Note 16 – Stock Plans and Management Compensation

Under the 2003 Stock Incentive Plan (Plan), the Company may grant stock options, SARs, non-vested stock and other types of share-based awards to executives and other management employees. Under the Plan, the Company may issue up to 13.1 million shares, from treasury shares and authorized, but unissued shares of common stock. As of December 31, 2011, 2.5 million shares were available for grant.

Stock Options and SARs

Since the beginning of 2005, the Company has issued stock-settled SARs and has not issued any stock options. Generally, stock options and SARs are exercisable over a period of 10 years, or as otherwise determined by the Human Resources and Compensation Committee of the Board of Directors, and subject to vesting periods of generally four years. However, with respect to stock options and SARs, all grants vest immediately: (i) in the event of a change in control; (ii) upon death or disability of the grantee; or (iii) with respect to awards granted prior to 2008, upon the sale or divestiture of the business unit to which the grantee is assigned. With respect to stock option and SAR awards granted prior to 2006, grantees continued to vest in accordance with the applicable vesting schedule even upon termination of employment if the sum of (A) the age of the grantee, and (B) the grantee's total number of years of service, equals 65 or more. With respect to SARs granted in 2006 through April 2009, grantees continue to vest in accordance with the vesting schedule even upon termination if (A) the grantee has attained the age of 62, and (B) the grantee's age plus total years of service equals 70 or more. The exercise price of stock options and SARs issued under the Plan cannot be less than the fair market value of the underlying shares at the date of grant.

In October 2009, the Human Resources and Compensation Committee modified the May 2009 SAR award to reflect certain changes in the retirement provisions. Specifically, award recipients will continue to vest in accordance with the vesting schedule even upon termination if (A) the grantee has attained the age of 62, or (B) the grantee's age plus total years of service equals 70 or more. An additional provision of the May 2009 SAR award modification included a provision that would prorate the grant in the event of termination prior to the first anniversary of the date of grant provided the participant had met the appropriate retirement age definition of rule of 70 or age 62. The modification of the May SAR award did not result in additional compensation cost from the originally calculated fair value using the Black-Scholes-Merton pricing model; however, the modification did result in the accelerated recognition of $1.6 million of additional compensation expense in the fourth quarter of 2009. SARs and stock option activity for all plans for the three years ended December 31, 2011, 2010 and 2009, was as follows:

	2011								2010					2009
(in thousands, except exercise price and terms)	SARs/Stock Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		SARs/Stock Options Outstanding			Weighted Average Exercise Price		SARs/Stock Options Outstanding			Weighted Average Exercise Price

Outstanding on January 1		9,168		$	16.53					8,332		$	18.27		6,484		$	25.20
Granted		1,105		$	20.45					1,987		$	11.18		2,911		$	5.30
Exercised		(556	)	$	15.22		$	3,489		(261	)	$	13.36		(1	)	$	3.59
Forfeited		(370	)	$	26.66					(890	)	$	27.17		(1,062	)	$	25.68

Outstanding on December 31		9,347		$	16.66	6.5 years	$	51,535		9,168		$	16.53		8,332		$	18.27

Exercisable on December 31		5,103		$	20.32	5.4 years	$	23,840		3,809		$	25.73		3,271		$	29.49

The following table summarizes information about SARs and stock options outstanding as of December 31, 2011:

		Outstanding					Exercisable
Range of Exercise Price		Number (in thousands)		Weighted Average Remaining Years of Contractual Life	Weighted Average Exercise Price		Number (in thousands)		Weighted Average Remaining Years of Contractual Life	Weighted Average Exercise Price

$	3.37 to $5.99		2,746	7.1 years	$	5.06		1,453	7.1 years	$	4.84
$	6.00 to $19.90		3,749	7.1 years	$	13.83		1,695	6.4 years	$	15.33
$	19.91 to $39.56		2,453	5.4 years	$	29.19		1,556	3.3 years	$	33.60
$	39.57 to $46.25		399	2.5 years	$	46.02		399	2.5 years	$	46.02

The weighted average fair values of individual SARs granted were $10.59, $5.68 and $2.99 during 2011, 2010 and 2009, respectively. The Company estimated the fair value of each grant on the date of grant using the Black-Scholes-Merton pricing model, utilizing the following weighted average assumptions for 2011, 2010 and 2009:

	2011	2010	2009

Risk-free interest rate	2.5 %	2.8 %	2.3 %
Dividend yield	0.2 %	0.7 %	1.9 %
Volatility factor (A)	53.7 %	53.0 %	72.3 %
Weighted average expected life	5.2 – 6.7 years	5.8 – 6.6 years	5.7 – 6.3 years

(A) The Company uses a combination of implied and historical volatility in calculating the fair value of each grant.

Total stock option and SARs expense was $11.9 million, $13.0 million and $8.4 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Non-vested stock awards

The Company grants non-vested stock units and awards to key employees as determined by the Human Resources and Compensation Committee of the Board of Directors. Non-vested stock units and awards have vesting periods of three or four years. Non-vested stock units and awards are eligible for dividends, which are reinvested and non-voting. All non-vested units and awards have restrictions on the sale or transfer of such awards during the non-vested period.

Generally, grants of non-vested stock units and awards are forfeited if employment is terminated prior to vesting. Non-vested stock units and awards granted in 2006 and later vest pro rata if the sum of (A) the age of the grantee, and (B) the grantee's total number of years of service equals 70 or more.

The Company recognizes the cost of non-vested stock awards on a straight-line basis over the requisite service period. During December 31, 2011, 2010 and 2009, there was $3.7 million, $2.1 million and $0.6 million, respectively, charged to compensation expense for non-vested stock awards.

The weighted average price per non-vested stock award at grant date was $21.02, $11.44 and $10.71 for the non-vested stock awards granted in 2011, 2010 and 2009, respectively. Non-vested stock award activity for all plans for the three years ended December 31 was as follows:

(in thousands)	2011			2010			2009

Outstanding at January 1		332			909			1,207
Granted		237			275			20
Released		(16	)		(79	)		(168	)
Forfeited		(12	)		(773	)		(150	)

Outstanding at December 31		541			332			909

As of December 31, 2011, there was $2.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period 1.1 years.

Director Awards

The Company issues stock awards to directors in accordance with the terms and conditions determined by the Nominating and Corporate Governance Committee of the Board of Directors. One-half of each director's annual fee is paid in Brunswick common stock, the receipt of which may be deferred until a director retires from the Board of Directors. Each director may elect to have the remaining one-half paid either in cash, in Brunswick common stock distributed at the time of the award, or in deferred Brunswick common stock units with a 20 percent premium. Prior to May 2009, each non-employee director also received an annual grant of restricted stock units, receipt of which is deferred until the director retires from the Board.