of Travis Boats before income tax expense and non-recurring audit adjustments (collectively "Pre-tax Income") reflects growth of 20% or more over the previous fiscal year, you Mr. Mark T. Walton November 16, 1999 Page 3 shall receive an annual bonus of 1.5% of such total annual Pre-tax Income. If the Pre-tax Income reflects growth of less than 20% over the previous fiscal year, the annual bonus shall be an amount determined by the Company. 9. Termination of Employment; Severance Payments. Notwithstanding the foregoing or anything to the contrary contained in this Letter Agreement, you may terminate your employment relationship with the Company at any time and for any reason whatsoever, or for no reason, after giving the Company written notice of such resignation at least 30 days prior to such intended resignation date, subject to the following provisions: (a) You shall have the right to resign for any Good Reason (as defined below) and such resignation shall be deemed to be a termination Without Good Cause (as defined below) for all purposes under this Agreement, including the "Change of Control" provisions set forth below and the severance provisions set forth in paragraph 9(d) below. For purposes of this Agreement, the term "Good Reason" shall be defined as: (i) The Company's failure in any material respect to perform any provision of this Agreement; (ii) Any material changes in your duties and responsibilities under this Agreement without your written consent; (iii) The hiring or promotion by the Company of another executive employee to a position of substantially similar job description or daily responsibility for the management of the Company without your written consent; (iv) The Company's directing you to work at a location other than Austin, Texas without your written consent; or (v) After a Change of Control, any material change which, in your sole but reasonable discretion, impacts you detrimentally upon your position within the Company. (b) Any resignation by you for any reason other than Good Reason shall be deemed a resignation "Without Good Reason." Other than as provided in paragraph 9(d) with respect to your resignation Without Good Reason during the 60-day period following a Change of Control, in the event of your resignation Without Good Reason, the Change of Control provisions in paragraph 10 and the severance provisions in paragraph 9(d) shall be inapplicable. (c) From the date you voluntarily terminate your employment with the Company Without Good Reason (other than as provided in paragraph 9(d) with respect to your resignation Without Mr. Mark T. Walton November 16, 1999 Page 4 Good Reason during the 60-day period following a Change of Control), from the date of your death or from the date your employment is terminated For Cause (as defined below) by the Company, you shall no longer be entitled to any base salary, bonus or other compensation benefits, other than such salary and bonus amounts earned but unpaid as of the date of termination of your employment. The term "For Cause" shall mean (i) your gross neglect or willful misconduct in the discharge of your duties and responsibilities to the Company, as determined by the Board of Directors of the general partner of the Company, (ii) your repeated failure to obey reasonable directions from the Company or the Board of Directors of the general partner of the Company, (iii) any act of yours against the Company or Travis Boats intended to enrich you at the expense of the Company or Travis Boats, (iv) any willful act or omission by you having the effect of materially injuring the business or business relationships of the Company or Travis Boats, or (v) your commission of a felony or any crime involving moral turpitude, fraud or misrepresentation. Any termination that is not For Cause or that does not result from your death or disability, shall be deemed to be a termination "Without Good Cause." (d) If your employment is terminated by the Company Without Good Cause (including expiration of a term without renewal) or you terminate this Letter Agreement Without Good Reason within sixty (60) days after the date of a Change of Control, then you shall be entitled to receive 2.99 times your annual compensation with proration of bonus for the year in which your employment was terminated, which amounts shall be payable over the three-year term in the same manner as such compensation would have been payable if employment had not terminated, provided that the Company may elect to pay or you may elect to receive such compensation as a lump sum payment. (e) Notwithstanding the foregoing you may submit the decision to classify termination of your employment as "For Cause" to binding arbitration under the rules and auspices of the American Arbitration Association then in effect. 10. Change of Control. The Company acknowledges that you agreed to assume your position with the Company and to enter into this Agreement based upon his confidence in the current shareholders of the Company and the support of the Board of Directors for the development of a new strategy for the Company. Accordingly, if the Company should undergo a "Change of Control," as defined in this section, the parties agree as follows: (a) For purposes of this Agreement, a "Change of Control" shall be deemed to exist in the event that any of the following occurs: (i) a change in the ownership of the capital stock of the Company where a corporation, person or group acting in concert (a "Person") as described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), holds or acquires, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Mr. Mark T. Walton November 16, 1999 Page 5 Act) of a number of shares of capital stock of the Company which constitutes 40% or more (or, 30% or more in the event the Company is subject to the reporting requirements of Sections 12 or 15(d) under the Exchange Act) of the combined voting power of the Company's then outstanding capital stock then entitled to vote generally in the election of directors; or (ii) the persons who were members of the Board of Directors immediately prior to a tender offer, exchange offer, contested election or any combination of the foregoing, cease to constitute a majority of the Board of Directors of the Company; or (iii) a dissolution of the Company, or the adoption by the Company of a plan of liquidation, or the adoption by the Company of a merger, consolidation or reorganization involving the Company in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company (for purposes of this Agreement, a sale of all or substantially all of the assets of the Company shall be deemed to occur if any Person acquires, or during the 12-month period ending on the date of the most recent acquisition by such Person, has acquired, gross assets of the Company that have an aggregate fair market value equal to 50% or more of the fair market value of all of the gross assets of the Company immediately prior to such acquisition or acquisitions); or (iv) a tender offer or exchange offer is made by any Person which, if successfully completed, would result in such person beneficially owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act) either 50% or more of the Company's outstanding shares of Common Stock or shares of capital stock having 50% or more of the combined voting power of the Company's then outstanding capital stock (other than an offer made by the Company), and sufficient shares are acquired under the offer to cause such person to own 30% or more of the voting power; or (v) a change in control is reported or is required to be reported by the Company in response to either Item 6(e) of Schedule 14A of Regulations 14A promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the Exchange Act, which change in control has not been approved by a majority of the Board of Directors then in office who were directors at the beginning of the two-year period ending on the date the reported change in control occurred; or (vi) during any period of two consecutive years, individuals who, at the beginning of such period constituted the entire Board of Directors of the Company, cease for any reason (other than death) to constitute a majority of the directors, unless the election, or the nomination for election, by the Company's stockholders, of each new director was approved by a vote of a least a majority of the directors then still in office who were directors at the beginning of the period. Mr. Mark T. Walton November 16, 1999 Page 6 For purposes of paragraph 10(a)(i) above, if a Person were the beneficial owner of 30% or more or 40% or more, as applicable, of the combined voting power of the Company's then outstanding securities as of the Effective Date and such Person thereafter accumulates more than 5% of additional voting power, a Change of Control of the Company shall be deemed to have occurred, notwithstanding anything in this Agreement to the contrary. A Change of Control shall include any other transactions or series of related transactions occurring which have substantially the same effect as the transactions specified in any of the preceding clauses of paragraph 4(a)(i)-(vi). However, a Change of Control shall not be deemed to occur if a person becomes the beneficial owner of the applicable percentage or more (as referenced above) of the combined voting power of the company's then outstanding securities solely by reason of the Company's redemption or repurchase of securities; but further acquisitions by such Person that cause such Person to be the beneficial owner of the applicable percentage or more (as referenced above) of the combined voting power of the Company's then outstanding securities shall be deemed a Change of Control. (b) In the event of a Change of Control, as defined in this section, all stock options then held by you for the purchase of equity securities of the Company shall immediately become vested, effective on the date of the Change of Control. 11. Nondisclosure and Noncompetition; Consideration. (a) You shall not, at any time during the term of your employment by the Company, nor so long as such information remains confidential with the Company or Travis Boats, use for your own account or for the benefit of any other person, firm, corporation or entity, directly or indirectly, except in the ordinary course of business, any of the supplier lists, customer or subscriber lists, contract terms, trade names, trade secrets or goodwill owned or used by the Company or Travis Boats in its business or, directly or indirectly, disclose or furnish to any other person, firm, corporation or entity, the methods by which the Company's business or that of Travis Boats is or has been conducted, any of the methods by which the customers or business of the Company or that of Travis Boats are or have been obtained, or any confidential or proprietary information whatsoever of the Company or Travis Boats, including, without limitation, the Intellectual Property described in paragraph 12 below and the identities of or other information regarding any customers or prospective customers of the Company. (b) Unless the Company consents in writing, at any time during the term of your employment with the Company, and within one year after the date your employment with the Company terminates, you will not, within the United States, directly or indirectly own, manage, operate, control, be employed by, advise or be connected in any manner (including, without limitation, as an employee, director, agent, partner, officer, stockholder, creditor, consultant or otherwise) with any person, firm, corporation or business which directly or indirectly is competitive with the Company's business (i.e., any business which engages in the business of retail marketing Mr. Mark T. Walton November 16, 1999 Page 7 or selling recreational power boats, boat motors or boat trailers or provides services to people or entities selected because of their involvement in the same industry); provided, however, the covenant not to compete set forth in this paragraph 11(b) shall not apply if you are rightfully entitled to receive, and the Company fails to pay you, the consideration in paragraph 9(d) or if you are part of a group that seeks to effect a Change of Control with respect to the Company. (c) Notwithstanding the foregoing, nothing in this Letter Agreement will prohibit you from owning less than five percent of the capital stock of a corporation, the common stock of which is publicly traded on a national securities exchange or through NASDAQ, notwithstanding that such corporation may compete with the Company. (d) At any time during the term of your employment by the Company, and within one year after the date your employment with the Company terminates, neither you nor any entity or business owned or controlled by you, will, directly or indirectly for your benefit or the benefit of any third party, without the written consent of the Company, hire or solicit the employment of any employee of the Company or influence or induce any employee to leave or decline employment by the Company. 12. Materials. All data, listings, charts, drawings, records, documents, programs, software, documentation, memoranda, journals, notebooks, records, files, drafts, specifications and similar items relating to the business of the Company or its affiliates, whether compiled by you, furnished to you by the Company, its customers or clients or otherwise made accessible to you or coming into your possession, while you are employed by the Company, and copies of any such items, shall be and remain the sole and exclusive property of the Company or its customers or clients, as the case may be, and none of such items shall be removed from the Company's business premises by you without the prior consent of the Company, except as required in the course of your employment. All of such items shall be returned to the Company by you upon the termination of your employment with the Company for whatever reason. The provisions of this paragraph shall not, however, prohibit you from using any materials published by the Company and made available (without a breach of this agreement) to the general public. 13. Intellectual Property. If, during the term of your employment, you develop any proprietary technology (including without limitation any architecture, structure, layouts, processes, formulae, inventions, know-how, ideas, concepts, designs, drawings, specifications, test data, and quality and quality control standards); any patents and patent rights (including all information or discoveries covered thereby and all enhancements, modifications, improvements, divisions, continuations, continuations in part, reissues, re-examinations or extensions thereof), trademarks and trademark rights, copyrights and copyright rights, trade secrets and trade secret rights, and applications, registrations or their equivalents for any of the same; or any other intellectual property rights (collectively, the "Intellectual Property"), relating to the manufacturing or supplying of Mr. Mark T. Walton November 16, 1999 Page 8 products or services in which the Company is or is likely to be involved, such Intellectual Property shall automatically become the property of the Company. You agree to cooperate with the Company to perfect your respective claims to such Intellectual Property and to execute and deliver any and all documents reasonably necessary in order to effectuate the intent of this paragraph, and you hereby grant to the Company an irrevocable power of attorney to execute any such documents. 14. Notices. All notices and communications hereunder shall be in writing and shall be deemed to have been duly given to a party when delivered in person (including delivery by an express delivery service or by facsimile transmission during the recipient's regular business hours), or three business days after such notice is enclosed in a properly sealed envelope, certified or registered, and deposited (postage and certification or registration prepaid) in a post office or collection facility regularly maintained by the United States Postal Service and addressed for delivery, if to you, at 7308 Kapok Lane, Austin, Texas 78759, or if to the Company, at 5000 Plaza on the Lake Blvd., Suite 250, Austin, Texas 78746. 15. Miscellaneous. (a) The rights and obligations of the Company under this Letter Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. (b) This Letter Agreement shall be subject to and governed by the laws (except the conflict of laws) of the State of Texas. (c) Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. Titles of sections are for convenience only and neither limit nor amplify any of the provisions contained herein. (d) Upon execution of this Letter Agreement, the rights, duties and obligations of the parties hereto with respect to the matters set forth herein shall be governed solely by the provisions of this Letter Agreement, and all representations, warranties, terms and conditions with respect to such matters which may be contained in any prior writing executed by the parties (or by any of them) shall be null and void and of no further force and effect. (e) If any provisions of this Letter Agreement, or the application thereof to any party hereto or under any circumstances, shall be invalid or unenforceable to any extent, the remainder of this Letter Agreement and the application of such provisions to other parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law; provided, that a provision as similar in terms and effect to such invalid or unenforceable shall be added automatically as part of this Letter Agreement. Mr. Mark T. Walton November 16, 1999 Page 9 (f) In the event of a breach or threatened breach by you of any provision of this Letter Agreement, then in addition to any other available remedy to which the Company may be entitled, including the recovery of damages, the Company shall be entitled to an injunction restraining you from breaching or attempting to breach, in whole or in part, any of the provisions of this Letter Agreement. In addition, in the event of a breach by either party of any provision of this Letter Agreement, the non-breaching or (in the event of litigation) the prevailing party shall be entitled to recover from the other party all reasonable costs and attorneys' fees incurred by the non-breaching or prevailing party in seeking any of such remedies, in addition to the other relief to which the non-breaching or prevailing party may be entitled. As used in the preceding sentence, "prevailing party" shall include, without limitation, the party who retains legal counsel or brings an action against the other party and subsequently obtains all or substantially all of the relief sought, whether by compromise, settlement or judgment. * * * Mr. Mark T. Walton November 16, 1999 Page 10 If you are in agreement with the foregoing, please so indicate by signing the enclosed extra original of this Letter Agreement and returning it to the Company, whereupon the provisions contained herein will be effective as of the date of this letter. Travis Boats, by signing below where indicated, agrees to be bound by the terms of this agreement in the event the management contract between the Company and Travis Boats ceases to exist. Very truly yours, TBC Management, Ltd. By: /s/ Michael B. Perrine ---------------------------------------------- Michael B. Perrine, Chief Financial Officer of Travis Boats & Motors, Inc., its Managing General Partner AGREED TO AND ACCEPTED: /s/ Mark T. Walton - ---------------------------- Mark T. Walton Date: , 1999 ----------------------- AGREED TO AND ACCEPTED: Travis Boats & Motors, Inc. By: /s/ Michael B. Perrine ------------------------ Michael B. Perrine Chief Financial Officer Date: , 1999 ------------------------ EX-10 3 EXHIBIT 10.41-EMPLOYMENT AGREEMENT-MICHAEL PERRINE EXHIBIT 10.41 TBC MANAGEMENT, LTD. November 16, 1999 Mr. Michael B. Perrine Travis Boats & Motors, Inc. 5000 Plaza on the Lake Blvd., Suite 250 Austin, Texas 78746 Re: Employment Agreement -------------------- Dear Michael: This letter agreement (this "Letter Agreement") sets forth the terms of your employment relationship with TBC Management, Ltd., a Texas limited partnership (the "Company"), which has an agreement to provide management services to Travis Boats & Motors, Inc., a Texas corporation, and its subsidiaries (collectively referred to as "Travis Boats"). As an inducement to you to enter into this Letter Agreement, if for any reason the agreement between the Company and Travis Boats ceases to exist, the Company shall immediately assign this Letter Agreement to Travis Boats. Travis Boats, by signing below where indicated, agrees to accept such assignment and perform the terms of this Letter Agreement. This Letter Agreement supersedes all previous agreements between you and the Company and/or Travis Boats, including but not limited to the Letter Agreements dated December 14, 1995, as amended, and May 7, 1996 (the "May 7 Letter Agreement"). 1. Duties. You agree to perform the duties and assume the responsibilities normally incidental to the position of Chief Financial Officer, Secretary and Treasurer of Travis Boats. You further agree to perform for the Company such other duties and responsibilities as may be reasonably prescribed from time to time by the Company. It is acknowledged that you are the Chief Financial Officer, Secretary and Treasurer, but not an employee, of Travis Boats. 2. Extent of Service. The initial term of this employment contract with the Company shall expire on the third anniversary of the Effective Date of this Letter Agreement (as defined in paragraph 3 hereof), unless sooner terminated in accordance with the terms hereof. You shall devote such time, attention and energy to the business of the Company as shall be reasonably requested, and you will faithfully, industriously, and to the best of your ability perform all of the duties that may be required of you as an employee. You will not engage in activities, businesses, or investment that would in any way conflict with the best interests of the Company or Travis Boats. Mr. Michael B. Perrine November 16, 1999 Page 2 3. Effective Date. This Letter Agreement shall be effective as of June 28, 1999 (the "Effective Date"). The parties acknowledge that this Letter Agreement shall be deemed effective as of the expiration of the May 7 Letter Agreement. 4. Salary. As long as you remain employed by the Company, the Company will pay you an annual salary of $130,000 (before federal or state withholding deductions), subject to adjustments, payable on the same schedule that salary is paid to other salaried employees of the Company. Your performance and base salary will be reviewed annually by the Company. You may be entitled to receive such further compensation as may be authorized by the Company upon such annual review or at other times deemed appropriate by the Company. 5. [Intentionally Omitted] 6. Benefits. As long as you remain employed by the Company, you shall be entitled to participate in health insurance, dental insurance, disability insurance, and accidental, death and disability insurance, as provided to the other executive employees of the Company, and such vacation and holiday time as provided in the Company's vacation/holiday policy. 7. Renewal and Extension Bonus Payment. As consideration for limiting other employment opportunities during the term of this Letter Agreement, the Company will pay you a renewal and extension bonus payment (the "Renewal Bonus") of $ 65,450.18, subject to withholding for applicable federal income tax, social security and other items required by law. The Company and you agree that you shall promptly repay a pro rata share of the Renewal Bonus to the Company based upon the initial three (3) year term of this Letter Agreement (net of any applicable taxes paid by you upon the payment of the Renewal Bonus) if you leave the employ of the Company during the initial term of this Letter Agreement, except for any termination of this Letter Agreement in connection with: (a) a termination by you for Good Reason (as defined below), (b) a termination by the Company Without Good Cause (as defined below), or (c) a termination by you Without Good Reason (as defined below) within sixty (60) days after the date of a Change of Control (as defined below). 8. Annual Bonus. As long as you remain employed by the Company and the consolidated income of Travis Boats before income tax expense and non-recurring audit adjustments (collectively "Pre-tax Income") reflects growth of 20% or more over the previous fiscal year, you shall receive an annual bonus of 1.5% of such total annual Pre-tax Income. If the Pre-tax Income Mr. Michael B. Perrine November 16, 1999 Page 3 reflects growth of less than 20% over the previous fiscal year, the annual bonus shall be an amount determined by the Company. 9. Termination of Employment; Severance Payments. Notwithstanding the foregoing or anything to the contrary contained in this Letter Agreement, you may terminate your employment relationship with the Company at any time and for any reason whatsoever, or for no reason, after giving the Company written notice of such resignation at least 30 days prior to such intended resignation date, subject to the following provisions: (a) You shall have the right to resign for any Good Reason (as defined below) and such resignation shall be deemed to be a termination Without Good Cause (as defined below) for all purposes under this Agreement, including the "Change of Control" provisions set forth below and the severance provisions set forth in paragraph 9(d) below. For purposes of this Agreement, the term "Good Reason" shall be defined as: (i) The Company's failure in any material respect to perform any provision of this Agreement; (ii) Any material changes in your duties and responsibilities under this Agreement without your written consent; (iii) The hiring or promotion by the Company of another executive employee to a position of substantially similar job description or daily responsibility for the management of the Company without your written consent; (iv) The Company's directing you to work at a location other than Austin, Texas without your written consent; or (v) After a Change of Control, any material change which, in your sole but reasonable discretion, impacts you detrimentally upon your position within the Company. (b) Any resignation by you for any reason other than Good Reason shall be deemed a resignation "Without Good Reason." Other than as provided in paragraph 9(d) with respect to your resignation Without Good Reason during the 60-day period following a Change of Control, in the event of your resignation Without Good Reason, the Change of Control provisions in paragraph 10 and the severance provisions in paragraph 9(d) shall be inapplicable. (c) From the date you voluntarily terminate your employment with the Company Without Good Reason (other than as provided in paragraph 9(d) with respect to your resignation Without Good Reason during the 60-day period following a Change of Control), from the date of your death Mr. Michael B. Perrine November 16, 1999 Page 4 or from the date your employment is terminated For Cause (as defined below) by the Company, you shall no longer be entitled to any base salary, bonus or other compensation benefits, other than such salary and bonus amounts earned but unpaid as of the date of termination of your employment. The term "For Cause" shall mean (i) your gross neglect or willful misconduct in the discharge of your duties and responsibilities to the Company, as determined by the Board of Directors of the general partner of the Company, (ii) your repeated failure to obey reasonable directions from the Company or the Board of Directors of the general partner of the Company, (iii) any act of yours against the Company or Travis Boats intended to enrich you at the expense of the Company or Travis Boats, (iv) any willful act or omission by you having the effect of materially injuring the business or business relationships of the Company or Travis Boats, or (v) your commission of a felony or any crime involving moral turpitude, fraud or misrepresentation. Any termination that is not For Cause or that does not result from your death or disability, shall be deemed to be a termination "Without Good Cause." (d) If your employment is terminated by the Company Without Good Cause (including expiration of a term without renewal) or you terminate this Letter Agreement Without Good Reason within sixty (60) days after the date of a Change of Control, then you shall be entitled to receive 2.99 times your annual compensation with proration of bonus for the year in which your employment was terminated, which amounts shall be payable over the three-year term in the same manner as such compensation would have been payable if employment had not terminated, provided that the Company may elect to pay or you may elect to receive such compensation as a lump sum payment. (e) Notwithstanding the foregoing you may submit the decision to classify termination of your employment as "For Cause" to binding arbitration under the rules and auspices of the American Arbitration Association then in effect. 10. Change of Control. The Company acknowledges that you agreed to assume your position with the Company and to enter into this Agreement based upon his confidence in the current shareholders of the Company and the support of the Board of Directors for the development of a new strategy for the Company. Accordingly, if the Company should undergo a "Change of Control," as defined in this section, the parties agree as follows: (a) For purposes of this Agreement, a "Change of Control" shall be deemed to exist in the event that any of the following occurs: (i) a change in the ownership of the capital stock of the Company where a corporation, person or group acting in concert (a "Person") as described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), holds or acquires, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of shares of capital stock of the Company which constitutes 40% or more (or, 30% Mr. Michael B. Perrine November 16, 1999 Page 5 or more in the event the Company is subject to the reporting requirements of Sections 12 or 15(d) under the Exchange Act) of the combined voting power of the Company's then outstanding capital stock then entitled to vote generally in the election of directors; or (ii) the persons who were members of the Board of Directors immediately prior to a tender offer, exchange offer, contested election or any combination of the foregoing, cease to constitute a majority of the Board of Directors of the Company; or (iii) a dissolution of the Company, or the adoption by the Company of a plan of liquidation, or the adoption by the Company of a merger, consolidation or reorganization involving the Company in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company (for purposes of this Agreement, a sale of all or substantially all of the assets of the Company shall be deemed to occur if any Person acquires, or during the 12-month period ending on the date of the most recent acquisition by such Person, has acquired, gross assets of the Company that have an aggregate fair market value equal to 50% or more of the fair market value of all of the gross assets of the Company immediately prior to such acquisition or acquisitions); or (iv) a tender offer or exchange offer is made by any Person which, if successfully completed, would result in such person beneficially owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act) either 50% or more of the Company's outstanding shares of Common Stock or shares of capital stock having 50% or more of the combined voting power of the Company's then outstanding capital stock (other than an offer made by the Company), and sufficient shares are acquired under the offer to cause such person to own 30% or more of the voting power; or (v) a change in control is reported or is required to be reported by the Company in response to either Item 6(e) of Schedule 14A of Regulations 14A promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the Exchange Act, which change in control has not been approved by a majority of the Board of Directors then in office who were directors at the beginning of the two-year period ending on the date the reported change in control occurred; or (vi) during any period of two consecutive years, individuals who, at the beginning of such period constituted the entire Board of Directors of the Company, cease for any reason (other than death) to constitute a majority of the directors, unless the election, or the nomination for election, by the Company's stockholders, of each new director was approved by a vote of a least a majority of the directors then still in office who were directors at the beginning of the period. For purposes of paragraph 10(a)(i) above, if a Person were the beneficial owner of 30% or more or 40% or more, as applicable, of the combined voting power of the Company's then Mr. Michael B. Perrine November 16, 1999 Page 6 outstanding securities as of the Effective Date and such Person thereafter accumulates more than 5% of additional voting power, a Change of Control of the Company shall be deemed to have occurred, notwithstanding anything in this Agreement to the contrary. A Change of Control shall include any other transactions or series of related transactions occurring which have substantially the same effect as the transactions specified in any of the preceding clauses of paragraph 4(a)(i)-(vi). However, a Change of Control shall not be deemed to occur if a person becomes the beneficial owner of the applicable percentage or more (as referenced above) of the combined voting power of the company's then outstanding securities solely by reason of the Company's redemption or repurchase of securities; but further acquisitions by such Person that cause such Person to be the beneficial owner of the applicable percentage or more (as referenced above) of the combined voting power of the Company's then outstanding securities shall be deemed a Change of Control. (b) In the event of a Change of Control, as defined in this section, all stock options then held by you for the purchase of equity securities of the Company shall immediately become vested, effective on the date of the Change of Control. 11. Nondisclosure and Noncompetition; Consideration. (a) You shall not, at any time during the term of your employment by the Company, nor so long as such information remains confidential with the Company or Travis Boats, use for your own account or for the benefit of any other person, firm, corporation or entity, directly or indirectly, except in the ordinary course of business, any of the supplier lists, customer or subscriber lists, contract terms, trade names, trade secrets or goodwill owned or used by the Company or Travis Boats in its business or, directly or indirectly, disclose or furnish to any other person, firm, corporation or entity, the methods by which the Company's business or that of Travis Boats is or has been conducted, any of the methods by which the customers or business of the Company or that of Travis Boats are or have been obtained, or any confidential or proprietary information whatsoever of the Company or Travis Boats, including, without limitation, the Intellectual Property described in paragraph 12 below and the identities of or other information regarding any customers or prospective customers of the Company. (b) Unless the Company consents in writing, at any time during the term of your employment with the Company, and within one year after the date your employment with the Company terminates, you will not, within the United States, directly or indirectly own, manage, operate, control, be employed by, advise or be connected in any manner (including, without limitation, as an employee, director, agent, partner, officer, stockholder, creditor, consultant or otherwise) with any person, firm, corporation or business which directly or indirectly is competitive with the Company's business (i.e., any business which engages in the business of retail marketing or selling recreational power boats, boat motors or boat trailers or provides services to people or entities selected because of their involvement in the same industry); provided, however, the covenant Mr. Michael B. Perrine November 16, 1999 Page 7 not to compete set forth in this paragraph 11(b) shall not apply if you are rightfully entitled to receive, and the Company fails to pay you, the consideration in paragraph 9(d) or if you are part of a group that seeks to effect a Change of Control with respect to the Company. (c) Notwithstanding the foregoing, nothing in this Letter Agreement will prohibit you from owning less than five percent of the capital stock of a corporation, the common stock of which is publicly traded on a national securities exchange or through NASDAQ, notwithstanding that such corporation may compete with the Company. (d) At any time during the term of your employment by the Company, and within one year after the date your employment with the Company terminates, neither you nor any entity or business owned or controlled by you, will, directly or indirectly for your benefit or the benefit of any third party, without the written consent of the Company, hire or solicit the employment of any employee of the Company or influence or induce any employee to leave or decline employment by the Company. 12. Materials. All data, listings, charts, drawings, records, documents, programs, software, documentation, memoranda, journals, notebooks, records, files, drafts, specifications and similar items relating to the business of the Company or its affiliates, whether compiled by you, furnished to you by the Company, its customers or clients or otherwise made accessible to you or coming into your possession, while you are employed by the Company, and copies of any such items, shall be and remain the sole and exclusive property of the Company or its customers or clients, as the case may be, and none of such items shall be removed from the Company's business premises by you without the prior consent of the Company, except as required in the course of your employment. All of such items shall be returned to the Company by you upon the termination of your employment with the Company for whatever reason. The provisions of this paragraph shall not, however, prohibit you from using any materials published by the Company and made available (without a breach of this agreement) to the general public. 13. Intellectual Property. If, during the term of your employment, you develop any proprietary technology (including without limitation any architecture, structure, layouts, processes, formulae, inventions, know-how, ideas, concepts, designs, drawings, specifications, test data, and quality and quality control standards); any patents and patent rights (including all information or discoveries covered thereby and all enhancements, modifications, improvements, divisions, continuations, continuations in part, reissues, re-examinations or extensions thereof), trademarks and trademark rights, copyrights and copyright rights, trade secrets and trade secret rights, and applications, registrations or their equivalents for any of the same; or any other intellectual property rights (collectively, the "Intellectual Property"), relating to the manufacturing or supplying of products or services in which the Company is or is likely to be involved, such Intellectual Property shall automatically become the property of the Company. You agree to cooperate with the Company Mr. Michael B. Perrine November 16, 1999 Page 8 to perfect your respective claims to such Intellectual Property and to execute and deliver any and all documents reasonably necessary in order to effectuate the intent of this paragraph, and you hereby grant to the Company an irrevocable power of attorney to execute any such documents. 14. Notices. All notices and communications hereunder shall be in writing and shall be deemed to have been duly given to a party when delivered in person (including delivery by an express delivery service or by facsimile transmission during the recipient's regular business hours), or three business days after such notice is enclosed in a properly sealed envelope, certified or registered, and deposited (postage and certification or registration prepaid) in a post office or collection facility regularly maintained by the United States Postal Service and addressed for delivery, if to you, at 7308 Kapok Lane, Austin, Texas 78759, or if to the Company, at 5000 Plaza on the Lake Blvd., Suite 250, Austin, Texas 78746. 15. Miscellaneous. (a) The rights and obligations of the Company under this Letter Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. (b) This Letter Agreement shall be subject to and governed by the laws (except the conflict of laws) of the State of Texas. (c) Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. Titles of sections are for convenience only and neither limit nor amplify any of the provisions contained herein. (d) Upon execution of this Letter Agreement, the rights, duties and obligations of the parties hereto with respect to the matters set forth herein shall be governed solely by the provisions of this Letter Agreement, and all representations, warranties, terms and conditions with respect to such matters which may be contained in any prior writing executed by the parties (or by any of them) shall be null and void and of no further force and effect. (e) If any provisions of this Letter Agreement, or the application thereof to any party hereto or under any circumstances, shall be invalid or unenforceable to any extent, the remainder of this Letter Agreement and the application of such provisions to other parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law; provided, that a provision as similar in terms and effect to such invalid or unenforceable shall be added automatically as part of this Letter Agreement. Mr. Michael B. Perrine November 16, 1999 Page 9 (f) In the event of a breach or threatened breach by you of any provision of this Letter Agreement, then in addition to any other available remedy to which the Company may be entitled, including the recovery of damages, the Company shall be entitled to an injunction restraining you from breaching or attempting to breach, in whole or in part, any of the provisions of this Letter Agreement. In addition, in the event of a breach by either party of any provision of this Letter Agreement, the non-breaching or (in the event of litigation) the prevailing party shall be entitled to recover from the other party all reasonable costs and attorneys' fees incurred by the non-breaching or prevailing party in seeking any of such remedies, in addition to the other relief to which the non-breaching or prevailing party may be entitled. As used in the preceding sentence, "prevailing party" shall include, without limitation, the party who retains legal counsel or brings an action against the other party and subsequently obtains all or substantially all of the relief sought, whether by compromise, settlement or judgment. * * * Mr. Michael B. Perrine November 16, 1999 Page 10 If you are in agreement with the foregoing, please so indicate by signing the enclosed extra original of this Letter Agreement and returning it to the Company, whereupon the provisions contained herein will be effective as of the date of this letter. Travis Boats, by signing below where indicated, agrees to be bound by the terms of this agreement in the event the management contract between the Company and Travis Boats ceases to exist. Very truly yours, TBC Management, Ltd. By: /s/ Mark T. Walton ----------------------------------------------- Mark T. Walton, Chairman of the Board of Travis Boats & Motors, Inc., its Managing General Partner AGREED TO AND ACCEPTED: /s/ Michael B. Perrine - ----------------------- Michael B. Perrine Date: , 1999 ----------------- AGREED TO AND ACCEPTED: Travis Boats & Motors, Inc. By: /s/ Mark T. Walton ------------------- Mark T. Walton Chairman of the Board Date: , 1999 ------------------ EX-10 4 EX 10.42-EMPLOYMENT AGREEMENT-RONALD SPRADLING EXHIBIT 10.42 TBC MANAGEMENT, LTD. November 16, 1999 Mr. Ronald L. Spradling Travis Boats & Motors, Inc. 5000 Plaza on the Lake Blvd., Suite 250 Austin, Texas 78746 Re: Employment Agreement -------------------- Dear Ron: This letter agreement (this "Letter Agreement") sets forth the terms of your employment relationship with TBC Management, Ltd., a Texas limited partnership (the "Company"), which has an agreement to provide management services to Travis Boats & Motors, Inc., a Texas corporation, and its subsidiaries (collectively referred to as "Travis Boats"). As an inducement to you to enter into this Letter Agreement, if for any reason the agreement between the Company and Travis Boats ceases to exist, the Company shall immediately assign this Letter Agreement to Travis Boats. Travis Boats, by signing below where indicated, agrees to accept such assignment and perform the terms of this Letter Agreement. This Letter Agreement supersedes all previous agreements between you and the Company and/or Travis Boats, including but not limited to the Letter Agreements dated December 14, 1995, as amended, and May 7, 1996 (the "May 7 Letter Agreement"). 1. Duties. You agree to perform the duties and assume the responsibilities normally incidental to the position of Executive Vice President of Travis Boats. You further agree to perform for the Company such other duties and responsibilities as may be reasonably prescribed from time to time by the Company. It is acknowledged that you are the Executive Vice President, but not an employee, of Travis Boats. 2. Extent of Service. The initial term of this employment contract with the Company shall expire on the third anniversary of the Effective Date of this Letter Agreement (as defined in paragraph 3 hereof), unless sooner terminated in accordance with the terms hereof. You shall devote such time, attention and energy to the business of the Company as shall be reasonably requested, and you will faithfully, industriously, and to the best of your ability perform all of the duties that may be required of you as an employee. You will not engage in activities, businesses, or investment that would in any way conflict with the best interests of the Company or Travis Boats. Mr. Ronald L. Spradling November 16, 1999 Page 2 3. Effective Date. This Letter Agreement shall be effective as of June 28, 1999 (the "Effective Date"). The parties acknowledge that this Letter Agreement shall be deemed effective as of the expiration of the May 7 Letter Agreement. 4. Salary. As long as you remain employed by the Company, the Company will pay you an annual salary of $170,000 (before federal or state withholding deductions), subject to adjustments, payable on the same schedule that salary is paid to other salaried employees of the Company. Your performance and base salary will be reviewed annually by the Company. You may be entitled to receive such further compensation as may be authorized by the Company upon such annual review or at other times deemed appropriate by the Company. 5. [Intentionally Omitted] 6. Benefits. As long as you remain employed by the Company, you shall be entitled to participate in health insurance, dental insurance, disability insurance, and accidental, death and disability insurance, as provided to the other executive employees of the Company, and such vacation and holiday time as provided in the Company's vacation/holiday policy. The Company shall provide you the use of an automobile for business use with all maintenance costs, automobile insurance premiums, gas and Company-related cellular phone charges paid by the Company. 7. Renewal and Extension Bonus Payment. As consideration for limiting other employment opportunities during the term of this Letter Agreement, the Company will pay you a renewal and extension bonus payment (the "Renewal Bonus") of $129,362.01, subject to withholding for applicable federal income tax, social security and other items required by law. The Company and you agree that you shall promptly repay a pro rata share of the Renewal Bonus to the Company based upon the initial three (3) year term of this Letter Agreement (net of any applicable taxes paid by you upon the payment of the Renewal Bonus) if you leave the employ of the Company during the initial term of this Letter Agreement, except for any termination of this Letter Agreement in connection with: (a) a termination by you for Good Reason (as defined below), (b) a termination by the Company Without Good Cause (as defined below), or (c) a termination by you Without Good Reason (as defined below) within sixty (60) days after the date of a Change of Control (as defined below). 8. Annual Bonus. As long as you remain employed by the Company and the consolidated income of Travis Boats before income tax expense and non-recurring audit adjustments (collectively "Pre-tax Income") reflects growth of 20% or more over the previous fiscal year, you shall receive an annual bonus of 1.5% of such total annual Pre-tax Income. If the Pre-tax Income Mr. Ronald L. Spradling November 16, 1999 Page 3 reflects growth of less than 20% over the previous fiscal year, the annual bonus shall be an amount determined by the Company. 9. Termination of Employment; Severance Payments. Notwithstanding the foregoing or anything to the contrary contained in this Letter Agreement, you may terminate your employment relationship with the Company at any time and for any reason whatsoever, or for no reason, after giving the Company written notice of such resignation at least 30 days prior to such intended resignation date, subject to the following provisions: (a) You shall have the right to resign for any Good Reason (as defined below) and such resignation shall be deemed to be a termination Without Good Cause (as defined below) for all purposes under this Agreement, including the "Change of Control" provisions set forth below and the severance provisions set forth in paragraph 9(d) below. For purposes of this Agreement, the term "Good Reason" shall be defined as: (i) The Company's failure in any material respect to perform any provision of this Agreement; (ii) Any material changes in your duties and responsibilities under this Agreement without your written consent; (iii) The hiring or promotion by the Company of another executive employee to a position of substantially similar job description or daily responsibility for the management of the Company without your written consent; (iv) The Company's directing you to work at a location other than Austin, Texas without your written consent; or (v) After a Change of Control, any material change which, in your sole but reasonable discretion, impacts you detrimentally upon your position within the Company. (b) Any resignation by you for any reason other than Good Reason shall be deemed a resignation "Without Good Reason." Other than as provided in paragraph 9(d) with respect to your resignation Without Good Reason during the 60-day period following a Change of Control, in the event of your resignation Without Good Reason, the Change of Control provisions in paragraph 10 and the severance provisions in paragraph 9(d) shall be inapplicable. (c) From the date you voluntarily terminate your employment with the Company Without Good Reason (other than as provided in paragraph 9(d) with respect to your resignation Without Good Reason during the 60-day period following a Change of Control), from the date of your death Mr. Ronald L. Spradling November 16, 1999 Page 4 or from the date your employment is terminated For Cause (as defined below) by the Company, you shall no longer be entitled to any base salary, bonus or other compensation benefits, other than such salary and bonus amounts earned but unpaid as of the date of termination of your employment. The term "For Cause" shall mean (i) your gross neglect or willful misconduct in the discharge of your duties and responsibilities to the Company, as determined by the Board of Directors of the general partner of the Company, (ii) your repeated failure to obey reasonable directions from the Company or the Board of Directors of the general partner of the Company, (iii) any act of yours against the Company or Travis Boats intended to enrich you at the expense of the Company or Travis Boats, (iv) any willful act or omission by you having the effect of materially injuring the business or business relationships of the Company or Travis Boats, or (v) your commission of a felony or any crime involving moral turpitude, fraud or misrepresentation. Any termination that is not For Cause or that does not result from your death or disability, shall be deemed to be a termination "Without Good Cause." (d) If your employment is terminated by the Company Without Good Cause (including expiration of a term without renewal) or you terminate this Letter Agreement Without Good Reason within sixty (60) days after the date of a Change of Control, then you shall be entitled to receive 2.99 times your annual compensation with proration of bonus for the year in which your employment was terminated, which amounts shall be payable over the three-year term in the same manner as such compensation would have been payable if employment had not terminated, provided that the Company may elect to pay or you may elect to receive such compensation as a lump sum payment. (e) Notwithstanding the foregoing you may submit the decision to classify termination of your employment as "For Cause" to binding arbitration under the rules and auspices of the American Arbitration Association then in effect. 10. Change of Control. The Company acknowledges that you agreed to assume your position with the Company and to enter into this Agreement based upon his confidence in the current shareholders of the Company and the support of the Board of Directors for the development of a new strategy for the Company. Accordingly, if the Company should undergo a "Change of Control," as defined in this section, the parties agree as follows: (a) For purposes of this Agreement, a "Change of Control" shall be deemed to exist in the event that any of the following occurs: (i) a change in the ownership of the capital stock of the Company where a corporation, person or group acting in concert (a "Person") as described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), holds or acquires, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of shares of capital stock of the Company which constitutes 40% or more (or, 30% Mr. Ronald L. Spradling November 16, 1999 Page 5 or more in the event the Company is subject to the reporting requirements of Sections 12 or 15(d) under the Exchange Act) of the combined voting power of the Company's then outstanding capital stock then entitled to vote generally in the election of directors; or (ii) the persons who were members of the Board of Directors immediately prior to a tender offer, exchange offer, contested election or any combination of the foregoing, cease to constitute a majority of the Board of Directors of the Company; or (iii) a dissolution of the Company, or the adoption by the Company of a plan of liquidation, or the adoption by the Company of a merger, consolidation or reorganization involving the Company in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company (for purposes of this Agreement, a sale of all or substantially all of the assets of the Company shall be deemed to occur if any Person acquires, or during the 12-month period ending on the date of the most recent acquisition by such Person, has acquired, gross assets of the Company that have an aggregate fair market value equal to 50% or more of the fair market value of all of the gross assets of the Company immediately prior to such acquisition or acquisitions); or (iv) a tender offer or exchange offer is made by any Person which, if successfully completed, would result in such person beneficially owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act) either 50% or more of the Company's outstanding shares of Common Stock or shares of capital stock having 50% or more of the combined voting power of the Company's then outstanding capital stock (other than an offer made by the Company), and sufficient shares are acquired under the offer to cause such person to own 30% or more of the voting power; or (v) a change in control is reported or is required to be reported by the Company in response to either Item 6(e) of Schedule 14A of Regulations 14A promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the Exchange Act, which change in control has not been approved by a majority of the Board of Directors then in office who were directors at the beginning of the two-year period ending on the date the reported change in control occurred; or (vi) during any period of two consecutive years, individuals who, at the beginning of such period constituted the entire Board of Directors of the Company, cease for any reason (other than death) to constitute a majority of the directors, unless the election, or the nomination for election, by the Company's stockholders, of each new director was approved by a vote of a least a majority of the directors then still in office who were directors at the beginning of the period. For purposes of paragraph 10(a)(i) above, if a Person were the beneficial owner of 30% or more or 40% or more, as applicable, of the combined voting power of the Company's then Mr. Ronald L. Spradling November 16, 1999 Page 6 outstanding securities as of the Effective Date and such Person thereafter accumulates more than 5% of additional voting power, a Change of Control of the Company shall be deemed to have occurred, notwithstanding anything in this Agreement to the contrary. A Change of Control shall include any other transactions or series of related transactions occurring which have substantially the same effect as the transactions specified in any of the preceding clauses of paragraph 4(a)(i)-(vi). However, a Change of Control shall not be deemed to occur if a person becomes the beneficial owner of the applicable percentage or more (as referenced above) of the combined voting power of the company's then outstanding securities solely by reason of the Company's redemption or repurchase of securities; but further acquisitions by such Person that cause such Person to be the beneficial owner of the applicable percentage or more (as referenced above) of the combined voting power of the Company's then outstanding securities shall be deemed a Change of Control. (b) In the event of a Change of Control, as defined in this section, all stock options then held by you for the purchase of equity securities of the Company shall immediately become vested, effective on the date of the Change of Control. 11. Nondisclosure and Noncompetition; Consideration. (a) You shall not, at any time during the term of your employment by the Company, nor so long as such information remains confidential with the Company or Travis Boats, use for your own account or for the benefit of any other person, firm, corporation or entity, directly or indirectly, except in the ordinary course of business, any of the supplier lists, customer or subscriber lists, contract terms, trade names, trade secrets or goodwill owned or used by the Company or Travis Boats in its business or, directly or indirectly, disclose or furnish to any other person, firm, corporation or entity, the methods by which the Company's business or that of Travis Boats is or has been conducted, any of the methods by which the customers or business of the Company or that of Travis Boats are or have been obtained, or any confidential or proprietary information whatsoever of the Company or Travis Boats, including, without limitation, the Intellectual Property described in paragraph 12 below and the identities of or other information regarding any customers or prospective customers of the Company. (b) Unless the Company consents in writing, at any time during the term of your employment with the Company, and within one year after the date your employment with the Company terminates, you will not, within the United States, directly or indirectly own, manage, operate, control, be employed by, advise or be connected in any manner (including, without limitation, as an employee, director, agent, partner, officer, stockholder, creditor, consultant or otherwise) with any person, firm, corporation or business which directly or indirectly is competitive with the Company's business (i.e., any business which engages in the business of retail marketing or selling recreational power boats, boat motors or boat trailers or provides services to people or entities selected because of their involvement in the same industry); provided, however, the covenant Mr. Ronald L. Spradling November 16, 1999 Page 7 not to compete set forth in this paragraph 11(b) shall not apply if you are rightfully entitled to receive, and the Company fails to pay you, the consideration in paragraph 9(d) or if you are part of a group that seeks to effect a Change of Control with respect to the Company. (c) Notwithstanding the foregoing, nothing in this Letter Agreement will prohibit you from owning less than five percent of the capital stock of a corporation, the common stock of which is publicly traded on a national securities exchange or through NASDAQ, notwithstanding that such corporation may compete with the Company. (d) At any time during the term of your employment by the Company, and within one year after the date your employment with the Company terminates, neither you nor any entity or business owned or controlled by you, will, directly or indirectly for your benefit or the benefit of any third party, without the written consent of the Company, hire or solicit the employment of any employee of the Company or influence or induce any employee to leave or decline employment by the Company. 12. Materials. All data, listings, charts, drawings, records, documents, programs, software, documentation, memoranda, journals, notebooks, records, files, drafts, specifications and similar items relating to the business of the Company or its affiliates, whether compiled by you, furnished to you by the Company, its customers or clients or otherwise made accessible to you or coming into your possession, while you are employed by the Company, and copies of any such items, shall be and remain the sole and exclusive property of the Company or its customers or clients, as the case may be, and none of such items shall be removed from the Company's business premises by you without the prior consent of the Company, except as required in the course of your employment. All of such items shall be returned to the Company by you upon the termination of your employment with the Company for whatever reason. The provisions of this paragraph shall not, however, prohibit you from using any materials published by the Company and made available (without a breach of this agreement) to the general public. 13. Intellectual Property. If, during the term of your employment, you develop any proprietary technology (including without limitation any architecture, structure, layouts, processes, formulae, inventions, know-how, ideas, concepts, designs, drawings, specifications, test data, and quality and quality control standards); any patents and patent rights (including all information or discoveries covered thereby and all enhancements, modifications, improvements, divisions, continuations, continuations in part, reissues, re-examinations or extensions thereof), trademarks and trademark rights, copyrights and copyright rights, trade secrets and trade secret rights, and applications, registrations or their equivalents for any of the same; or any other intellectual property rights (collectively, the "Intellectual Property"), relating to the manufacturing or supplying of products or services in which the Company is or is likely to be involved, such Intellectual Property shall automatically become the property of the Company. You agree to cooperate with the Company Mr. Ronald L. Spradling November 16, 1999 Page 8 to perfect your respective claims to such Intellectual Property and to execute and deliver any and all documents reasonably necessary in order to effectuate the intent of this paragraph, and you hereby grant to the Company an irrevocable power of attorney to execute any such documents. 14. Notices. All notices and communications hereunder shall be in writing and shall be deemed to have been duly given to a party when delivered in person (including delivery by an express delivery service or by facsimile transmission during the recipient's regular business hours), or three business days after such notice is enclosed in a properly sealed envelope, certified or registered, and deposited (postage and certification or registration prepaid) in a post office or collection facility regularly maintained by the United States Postal Service and addressed for delivery, if to you, at 7308 Kapok Lane, Austin, Texas 78759, or if to the Company, at 5000 Plaza on the Lake Blvd., Suite 250, Austin, Texas 78746. 15. Miscellaneous. (a) The rights and obligations of the Company under this Letter Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. (b) This Letter Agreement shall be subject to and governed by the laws (except the conflict of laws) of the State of Texas. (c) Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. Titles of sections are for convenience only and neither limit nor amplify any of the provisions contained herein. (d) Upon execution of this Letter Agreement, the rights, duties and obligations of the parties hereto with respect to the matters set forth herein shall be governed solely by the provisions of this Letter Agreement, and all representations, warranties, terms and conditions with respect to such matters which may be contained in any prior writing executed by the parties (or by any of them) shall be null and void and of no further force and effect. (e) If any provisions of this Letter Agreement, or the application thereof to any party hereto or under any circumstances, shall be invalid or unenforceable to any extent, the remainder of this Letter Agreement and the application of such provisions to other parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law; provided, that a provision as similar in terms and effect to such invalid or unenforceable shall be added automatically as part of this Letter Agreement. Mr. Ronald L. Spradling November 16, 1999 Page 9 (f) In the event of a breach or threatened breach by you of any provision of this Letter Agreement, then in addition to any other available remedy to which the Company may be entitled, including the recovery of damages, the Company shall be entitled to an injunction restraining you from breaching or attempting to breach, in whole or in part, any of the provisions of this Letter Agreement. In addition, in the event of a breach by either party of any provision of this Letter Agreement, the non-breaching or (in the event of litigation) the prevailing party shall be entitled to recover from the other party all reasonable costs and attorneys' fees incurred by the non-breaching or prevailing party in seeking any of such remedies, in addition to the other relief to which the non-breaching or prevailing party may be entitled. As used in the preceding sentence, "prevailing party" shall include, without limitation, the party who retains legal counsel or brings an action against the other party and subsequently obtains all or substantially all of the relief sought, whether by compromise, settlement or judgment. * * * Mr. Ronald L. Spradling November 16, 1999 Page 10 If you are in agreement with the foregoing, please so indicate by signing the enclosed extra original of this Letter Agreement and returning it to the Company, whereupon the provisions contained herein will be effective as of the date of this letter. Travis Boats, by signing below where indicated, agrees to be bound by the terms of this agreement in the event the management contract between the Company and Travis Boats ceases to exist. Very truly yours, TBC Management, Ltd. By: /s/ Mark T. Walton ----------------------------------------------- Mark T. Walton, Chairman of the Board of Travis Boats & Motors, Inc., its Managing General Partner AGREED TO AND ACCEPTED: /s/ Ronald L. Spradling - ----------------------- Ronald L. Spradling Date: , 1999 ------------------ AGREED TO AND ACCEPTED: Travis Boats & Motors, Inc. By: /s/ Mark T. Walton ------------------- Mark T. Walton Chairman of the Board Date: , 1999 ------------------- EX-10 5 EXHIBIT 10.43 - WELLCRAFT MASTER DEALER AGREEMENT EXHIBIT 10.43 Confidential Treatment Requested. Confidential portions of this document have been redacted and filed separately with the Commission WELLCRAFT MASTER DEALER AGREEMENT This master agreement, effective September 29, 1998, is by and between Wellcraft Marine Corp., a Delaware corporation ("Wellcraft") and Travis Boats & Motors, Inc., a Texas corporation ("Travis") (the "Agreement"). WHEREAS, Wellcraft is engaged in the manufacture of recreational powerboats and accessories and the sale of certain accompanying engines ("Products") and desires to sell its Products to Travis, through or to certain of its subsidiaries or affiliates ("Travis Subs"); and WHEREAS, Travis and Travis Subs are engaged in the sale of Products to the retail public and desire to purchase various Products from Wellcraft; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1. Travis and Travis Subs. For purposes of this Agreement, the term Travis when used shall be inclusive of Travis Subs except where the Agreement specifically uses Travis Subs individually. 2. Sale of Product. Wellcraft shall manufacture and sell to Travis or Travis Subs those various Products ordered from time to time by Travis or Travis Subs pursuant to Wellcraft's standard dealer agreement, as mutually agreed upon and as may be amended from time to time by mutual agreement. : 3. Dealer Agreements and Relationship to this Master Agreement. Each Travis or Travis Sub retail location which purchases Wellcraft Products shall execute and be subject to Wellcraft's standard dealer agreement as mutually agreed upon by the parties and as may be amended upon mutual agreement of the parties. This Agreement shall supplement and amend each individual *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 1 standard dealer agreement executed at each Travis retail location which sells Wellcraft Products. To the maximum extent possible, this Agreement and the standard dealer agreement shall be read and interpreted to be consistent with each other. In the event there is a conflict between the dealer agreement and this Agreement, the provisions of this Agreement shall control. 4. Pricing. a. *. During the term of this Agreement, Wellcraft shall sell Wellcraft Products to Travis at all times *. In the event Wellcraft changes its pricing structure or program discounts during the Wellcraft model year, * except that during Wellcraft model year 1999, the pricing for Wellcraft Products pre-rigged to receive Mercury engines shall be as described on Exhibit A hereto. For the purposes of this Agreement, pre-rigged Products are those which are rigged by Genmar, its divisions or subsidiaries, to receive a certain brand of engine but that are not sold with such engine. Notwithstanding the above, from time to time Wellcraft may sell individual Products *. For purposes of this Agreement, the Wellcraft "model year" means the period commencing on July 1 of any calendar year through June 30 of the following calendar year and the Travis "model year" means the period commencing on August 1 of any calendar year through July 31 of the following calendar year. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 2 b. Freight. In addition to the price of the Product described above, Wellcraft shall charge Travis a freight charge that Wellcraft shall incorporate into its total invoice price on the following basis: i. For Products shipped which are 28 feet in length or longer, Wellcraft shall charge Travis * ii. For Products shipped which are less than 28 feet in length, Wellcraft shall charge Travis *. Wellcraft shall calculate the * each model year based on Travis' annual forecast of Product to be purchased by Travis by each retail location and the shipping destination for Products. Wellcraft shall maintain records on * and this information shall be reported to Travis on a quarterly basis starting on the quarter ending September 30 of each model year. Travis shall report to Wellcraft any suspected errors in the records within 30 days of receipt of the report. At the end of each Wellcraft model year, Wellcraft shall reconcile * *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 3 * c. Engines. In the event an engine manufacturer changes its published pricing and enacts such changes after Wellcraft has published its engine price list, Travis, after the effective date of such change, shall pay *. 5. Timing of Purchases, Shipping and Delivery. Wellcraft will use its best efforts to ship then current Wellcraft model year Products at the * for all firm orders received from and delivered to Travis by June 30 of the then current Wellcraft model year. * Travis shall purchase and take delivery of and Wellcraft shall deliver 40 percent of the Product units Travis has forecasted to purchase for such Travis model year in its annual model year forecast. Wellcraft's obligation to deliver is subject to the following: i. Wellcraft receiving Travis' annual model year forecast as set forth in paragraph 6 herein on or before July 31 of each calendar year, ii. Wellcraft approving the monthly schedule of the number and type of Wellcraft Product units Travis ex- pects to order and take delivery of by January 15 as set forth in its annual model year forecast, and *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 4 iii. Travis submitting actual orders between August 1 and January 15 of such model year that do not exceed the monthly schedule set forth in its annual model year forecast by greater than 15 percent. Except where Travis may have caused a delay, Travis may cancel orders if Product has not been delivered by Wellcraft within 150 days of Wellcraft's acceptance of the order for such Product from Travis. 6. Forecasting. Travis shall provide Wellcraft, on or before July 31 of each calendar year, with a Travis model year forecast which describes (i) the number and type of Wellcraft Product units by month Travis expects to order and take delivery of between August 1 and January 15 of the upcoming Travis model year starting on August 1 and (ii) the number and type of Wellcraft Product units Travis expects to order and take delivery of between January 16 and July 31 of the upcoming Travis model year. In addition to the above annual model year forecast, Travis will forecast its Wellcraft Product requirements on a three (3) month rolling basis, updated monthly. Travis shall submit the forecast to Wellcraft by the first day of each calendar month. Travis shall designate a Travis representative with responsibility for forecasting Product purchases from Wellcraft. The forecasts shall be in a form mutually agreed to by the parties and shall include, at a minimum, a three-month projected schedule identifying the number of Product units scheduled to be purchased by Travis by boat brand, model, and engine brand, model and horsepower. The first-month forecast in the monthly report shall reflect a firm order previously accepted by Wellcraft. As a firm order, the first-month forecast may not be changed and is non-cancelable, however, Wellcraft reserves the right to not accept the portions of orders in any one month that exceed 15 percent of the amounts forecast for that month in the previous months' 3-month rolling forecast. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 5 7. * 8. Product Modification. Travis shall meet with Wellcraft management and product engineers in August and January of each year, unless mutually waived by the parties hereto, to provide input into changes for Wellcraft Products for the next model year. The August meeting shall primarily be to provide input on the structure and design of the Products. The January meeting shall primarily be to provide input on the features and accessories of the Products. Wellcraft will use its best efforts to incorporate the recommendations made by Travis taking into account considerations such as cost, safety, warranty and standard design. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 6 Wellcraft reserves the right, without notice or obligation, to change the design of the Products to the extent that such change does not materially alter the operation of the Boat or to the extent that such change is required due to product safety concerns, government regulations or vendor supply shortages. Wellcraft will provide Travis with as much notice as reasonably possible, but not less than ninety (90) days prior notice of shipment of a Product design change if such design change materially affects the appearance or operation of the Product. 9. Warranty and Third Party Litigation. Wellcraft makes no representations or warranties as to its Products except as may be described in the Wellcraft dealer agreement or Product materials. In the event legal action is commenced against Wellcraft and Travis related to Wellcraft Products, to the extent possible and if no conflict exists, Wellcraft and Travis shall reasonably agree in writing on the retention of common counsel and sharing of legal expenses. 10. Term of the Agreement. The term of this Agreement and the dealer agreement between the parties shall commence on the date of this Agreement and shall terminate on July 31, 2003. 11. Insurance. Each party to this Agreement shall maintain liability insurance coverage and shall provide evidence of such coverage to the other party upon such party's reasonable request. 12. Force Majeure. The parties will not be responsible for failure to perform any part of this Agreement or for any delay in the performance of any part of this Agreement, directly or indirectly resulting from or contributed to by any foreign or domestic embargoes, seizures, acts of God, strikes, labor disputes, vendor problems, insurrections, wars and/or continuance of war, or the adoption or enactment of any law, ordinance, regulation, ruling or order directly or indirectly interfering with production, delivery or other contingencies beyond their control. This Section does not affect the payment obligations of either party under this Agreement. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 7 13. Assignment. Neither party shall assign or otherwise transfer this Agreement, without the prior written consent of the other party, which consent shall not be unreasonably withheld. 14. Confidentiality. Each party agrees that the specific terms and conditions set forth in this Agreement shall be kept confidential and that neither party hereto shall make any disclosure regarding this Agreement or its terms except as may be required by law or with the consent of the other party. In the event either party concludes that it is obligated by law to disclose the terms of this Agreement, such party shall give the other party 3 business days prior written notice before disclosure along with an explanation as to why such disclosure is deemed necessary. 15. Disputes. All disputes arising out of or in connection with this Agreement shall be resolved by binding arbitration as set forth in Wellcraft's standard dealer agreements as mutually agreed upon and amended from time to time. 16. Severability. Each of the provisions contained in this Agreement shall be severable, and the unenforceability of one shall not affect the enforceability of any others or of the remainder of this Agreement. 17. Waiver. The failure of any party to enforce any condition or part of this Agreement at any time shall not be construed as a waiver of that condition or part, nor shall such party forfeit any rights to future enforcement thereof. The parties waive presentment for payment, protest, and notice of dishonor. 18. Headings. The headings and captions of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof. 19. Counterparts. More than one counterpart of this Agreement may be executed by the parties hereto, and each fully executed counterpart shall be deemed an original. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 8 20. Further Assurances. Each party will, at the reasonable request of the other, execute and deliver to the other all such further instruments, assignments, assurances and other documents as the other may request in connection with the carrying out of this Agreement and the transactions contemplated hereby. 21. Notices. All communications, notices and consents provided for herein shall be in writing and be given in person or by means of telex, telecopy or other wire transmission (with request for assurance of receipt in a manner typical with respect to communications of that type) or by mail, and shall become effective (x) on the delivery if given in person, (y) on the date of transmission if sent by telex, telecopy or other wire transmission (receipt confirmed), or (z) four business days after being deposited in the mails, with proper postage for first class registered or certified mail, prepaid. Notices shall be addressed as follows: IF TO WELLCRAFT: Wellcraft Marine Corp. 1651 Whitfield Avenue Sarasota, Florida 34243 Attention: President Telephone: 941-753-7811 Telecopy: 941-751-7822 WITH COPY TO: Genmar Holdings, Inc. 100 South Fifth Street Suite 2400 Minneapolis, Minnesota 55402 Attention: General Counsel Telephone: 612-339-7600 Telecopy: 612-337-1930 *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 9 IF TO TRAVIS: Travis Boats & Motors, Inc. 5000 Plaza on the Lake Suite 250 Austin, Texas 78746 Attn: President Telephone: 512-347-8787 Telecopy: 512-329-0480 provided, however, that if either party shall have designed a different address by notice to the other, then to the last address so designated. 22. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and no provision of this Agreement shall be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. 23. Amendments: Entire Agreement. This Agreement may not be amended, supplemented or otherwise modified except by an instrument in writing signed by each of the parties hereto. This Agreement contains the entire agreement of the parties hereto with respect to the transactions covered hereby, superseding all negotiations, prior discussions and preliminary agreements made prior to the date hereof. 24. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Minnesota. WELLCRAFT MARINE CORP. TRAVIS BOATS & MOTORS, INC. By: /s/ Grant E. Oppeguard By: /s/ Mark Walton ------------------------ ------------------------------- Its: VP Its: President ---------------------- ------------------------------ Date: 10-7-98 Date: 10-8-98 ---------------------- ------------------------------ *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 10 EXHIBIT A WELLCRAFT MASTER DEALER AGREEMENT - ------------------------------------------------------------- WELLCRAFT MERCURY PRICE ($) - ------------------------------------------------------------- 160 FISHERMAN * - ------------------------------------------------------------- 180 FISHERMAN * - ------------------------------------------------------------- 180 SPORTSMAN * - ------------------------------------------------------------- 190 FISHERMAN * - ------------------------------------------------------------- 210 FISHERMAN * - ------------------------------------------------------------- 210 SPORTSMAN * - ------------------------------------------------------------- 22 WALKAROUND * - ------------------------------------------------------------- 230 FISHERMAN * - ------------------------------------------------------------- 230 COASTAL * - ------------------------------------------------------------- 230 FISHERMAN-TWIN * - ------------------------------------------------------------- 230 COASTAL-TWIN * - ------------------------------------------------------------- 24 WALKAROUND * - ------------------------------------------------------------- 270 COASTAL * - ------------------------------------------------------------- 290 COASTAL * - ------------------------------------------------------------- 302 SCARAB SPORT * - ------------------------------------------------------------- * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 11 EX-10 6 EXHIBIT 10.44 - AQUASPORT MASTER DEALER AGREEMENT EXHIBIT 10.44 Confidential Treatment Requested. Confidential portions of this document have been redacted and filed separately with the Commission AQUASPORT MASTER DEALER AGREEMENT This master agreement, effective September 29, 1998, is by and between Aquasport, a division of Wellcraft Marine Corp., a Delaware corporation ("Aquasport") and Travis Boats & Motors, Inc., a Texas corporation ("Travis") (the "Agreement"). WHEREAS, Aquasport is engaged in the manufacture of recreational powerboats and accessories and the sale of certain accompanying engines ("Products") and desires to sell its Products to Travis, through or to certain of its subsidiaries or affiliates ("Travis Subs"); and WHEREAS, Travis and Travis Subs are engaged in the sale of Products to the retail public and desire to purchase various Products from Aquasport; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1. Travis and Travis Subs. For purposes of this Agreement, the term Travis when used shall be inclusive of Travis Subs except where the Agreement specifically uses Travis Subs individually. 2. Sale of Product. Aquasport shall manufacture and sell to Travis or Travis Subs those various Products ordered from time to time by Travis or Travis Subs pursuant to Aquasport's standard dealer agreement, as mutually agreed upon and as may be amended from time to time by mutual agreement. 3. Dealer Agreements and Relationship to this Master Agreement. Each Travis or Travis Sub retail location which purchases Aquasport Products shall execute and be subject to Aquasport's standard dealer agreement as mutually agreed upon by the parties and as may be amended upon mutual agreement of the parties. This Agreement shall supplement and amend each individual standard dealer agreement executed at each Travis retail location which sells Aquasport Products. To the maximum extent possible, this Agreement and the standard dealer agreement shall be read and interpreted to be consistent with each other. In the event there is a conflict between the dealer agreement and this Agreement, the provisions of this Agreement shall control. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 1 4. Pricing. a. *. During the term of this Agreement, Aquasport shall sell Aquasport Products to Travis at all times for *. In the event Aquasport changes its pricing structure or program discounts during the Aquasport model year, * except that, during Aquasport model year 1999, the pricing for Aquasport Products pre-rigged to receive Mercury engines shall be as described on Exhibit A hereto. For purposes of this Agreement, pre-rigged Products are those which are rigged by Genmar, its divisions or subsidiaries, to receive a certain brand of engine but that are not sold with such engine. Notwithstanding the above, from time to time Aquasport may sell individual Products *. For purposes of this Agreement, the Aquasport is model year' means the period commencing on July 1 of any calendar year through June 30 of the following calendar year and the Travis "model year" means the period commencing on August 1 of any calendar year through July 31 of the following calendar year. b. Freight. In addition to the price of the Product described above, Aquasport may charge Travis a freight charge that Aquasport shall incorporate into its total invoice price equal to the average of all of the freight rates which would be charged to Travis Stores under Aquasport's then current published freight program for dealers. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 2 c. Engines. In the event an engine manufacturer changes its published pricing and enacts such changes after Aquasport has published its engine price list, Travis, after the effective date of such change, shall pay * 5. Timing of Purchases, Shipping and Delivery. Aquasport will use its best efforts to ship then current Aquasport model year Products at the * for all firm orders received from and delivered to Travis by June 30 of the then current Aquasport model year. * Travis shall purchase and take delivery of and Aquasport shall deliver 40 percent of the Product units Travis has forecasted to purchase for such model year in its annual model year forecast. Aquasport's obligation to deliver is subject to the following: i. Aquasport receiving Travis' annual model year forecast as set forth in paragraph 6 herein on or before July 31 of each calendar year, ii. Aquasport approving the monthly schedule of the number and type of Aquasport Product units Travis expects to order and take delivery of by January 15 as set forth in its annual model year forecast, and iii. Travis submitting actual orders between August 1 and January 15 of such model year that do not exceed the monthly schedule set forth in its annual model year forecast by greater than 15 percent. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 3 Except where Travis may have caused a delay, Travis may cancel orders if Product has not been delivered by Aquasport within 150 days of Aquasport's acceptance of the order for such Product from Travis. 6. Forecasting. Travis shall provide Aquasport, on or before July 31 of each calendar year, with a Travis model year forecast which describes (i) the number and type of Aquasport Product units by month Travis expects to order and take delivery between August 1 and January 15 of the upcoming Travis model year starting August 1 and (ii) the number and type of Aquasport Product units Travis expects to order and take delivery between January 16 and July 31 of the upcoming Travis model year. In addition to the above annual model year forecast, Travis will forecast its Aquasport Product requirements on a three (3) month rolling basis, updated monthly. Travis shall submit the forecast to Aquasport by the first day of each calendar month. Travis shall designate a Travis representative with responsibility for forecasting Product purchases from Aquasport. The forecasts shall be in a form mutually agreed to by the parties - and shall include, at a minimum, a three-month projected schedule identifying the number of Product units scheduled to be purchased by Travis by boat brand, model, and engine brand, model and horsepower. The first-month forecast in the monthly report shall reflect a firm order previously accepted by Aquasport. As a firm order, the first-month forecast may not be changed and is noncancelable, however, Aquasport reserves the right to not accept the portions of orders in any one month that exceed 15 percent of the amounts forecast for that month in the previous months' 3-month rolling forecast. 7. * *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 4 * 8. Product Modification. Travis shall meet with Aquasport management and product engineers in August and January of each year, unless mutually waived by the parties hereto, to provide input into changes for Aquasport Products for the next model year. The August meeting shall primarily be to provide input on the structure and design of the Products. The January meeting shall primarily be to provide input on the features and accessories of the Products. Aquasport will use its best efforts to incorporate the recommendations made by Travis taking into account considerations such as cost, safety, warranty and standard design. Aquasport reserves the right, without notice or obligation, to change the design of the Products to the extent that such change does not materially alter the operation of the Boat or to the extent that such change is required due to product safety concerns, government regulations or vendor supply shortages. Aquasport will provide Travis with as much notice as reasonably possible, but not less than ninety (90) days prior notice of shipment of a Product design change if such design change materially affects the appearance or operation of the Product. 9. Warranty and Third Party Litigation. Aquasport makes no representations or warranties as to its Products except as may be described in - -the Aquasport dealer agreement or Product materials. In the event legal action is commenced against Aquasport and Travis related to *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 5 Aquasport Products, to the extent possible and if no conflict exists, Aquasport and Travis shall reasonably agree in writing on the retention of common counsel and sharing of legal expenses. 10. Term of the Agreement. The term of this Agreement and the dealer agreement between the parties shall commence on the date of this Agreement, and shall terminate on July 31, 2001. 11. Insurance. Each party to this Agreement shall maintain liability insurance coverage and shall provide evidence of such coverage to the other party upon such party's reasonable request. 12. Force Majeure. The parties will not be responsible for failure to perform any part of this Agreement or for any delay in the performance of any part of this Agreement, directly or indirectly resulting from or contributed to by any foreign or domestic embargoes, seizures, acts of God, strikes, labor disputes, vendor problems, insurrections, wars and/or continuance of war, or the adoption or enactment of any law, ordinance, regulation, ruling or order directly or indirectly interfering with production, delivery or other contingencies beyond their control. This Section does not affect the payment obligations of either party under this Agreement. 13. Assignment. Neither party shall assign or otherwise transfer this Agreement, without the prior written consent of the other party, which consent shall not be unreasonably withheld. 14. Confidentiality. Each party agrees that the specific terms and conditions set forth in this Agreement shall be kept confidential and that neither party hereto shall make any disclosure regarding this Agreement or its terms except as may be required by law or with the consent of the other party. In the event either party concludes that it is obligated by law to disclose the terms of this Agreement, such party shall give the other party 3 business days prior written notice before disclosure along with an explanation as to why such disclosure is deemed necessary. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 6 15. Disputes. All disputes arising out of or in connection with this Agreement shall be resolved by binding arbitration as set forth in Aquasport's standard dealer agreement as mutually agreed upon and amended from time to time. 16. Severability. Each of the provisions contained in this Agreement shall be severable, and the unenforceability of one shall not affect the enforceability of any others or of the remainder of this Agreement. 17. Waiver. The failure of any party to enforce any condition or part of this Agreement at any time shall not be construed as a waiver of that condition or part, nor shall such party forfeit any rights to future enforcement thereof. The parties waive presentment for payment, protest, and notice of dishonor. 18. Headings. The headings and captions of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof. 19. Counterparts. More than one counterpart of this Agreement may be executed by the parties hereto, and each fully executed counterpart shall be deemed an original. 20. Further Assurances. Each party will, at the reasonable request of the other, execute and deliver to the other all such further instruments, assignments, assurances and other documents as the other may request in connection with the carrying out of this Agreement and the transactions contemplated hereby. 21. Notices. All communications, notices and consents provided for herein shall be in writing and be given in person or by means of telex, telecopy or other wire transmission (with request for assurance of receipt in a manner typical with respect to communications of that type) or by mail, and shall become effective (x) on the delivery if given in person, (y) on the date of transmission if sent *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 7 by telex, telecopy or other wire transmission (receipt confirmed), or (z) four business days after being deposited in the mails, with proper postage for first class registered or certified mail, prepaid. Notices shall be addressed as follows: If to Aquasport: Wellcraft Marine Corp. 1651 Whitfield Avenue Sarasota, Florida 34243 Attention: President Telephone: 941-753-7811 Telecopy: 941-751-7822 With copy to: Genmar Holdings, Inc. 100 South Fifth Street Suite 2400 Minneapolis, Minnesota 55402 Attention: General Counsel Telephone: 612-339-7600 Telecopy: 612-337-1930 If to Travis: Travis Boats & Motors, Inc. 5000 Plaza on the Lake Suite 250 Austin, Texas 78746 Attn: President Telephone: 512-347-8787 Telecopy: 512-329-0480 Provided, however, that if either party shall have designed a different address by notice to the other, then to the last address so designated. 22. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and no provision of this Agreement shall be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 8 23. Amendments; Entire Agreement. This Agreement may not be amended, supplemented or otherwise modified except by an instrument in writing signed by each of the parties hereto. This Agreement contains the entire agreement of the parties hereto with respect to the transactions covered hereby, superseding all negotiations, prior discussions and preliminary agreements made prior to the date hereof. 24. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Minnesota. AQUASPORT, a division of TRAVIS BOATS & MOTORS, INC. WELLCRAFT MARINE CORP. By: /s/ Grant E Oppeguard By: /s/ Mark Walton -------------------------- -------------------------------- Its: VP Its: President ------------------------- -------------------------------- Date: 10-7-98 Date: 10-8-98 ------------------------- -------------------------------- *Indicates confidential treatment requested. The redacted material has been filed separately with the Commission. 9 Exhibit A Aquasport Master Dealer Agreement - ------------------------------------------------------------------------ Aquasport Mercury Price ($) - ------------------------------------------------------------------------ 165 Striper * - ------------------------------------------------------------------------ 175 Osprey * - ------------------------------------------------------------------------ 200 Osprey * - ------------------------------------------------------------------------ 205 Osprey * - ------------------------------------------------------------------------ 215 Dual Console * - ------------------------------------------------------------------------ 215 Explorer * - ------------------------------------------------------------------------ 225 Explorer * - ------------------------------------------------------------------------ 225 Osprey * - ------------------------------------------------------------------------ 225 Explorer-twin * - ------------------------------------------------------------------------ 225 Osprey-twin * - ------------------------------------------------------------------------ 245 Explorer * - ------------------------------------------------------------------------ 245 Osprey * - ------------------------------------------------------------------------ 245 Explorer-twin * - ------------------------------------------------------------------------ 245 Osprey-twin * - ------------------------------------------------------------------------ * Indicates Confidential Treatment requested. The redacted material has been filed separately with the Commission. 10 EX-10 7 EX 10.45-OUTBOARD MARINE CORP. RETAIL STORE AGMT EXHIBIT 10.45 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION. OUTBOARD MARINE CORPORATION PRIVATE LABEL\RETAIL STORE AGREEMENT THIS AGREEMENT is made this ____ day of _________________, ________ by and between Travis Boats and Motors, Inc., a Texas corporation with its principal place of business in Austin, TX ("TRAVIS") and Outboard Marine Corporation, a Delaware corporation with its principal place of business in Waukegan, IL ("OMC"). WHEREAS, Travis purchases private label boats for resale under the Travis Edition tradename through its owned retail stores; WHEREAS, it is the parties' intention that during the term of this Agreement, any gasoline outboard motor OMC manufactures, markets or distributes in the United States, including Johnson(R) or Evinrude(R), will be subject to the terms of this Agreement. In addition, it is OMC's intention undeR the Agreement to maintain Travis' relative position in the marketplace with regard to * discounts; WHEREAS, Travis wishes to purchase remote steering and electric start gasoline outboard motors manufactured, sold or distributed by OMC in the United States, including Johnson and Evinrude outboard motors ("OUTBOARD MOTORS") for resale as part of its Travis Edition or other new boat packages and for sale as loose outboards through Travis retail stores, all within the United States; WHEREAS, Travis wishes to purchase tiller steering outboard motors, including Johnson and Evinrude tiller steering outboard motors, ("TILLER OUTBOARDS") for sale through Travis retail stores in the United States; and WHEREAS, OMC wishes to sell Outboard Motors and Tiller Outboards to Travis. NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, the parties agree as follows: 1. All purchases and sales of Outboard Motors and Tiller Outboards shall be under the terms and conditions of this Agreement, which is non-exclusive. 2. The prices paid by Travis for Outboard Motors for use with new boat packages shall be as follows: U.S. Dealer Net Price: 100% * Discount (see Paragraph 2(b): * Contract Discount (see Paragraphs 1 and 14): * * Indicates Confidential Treatment Requested. The redacted material has been filed separately with the Commission. 1 Contract Resolution Discount: * Total Discount: * Invoice Price: * * Rebate (see Paragraph 2(c)): * (paid monthly) Contract Resolution Rebate: * (paid quarterly) Planning Rebate (see Paragraph 2(d)): * (paid quarterly) Travis Edition Rebate: * (paid quarterly) Package Rebate (see Paragraph 2(e)): * (paid quarterly) Market Development Rebate (available for sales to Travis retail stores see Paragraph 2(f)): * (paid upon approved claims) Total Rebate: * Net Cost: * The discounts and rebates above are subject to the following conditions: (a) In order to earn the rebates described in this Para- graph 2, * i. Not later than fifteen (15) days after the execution of this Agreement Travis shall obtain a statement in the form attached hereto as Attachment A from each of its suppliers of boats waiving such suppliers' eligibility for and right and claim to any pre-rig or package fee from OMC for model year 1999. Travis shall obtain a similar statement from each of its suppliers of boats for each subsequent model year during the term of this Agreement. Such statements shall be provided to OMC not later than fifteen (15) days prior to the beginning of each subsequent model year; ii. On a monthly basis, Travis will provide OMC with a list showing the Outboard Motors' serial number, corresponding hull identification number and make of boat for each new boat package shipped by Travis in the previous month; and iii. On a monthly basis, Travis will provide OMC with a list of Outboard Motors sold by Travis in the previous month as loose outboards. OMC shall charge back Travis for all Outboard Motors on which the * Rebate is paid and which are sold as loose outboards. (b) * For model years 1999 and 2000, Travis's * Discount shall be * and its invoice price shall be * of dealer net price. For model year 2001, the * Discount available to Travis shall be adjusted as necessary so that the Travis Invoice Price remains equal to the net price available to OMC dealers pursuant to the maximum discounts and rebates offered to OMC dealers under the applicable OMC dealer * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 2 program. OMC shall use commercially reasonable efforts to keep its dealer program competitive to those offered by other outboard manufacturers. (c) * REBATE. The * Rebate shall be * . For model year 1999, if Travis fails to purchase a combined total of * units of Outboard Motors and Tiller Outboards and attain an average of * for its purchases of Outboards Motors and Tiller Outboards, the Horsepower/Volume Rebate shall be reduced by * percentage points for the following model year as OMC's sole remedy, except as provided in Paragraph 6(g) herein. For each model year after 1999, if Travis fails to purchase a combined total of * units of Outboard Motors and Tiller Outboards and attain an average of * for its purchases of Outboard Motors and Tiller Outboards, the * Rebate shall be reduced by * percentage points for the following model year as OMC's sole remedy, except as provided in Paragraph 6(g) herein. Average horsepower shall be calculated on the following basis: the total horsepower of units units. In the event OMC is unable to timely ship forecasted reasonable orders of Travis, then the units not shipped will be counted toward the horsepower and volume requirements of this Agreement. * Rebates will be paid on a monthly basis. * Rebate payments will be made within 30 days of the end of each month. (d) For model year 1999, Travis will earn the Planning Rebate by adhering to its own forecast and placing orders in a pattern consistent with its past order pattern with OMC. To qualify for the Planning Rebate in subsequent model years, Travis must forecast, by model, at least * of the total unit volume sold in the four most recently completed quarters. Forecasts must be submitted at least 30 days prior to the start of each quarter. Forecasts are subject to acceptance by OMC in its sole discretion. Acceptance of forecasts will not be unreasonably withheld provided Travis' forecasts are consistent with its past order pattern with OMC. The rebate will be paid based upon the accuracy of the forecast according to the following schedule: % of Forecast Shipped Each Quarter Rebate ------------ ------ * * * * * * * * Accepted orders not shipped shall count toward determining the Planning Rebate. Planning Rebates shall be paid quarterly within 30 days after each quarter. * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 3 (e) PACKAGE REBATE. The Package Rebate shall be paid quarterly on Outboard Motors sold as part of a new boat package, documented in accordance with Paragraph 2(a). (f) MARKET DEVELOPMENT REBATE. The Market Development Rebate shall be paid to Travis upon submission to OMC of such documents as may be required under OMC's then current Market Development Program. This is the only Market Development Rebate available to Travis retail stores under the 1999 OMC Johnson and Evinrude Dealer Sales Programs. The Market Development Rebate shall be paid upon approval of claims. The * Market Development Rebate will apply only to new boat package sales by Travis retail stores. The Market Development Rebate shall be calculated on the dealer net price of Outboard Motors purchased by Travis under this Agreement. The Market Development Funds shall be used for the purpose of promoting Outboard Motors in accordance with OMC's Market Development Program which may be in effect from time to time. 3. Travis agrees that its purchases of Outboard Motors from OMC under the terms described in Paragraph 2 above are for the exclusive purpose of sale by Travis retail stores in the United States, which are authorized OMC dealers, as part of a complete new boat package and for no other purpose. Travis agrees not to offer or sell boat packages with Outboard Motors or Tiller Outboards in excess of the boat's rated horsepower capacity. 4. LOOSE OUTBOARD MOTORS AND TILLER OUTBOARDS DISCOUNTS AND REBATES. The discounts, rebates and procedures described in Paragraphs 2 and 3 of this Agreement apply only to Outboard Motors sold as a part of a complete boat package. For model year 1999, loose Outboard Motors and Tiller Outboards will be priced as follows provided a minimum of * combined total units of loose Outboard Motors and Tiller Outboards are purchased: U.S. DEALER NET PRICE: 100% Loose Outboard Motors and Tiller Outboards Discount: * Invoice Price: * Net Cost: * Terms and financing for model year 1999 are as provided for in the 1999 Johnson and Evinrude Dealer Sales Programs. OMC reserves the right to change its dealer programs with regard to loose Outboard Motors and Tiller Outboards for future model years, However, for model year 2000 Travis' discount for loose Outboard Motors and Tiller Outboards will remain at 22% provided it complies with the minimum purchase requirement of such programs. For model year 2001, Travis will * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 4 receive the maximum discount and rebate offered to dealers under OMC's published dealer programs provided it complies with the minimum purchase volume requirements of such programs. 5. During the term of this Agreement, terms of purchase (including freight and financing from finance companies) on Outboard Motors and Tiller Outboards purchased by Travis from OMC shall be subject to, but no less favorable than, for each year of the Agreement, those offered by OMC to its authorized dealers during that model year. OMC intends for its dealer programs for Outboard Motors and Tiller Outboards to remain competitive with the terms and conditions of those programs offered by the other outboard manufacturers. Travis agrees not to publish or disclose to third parties in any way the prices and discounts contained in this Agreement, except as required by its accounting or legal advisors or as required by law, including without limitation applicable regulations of the United States Securities Exchange Commission or stock exchange requirements. 6. This Agreement may be terminated by either OMC or Travis in the event of any breach of the terms of this Agreement by the other, including, but not limited to: (a) Failure of Travis to pay for Outboard Motors or Tiller Outboards in accordance with the terms of this Agreement; (b) failure of OMC to pay rebates as required by this Agreement; (c) Bankruptcy or insolvency of the other party; (d) Material or intentional fraud or misrepresentation; (e) Disclosure to third parties of Outboard Motor or Tiller Outboard prices charged to Travis by OMC, except as required by its accounting or legal advisors or as required by law, including without limitation applicable regulations of the United States Securities Exchange Commission or stock exchange requirements. (f) * ; (g) Travis's failure to order at least a combined total of * units of Outboard Motors and Tiller Outboards in any model year during the term of this Agreement; (h) OMC's failure to supply at least 80% of Travis' accepted orders in any two consecutive quarters; and (i) The failure of either party to act in good faith in any material respect as relating to this Agreement. * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 5 Provided, however, termination shall be subject to the following cure provisions: The party suffering the breach shall provide the breaching party a written notice of such breach. The breaching party shall have a period of * days from the date of receipt of such notification of such breach to cure the breach of the Agreement, except in the instance of the breaches set forth in (c), (d) and (e) above for which there shall be no cure period. All notifications shall be sent by certified or other forms of registered mail. 7. Travis retail stores shall not be eligible for any discounts, rebates, or any other OMC dealer programs except, to the extent they may exist in any model year during the term of this Agreement, the following: (a) Dealer Sales to Government Agencies (b) Resort Rental Plan (c) Professional Guide Program (d) Promotional Engine Program 8. Travis agrees to increase its OMC Genuine Parts & Accessories ("P&A") business by * per model year starting with a goal of * (exclusive of electric trolling motor purchases) in P&A purchases in model year 1999. Travis will be allowed to participate in all P&A programs and will receive a * volume rebate per year during the term of this Agreement provided the abovereferenced annual P&A purchase goals are met. OMC will accept in each model year of this Agreement, * , return of up to * of the total P&A purchased by Travis. 9. OMC agrees to sell to Travis rigging items at * for the pre-rigging of Travis Edition boats. These rigging items are not eligible for the * P&A volume rebate. These rigging items will, however, count toward Travis' annual P&A purchase goals. 10. This Agreement supersedes any and all prior agreements between the parties relating to prices and discounts for Outboard Motors, Tiller Outboards and P&A. The discounts and rebates contained in this Agreement are the only ones applicable to purchases of Outboard Motors, Tiller Outboards and P&A by Travis. In the event of a conflict between this Agreement and any other agreement concerning any provisions of this Agreement, the terms of this Agreement shall prevail. 11. The Agreement dated October 3, 1997 by and between Travis Boats & Motors, Inc. and OMC (the "1997 AGREEMENT") is hereby terminated effective June 30, 1998. 12. OMC and Travis retail stores may enter into Dealer Agreements. Such Dealer Agreements will govern all aspects of the parties' relationship except those relating to the purchase of * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 6 Outboard Motors and Tiller Outboards as contained in this Agreement. OMC will not terminate or fail to renew such Dealer Agreements during the term of this Agreement except for cause as defined in such Dealer Agreement. For purposes of this Agreement, the definition of cause will not change materially from that definition contained in the 1999 OMC Dealer Agreement. OMC has the sole discretion in approving Travis retail stores as OMC dealers, but such approval shall not be unreasonably withheld. 13. OMC reserves the right to modify, change or alter its dealer programs and discounts at any time during the term of this Agreement and shall provide Travis with reasonable notice of such modifications, changes or alterations. * . OMC reserves the right to conduct an audit of Travis' books and records upon reasonable notice for the purpose of verifying any discount or rebate claimed by Travis pursuant to this Agreement. 14. This Agreement shall be effective as of July 1, 1998 and shall expire on June 30, 2001. 15. Each party hereby covenants and agrees that such party will not pursue against any other party hereto any claims that such party has, had or may have had against such other party pursuant to the 1997 Agreement; provided, however, that the foregoing covenant and agreement shall be of no further force and effect if this Agreement is terminated prior to June 30, 2001, unless such termination is by OMC pursuant to Paragraphs 6(a), (e) or (g) above. 16. The provisions hereof shall inure to the benefit of, and be binding upon, the permitted assignees, successors, heirs, executors and administrators of the parties hereto. This Agreement may not be assigned without the written consent of all other parties. TRAVIS BOATS & MOTORS, INC. OUTBOARD MARINE CORPORATION BY: /S/ MARK WALTON BY: ILLEGIBLE -------------------------- ----------------------------- ITS: PRESIDENT ITS: VICE PRESIDENT, GENERAL COUNSEL & SECRETARY DATE: NOVEMBER 13, 1998 DATE: NOVEMBER 12, 1998 * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 7 EX-10 8 EXHIBIT 10.46 - PRODUCT SUPPLY AGREEMENT EXHIBIT 10.46 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION. PRODUCT SUPPLY AGREEMENT This Product Supply Agreement (the "Agreement") is made this 29th day of June, 1999, by and between Mercury Marine, a division of Brunswick Corporation, a corporation organized under the laws of the state of Delaware ("Mercury") and Travis Boats & Motors, Inc. a corporation organized under the laws of the state of Texas ("TBM" or the "Company"), and the Company Affiliates (as hereinafter defined). RECITALS a. Mercury manufactures and sells Mercury, Mariner, and Force outboards. These outboard motors or any other outboard motors produced or manufactured by or on behalf of Mercury or its successors, assigns or affiliates during the term of this Agreement shall be collectively referred to herein as AOUTBOARDS@ and related parts and accessories ("PARTS") (Outboards and Parts are hereinafter collectively referred to as "PRODUCTS"). b. TBM and the TBM affiliates described on Exhibit A (the "COMPANY AFFILIATES") (TBM and Company Affiliates collectively referred to as "TRAVIS") own and operate retail facilities for the sale of marine products throughout the United States. Travis desires an additional source of marine engine products. c. The parties wish to enter into this Agreement whereby Travis will purchase Outboards and Parts from Mercury and Mercury will supply Outboards and Parts to Travis. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein, Mercury and Travis agree as follows: AGREEMENT SECTION 1. DEFINITIONS. The following terms have the following meanings when used herein: (a) "MINIMUM OUTBOARD VOLUME" means Outboard purchases by Travis from Mercury equal to at least * during the 1999 Model Year, and for each Model Year thereafter an amount equal to * multiplied by the ratio of outboard engine units (Mercury and Non-Mercury) sold by Travis during such Model Year divided by the outboard engine units (Mercury and Non-Mercury) sold by Travis during the 1999 Model Year. * * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 1 (b) "MODEL YEAR" means the 12 month period so designated by Mercury, currently commencing July 1 of any calendar year and ending June 30 of the following calendar year. No change in a Model Year shall have the effect of overlapping months from the prior Model Year. (c) "DEALER LIST PRICE" means the dealer list price published by Mercury from time to time. The current dealer list price is attached as Exhibit B. SECTION 2. SUPPLY OF PRODUCTS 2.1 Purchase and Sale of Products (a) During the term of this Agreement, Mercury shall sell and deliver to Travis, and Travis shall purchase from Mercury, Products in accordance with and pursuant to this Agreement. If Travis fails to purchase the Minimum Overboard Volume during any Model Year, Travis shall pay Mercury an amount equal to the Benefit Adjustment (as hereinafter defined) and Mercury may refuse to sell Travis Products until such time that the Benefit Adjustment is paid in full. Notwithstanding the foregoing, if such failure is the result of the actions or inactions of Mercury, then Mercury shall be required to continue to sell Travis Products and Travis shall not be obligated to repayment under the terms of the Benefit Adjustment. In order to determine whether Travis has satisfied its obligations under this Section 2.1 and to calculate any Benefit Adjustment under Section 6(b), purchases of Outboards by Company Affiliates during the Term shall be deemed to be purchases by Travis. (b) Mercury retains the right, in its sole and exclusive discretion to modify the design and components of Products or discontinue any Products at any time. However, in the event that Mercury discontinues a Product and fails to make available to Travis alternative replacement Product that is as a minimum B competitive in price, performance, technology and availability to the discontinued Product which was purchased by Travis then the Minimum Outboard Volume shall be reduced by the dollar value of such discontinued Product purchased by Travis in the current Model Year. It is agreed by the Parties hereto that this shall not include the discontinuance of the * model line. 2.2 Shipment and Billing All shipments of Products shall be made FOB Mercury=s factory distribution center, at which time title shall pass. Travis shall pay all applicable shipping, transportation, deliver and handling charges for Products ordered, except for orders for * or more Outboards in which case Mercury shall pay such charges and except for ordered made pursuant to published P&A programs offered by Mercury from time to time. * Mercury covenants that the date of invoice shall in no case be a date preceding the date such product is shipped by Mercury to Travis. Mercury further covenants that in no case shall the date of invoice proceed five (5) days from the date such Product is delivered to Travis, unless such is the result of the actions and inactions of Travis. Accordingly, Mercury and Travis agree to use commercially reasonable diligence to modify, as necessary certain dates of invoice. Travis shall pay Mercury a fee equal to the New York Prime Rate plus 2% on any past due 2 * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. invoice amounts pro-rated for the number of days such invoice is past due, however, in no case will such amount paid by Travis exceed the maximum allowed by law. Mercury may refuse shipment if Travis fails to pay for a prior shipment in a timely manner. Travis will reimburse Mercury for all reasonable costs in collecting past due accounts. Mercury may adjust or set off any rebates previously paid or credited to Travis for returned or repurchased Products. Mercury retains a security interest and lien on all Products sold to Travis, and all proceeds arising out of the sale of Products by Travis until Products are paid for in full with cash; as well as on all discounts, rebates and all funds on Travis' account at Mercury. 2.3 Price. (a) Outboard Pricing. The purchase price for all Outboards shall equal Mercury's Dealer List Price minus an amount equal to * of such published Dealer List Price. (b) Parts Pricing. Except as set forth in Section 6(a)(i) below, the purchase price and terms for Parts shall be determined in accordance with Mercury's standard industry dealer programs in effect at the time of Travis' order. 2.4 Forecasts and Order Procedure. (a) Rolling Forecasts. During the term of this Agreement, on or before the 15th day of each month, Travis shall provide to Mercury a three month forecast ("ROLLING FORECAST") setting forth Travis' projected volume requirements for Products on a month by month basis for a three month period that begins the month immediately following the month in which such Rolling Forecast is delivered. The volumes shown for the first month of each Rolling Forecast shall be treated as a firm order and shall not vary from the volume forecast of such month as set forth in the immediately preceding Rolling Forecast. The volume shown for the second and third months of each Rolling Forecast are forecast only, but such volumes shall not exceed by more than * the volume forecast for such months as set forth in the immediately preceding Rolling Forecast. Mercury may, in its sole discretion, agree to variance from such percentages. The above mentioned Rolling Forecast shall be provided by Travis for each Retail Location (as hereinafter defined). (b) Purchase Orders. Immediately upon the delivery of any Rolling Forecast and in consideration of required lead time, Travis shall provide to Mercury a Purchase Order confirming the order for Products which is forecast for the first month of the Rolling Forecast. Travis may use its own standard purchase order, provided that no additional or different terms or conditions contained in any purchase order or other communication from Travis shall be binding upon Mercury. The requested shipping time shall be at least 30 days after the date on which the 4 order is placed. Mercury shall ship all such Products on the shipment date identified on Travis' Purchase Orders. * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 3 SECTION 3. SALES AND SERVICE AGREEMENT. All Products sold to Travis or Company Affiliates are subject to the Product warranty provisions in the Mercury Dealer Sales and Service Agreement, which is attached as Exhibit C. SECTION 4. TERM OF AGREEMENT. 4.1 Term. This Agreement shall be deemed effective as of July 1, 1998 and shall remain in full force and effect until the earlier of June 30, 2001 or the Termination Date (the "TERM"). The ATERMINATION DATE@ shall be the date of any termination of this Agreement pursuant to Section 4.2. 4.2 Termination. This Agreement may be terminated as follows: (a) by a written agreement of the parties; or (b) by either party with written notice to the other if the other shall be insolvent, or there shall be instituted by or against any party and such shall remain unstayed for a period of 30 days any proceeding of bankruptcy or if the other party shall make an assignment for the benefit of its creditors; or (c) by either party in the event of any material breach by the other party of any provision of this Agreement that has not been cured by the other party within thirty (30) days after written notice of such breach has been given to such party; or (d) by Mercury upon written notice to Travis in the event Travis fails to purchase at least an aggregate Dealer List Price of * of Outboards during any Model Year. SECTION 5. * BENEFITS. Mercury shall offer its standard published Outboard pre-rig programs to all boat builders that sell boats to Travis ("TRAVIS BOAT BUILDERS"). Mercury commits that the benefit paid to such Travis Boat Builders shall equal the greater of * (which shall not be subject to offset, a security interest or any other type of lien by Mercury with exception of claims arising out of fraud or misrepresentation by a Travis Boat Builder) per boat pre-rigged by boat builders pursuant to the current published Mercury programs and sold to Travis or the benefit provided under then current published Mercury pre-rig programs. The benefits provided to Travis Boat Builders pursuant to this Section shall apply only to boats sold to Travis. SECTION 6. ADDITIONAL BENEFITS. (a) As consideration for Travis' sales and marketing commitments under this Agreement, Mercury shall provide Travis additional benefits for the purchase of certain Outboards and Parts during the Term of this Agreement ("ADDITIONAL BENEFITS"). It is the intent of the parties that the * value of the Additional Benefits provided to Travis during any Model Year will equal * multiplied by the aggregate Dealer List Price of Outboards purchased during such Model Year. Mercury shall, * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 4 at its discretion, provide the Additional Benefits during the Model Year or within 30 days thereafter in the form of one or more of the following: (i) Provide Travis with * discounts on Parts as mutually agreed to by the parties. The Parts pricing provided to Travis pursuant to this Section 6(a)(i) shall in no event be less than pricing for similar products purchased by Travis from suppliers other than Mercury. In addition, prices to Travis for Parts used in connection with rigging boats will in no event be less than Mercury's best * discount provided at that time. (ii) Offer Travis the right to purchase non standard Outboards which Mercury may have available during the Term, including used Canadian camp engines, remanufactured engines, repossessed engines, and non current engines (collectively referred to as "Non STANDARD OUTBOARDS"). The price for Non Standard Outboards will equal * . In addition, Travis will receive an additional discount equal to * of the Dealer List Price if Travis purchases Mercury's entire stock of such Non Standard Outboards. In this case, the aggregate dollar amount of the * or the * reduction below the standard published industry discounts shall count towards the satisfaction by Mercury of the aforementioned * of Additional Benefits. Travis' purchases of Non Standard Outboards will equal no more than * of their total annual dollar volume of Outboard purchases, provided, however that Mercury may allow Travis' purchase volume of Non Standard Outboards to exceed the above mentioned * limitation in the event that such purchases are necessary to achieve the minimum Additional Benefits described below. (b) In the event Travis fails to purchase the Minimum Outboard Volume during any Model Year, Travis shall repay Mercury an amount equal to the product of (a) one (1) minus the quotient of the actual volume of Outboard purchases by Travis during the applicable Model Year divided by the Minimum Outboard Volume for such Model Year * . Travis shall pay Mercury the Unearned Benefit Adjustment in cash within thirty days following the end of the applicable Model Year. SECTION 7. PARTS RETURN. During the 1999 Model Year, Mercury will, at Travis' request, exchange current Model Year Parts for Parts in Travis' inventory * . The parties agree that the total Travis book value of parts returned pursuant to this Section 7 during the 1999 Model Year will not exceed * and the total Travis book value of * returned pursuant to this Section 7 will not exceed * . During each of the 2000 and 2001 Model Years, Mercury will, at Travis' request, exchange current Model Year Parts for Parts in Travis' inventory in an amount not exceeding the lesser of * of Travis' Parts purchases in each Model Year or * , provided that the parties agree that Travis cannot exchange * during the 2000 and 2001 Model Years. During the term of the Agreement, Parts return or exchange will be subject to Mercury's standard published dealer return policies with the following exceptions: * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 5 (a) Travis will have no restocking charges. (b) Travis may return Parts in * condition. (c) In the 1999 Model Year, Travis may return Parts whether or not they are a * . However, in each of the 2000 and 2001 Model Years Parts with * may only be returned in those situations and quantities as may be mutually agreed upon by the parties. (d) Travis may exchange and deliver Parts to Mercury under this Section 7 from September 1 to December 31 following each Model Year of the Agreement. The parties agree that the intent of this Section is to allow Travis to decrease its inventory of * Parts and * and it is not intended to allow Travis to obtain a lower price for Parts purchased from Mercury. SECTION 8. ADDITIONAL COMMITMENTS. During the Term, the parties agree to the following rights, commitments and obligations: (a) * (b) Mercury will provide Travis with * inventory based on a per store engine forecast provided by Travis pursuant to this Agreement. (c) Mercury will provide Travis a mutually agreed upon amount of merchandising material for consumer boat shows. (d) Mercury will provide Travis with mutually agreed upon Mercury University training services. (e) During the Term, the mix of Outboards purchased by Travis will be relatively equivalent to the overall outboard engine product mix sold by Travis at retail during any Model Year. (f) Mercury, during the Term will maintain Dealer List Prices that are substantially similar to Dealer List Prices currently in effect in terms of the ratio of such Dealer List Prices compared to net industry outboard prices. SECTION 9. DISTRIBUTION NETWORK. Travis shall sell the Products only through the retail locations described in Exhibit D (ARETAIL LOCATIONS@). Travis agrees that each Retail Location shall sign Mercury's Sales and Service Agreement and the terms and conditions of the Sales and Service Agreement shall control the 6 * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. distribution of Products, provided, however, that in the event that there is . a conflict with the terms of this Agreement, the terms of this Agreement shall control. Additional Dealer Locations shall be added at the sole discretion of Mercury which shall not be unreasonably withheld. SECTION 10. MISCELLANEOUS. (a) Severability. Each of the provisions contained in this Agreement shall be severable, and the unenforceability of one shall not affect the enforceability of any others or of the remainder of this Agreement. (b) Waiver. The failure of any party to enforce any condition or part of this Agreement at any time shall not be construed as a waiver of that condition or part, nor shall such party forfeit any rights to future endorsement thereof. (c) Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the state of Illinois. (d) Counterparts. More than one counterpart of this Agreement may be executed by the parties hereto, and each fully executed counterpart shall be deemed an original. (e) Notices. All communications, notices and consents provided for herein shall be in written and given in person or by mail. It shall become effective upon delivery if given in person, or four days after being deposited in mails, with the proper postage for first class registered or certified, prepaid. The notices shall be addressed as follows: If to Travis: Mr. Mark T. Walton Chairman and President Travis Boats & Motors, Inc. 5000 Plaza on the Lake, Suite 250 Austin, TX 78746 If to Mercury: Mr. Fred Brightbill Mercury Marine, division of Brunswick Corporation W6250 Pioneer Road P.O. Box 1939 Fond du Lac, WI 54936-1939 provided, however, that if either party shall have designated a different address by notice to the other, then to the last address so designated. (f) Force Majeure. Neither party shall be liable for any failure, inability or delay in performing hereunder if such failure, inability or delay is solely due to an act of God, war, strike or failures or delays in usual sources of supply of components or any other cause beyond the reasonable * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 7 control of either party, provided that due diligence and every reasonable effort shall be used in curing such cause and resuming performance. (g) Assignment. This Agreement may not be assigned by either party to any person, firm or corporation without advanced written consent of the other party. Notwithstanding the foregoing, this Agreement shall be binding upon either party's successors. (h) Entire Instrument. No modification, amendment, renewal, extension, termination or waiver of this Agreement or any provisions contained herein shall be binding upon either party unless made in writing. The terms and conditions of this Agreement shall be the exclusive terms and conditions applicable to any purchase of Products hereunder. (i) Insurance. Mercury agrees to carry a commercially reasonable amount of product liability insurance during the term of this Agreement. (j) Dealer Award Trips. Mercury agrees that Travis shall be eligible for Dealer Trips awarded by Mercury to dealers reaching various volume levels of Product purchases. This shall include, * representatives from Travis along with their spouses or guests. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be properly executed as of the date first above written. MERCURY MARINE, A DIVISION OF TRAVIS BOATS & MOTORS, INC. BRUNSWICK CORPORATION By: _________________________ By: _______________________ Title: ______________________ Title: ____________________ COMPANY AFFILIATES By: _________________________ Title:_______________________ * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 8 EXHIBIT A --------- COMPANY AFFILIATE ----------------- The term "Company Affiliate" shall mean the following wholly owned subsidiaries of Travis: [List Travis Subsidiaries] No corporation or other entity that becomes an affiliate (whether through merger, consolidation, acquisition of stock or other equity interest, acquisition of assets or otherwise) of Travis after November ___, 1998 shall be a Company Affiliate for purpose of this Agreement without the express written consent of Mercury. * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 9 EXHIBIT B --------- [CURRENT DEALER LIST PRICE] * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 10
2000 Model Year Mercury Outboards Dealer Price List Effective 7/5/99 2000 MY 1999 MY % Chng from Model Description Dealer Price Dealer Price 1999 MY 1F04201WK ME 4M 4S * * * 1F04211WK ME 4ML 4S * * * 1F05201WK ME 5M 4S * * * 1F05211WK ME 5ML 4S * * * 1F06201WK ME 6M 4S * * * 1F06211WK ME 6ML 4S * * * 1F10203WD ME 9.9M 4S * * * 1F10213WD ME 9.9ML 4S * * * 1F10253WD ME 9.9ML BIGFOOT 4S * * * 1F10263WD ME 9.9MXL BIGFOOT 4S SAILPOWER * * * 1F10312WD ME 9.9EL 4S * * * 1F10352WD ME 9.9EL BIGFOOT 4S * * * 1F10351WD ME 9.9ELH BIGFOOT 4S * * * 1F10361WD ME 9.9EXLH BIGFOOT 4S SAILPOWER * * * 1F15203WD ME 15M 4S * * * 1F15213WD ME 15ML 4S * * * 1F15253WD ME 15ML BIGFOOT 4S * * * 1F15302WD ME 15E 4S * * * 1F15312WD ME 15EL 4S * * * 1F15301WD ME 15EH 4S * * * 1F15311WD ME 15ELH 4S * * * 1F15352WD ME 11EL BIGFOOT 4S * * * 1F25203WD ME 25M BIGFOOT 4S * * * 1F25213WD ME 25ML BIGFOOT 4S * * * 1F25302WD ME 25E BIGFOOT 4S * * * 1F25312WD ME 25EL BIGFOOT 4S * * * 1F25301WD ME 25EH BIGFOOT 4S * * * 1F25311WD ME 25ELH BIGFOOT 4S * * * 1F25412WD ME 25ELPT BIGFOOT 4S * * * 1F30203WD ME 30M 4S * * * 1F30213WD ME 30ML 4S * * * 1F30302WD ME 30E 4S * * * 1F30312WD ME 30EL 4S * * * 1F30311WD ME 30ELH 4S * * * 1F30412WD ME 30ELPT 4S * * * 1F40203WD ME 40M 4S * * * 1F40213WD ME 40ML 4S * * * 1F40253WD ME 40ML BIGFOOT 4S * * * 1F40302WD ME 40E 4S * * * 1F40312WD ME 40EL 4S * * * 1F40311WD ME40ELH 4S * * * 1F40412WD ME 40ELPT 4S * * * 1F40411WD ME 40ELHPT 4S * * * 1F40452WD ME 40ELPT BIGFOOT 4S * * * 1F50412WD ME 50ELPT 4S * * * 1F50411WD ME 50ELHPT 4S * * * 1F50352WD ME 50EL BIGFOOT 4S * * * 1F50452WD ME 50ELPT BIGFOOT 4S * * * 1F75412WD ME 75ELPT 4S * * * 1F75411WD ME 75ELHPT 4S * * * 1F90412WD ME 90ELPT 4S * * * 1F90411WD ME 90ELHPT 4S * * * 1F90412WY ME 90ELPT 4S SALTWATER * * * 1F90422WD ME 90EXLPT 4S SALTWATER * * * * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 11 2000 MY 1999 MY % Chng from Model Description Dealer Price Dealer Price 1999 MY 1115473WD ME 115L OPTIMAX * * * 1115473WY ME 115L OPTIMAX SALTWATER * * * 1115483WD ME 115XL OPTIMAX SALTWATER * * * 1115484WD ME 115CXL OPTIMAX SALTWATER * * * 1115D73WD ME 115L OPTIMAX (D) * * * 1115D73WY ME 115L OPTIMAX SALTWATER (D) * * * 1115D83WD ME 115XL OPTIMAX SALTWATER (D) * * * 1115D84WD ME 115CXL OPTIMAX SALTWATER (D) * * * 1135473WD ME 135L OPTIMAX * * * 1135473WY ME 135L OPTIMAX SALTWATER * * * 1135483WD ME 135XL OPTIMAX SALTWATER * * * 1135484WD ME 135CXL OPTIMAX SALTWATER * * * 1135D73WD ME 135L OPTIMAX (D) * * * 1135D73WY ME 135L OPTIMAX SALTWATER (D) * * * 1135D83WD ME 135XL OPTIMAX SALTWATER (D) * * * 1135D84WD ME 135CXL OPTIMAX SALTWATER 9D) * * * 1150473WD ME 150L OPTIMAX * * * 1150473WY ME 150L OPTIMAX SALTWATER * * * 1150483WD ME 150XL OPTIMAX SALTWATER * * * 1150484WD ME 150CXL OPTIMAX SALTWATER * * * 1150D73WD ME 150L OPTIMAX (D) * * * 1150D73WY ME 150L OPTIMAX SALTWATER (D) * * * 1150D83WD ME 150XL OPTIMAX SALTWATER (D) * * * 1150D84WD ME 150CXL OPTIMAX SALTWATER (D) * * * 1200473WD ME 200L OPTIMAX * * * 1200483WD ME 200XL OPTIMAX SALTWATER * * * 1200484WD ME 200CXL OPTIMAX SALTWATER * * * 1200493WD ME200XXL OPTIMAX SALTWATER * * * 1200494WD ME 200CXXL OPTIMAX SALTWATER * * * 1200D73WD ME 200L OPTIMAX (D) * * * 1200D83WD ME 200XL OPTIMAX SALTWATER (D) * * * 1200D84WD ME 200CXL OPTIMAX SALTWATER (D) * * * 1200D93WD ME 200XXL OPTIMAX SALTWATER (D) * * * 1200D94WD ME 200CXXL OPTIMAX SALTWATER (D) * * * 1225473WD ME 225L OPTIMAX * * * 1225483WD ME 225XL OPTIMAX SALTWATER * * * 1225484WD ME 225CXL OPTIMAX SALTWATER * * * 1225493WD ME 225XXL OPTIMAX SALTWATER * * * 1225494WD ME 225CXXL OPTIMAX SALTWATER * * * 1225D73WD ME 225L OPTIMAX (D) * * * 1225D83WD ME 225XL OPTIMAX SALTWATER (D) * * * 1225D84WD ME 225CXL OPTIMAX SALTWATER 9D) * * * 1225D93WD ME 225XXL OPTIMAX SALTWATER (D) * * * 1225D94WD ME 225CXXL OPTIMAX SALTWATER (D) * * * (D) - DIGITAL OPTIMAX MODELS * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 12 Classics 2000 MY 1999 MY % Chng from Model Description Dealer Price Dealer Price 1999 MY 1025201WD ME 25M * * * 1025211WD ME 25ML * * * 1025302WD ME 25E * * * 1025312WD ME 25EL * * * 1025301WD ME 25EH * * * 1025311WD ME 25ELH * * * 1041412WD ME 40ELPTO (2 Cyl) * * * 1050312WD ME 50ELO * * * 2000 MY 1999 MY % Chng from Model Description Dealer Price Dealer Price 1999 MY 1050412WD ME 50ELPTO * * * 1050411WD ME 50ELHPTO * * * 1075412WD ME 75ELPTO * * * 1075411WD ME 75ELHPTO * * * 1090412WD ME 90ELPTO * * * 1090412WY ME 90ELPTO SALTWATER * * * 1090411WD ME 90ELHPTO * * * 1125412WD ME 125ELPTO * * * 1125422WD ME 125EXLPTO SALTWATER * * * 1150454WD ME 150L XR6 * * * 1150454WY ME 150L SALTWATER * * * 1150462WD ME 150XL SALTWATER * * * 1150465WD ME 150CXL SALTWATER * * * 1200412WD ME 200L * * * 1200412WY ME 200L SALTWATER * * * 1200422WD ME 200XL SALTWATER * * * 1200425WD ME 200CXL SALTWATER * * * Small 2-Stroke 1002201WK ME 2.5M * * * 1003201WK ME 3.3M * * * 1004201WK ME 4M * * * 1004211WK ME 4ML * * * 1005201WK ME 5M * * * 1005211WK ME 5ML * * * 1006201WD ME 6M * * * 1006211WD ME 6ML * * * 1008201WD ME 8M * * * 1008211WD ME 8ML * * * 1010201WD ME 9.9M * * * 1010211WD ME 9.9ML * * * 1010312WD ME 9.9EL * * * 1015201WD ME 15M * * * 1015211WD ME 15ML * * * 1015301WD ME 15EH * * * 1015312WD ME 15EL * * * 1015311WD ME 15ELH * * * 1020201WD ME 20M * * * 1020211WD ME 20ML * * * 1020312WD ME 20EL * * * 1020301WD ME 20EH * * * 1031302WD ME 30EO * * * 1031312WD ME 30ELO * * * 1031301WD ME 30EHO * * * * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 1031311WD ME 30ELHO * * * 1031412WD ME 30ELPTO * * * 1043203WD ME 40M * * * 1043213WD ME 40ML * * * 1043302WD ME 40EO * * * 1043312WD ME 40ELO * * * 1043412WD ME 40 ELPTO (3 Cyl) * * * 1043411WD ME 40 ELHPTO * * * 1060302WD ME 60EO * * * 1060312WD ME 60ELO * * * 1060412WD ME 60ELPTO * * * 1060411WD ME 60ELHPTO * * * 1060452WD ME 60 ELPTO BIGFOOT * * * 1115412WD ME 115ELPTO * * * 1115412WY ME 115ELPTO SALTWATER * * * 1115422WD ME 115EXLPTO SALTWATER * * * * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 14 V6 Carb/EFI 2000 MY 1999 MY % Chng from Model Description Dealer Price Dealer Price 1999 MY 1135412WD ME 135L * * * 1135422WD ME 135XL SALTWATER * * * 1135425WD ME 135CXL SALTWATER * * * 1150413WD ME 150L EFI * * * 1150413WY ME 150L EFI SALTWATER * * * 1150423WD ME 150XL EFI SALTWATER * * * 1150424WD ME 150CXL EFI SALTWATER * * * 1175412WD ME 175L * * * 1175413WD ME 175L EFI * * * 1175423WD ME 175XL EFI SALTWATER * * * 1175424WD ME 175CXL EFI SALTWATER * * * 1200413WD ME 200L EFI * * * 1200413WY ME 200L EFI SALTWATER * * * 1200423WD ME 200XL EFI SALTWATER * * * 1200424WD ME 200CXL EFI SALTWATER * * * 1225413WD ME 225L EFI * * * 1225423WD ME 225XL EFI SALTWATER * * * 1225424WD ME 225CXL EFI SALTWATER * * * 1225433WD ME 225XXL EFI SALTWATER * * * 1225434WD ME 225CXXL EFI SALTWATER * * * 1250423WD ME 250XL EFI SALTWATER * * * 1250424WD ME 250CXL EFI SALTWATER * * * 1250433WD ME 250XXL EFI SALTWATER * * * 1250434WD ME 250CXXL EFI SALTWATER * * * Jet Outboards 1025271WD ME 25M (JET 20) * * * 1043372WD ME 40EO (JET 30) * * * 1060372WD ME 60 EO (JET 45) * * * 1090472WD ME 90ELPTO (JET 65) * * * 1115472WD ME 115ELPTO (JET 80) * * *
* INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 15 EXHIBIT C --------- Sales and Service Agreement --------------------------- [Attach current copy of Sales and Service Agreement] * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 16
EXHIBIT D --------- Retail Locations ---------------- A B - --------- -------------------- -------------------------------------------------------------------------------------- 1 10/26/98 - --------- -------------------- -------------------------------------------------------------------------------------- 2 - --------- -------------------- -------------------------------------------------------------------------------------- 3 - --------- -------------------- -------------------------------------------------------------------------------------- 4 TRAVIS STORE LOCATIONS - --------- -------------------- -------------------------------------------------------------------------------------- 5 - --------- -------------------- -------------------------------------------------------------------------------------- 6 DEALER # CORPORATE LEGAL ENTITY - --------- -------------------- -------------------------------------------------------------------------------------- 7 93893 Travis Boating Center Alabama, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 8 87831 Travis Boating Center Arkansas, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 9 87832 Travis Boating Center Arkansas, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 10 93892 Travis Boating Center Florida, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 11 91913 Travis Boating Center Florida, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 12 91915 Travis Boating Center Georgia, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 13 80913 Travis Boats & Motors Baton Rouge, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 14 80914 Travis Boating Center Louisiana, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 15 87837 Travis Boating Center Louisiana, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 16 87835 Travis Boating Center Louisiana, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 17 93933 Travis Boating Center Mississippi, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 18 80915 Travis Boating Center Oklahoma, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 19 91900 Travis Boating Center Alabama, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 20 91914 Travis Boating Center Tennessee, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 21 93931 Travis Boating Center Tennessee, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 22 91927 Travis Boating Center Tennessee, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 23 87825 Falcon Marine Abilene, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 24 87827 Travis Boating Center Arlington, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 25 87838 ** TBC Management Ltd. - --------- -------------------- -------------------------------------------------------------------------------------- 26 87829 Travis Boats & Motors, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 27 87830 Travis Boating Center Beaumont, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 28 87833 Travis Boats & Motors, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 29 80916 Travis Snowden Marine, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 17 - --------- -------------------- -------------------------------------------------------------------------------------- 30 87836 Falcon Marine, Inc. - --------- -------------------- -------------------------------------------------------------------------------------- 31 87834 Travis Boats & Motors, Inc. - --------- -------------------- --------------------------------------------------------------------------------------
** Corporate Office C D E F - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 1 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 2 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 3 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 4 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 5 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 6 ADDRESS CITY STATE ZIP - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 7 2006 Fisher St. Huntsville AL 35803 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 8 2001 Highway 25 North Heber Springs AR 72543 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 9 3034 Albert Pike Hot Springs AR 71913 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 10 1201B Miracle Strip Ft. Walton Beach FL 32548 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 11 Mile Marker 104 South Key Largo FL 33037 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 12 743 Old Holcomb Bridge Rd. Roswell GA 30076 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 13 14369 Florida Blvd. Baton Rouge LA 70819 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 14 4306 E. Texas St. Bossier City LA 71111 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 15 1700 East Main St. New Iberia LA 70560 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 16 10567 W. Airline Dr. St. Rose LA 70087 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 17 4929 Denny Highway Pascagoula MS 39581 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 18 2100 SW Highway 66 Claremore OK 74017 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 19 Route 7, Box 1 Florence SC 35630 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 20 1089 W. Main St. Hendersonville TN 37075 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 21 15707 E. Highway 70 Lenoir City TN 37772 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 22 38 Marina Lane Winchester TN 37398 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 23 1201 E. Highway 80 Abilene TX 79601 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 24 1900 E. Division Arlington TX 76011 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 25 5000 Plaza on the Lake-Ste 250 Austin TX 78746 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 26 13045 Research Blvd. Austin TX 78750 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 27 7660 College St. Beaumont TX 77707 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 28 7530 North Freeway Houston TX 77037 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 29 1320 S. Stemmons Lewisville TX 75067 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 18 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 30 1920 North Loop 250 W. Midland TX 79707 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------ 31 12300 IH 10 West San Antonio TX 78230 - --------- ------------------------------------------ ----------------------------- ------------------ ------------------
* INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 19
G H I J - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 1 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 2 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 3 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 4 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 5 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 6 PHONE GENERAL MGR PREV DLR # MIDAS - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 7 205-881-6818 Jimmy Lee - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 8 501-362-3171 Ron Robare 87593 YES - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 9 501-767-2511 Mike Whaley 87563 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 10 850-244-1099 Fred Pace 93917 YES - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 11 305-451-3398 Daniel Smith - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 12 770-518-1258 Charlie Bell 91905 YES - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 13 504-272-2628 Jim McManus - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 14 318-747-2628 Bucky Boone 80658 YES - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 15 318-364-7141 Clay Peltier - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 16 504-441-5718 Greg Bent 87821 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 17 601-762-8787 Butch Isbell - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 18 918-341-6895 Steve Camp - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 19 205-757-5000 Ted Simerson - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 20 615-264-6318 Mike Zoretic 93920 YES - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 21 423-690-2628 Roddy Rodgers 93783 YES - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 22 615-967-7127 Charlie Bondurant 93921 YES - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 23 915-672-2171 Billy Breed - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 24 817-265-3232 Don Nickell - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 25 512-347-8787 Mark Walton - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 26 512-250-9000 Kelly Harber - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 27 409-860-9444 Rob Harrell 87816 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 28 713-591-2028 Mike Kirkeby 85283 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 29 972-436-2628 Art Hansen 87055 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 30 915-697-3261 Jim Hargrove 87171 - --------- -------------------------- -------------------------------- ----------------------- ------------------------ 31 210-690-6270 Jessie Cox 87815 - --------- -------------------------- -------------------------------- ----------------------- ------------------------
20 * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. EX-10 9 EXHIBIT 10.47 - LARSON MASTER DEALER AGREEMENT EXHIBIT 10.47 Confidential Treatment Requested. Confidential portions of this document have been redacted and have been filed separately with the Commission. LARSON MASTER DEALER AGREEMENT This master agreement, effective September 29, 1998, is by and between Larson/Glastron Boats, Inc., a Delaware corporation ("Larson") and Travis Boats & Motors, Inc., a Texas corporation ("Travis") (the "Agreement"). WHEREAS, Larson is engaged in the manufacture of recreational powerboats and accessories and the sale of certain accompanying engines ("Products") and desires to sell its Products to Travis, or through or to certain of its subsidiaries or affiliates ("Travis Subs"); and WHEREAS, Travis and Travis Subs are engaged in the sale of Products to the retail public and desire to purchase various Products from Larson; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1. Travis and Travis Subs. For purposes of this Agreement, the term Travis when used shall be inclusive of Travis Subs except where the Agreement specifically uses Travis Subs individually. 2. Sale of Product. Larson shall manufacture and sell to Travis or Travis Subs those various Products ordered from time to time by Travis or Travis Subs pursuant to Larson's standard dealer agreement, as mutually agreed upon and as may be amended from time to time by mutual agreement. 3. Dealer Agreements and Relationship to this Master Agreement. Each Travis or Travis Sub retail location which purchases Larson Products shall execute and be subject to Larson's standard dealer agreement as mutually agreed upon by the parties and as may be amended upon mutual 1 * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. agreement of the parties. This Agreement shall supplement and amend each individual standard dealer agreement executed at each Travis retail location which sells Larson Products. To the maximum extent possible, this Agreement and the standard dealer agreement shall be read and interpreted to be consistent with each other. In the event there is a conflict between the dealer agreement and this Agreement, the provisions of this Agreement shall control. 4. Pricing. During the term of this Agreement Larson shall sell Larson Products to Travis at all times for *. For purposes of this Agreement, Larson "model year" means the period commencing on July 1 of any calendar year through June 30 of the following calendar year. Larson may increase or decrease prices as follows: a. Larson may increase prices each Larson model year and Travis shall pay such increases in any Larson model year *: i. *; or ii. *; or iii. *. b. * * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 2 *. c. Notwithstanding the above, during Larson model year 1999, the pricing for Larson Products pre-rigged to receive Mercury engines shall be as described on Exhibit A hereto. 5. Forecasting. Travis shall provide Larson, on or before July 31 of each calendar year, with a Travis model year forecast which describes (i) the number and type of Larson Product units by month Travis expects to order and take delivery of between August 1 and January 15 of the upcoming Travis model year starting on August 1 and (ii) the number and type of Larson Product units Travis expects to order and take delivery of between January 16 and July 31 of the upcoming Travis model year. In addition to the above annual model year forecast, Travis will forecast its Larson Product requirements on a three (3) month rolling basis, updated monthly. Travis shall submit the forecast to Larson by the first day of each calendar month. Travis shall designate a Travis representative with responsibility for forecasting Product purchases from Larson. The forecasts shall be in a form mutually agreed to by the parties and shall include, at a minimum, a three-month projected schedule identifying the number of Product units scheduled to be purchased by Travis by boat brand, model, and engine brand, model and horsepower each of the three months. The first-month forecast in the monthly report shall reflect a firm order previously accepted by Larson. As a firm order, the first-month forecast may not be changed and is non-cancelable, however, Larson reserves the right to not accept the portions of orders in any one month that exceed 15 percent of the amounts forecast for that month in the previous months' 3-month rolling forecast. Except where Travis may have caused a delay, Travis may cancel orders if Product has not been delivered by Larson within 150 days of Larson's acceptance of an order for such Product from Travis. * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 3 6. Timing of Purchases, Shipping and Delivery. Larson will use its best efforts to ship then current Larson model year Products *. Between August 1 and January 15 of each Travis model year, Travis shall purchase and take delivery of and Larson shall deliver 40 percent of the Product units Travis has forecasted to purchase for such Travis model year in its annual model year forecast. Larson's obligation to deliver is subject to the following: i. Larson receiving Travis' annual model year forecast as set forth in paragraph 5 herein on or before July 31 of each calendar year, ii. Larson approving the monthly schedule of the number and type of Larson Product units Travis expects to order and take delivery of by January 15 as set forth in its annual model year forecast, and iii. Travis submitting actual orders between August 1 and January 15 of such model year that do not exceed the monthly schedule set forth in its annual model year forecast by greater than 15 percent. Except where Travis may have caused a delay, Travis may cancel orders if Product has not been delivered by Larson within 150 days of Larson's acceptance of the order for such Product from Travis. 7. Product Modification. Travis shall meet with Larson management and product engineers in August and January of each year, unless mutually waived by the parties hereto, to * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 4 provide input into changes for Larson Products for the next model year. The August meeting shall primarily be to provide input on the structure and design of the Products. The January meeting shall primarily be to provide input on the features and accessories of the Products. Larson will use its best efforts to incorporate the recommendations made by Travis taking into account considerations such as cost, safety, warranty and standard design. Larson reserves the right, without notice or obligation, to change the design of the Products to the extent that such change does not materially alter the operation of the Products or to the extent that such change is required due to product safety concerns, government regulations or vendor supply shortages. Larson will provide Travis with as much notice as reasonably possible, but not less than ninety (90) days prior notice of shipment of a Product design change if such design change materially affects the appearance or operation of the Product. 8. * * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 5 *. 9. Warranty. Larson makes no representations or warranties as to its Products except as may be described in the Larson dealer agreement or Product materials. In the event legal action is commenced against Larson and Travis related to Larson Products, to the extent possible and if no conflict exists, Larson and Travis shall reasonably agree in writing on the retention of common counsel and sharing of legal expenses. 10. Term of the Agreement. The term of this Agreement and the dealer agreement between the parties shall commence on the date of this Agreement and shall terminate on July 31, 2001. 11. Insurance. Each party to this Agreement shall maintain liability insurance coverage and shall provide evidence of such coverage to the other party upon such party's reasonable request. 12. Force Majeure. The parties will not be responsible for failure to perform any part of this Agreement or for any delay in the performance of any part of this Agreement, directly or indirectly resulting from or contributed to by any foreign or domestic embargoes, seizures, acts of God, strikes, labor disputes, vendor problems, insurrections, wars and/or continuance of war, or the adoption or enactment of any law, ordinance, regulation, ruling or order directly or indirectly interfering with production, delivery or other contingencies beyond their control. This Section does not affect the payment obligations of either party under this Agreement. 13. Assignment. Neither party shall assign or otherwise transfer this Agreement, without the prior written consent of the other party, which consent shall not be unreasonably withheld. 14. Confidentiality. Each party agrees that the specific terms and conditions set forth in this Agreement shall be kept confidential and that neither party hereto shall make any disclosure * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 6 regarding this Agreement or its terms except as may be required by law or with the consent of the other party. In the event either party concludes that it is obligated by law to disclose the terms of this Agreement, such party shall give the other party 3 business days prior written notice before disclosure along with an explanation as to why such disclosure is deemed necessary. 15. Disputes. All disputes arising out of or in connection with this Agreement shall be resolved by binding arbitration as set forth in Larson's standard dealer agreement as mutually agreed upon and amended from time to time. 16. Severability. Each of the provisions contained in this Agreement shall be severable, and the unenforceability of one shall not affect the enforceability of any others or of the remainder of this Agreement. 17. Waiver. The failure of any party to enforce any condition or part of this Agreement at any time shall not be construed as a waiver of that condition or part, nor shall such party forfeit any rights to future enforcement thereof. The parties waive presentment for payment, protest, and notice of dishonor. 18. Headings. The headings and captions of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof. 19. Counterparts. More than one counterpart of this Agreement may be executed by the parties hereto, and each fully executed counterpart shall be deemed an original. 20. Further Assurances. Each party will, at the reasonable request of the other, execute and deliver to the other all such further instruments, assignments, assurances and other documents as the other may request in connection with the carrying out of this Agreement and the transactions contemplated hereby. * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 7 21. Notices. All communications, notices and consents provided for herein shall be in writing and be given in person or by means of telex, telecopy or other wire transmission (with request for assurance of receipt in a manner typical with respect to communications of that type) or by mail, and shall become effective (x) on the delivery if given in person, (y) on the date of transmission if sent by telex, telecopy or other wire transmission (receipt confirmed), or (z) four business days after being deposited in the mails, with proper postage for first class registered or certified mail, prepaid. Notices shall be addressed as follows: If to Larson: Paul Larson Memorial Drive Little Falls, Minnesota 56345 Attention: President Telephone: 320-632-5481 Telecopy: 320-632-1439 With copy to: Genmar Holdings, Inc. 100 South Fifth Street Suite 2400 Minneapolis, Minnesota 55402 Attention: General Counsel Telephone: 612-339-7600 Telecopy: 612-337-1930 If to Travis: Travis Boats & Motors, Inc. 5000 Plaza on the Lake, Suite 250 Austin, Texas 78746 Attention: President Telephone: 512-347-8787 Telecopy: 512-329-0480 provided, however, that if either party shall have designed a different address by notice to the other, then to the last address so designated. * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 8 22. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and no provision of this Agreement shall be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. 23. Amendments; Entire Agreement. This Agreement may not be amended, supplemented or otherwise modified except by an instrument in writing signed by each of the parties hereto. This Agreement contains the entire agreement of the parties hereto with respect to the transactions covered hereby, superseding all negotiations, prior discussions and preliminary agreements made prior to the date hereof. 24. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Minnesota. LARSON/GLASTRON BOATS, INC. TRAVIS BOATS & MOTORS, INC. By: /s/ Grant E. Oppeguard By: /s/ Mark Walton -------------------------- ------------------------------ Its: Vice President Its: President -------------------------- ------------------------------ Date: 10-7-98 Date: 10-8-98 -------------------------- ------------------------------ * INDICATES CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION. 9 Exhibit A Larson Master Dealer Agreement - ------------------------------------------------------------- Larson Mercury Price ($) - ------------------------------------------------------------- Flyer 166 * - ------------------------------------------------------------- SEI 186 * - ------------------------------------------------------------- SEI 186 SF * - ------------------------------------------------------------- SEI 206 * - ------------------------------------------------------------- * Indicates Confidential Treatment Requested. The redacted material has been filed separately with the Commission. 10 EX-21 10 EXHIBIT 21.1 - LIST OF SUBSIDIARIES OF REGISTRANT EXHIBIT 21.1 Subsidiaries of Registrant REGISTRANT: Travis Boats & Motors, Inc. Travis Snowden Marine, Inc. Travis Boating Center Arlington, Inc. Falcon Marine, Inc. Falcon Marine Abilene, Inc. Travis Boating Center Beaumont, Inc. Travis Boats & Motors Baton Rouge, Inc. TBC Arkansas, Inc. TBC Management, Ltd. TBC Management, Inc. Travis Boating Center Louisiana, Inc. Travis Boating Center Tennessee, Inc. Travis Boating Center Alabama, Inc. Red River Marine Arkansas, Inc. Travis Boating Center Little Rock, Inc. Travis Boating Center Georgia, Inc. Travis Boating Center Florida, Inc. Travis Boating Center Mississippi, Inc. Adventure Marine & Outdoor, Inc. Adventure Boat Brokerage, Inc. Adventure Marine South, Inc. Shelby Marine Center, Inc. Shelby Marine Pickwick, LLC EX-23 11 EXHIBIT 23.1 - CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the 1995 Incentive Plan of Travis Boats & Motors, Inc. of our report dated December 8, 1999, with respect to the consolidated financial statements of Travis Boats & Motors included in the Annual Report (Form 10-K) for the year ended September 30, 1999. /s/ Ernst & Young LLP ---------------------- Austin, Texas December 27, 1999 EX-23 12 EXHIBIT 23.2-CONSENT OF INDEPENDENT AUDITORS-1/12 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the use of our report dated December 8, 1999, included in the Annual Report on Form 10-K of Travis Boats & Motors, Inc. for the year ended September 30, 1999, with respect to the consolidated financial statements, as amended, included in this Form 10-K/A. /s/ ERNST & YOUNG LLP ---------------------- Austin, Texas January 12, 2000 EX-27 13 FDS -- FOR TRAVIS BOATS & MOTORS, INC.
5 Financial Data Schedule for Travis Boats & Motors, Inc. 0001012734 Travis Boats & Motors, Inc. 1,000 U.S. Dollars 12-MOS 12-MOS SEP-30-1999 SEP-30-1998 OCT-01-1998 OCT-01-1997 SEP-30-1999 SEP-30-1998 1 1 4,125 4,618 0 0 12,668 4,893 (247) 0 75,700 38,934 93,559 50,095 24,944 16,110 4,529 3,417 125,931 69,116 88,339 38,683 6,897 4,980 0 0 0 0 43 43 37,592 30,390 125,931 69,116 182,259 131,740 182,259 131,740 (135,625) (96,839) (135,625) (96,839) (32,945) (23,890) 0 0 (3,808) (2,310) 10,419 8,781 (3,846) (3,218) 6,573 5,563 0 0 0 0 0 0 6,573 5,563 1.53 1.31 1.49 1.26
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